62
Canada’s Catch-22: Te State of Canada-US Relations in 2014 by Alexander Moens and Alex Bartos January 2014  1974 - 2014  Y E A R S  40

Canadas Catch 22 State of Canada Us Relations in 2014

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Canadarsquos

Catch-22

Te State of

Canada-US

Relations

in 2014

by Alexander Moensand Alex Bartos

January 2014

1974 - 201

Y E A R

40

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January 2014

Canadarsquos Catch-983090983090 The State of Canada-US Relations in 983090983088983089983092

by Alexander Moens and Alex Bartos

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fraserinstituteorg

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fraserinstituteorg i

Contents

Executive summary iii

Bilateral trade relations 1

Trade and regulatory barriersdisputes 12

State of the border and regulatory cooperation 18

Canadian and American public perceptions 24

US policy uncertainty 27

Trade diversification 30

Conclusion the bilateral and diversification agenda 39

References 41

About the authors 49

Acknowledgments 50

Publishing information 51

Supporting the Fraser Institute 52

Purpose funding amp independence 53

About the Fraser Institute 54

Editorial Advisory Board 55

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Executive summary

Economic and political relations between Canada and the United States

our most important foreign relationship have worsened since the Fraser

Institutersquos previous report on the state of Canada-US relations Skating on

Tin Ice (Moens 983090983088983089983088) Te recovery of the US economy after the financial

crash in 983090983088983088983096 has been slow Te long-term uncertainty in US budget politics

and public debt resolution remains and the concomitant policy instabilitymdash

as we first noted in US Election 983090983088983089983090 Implications for Canada (Moens and

Clemens 983090983088983089983091)mdashcontinues to put a drag on economic growth Te across-

the-board budget cuts that took effect on January 983089 983090983088983089983091 better known as

sequestration offer a ray of light in the present context as they have imposed

cuts on spending of $983096983092 billion in both 983090983088983089983091 and 983090983088983089983092

Canadian merchandise exports to the United States have weakened

in relative terms At the same time there is not enough Canadian export

diversification to other destinations to make up this relative loss Te natural

resources component of Canadian exports is the only major growing segment

of overall trade In both merchandise and services trade the post-983090983088983088983095 per-

iod shows Canada is losing in trade competitiveness in relation to the United

States Te negative trend in trade competitiveness in services is even big-

ger than in merchandise trade Te relative loss of trade competitiveness in

our relationship may be a surprise to many Canadians who believe Canada

is simply doing better than the United States

Canadarsquos weakening competitiveness vis-agrave-vis the United States is

occurring at the same time as political relations at the top are in a slump

Te main sector in US-bound trade showing growth in the last decade crude

oil products is also the one facing most political interference from US deci-

sion makers Te six-year delay in the international permit for KXL to cross

the Canada-USA border is without precedent in our bilateral relations Atthe same time the US mandatory country-of-origin labeling rule which

took effect in 983090983088983088983097 has severely damaged the decades-old and deeply inte-

grated supply chain in beef and pork costing Canadian producers some $983089

billion per year ldquoBuy Americanrdquo in the public procurement sector remains a

latent threat to bilateral relations While American trade barriers have risen

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fraserinstituteorg 983089

Bilateral trade relations

Merchandise trade

Tere is a significant decline in both exports and imports from 983090983088983088983096 to 983090983088983088983097

as a result of the US recession (table 983089) Te sharpest decline is in Canadian

merchandise exports to the US which decreased by 983090983095 percent in 983090983088983088983097 and

still have not recovered to the 983090983088983088983096 level in 983090983088983089983090 Canadian merchandise

imports from the US on the other hand did not fall as sharplymdash983089983094 percent in

983090983088983088983097mdashand in 983090983088983089983090 are only slightly below the 983090983088983088983096 number Tus on balance

Canadian exports to the US have suffered significantly more from the reces-

sion than American exports to Canada (figures 983089 983090) Given this re-balancing

Canadarsquos merchandise trade balance surplus with the USA has been virtu-

ally cut in half (983092983094 percent) from $983095983095 billion in 983090983088983088983096 to $983091983093 billion in 983090983088983089983090983089

Te traditionally large gap between merchandise exports and imports

between Canada and its largest trading partner have shrunk substantially As

a result Canadarsquos trade balance with the world has declined from $983092983089 billion

in 983090983088983088983096 to a deficit of $983089983088 billion in 983090983088983089983090 Te monthly import and export

numbers in 983090983088983089983091 show a continuation of this trend

A noticeable trend in Canada in the last 983095 years reveals that less GDP is

derived from trade (and thus more from Canadarsquos domestic market) while in

the United States the trade versus domestic market share of GDP is on a ris-

ing trend (table 983090) When we examine the US share of Canadarsquos total exports

and imports over a longer period (983089983097983097983091ndash983090983088983089983090) we notice the overall down-

ward trend (figures 983091 983092) Te main causal factors are the higher value of the

Canadian dollar the post-983090983088983088983096 slump in US demand and a certain amount

of diversification in Canadarsquos trade as well as stronger relative growth inCanadarsquos domestic market

1048625 All figures are in real Canadian dollars unless otherwise noted

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983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

A breakdown of the top export and import sectors in Canada-US trade

shows that the traditionally strong machinery and automotive sectors are

holding well in terms of US exports to Canada but the same sector is weaker

on the Canadian side Te gains on our side are in minerals and energy prod-

ucts (tables 983091 983092) Te slow decline in Canadian exports of manufactured prod-

ucts suggests a weakening on Canadarsquos side in the integrated supply-chain in

this sector Lower productivity and border costs may well play a role

Table 983089 Canadian merchandise trade 983090983088983088983095ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2007 2008 2009 2010 2011 2012

Total exports 41380 42705 32099 34675 38099 38006

Exports to US 31795 32331 23610 25332 27517 27809

Total imports 37291 38877 32691 35508 38036 38993

Imports from US 24215 24666 20641 22312 23475 24360

Total balance 4089 3827 -592 -833 063 -987

Balance with US 7579 7666 2969 3020 4042 3450

Note On a balance of payments basis

Source Statistics Canada (2013d)

15

20

25

30

35

2 0 1 3 - 0 5

2 0 1 3 - 0 1

2 0 1 2 - 0 9

2 0 1 2 - 0 5

2 0 1 2 - 0 1

2 0 1 1 - 0 9

2 0 1 1 - 0 5

2 0 1 1 - 0 1

2 0 1 0 - 0 9

2 0 1 0 - 0 5

2 0 1 0 - 0 1

2 0 0 9 - 0 9

2 0 0 9 - 0 5

2 0 0 9 - 0 1

2 0 0 8 - 0 9

2 0 0 8 - 0 5

2 0 0 8 - 0 1

2 0 0 7 - 0 9

2 0 0 7 - 0 5

2 0 0 7 - 0 1

Import Export

2 0 0 2 C A $ b i l l i o n s

Figure Canadarsquos merchandise trade (monthly) ndash

Source Statistics Canada (2013c) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091

fraserinstituteorg

Table 983090 Merchandise trade as a of GDP 983090983088983088983093ndash983090983088983089983090 (current US$)

2005 2006 2007 2008 2009 2010 2011 2012

Canada 602 584 569 583 483 501 515 510

Growth 02 -30 -26 25 -172 37 28 -10

US 210 221 227 243 191 225 250 248

Growth 61 52 27 70 -214 178 111 -08

Source The World Bank (2013a)

0

1

2

3

4

5

6

7

8

9

2 0 1 3

- 0 5

2 0 1 3

- 0 1

2 0 1 2

- 0 9

2 0 1 2

- 0 5

2 0 1 2

- 0 1

2 0 1 1

- 0 9

2 0 1 1

- 0 5

2 0 1 1

- 0 1

2 0 1 0

- 0 9

2 0 1 0

- 0 5

2 0 1 0

- 0 1

2 0 0 9

- 0 9

2 0 0 9

- 0 5

2 0 0 9

- 0 1

2 0 0 8

- 0 9

2 0 0 8

- 0 5

2 0 0 8

- 0 1

2 0 0 7

- 0 9

2 0 0 7

- 0 5

2 0 0 7

- 0 1

2 0 0 2 C A $ b i l l i o n s

Figure Canada-US net merchandise trade (monthly) ndash

Source Statistics Canada (2013c) calculations by authors

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983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

-5

-4

-3

-2

-1

0

1

2

3

2012201120102009200820072006200520042003200220012000

G r o

w t h ( )

Figure GrowthUS share of Canadarsquos annual merchandise trade ()

ndash

Source Industry Canada (2013b) calculations by authors

Import Export

45

50

55

60

65

70

75

80

85

90

2011200920072005200320011999199719951993

Import Export

Figure US share of Canadarsquos annual merchandise trade () ndash

Source Industry Canada (2013b)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093

fraserinstituteorg

Table 983091 Top sectors for Canadian merchandise exports to the US 983090983088983089983090

Industry Exports

2002 CA$ bi llions Percentage

Mineral products 886 318

Products of chemical or allied industries 163 59

Plastics and related articles 118 43

Base metals and articles of base metals 200 72

Machinery mechanical appliances electrical equipment and related articles 276 99

Vehicles aircraft vessels and associated transport equipment 530 191

Note On a customs basis

Source Statistics Canada (2013a)

Table 983092 Top industries for Canadian merchandise imports from the US 983090983088983089983090

Industry Imports

2002 CA$ bi llions Percentage

Mineral products 163 85

Products of chemical or allied industries 171 89

Plastics and related articles 127 66

Base metals and articles of base metals 158 82

Machinery mechanical appliances electrical equipment and related articles 413 215

Vehicles aircraft vessels and associated transport equipment 413 215

Note On a customs basis

Source Statistics Canada (2013a)

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983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Trade in services

As a share of overall bilateral trade trade in services is growing gradually otal

bilateral services trade in 983090983088983089983088 amounted to 983089983096 percent of bilateral merchan-

dise trade It was 983089983093 percent in 983090983088983088983095983090 Te United States is by far the largest

trading partner in Canadarsquos international trade in services rade with the

US is nearly ten times the amount with the next largest partner the United

Kingdom But unlike merchandise trade the value of non-US services trade

is nearly half (983092983092 percent in 983090983088983089983088) of that with the USA (table 983093) In other

words there is more diversification from the US market in services than in

merchandise983091

Te trend reveals rising competitiveness on the US side (and non-USA)

as Canadian imports are growing considerably while Canadian exports are

stagnant resulting in a growing services trade deficit (figure 983093)

Bilateral trade in services was not impacted by the US recession as

merchandise trade was otal volume of trade is slightly up in the three years

after 983090983088983088983095 (figure 983094) Most of this gain is from growth in Canadian imports

from the US (and from non-US) while Canadian exports to the USA are

slightly down

Given that there is no growth in Americans traveling to Canada during

this time period (as we will show later) the relative strength of US exports vis-

agrave-vis Canadian exports appears to lie in the commercial sector (tables 983094 983095)

In conclusion in both merchandise and services trade the post 983090983088983088983095

period shows that Canada is relatively losing in trade competitiveness in rela-

tion to the United States Te relative loss of trade competitiveness in our

relationship may be a surprise to many Canadians who believe Canada has

simply been doing better than the US since 983090983088983088983096 Te lsquodoing betterrsquo part may

apply to domestic economic activity but not to external trade

1048626 Data on trade in services is not as recent as merchandise trade

1048627 op export destinations in 983090983088983089983088 after the USA are the UK France and Germany op

importers to Canada in 983090983088983089983088 after the USA include UK Hong Kong (China) France

Germany and Mexico Te case with importers to Canada is similar to that with export-

ing countries Imports from the UK make up roughly 983089983088 percent that of imports from the

US Imports from Hong Kong are 983093983089 percent that from the UK with France at 983092983090 percent

and both Germany and Mexico rest at roughly 983091983096 percent each

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The state of Canada-US relations in 983090983088983089983092 983095

fraserinstituteorg

Table 983093 Services trade between Canada and the US 983090983088983088983093ndash983090983088983089983088 (983090983088983088983090 CA$ billions)

2005 2006 2007 2008 2009 2010

Exports to USA 3988 3815 3834 3966 3718 3700

Imports from USA 4358 4395 4544 4833 4783 4960

Trade balance with USA -370 -580 -710 -866 -1065 -1260

Trade balance with USA -443 -707 -847 -985 -1240 -1455

Exports to non-USA 2832 3080 2985 3052 3142 3102

Imports from non-USA 3022 3187 3380 3518 3496 3722

Trade balance with non-USA -189 -108 -395 -466 -354 -620

Trade balance with non-USA -323 -172 -621 -710 -540 -909

Total services exports 6820 6894 6819 7018 6860 6802

Total services imports 7379 7582 7924 8350 8279 8682

Total trade balance -559 -688 -1105 -1333 -1419 -1880

Total trade balance -394 -475 -750 -867 -937 -1214

Bilateral (X+I) USA 8346 8210 8378 8799 8589 8660

Bilateral (X+I) non-USA 5854 6267 6365 6569 6551 6824

Bilateral (X+I) total 14200 14477 14742 15368 15140 15484

Source Foreign Affairs Trade and Development Canada (2013a)

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983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

80

81

82

83

84

85

86

87

88

89

90

201020092008200720062005

2 0

0 2 C A $ b i l l i o n s

Figure Canada-US net services trade ndash

Source Foreign Affairs Trade and Development Canada (2013a)

-20

-16

-12

-8

-4

0

201020092008200720062005

Trade balance with USA Total trade balance

Figure Canadarsquos trade deficit with US and the world ndash

Source Foreign Affairs Trade and Development Canada (2013a)

2 0 0 2 C A $ b i l

l i o n s

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983097

fraserinstituteorg

Table 983094 Top categories for service trade exports Canada-World 983090983088983089983090

Category Subcategory Exports

2002 CA$ bi llions Percentage

Government services 13 19

Travel services 143 207

Personal travel 119 172

Transportation services 111 161

Air transport 52 76

Commercial services 424 614

Financial services 57 82

Computer and information services 64 93

Intellectual property use 31 44

Management services 90 130

Research and development 33 47

Architectural engineering 39 57

Source Foreign Affairs Trade and Development Canada (2013a)

Table 983095 Top categories for service trade imports Canada-World 983090983088983089983090

Category Subcategory Imports

2002 CA$ billions Percentage

Government services 11 12

Travel services 288 323

Personal travel 253 284

Transportation services 195 219

Water transport 82 92

Air transport 84 95

Commercial services 396 446

Insurance services 44 50

Financial services 44 50

Intellectual property use 89 100

Management services 75 84

Source Foreign Affairs Trade and Development Canada (2013a)

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983089983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

075

080

085

090

095

100

105

2 0 1 3

- 0 7

2 0 1 3

- 0 1

2 0 1 2

- 0 7

2 0 1 2

- 0 1

2 0 1 1

- 0 7

2 0 1 1

- 0 1

2 0 1 0

- 0 7

2 0 1 0

- 0 1

2 0 0 9

- 0 7

2 0 0 9

- 0 1

2 0 0 8

- 0 7

2 0 0 8

- 0 1

2 0 0 7

- 0 7

2 0 0 7

- 0 1

Figure CanadaUS dollar exchange rate ndash

Source Bank of Canada (2013b)

C A U S e x c h a n g e r a t e

Dollar value and productivity trends

Te first factor to consider regarding Canadarsquos trade competitiveness vis-agrave-vis

the United States is the value of the Canadian dollar Te substantial appre-

ciation of the Canadian dollar against the US dollar that began in the early

983090983088983088983088s has stabilized at a much higher average value of the loonie ( figure 983095)

As is well documented such exchange rate appreciation tends to have a strong

effect on current account balances as exports decline (Kappler et al 983090983088983089983089)

A growing account deficit will likely push the value of the Canadian dollar

downward in the longer term and thus offer some remedy

ProductivityOf more concern to Canadians should be the data indicating that Canadian

labour productivity rates are lagging those in the United States (figures 983096 983097)

One would expect that Canadarsquos higher dollar has provided industry in recent

years with an opportunity to improve productivity as imported machinery

and technology would be available at a lower price However Canadarsquos pro-

ductivity rate of growth is modest and in 983090983088983089983090 dips into negative territory

again

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983089983089

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-1

0

1

2

3

20122011201020092008

Canada US

Figure Canada and US rates of output productivity growth ()

ndash

Source Statistics Canada (2013g)

R a t e o f p r o d u c t i v i t y g r o

w t h ( )

-10

-5

0

5

20122011201020092008

Labour productivity (Canada) Real GDP (Canada) Hours worked (Canada)

Labour productivity (US) Real GDP (US) Hours worked (US)

Figure Real US-Canadian output and hours worked () ndash

Source Statistics Canada (2013g)

A n n u a l c

h a n g e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983089983090 fraserinstituteorg

Trade and regulatory barriersdisputes

Table 983096 provides a synopsis of the major trade disputesbarriers that have

played a role in bilateral relations in the last five years and that are pertinent

for the 983090983088983089983092 period (pages 983089983094-983089983095) Te two large disputesmdashKeystone XL and

Mandatory Country-of-Origin Labeling (MCOOL) on red meatmdashare more

ominous than they may seem First both in crude oil products and in cattle

and hogs the United States is unilaterally disrupting or dismantling a well-

established integrated sector Canada has started attempts to diversify its oil

transportation structure including more rail and new pipeline routes But

as all proposed alternative pipelines have shown the alternatives are contro-

versial and at best years away from making a difference Meanwhile there is

considerable risk in putting too much crude oil on rail as its accident rates

are higher than pipe

Canadian threats to counter US MCOOL action with tariffs on food

products are not going to have much impact in the near future Moreover

an escalating tariff war on food products cannot be won by Canada and will

ultimately harm consumers on both sides of the border US defiance of two

WO rulings also means more uncertainty for Canadian traders

Keystone XL pipeline

Proposed in 983090983088983088983096 the Keystone XL (KXL) extension is part of a pipeline sys-

tem connecting Alberta oil sands and US mid-West and Gulf region refineries

KXL is a 983089983096983097983095 km crude oil pipeline with a capacity of 983092983094983093983088983088983088 barrels per

day (Hussain 983090983088983089983091) It is a substantial private infrastructure proposal that

will create employment and guarantee a secure energy source for the United

States (Millington and Murillo 983090983088983089983091) It is by no means a new feature in

Canada-US energy relations as a dense network of oil and electricity carri-ers cross the border at multiple points

What is unprecedented is that the permit process is now in its sixth

year and the final resolution remains uncertain (by US law a cross-border line

requires Department of State approval) If not resolved in 983090983088983089983092 the question

may well be handed over to the next president after 983090983088983089983094 Te policy uncertainty

associated with KXL approval has by far the largest impact on Canada-US trade

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The state of Canada-US relations in 983090983088983089983092 983089983091

fraserinstituteorg

relations Te dragged-out procedure has chilled relations Te southern leg of

KXL has been completed and the original route objection by Nebraska has been

resolved What remains ostensibly the problem is that the US administration

has identified this heavy oil as a component of its policy objective of curbing

the emission of greenhouses gasses to reduce global warming

Te impact of this pipeline delay in the 983090983095 million barrels per day (bpd)

export of Canadian oil products to the USA reverberates at various levels

Across Canada investment in mining oil and gas extraction for 983090983088983089983091 is pre-

dicted to decrease by 983090983095 percentmdashthe largest decline since the 983090983088983088983096 recession

(Statistics Canada 983090983088983089983091f) In Alberta investment is predicted to increase by

only 983088983089 percent (Statistics Canada 983090983088983089983091f) Capital investment in oil and gas

extraction has not recovered to pre-983090983088983088983096 levels (Industry Canada 983090983088983089983091a)

While the industry has become increasingly dependent on rail trans-

port to move product it is a costly alternative It can cost up to three times

as much as pipeline transport (Millington and Murillo 983090983088983089983091) and its limita-

tions are self-evident because rail movement of oil is constrained by the lim-

ited availability of rail cars In 983090983088983089983090 983089983091983088983088983088983088 bpd of heavy crude was being

transported by rail Tis is expected to rise to 983092983090983093983088983088983088 bpd by the end of

983090983088983089983092 falling short of the 983092983094983093983088983088983088 bpd which could have been moved through

KXL (Hussain 983090983088983089983091) Te forced increase in rail transport has resulted in

unintended costs for the industry a total of US$983089 billion must be invested for

new rail terminals and another US$983092ndash983093 billion for new rail cars (Lewis 983090983088983089983091)

Rail transport is both more costly and more dangerous A recent study

concluded that ldquopipeline transportation is safer than transportation by road

rail or barge as measured by incidents injuries and fatalitiesrdquo (Green amp

Furchtgott-Roth 983090983088983089983091) It is not inconceivable that another major oil acci-

dent either in Canada or the USAmdashsuch as took place in Quebec in July 983090983088983089983091

killing 983092983095 peoplemdashwould result in a moratorium on oil transport by rail with

grave consequences for Canadian producers

983090983088983088983090 Mandatory Country-of-Origin Labeling

Mandatory Country-of-Origin Labeling (MCOOL) is a provision mandated

by Congressional law and first implemented in 983090983088983088983096 Te measure imposes

strict segregation rules on American Canadian and Mexican cattle and hogs

and the subsequent slaughtering and processing of these animals to producebeef and pork products for retail sale Te stated purpose is to create labels

that indicate the origin in part or in whole of the product In effect it is a

veiled trade barrier because it gives US animals and products a competitive

advantage due to higher labeling inventory and processing costs for equiva-

lent Canadian products

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983089983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983096 Synopsis of trade disputes in Canadian-American relations in 983090983088983089983091

Dispute Impact and cost Prospect for resolution

Keystone XL Pipeline Very serious Poor

2008 proposal for a 1897

km 465000 bpd crude oilpipeline spanning fromAlberta down to Nebraska

Downward pressure on investment

Lost wages January 2012postponement is costing US $47million a day in lost wages (ConsumerEnergy Alliance 2013)

Continuation of crude oil pricediscounts due to lack of infrastructure

Costly alternative rail has emerged as atransportation alternative but can costup to three times as much as pipelinetravel (Millington and Murillo 2013)

Permit postponed twice

Resolution is not transparent

Rising risk of decision deferral past 2016

Mandatory Country-of-OriginLabelling (MCOOL)

Serious Poor

2008 CongressionalLaw mandating rulesfor segregated livestockprocessing and packagingand a labeling structure inorder to have food labelsindicate origin of product

Annual cost to Canadian beef and porksector of $1 billion

Deconstruction of a highly integratedtrilateral supply chain industry

MCOOL adds no animal health or foodsafety benefits

US has defied both WTO complaint andthe core part of the WTO Appeal ruling

2013 US reaction has been to strengthenthe discriminatory provision banning co-mingling of meats altogether

Canada plans to retaliate with tariffs butthis is a costly gambit with low chance ofsuccess

Softwood Lumber Agreement Moderate Good

In 2011 American softwoodcompanies took theirCanadian counterparts to theLondon Court of InternationalArbitration accusing themof circumventing the SLA(Foreign Affairs Trade andDevelopment Canada 2012a)

If in violation Canadian industry wouldface $380 million in penalties (TheCanadian Press 2012)

The London Court of InternationalArbitration in 2012 ruled in favor ofCanada (Foreign Affairs Trade andDevelopment Canada 2012a)

SLA was to expire in 2013 but Canadaand the USA extended it until 2015 (CBCNews 2012)

Long-term free trade in lumber needs toreplace SLA

Buy American Provision Serious Partial resolution but high risk ofrecurring Buy American legislation

2009 American Recovery andReinvestment Act

Exclusion of Canadian products andproduction sharing in US public worksprocurement

Canada-US Procurement Agreement in2010 which allowed for the purchaseof Canadian goods on seven US

infrastructure projects valued at morethan $7777000

Canada needs to seek a comprehensiveagreement in order to escape futureAmerican protectionism with allprovinces on board and compliant withthe WTO provision

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983089983093

fraserinstituteorg

Dispute Impact and cost Prospect for resolution

Canadian Wheat Board Long-term benefit Completed

Canadarsquos mandatory wheat

marketing board monopsonyended in 2011

Frequent US action against CWB in the

past will now end as wheat marketingin Canada turns fully market based

Intellectual Property Rights Moderate potential cost Partially resolved

Canada has been on theSpecial 301 Priority Watch Listby the United States TradeRepresentative since 1995

Ongoing threat of US Trade Action andlegal action

Canadian domestic complianceincluding

Strengthening data protection

Participation in Anti-counterfeiting TradeAgreement (ACTA in 2013)

Enacted the Combating CounterfeitProducts Act (2013)

Started the process of strengthening

the Copyright Act and implementingWorld Intellectual Property OrganizationInternet Treaties

In recognition of which Canada has beenremoved from the Special 301 PriorityWatch List

Prescription drugs Serious potential for trade action Indirect progress

The US complaint againstCanada

Imposing price ceilings thatshifts the cost burden of RampDto US firms

Weak protection ofintellectual property rights rethird party sales

Slow prescription drugapproval process causingreduced market access

US firms experience lost revenues andtrade action is a risk

In 2013 CETA agreement with theEuropean Union Canada agrees to givefull patent protection to new drugs fortwo years

Two-year rule may be transferable tofuture Canada-US resolution

Table 983096 continued

Canada and the United States have had a deeply integrated market in

this sector since the early 983089983097983097983088s Animal health and food safety standards have

been largely harmonized As a result highly efficient supply-chain production

methods have made this industry quite efficient However the imposition of

MCOOL has changed all that (Moens amp Leon 983090983088983089983090) Te cost differential haswidened and Canadian exports have dropped dramatically Since 983090983088983088983096 the

cattle sector has lost $983094983092983088 million per year and the hog sector has lost $983093983088983088

million a year (Te Canadian Press 983090983088983089983091a)

In 983090983088983089983090 the World rade Organization (WO) ruled in Canadarsquos favor by

concluding that MCOOL is discriminatory Te WO gave the US until May 983090983091

983090983088983089983091 to act but on that same day the USDA imposed regulatory changes that

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983089983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

actually strengthened the provisions of MCOOL In retaliation the Canadian

government released a list of US exports to Canada that would be subjected

to tariffs and it is preparing to seek a compliance panel at the WO Until this

situation is resolved the Canadian government predicts a continuing annual

loss of $983089 billion for the Canadian red meat sector (Te Canadian Press 983090983088983089983091a)

Softwood lumber

In 983090983088983089983089 several American softwood companies took their Canadian counter-

parts to the Court of International Arbitration in London accusing them of cir-

cumventing the Softwood Lumber Agreement of 983090983088983088983094 (Foreign Affairs rade

and Development Canada 983090983088983089983090a) Te dispute centered on the accelerating pace

of lumber harvests resulting from the pine beetle infestation Te stakes were

high $983091983096983088 million in penalties should Canada lose (Te Canadian Press 983090983088983089983090)

In 983090983088983089983090 the Court of International Arbitration ruled in Canadarsquos favor

(Foreign Affairs rade and Development Canada 983090983088983089983090a) In addition while

the Softwood Lumber Agreement was set to expire in 983090983088983089983091 the Canadian

and American governments successfully negotiated an extension of the

Agreement until 983090983088983089983093 (CBC News 983090983088983089983090) Te fact remains that as long as a

large part of Canadarsquos softwood lumber is managed in terms of quotas and

the stumpage fee system US trade action is very likely

lsquoBuy Americanrsquo provision

Te 983090983088983088983097 American Recovery and Reinvestment Act (ARRA which expired

on September 983091983088 983090983088983089983089) and the more recent 983090983088983089983089 American Jobs Act stipu-

lated that steel iron and other goods used in the repair and construction of

infrastructure projects in the US (highways bridges mass transit and fed-

eral buildings) must be manufactured in the United States (Matthiesen 983090983088983089983089)

In response to ARRA Canada and the US signed the Canada-US

Procurement Agreement in 983090983088983089983088 which allowed for the purchase of Canadian

goods on seven US infrastructure projects valued at more than $983095983095983095983095983088983088983088

or within the 983091983095 states subject to the WO GPA (Government of Canada

983090983088983089983091a) Te 983090983088983089983089 American Jobs Act did not pass in Senate and is thus moot

While the ARRA dispute was partially resolved lsquoBuy Americanrsquo anda counter position of lsquoBuy Canadianrsquo can flare up on either side of the bor-

der Canadian industry is most vulnerable in this uncertainty Te Canadian

government ought to seek a comprehensive Buy American exemption to

escape future American protectionism In so doing all provincial govern-

ments need to be on board in order to make the WO and NAFA rules

function optimally

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983089983095

fraserinstituteorg

Canadian Wheat Board (CWB)

In 983090983088983089983089 the Canadian government removed the monopsony held by the

Canadian Wheat Board Tis unilateral action offers a successful reduction

in bilateral trade distortion oday the CWB continues to operate as a mar-

keting group

Intellectual Property Rights (IPR)

From 983089983097983097983093 through 983090983088983089983091 Canada was on the Special 983091983088983089 Priority Watch

List by the United States rade Representative Te US complaint was that

protection and enforcement of IPR in Canada were weak Te Special 983091983088983089

Priority Watch List is designed to identify US trading partners that are the

worst offenders in IPR protection (Embassy of the United States Ottawa

Canada 983090983088983089983091)

Although the issue is not completely resolved Canada has made sig-

nificant progress in recent years Te federal government has strengthened

data protection regulations criminalized the use of camcorders in theaters

and participates in the Anti-Counterfeiting rade Agreement (ACA) nego-

tiations (983090983088983089983091) Most recently Canada enacted the Combatting Counterfeit

Products Act (Embassy of the United States Ottawa Canada 983090983088983089983091) Te

Canadian Government is in the process of strengthening the Copyright Act

and implementing World Intellectual Property Organization Internet reaties

(Embassy of the United States Ottawa Canada 983090983088983089983091)

As a result of these steps Canada was removed from the Special 983091983088983089

Priority Watch List in 983090983088983089983091

Prescription drugs

Prescription drug prices in Canada are relatively low due to a price ceil-

ing mandated by Canadarsquos healthcare system In addition Health Canada

approval times for prescription drugs significantly lag behind their counter-

parts in the United States and the European Union (Barua and Esmail 983090983088983089983091)

US lawmakers have repeatedly expressed their concerns over cheap prescrip-

tion drugs re-entering the US from Canada (Moens and Gabler 983090983088983089983089) TeEU also asked Canada to strengthen IPR protections for prescription drugs

(Lexchin and Gagnon 983090983088983089983091) Since the signing of the CEA agreement in

principle on October 983089983096 983090983088983089983091 the issue between Canada and the EU is now

resolved (Waldie 983090983088983089983091) Canada has agreed to ldquoEU demands for patent pro-

tection for up to two years on brand-name drugsrdquo (Blanchfield 983090983088983089983091)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983089983096 fraserinstituteorg

State of the border andregulatory cooperation

Te decline in Americans traveling to Canada corresponds with the US

Greenback losing value against the Canadian dollar (figures 983089983088 983089983089) However

when we consider the extent of the decline in total numbers it appears dispro-

portionate Te change in American travel suggests instead a bigger problem

following the 983097-983089983089 shock Te imposition of new border transit requirements

such as passports as well as longer wait times and more security screening

has likely dampened US travel across this international boundary Given the

modest economic recovery in the USA from the beginning of 983090983088983089983088 onward

one would expect disposable income including for travel to trend back up

Instead the numbers remain stagnant at around 983090983088 million less than half the

number of 983090983088983088983090

While an overall national average for border wait times is not avail-

able data on major border crossings in both Central Canada and British

Columbia indicate that no reductions in wait times have been achieved

between 983090983088983088983094 and 983090983088983089983089 (figure 983089983090) Te problem of inefficiency as presented

by the Canada-US border goes well beyond wait times It includes inefficient

activity away from the border such as extra warehousing and costs of com-

plying with various facilitated traveler and goods programs such as FAS for

trucks loads and drivers

Tere are consistent cost differences between domestic and cross-bor-

der truck-borne trade which point to significant border costs ldquoFor exports

to the US these costs added 983088983097 percent to the delivered price of goods in

983090983088983088983092 Tis figure fell to 983088983092 percent in 983090983088983088983097 hellip Higher fixed costs per shipment

accounted for most of the additional cost of transporting goods to the USrdquo

(Brown and Anderson 983090983088983089983090) When we consider that in the manufacturingsector parts cross the border several times in various stages of assembly we

realize how this cost accumulates and defeats the efficiency gains otherwise

generated by integrated supply chain manufacturing Border costs are typ-

ically passed on to the consumer as fixed costs per shipment

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The state of Canada-US relations in 983090983088983089983092 983089983097

fraserinstituteorg

An unprecedented border problem has arisen in the current USAdministrationrsquos lengthy (six years) review of the permitting of a pipeline

border crossing as proposed in the Keystone XL project As a result oil-by-

rail transport has recently increased while the pipeline mode of Canada-US

trade has seen a drop in growth in the 983090983088983089983089983089983090 period ( figures 983089983091 983089983092)

0

10

20

30

40

50

201220112010200920082007200620052004200320022001200019991998

Figure Travellers entering Canada ndash

Source Statistics Canada (2013e)

US residents Non-US residents

0

3

6

9

12

15

18

0

03

06

09

12

15

18

20122011201020092008200720062005200420032002

Trips Spending US$CA$ (Secondary axis)

Figure US overnight travel to Canada ndash

Source Statistics Canada (2011) Bank of Canada (2013b)

M i l l i o n s o f t r i p

s N o m i n a l C A $ b i l l i o n s

U S $ C A $ ex c h a n

g er a t e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

5

10

15

20

201120102009200820072006

Northbound average delay Southbound average delay

Figure Peace Arch average border wait time ndash

Source Cascade Gateway Data (2013)

M i n u t e s

0

25

50

75

100

125

150

175

200

225

250

275

300

201220112010200920082007200620052004

2 0 0 4

U S $ b

i l l i o n s

Figure All surface modes of freight flow data based on value of goods

ndash

Source Bureau of Transportation Statistics (2013)

Truck Rail Pipeline

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983089

fraserinstituteorg

lsquoBeyond the Borderrsquo and Regulatory Cooperation

In 983090983088983089983089 Canada and the United States announced an ambitious agreement

to reduce border costs by means of deeper bilateral regulatory and secur-

ity cooperation Te accord seeks to streamline various border proceduresmdash

some already in existence and some newmdashto improve intelligence-sharing

between law enforcement agencies mutual recognition of passenger baggage

screening improved frameworks for trusted trade programs harmoniza-

tion of NEXUS protocols streamlined supply chains enhanced trade com-

petitiveness collaboration in border infrastructure investment and deeper

cooperation in national security investigations Te agreement is known as

Beyond the Border A Shared Vision for Perimeter Security and Economic

Competitiveness (February 983092 983090983088983089983089)

Te Beyond the Border Vision accord also set up a Regulatory

Cooperation Council In it Canadian and American officials seek to reduce

red tape and harmonize regulations in certain key sectors o date the

Council has announced various plans affecting agriculture and food trans-

portation health personal care products workplace chemicals environmentnano materials and small business loans We summarize the key points of

progress made since 983090983088983089983089 in table 983097

-35

-25

-15

-5

5

15

25

35

20122011201020092008200720062005

Truck Rail Pipeline

Figure Growth rate of all surface modes of freight flows () ndash

Source Bureau of Transportation Statistics (2013) calculations by authors

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983090983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983097 Key elements of Beyond the Border and Regulatory Cooperation

Beyond the Border Program

Integrated Cargo Security Strategy (ICSS)December 2011

Reduces administrative duplication between Canada and the US byaddressing security risks in advance within the shipment supply chainand at the border (Canada Border Services Agency 2013)

Prince Rupert Pilot October 2012 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry via rail is examined by Canadian officials onbehalf of the US (Government of Canada 2013c)

Montreal Pilot January 2013 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry to the US via truck is examined by Canadianofficials on behalf of the US (Government of Canada 2013c)

Pre-load Air Cargo Targeting (PACT) Joint pilot by CBSA and Transport Canada to screen cargo pre-flight onCanada-bound airplanes at foreign airports (Canada Border ServicesAgency 2013)

Tamper Evident Technology PilotOctober 2012

Pilot collaboration between CBSA and US CBP to ensure containersremain sealed upon arrival at the US border (Canada Border Services

Agency 2013)

Truck Cargo Pre-Inspection PilotMarch 2013

Pilot program between the CBSA and the US CBP for pre-inspection ofsouthbound traffic into US (Canada Border Services Agency 2013)

Free and Secure Trade (FAST) PilotSarnia Ontario

Pilot program for usage of FAST lanes without Partners in Protection andCustoms Self Assessment programs (Government of Canada 2013c)

Canada-US Shiprider June 2013 Removal of jurisdictional barriers to improve law enforcement personnelin Windsor-Detroit and Vancouver-Blaine waterways (Government ofCanada 2013c)

EntryExit Initiative Phase II June 2013 Exchange entryexit data between the CBSA and US DHS on individualsat Canada-US land border crossings (Government of Canada 2013c)

Regulatory Cooperation ProgramMemorandum of Understanding between Transport Canada and the RailwayAssociation of Canada September 2013

Framework for Canadian rail emissions between 2011 to 2015(Government of Canada 2013d)

Canada-United States Perimeter Approachto Plant Protection September 2013

Draft framework for increased cooperation and reduction inadministrative duplication between the Canadian Food InspectionAgency (CFIA) and United States Animal and Plant Health InspectionService (APHIS) on trade in plants and plant products (Government ofCanada 2013d)

Common Electronic Submission GatewayPilot (CESG) August 2013

FDA and Health Canada will allow pharmaceutical firms to electronicallysubmit drug applications (Government of Canada 2013d)

Initiative to Align Veterinary DrugApprovals December 2012

Joint reviews between US FDA and Health Canada on veterinary drugproducts (Government of Canada 2013d)

Stricter Air Pollutant Emissions Environment Canada aligns car emissions beginning in 2017 with theUS Environmental Protection Agencyrsquos ldquoTier 3rdquo (Government of Canada2013d)

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The state of Canada-US relations in 983090983088983089983092 983090983091

fraserinstituteorg

On September 983092 983090983088983089983091 $983092983094983094 million in investment was allocated to the

Border Action plan by the Government of Canada in order expand two marine

container examination facilities (Government of Canada 983090983088983089983091c) $983091983091 million

was invested by the Government of Canada in the Asia Pacific Gateway and

rade Corridor Initiative (Government of Canada 983090983088983089983091c) Te Plan includes

an additional 983090983097 harmonization initiatives that will enhance trade activity

between Canada and the US

Neither Beyond the Border nor the Regulatory Cooperation Council

offer further investment or cost estimates on the initiatives described in table

983097 Moens and Gabler (983090983088983089983090) pointed to the need for both the Canadian and

American governments to provide data on border costs so that a cost-benefit

analysis can ensue Nonetheless the small steps of progress towards inte-

grating and harmonizing US and Canadian border practices remains a very

important (long-term) part of reducing the profile of the border

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983090983092 fraserinstituteorg

Canadian and American public perceptions

Tree observations are noteworthy in recent assessments of public percep-

tions between Americans and Canadians First Americans consistently have

a very high favourability rating of Canadians typically in the 983097983088 plus range

(table 983089983088 figure 983089983093) Both as a friend and a strategic ally Americans hold

Canadians in the most favourable light possible (table 983089983089) Disagreements over

policy between the two countries whether in defence and foreign affairs or

over border and trade issues do not move this fundamental asset Canadians

enjoy in dealing with their neighbour

Second Canadians do not have high expectations of either the

American or Canadian government regarding progress in bilateral relations

As table 983089983090 shows Canadians hold Obama in high regard (983094983091 percent) but

only 983093983092 percent expect progress from him in trade relations Prime Minister

Harper is rated slightly ahead of President Obama in terms of working hard

towards improving Canada-US relations (table 983089983091)

Tird and most significant in light of Canadarsquos Catch-983090983090 situation both

Canadians and Americans are more supportive of closer cooperation and inte-

gration policies than is the case for political representatives in either the United

States or Canada In two recent studies we showed how US Senators and House

Representatives are quite critical of Canada with regard to NAFA issues and bor-

der security (Moens and Gabler 983090983088983089983089) Similarly we found that among the three

major political parties in Canadarsquos parliament only one consistently expressed

itself in favour of closer ties with the United States (Moens and Gabler 983090983088983089983089)

A recent survey of American and Canadian (and Mexican) attitudes

towards free trade and NAFA show surprisingly strong data for more trade

integration In response to the statement ldquoTere should be more free trade

between the US Canada and Mexicordquo 983096983088 percent of Canadians approved

as did 983095983092 percent of Americans Even on border security Canadians andAmericans are more pro-cooperation and integration than their governmental

policies suggest In the US 983092983089 percent support a common perimeter while

983090983088 percent are opposed In Canada 983092983091 percent support it and 983091983088 percent are

opposed (Graves Pastor and Basaacutentildeez 983090983088983089983091) Terefore in terms of public

mandate both governments would have a case to work towards broader bilat-

eral (or trilateral) cooperation to lower trade barriers

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The state of Canada-US relations in 983090983088983089983092 983090983093

fraserinstituteorg

Table 983089983088 Canadian favourability rating among Americans (February 983090983088983089983090)

Veryfavourable

Mostlyfavourable

Mostlyunfavourable

Veryfavourable Not sure Total

favourableTotal

unfavourable

53 38 3 2 3 91 5

Note n=1015

Source Gallup Poll (2012)

Table 983089983089 Ally or enemy for Americans (June 983090983088983089983091)

Country Ally Friendly Unfriendly Enemy Total Ally andFriendly

Great Britain 66 25 2 1 91

Canada 61 33 2 1 94

China 11 44 26 14 55

Note n=1529Source Gallup Poll (2013)

88

90

92

94

96

98

201220112010200920082007

Figure Canadian favourability among Americans () ndash

Source Gallup Poll (2012)

f a

v o u r a

b l e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983090 What effect will Obama have on Canada-US relations (November 983090983088983089983090)

Canadians Americans

Positive Negative None Positive Negative None

Relationship 62 5 34 48 12 40

Trade 54 10 35 48 12 39

Harmonizing 53 8 40 47 14 39

Note n=1066

Source Abacus Data (2012)

Table 983089983091 Has each leader worked hard to improve Canada-US relations

(July 983090983088983089983090)

Country Agree Disagree Not sure

Stephen Harper 58 32 10

Barack Obama 53 32 15

Note Sample of Canadians

Source HarrisDecima (2012)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983090983095

US policy uncertainty

Canadian economic prospects face their most important challenge in the

United States Te US economic recovery has been modest and real GDP

growth so far has remained below the post-World War II average of post-

recession periods (figure 983089983094) As we noted above the less-than-stellar US

recovery is made even more challenging for Canadian traders in that pro-

ductivity gains in Canada are lagging while the Canadian dollar remains high

On top of that several American-imposed regulatory obstacles to free trade

are depressing trade prospects in crude oil red meat and public works pro-

curement Tese impediments reduce Canadian competitive access to the

US market

A high level of public spending until the January 983090983088983089983091 sequester and

ongoing monetary stimulation have not produced notable US GDP growth

Te seven post-recession periods below show the current average to be well

below the historical average (Young 983090983088983089983091)

983089983097983092983096-983089983097983093983095 983091983096983088

983089983097983093983096-983089983097983094983095 983092983090983096

983089983097983094983096-983089983097983095983095 983091983089983096

983089983097983095983096-983089983097983096983095 983091983089983093

983089983097983096983096-983089983097983097983095 983091983088983093

983089983097983097983096-983090983088983088983095 983090983097983097

983090983088983088983096-983090983088983089983091 983088983095983091

While economic growth has been modest growth in the public debt

has not (figure 983089983095) Publicly held debt in the US is now at 983095983091 percent of GDP

the highest since 983089983097983092983094 (Congressional Budget Office 983090983088983089983091)

Te widening gap between federal government outlays and revenueshas only recently been capped by the Sequester (figure 983089983096) However the

budget Sequester is temporary and final resolution of public spending and

taxation levels remains unclear given repeated gridlock in presidential-con-

gressional policy making High debt levels combined with stalemate over

taxes and budget cuts have produced a case of policy instability or uncer-

tainty in the last five years (Baker Bloom and Davis 983090983088983089983091)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

US policy uncertainty is further aggravated by inaction on the large

lsquoentitlementrsquo programsmdashSocial Security Medicare and Medicaidmdashwhich are

the major drivers of the long-term gap in revenues and spending

-4

-2

0

2

4

6

8

201220062000199419881982197619701964

Figure US GDP growth rate ndash ( forecast)

Source The World Bank (2013b) OECD (2013)

-10

-8

-6

-4

-2

0

0

20

40

60

80

100

20122011201020092008200720062005200420032002

Government deficit as a percentage of GDP Government debt as a percentage of GDP

Figure US Government deficit and debt as a percentage of GDP ndash

Source Congressional Budget Office (2013)

D e fi c i t p e r c e n t a g e ( ) D

e b t p er c en t a g e ( )

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983097

fraserinstituteorg

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

20122003199319831973

Revenue Outlays

Figure US Government revenue and outlays ndash ( US$ billions)

Source Congressional Budget Office (2013)

1 9 8 3 U S $ b i l l i o n s

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 3762

983091983088 fraserinstituteorg

Trade diversification

Given the weakness in near-term US opportunities Canadians are (again)

wondering how to pursue trade diversification away from the United States

Te objective is logical and if achieved will prove advantageous but various

trends in trade and investment show that diversification for Canada is a slow

and arduous journey (table 983089983092)

In terms of overall share exports to China in the last five years have

doubled but the numbersmdashfrom 983090983089983095 percent to 983092983090983094 percentmdashremain rela-

tively low In the same period the US-bound share declined by 983091 percent but

remains a towering 983095983092983093983092 percent Te pattern of small overall impact applies

to all the other top trading partners For example exports to the UK have

increased but exports to Japan and Mexico have essentially stalled When we

consider average export growth rates over the last five years (table 983089983093) we see

a very strong rate for China (983089983093983093 percent) and strong rates for the UK and

South Korea (983096983097 percent and 983094983097 percent) However a 983089983093 percent increase in a

983092 percent overall trade share produces little change Te point we are making

is that at this rate and pattern of trade lsquodiversificationrsquo it will actually take a

very long timemdashwhile relatively small upward trends in trade with the United

States could have a quick and very large impact in the opposite direction

On the import side we notice more trade diversification with the US

share at 983093983088 percent and the Chinese share at 983089983089 percent (table 983089983094) Te Chinese

growth rate on the import side is less than on the export side (table 983089983095) Te

most revealing number may be the high average over five years for Mexico

at 983097 percent Tis could be indicative of a growing supply chain with Mexico

While foreign direct investment (FDI) is not a direct indicator of future

trade trends in investment may harbinger change In terms of outbound

FDI we notice that only a small segment (less than 983089983088 percent) is targeted

for manufacturing (table 983089983096) It is investment in this category in which onewould expect growth in supply chains

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983089

fraserinstituteorg

Table 983089983092 Canadarsquos merchandise exports top ten destinations 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 3291 1 777 2361 1 751 2564 1 749

China 92 4 22 97 3 31 114 3 33

UK 114 2 27 105 2 33 141 2 41

Japan 97 3 23 73 4 23 79 4 23

Mexico 51 5 12 42 5 13 43 5 13

Netherlands 32 8 08 24 8 08 28 8 08

South Korea 34 7 08 31 7 10 32 7 09

Germany 39 6 09 33 6 10 34 6 10

France 28 9 07 23 9 07 20 10 06

Brazil 23 10 05 14 10 04 22 9 06

Total 4237 3145 3424

2011 2012Average

shareValue Rank Share Value Rank Share

US 2750 1 737 2783 1 745 752

China 140 3 38 159 2 43 33

UK 157 2 42 154 3 41 37

Japan 89 4 24 85 4 23 23

Mexico 46 5 12 44 5 12 12

Netherlands 40 7 11 37 6 10 09

South Korea 43 6 11 30 7 08 09

Germany 33 8 09 29 8 08 09

France 26 9 07 26 9 07 07

Brazil 24 10 06 21 10 06 06

Total 3732 3734

Source Industry Canada (2013b)

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983091983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983093 Canadian export growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 56 7 -281 9 106 = 5

China 101 6 65 1 187 3

UK 16 9 -73 2 358 2

Japan 202 3 -250 7 106 = 5

Mexico 179 4 -178 6 43 9

Netherlands -85 10 -255 8 183 4

South Korea 276 2 -80 3 52 8

Germany 160 5 -167 4 54 7

France 36 8 -174 5 -122 10

Brazil 706 1 -380 10 603 1

2011 2012Average

Rank Rank

US 104 8 27 2 02

China 270 4 152 1 155

UK 148 6 -02 4 90

Japan 161 5 -29 6 38

Mexico 94 9 -16 5 24

Netherlands 475 1 -55 7 53

South Korea 374 2 -272 10 70

Germany 05 10 -95 9 -09

France 311 3 23 3 15

Brazil 109 7 -92 8 189

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983091

fraserinstituteorg

Table 983089983094 Canadarsquos merchandise imports top ten sources 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 1992 1 524 1633 1 511 1745 1 504

China 374 2 98 347 2 109 382 2 110

Mexico 157 3 41 145 3 45 190 3 55

Japan 134 4 35 108 4 34 115 4 33

Germany 111 5 29 95 5 30 97 5 28

UK 110 6 29 82 6 26 92 6 27

South Korea 53 9 14 52 7 16 53 7 15

Algeria 67 7 18 33 10 10 31 10 09

Italy 45 10 12 39 9 12 40 9 12

France 53 8 14 49 8 15 47 8 13

Total 3804 3194 3465

2011 2012Average

shareValue Rank Share Value Rank Share

US 1846 1 496 1922 1 506 508

China 402 2 108 417 2 110 107

Mexico 205 3 55 210 3 55 50

Japan 109 4 29 123 4 33 33

Germany 107 5 29 118 5 31 29

UK 86 6 23 70 6 18 25

South Korea 55 7 15 52 7 14 15

Algeria 46 9 12 49 8 13 12

Italy 43 10 11 43 9 11 12

France 46 8 12 41 10 11 13

Total 3723 3796

Source Industry Canada (2013b)

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983091983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983095 Old and new trade prospectsmdashimport growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 29 8 -178 7 89 5

China 112 4 -70 2 123 3

Mexico 43 7 -77 4 337 1

Japan -11 10 -192 8 89 4

Germany 105 5 -149 6 44 7

UK 95 6 -252 9 141 2

South Korea 120 3 -14 1 36 8

Algeria 518 1 -511 10 -50 10

Italy 11 9 -132 5 48 6

France 191 2 -70 3 -35 9

2011 2012Average

Rank Rank

US 88 5 57 4 17

China 82 6 53 5 60

Mexico 111 3 39 6 91

Japan -29 9 151 1 01

Germany 132 2 117 2 50

UK -36 10 -173 10 -45

South Korea 76 7 -37 8 37

Algeria 533 1 91 3 116

Italy 95 4 23 7 09

France 22 8 -97 9 02

Source Industry Canada (2013b) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983093

fraserinstituteorg

In terms of overall Canadian outbound FDI stocks in the US remain

very high despite the recent US recession while growth in stock in Asia is

modest (figure 983089983097) When we examine Canadian FDI in the so-called BRIC

states we notice that investment in both China and India is relatively small

Canadian mining investment in Brazil is much larger (figure 983090983088) In fact when

we examine amounts of FDI we find that Canada is not really a big BRIC

investor other than Brazil Chile Hong Kong and Peru are larger FDI recipi-

ents than China and India (figure 983090983089)

In terms of FDI flowing into Canada we notice the very large share

(983090983096983094983093 percent) in manufacturing which indicates both the predominant

share of US FDI and the extensive integrated supply chains in Canada-US

manufacturing (table 983089983097) Even more than for outbound FDI inflow stocks

show very large US preponderance (figure 983090983090) Such continued concentra-

tion of US FDI in Canada suggests that Canadian trade diversification is not

just a decision to be made by Canadian producers

Like trade growth Chinese FDI growth in Canada is positive but the

overall numbers are small and do not show rapid growth in the last 983091 years

(figure 983090983091)

Table 983089983096 Top industries for outward stocks of FDI 983090983088983089983090

Category Value Share

Mining oil and gas extraction 1099 188

Oil and gas subcategory 542 93

Manufacturing 569 97

Finance and insurance 2334 399

Management of companies and enterprises 757 129

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

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983091983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

1

2

3

4

5

6

7

8

9

10

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n s

Figure Canadian foreign direct investment (stock) BRIC ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Brazil PRC India Russia

0

20

4060

80

100

120

140

160

180

200

220

240

260

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) various regions

ndash

Notes Excluding Mexico Canadian FDI to Mexico in 2012 was $557 billion

Foreign Direct Investment measures the purchase of various forms of capital stock abroad

However tax havens (Barbados Bermuda etc) are frequently found to be some of the highest

recipients of FDI In reality tax havens do not reflect economic growth as FDI figures invested

into tax havens are often reinvested back to the source country in a concept known as

round-tripping (Financial Post 2013) We have accounted for tax havens by removing them from

tables and figures in this section The numbers corresponding to Figure 19 would be Barbados

($593 billion) Bermuda ($118 billion) British Virgin Islands ($21 billion) Cayman Islands ($302

billion)

Source Foreign Affairs Trade and Development Canada (2013c)

US Europe Asia amp Oceania Central amp South America Africa

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The state of Canada-US relations in 983090983088983089983092 983091983095

fraserinstituteorg

Table 983089983097 Top industries for inward stocks of FDI 983090983088983089983090

Category Value Share

Oil and gas extraction 766 147

Manufacturing 1492 287

Petroleum and coal products manufacturing 377 72

Wholesale trade 395 76

Finance and insurance 699 134

Management of companies and enterprises 999 192

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

0

2

4

6

8

10

12

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) Chile Hong Kong

Peru amp Korea ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Chile Hong Kong Peru Korea

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fraserinstituteorg

0

40

80

120

160

200

240

280

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Foreign direct investment (stock) in Canada from top three

countries ndash

Source Foreign Affairs Trade and Development Canada (2013c)

US Netherlands UK

0

2

4

6

8

10

12

201220112010200920082007

2 0 0 2 C A $ b

i l l i o n s

Figure Foreign direct investment (stock) in Canada from China

ndash

Source Foreign Affairs Trade and Development Canada (2013c)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

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fraserinstituteorg

Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

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References

Abacus Data (983090983088983089983090 November 983090983088) Beyond the Canadian-American Border

lthttpabacusdatacawp-contentuploads983090983088983089983090983089983089Can-AM_Report_CABC_

Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5662

The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

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983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5962

983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6062

The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 2: Canadas Catch 22 State of Canada Us Relations in 2014

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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January 2014

Canadarsquos Catch-983090983090 The State of Canada-US Relations in 983090983088983089983092

by Alexander Moens and Alex Bartos

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 362

fraserinstituteorg

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 462

fraserinstituteorg i

Contents

Executive summary iii

Bilateral trade relations 1

Trade and regulatory barriersdisputes 12

State of the border and regulatory cooperation 18

Canadian and American public perceptions 24

US policy uncertainty 27

Trade diversification 30

Conclusion the bilateral and diversification agenda 39

References 41

About the authors 49

Acknowledgments 50

Publishing information 51

Supporting the Fraser Institute 52

Purpose funding amp independence 53

About the Fraser Institute 54

Editorial Advisory Board 55

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg iii

Executive summary

Economic and political relations between Canada and the United States

our most important foreign relationship have worsened since the Fraser

Institutersquos previous report on the state of Canada-US relations Skating on

Tin Ice (Moens 983090983088983089983088) Te recovery of the US economy after the financial

crash in 983090983088983088983096 has been slow Te long-term uncertainty in US budget politics

and public debt resolution remains and the concomitant policy instabilitymdash

as we first noted in US Election 983090983088983089983090 Implications for Canada (Moens and

Clemens 983090983088983089983091)mdashcontinues to put a drag on economic growth Te across-

the-board budget cuts that took effect on January 983089 983090983088983089983091 better known as

sequestration offer a ray of light in the present context as they have imposed

cuts on spending of $983096983092 billion in both 983090983088983089983091 and 983090983088983089983092

Canadian merchandise exports to the United States have weakened

in relative terms At the same time there is not enough Canadian export

diversification to other destinations to make up this relative loss Te natural

resources component of Canadian exports is the only major growing segment

of overall trade In both merchandise and services trade the post-983090983088983088983095 per-

iod shows Canada is losing in trade competitiveness in relation to the United

States Te negative trend in trade competitiveness in services is even big-

ger than in merchandise trade Te relative loss of trade competitiveness in

our relationship may be a surprise to many Canadians who believe Canada

is simply doing better than the United States

Canadarsquos weakening competitiveness vis-agrave-vis the United States is

occurring at the same time as political relations at the top are in a slump

Te main sector in US-bound trade showing growth in the last decade crude

oil products is also the one facing most political interference from US deci-

sion makers Te six-year delay in the international permit for KXL to cross

the Canada-USA border is without precedent in our bilateral relations Atthe same time the US mandatory country-of-origin labeling rule which

took effect in 983090983088983088983097 has severely damaged the decades-old and deeply inte-

grated supply chain in beef and pork costing Canadian producers some $983089

billion per year ldquoBuy Americanrdquo in the public procurement sector remains a

latent threat to bilateral relations While American trade barriers have risen

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983089

Bilateral trade relations

Merchandise trade

Tere is a significant decline in both exports and imports from 983090983088983088983096 to 983090983088983088983097

as a result of the US recession (table 983089) Te sharpest decline is in Canadian

merchandise exports to the US which decreased by 983090983095 percent in 983090983088983088983097 and

still have not recovered to the 983090983088983088983096 level in 983090983088983089983090 Canadian merchandise

imports from the US on the other hand did not fall as sharplymdash983089983094 percent in

983090983088983088983097mdashand in 983090983088983089983090 are only slightly below the 983090983088983088983096 number Tus on balance

Canadian exports to the US have suffered significantly more from the reces-

sion than American exports to Canada (figures 983089 983090) Given this re-balancing

Canadarsquos merchandise trade balance surplus with the USA has been virtu-

ally cut in half (983092983094 percent) from $983095983095 billion in 983090983088983088983096 to $983091983093 billion in 983090983088983089983090983089

Te traditionally large gap between merchandise exports and imports

between Canada and its largest trading partner have shrunk substantially As

a result Canadarsquos trade balance with the world has declined from $983092983089 billion

in 983090983088983088983096 to a deficit of $983089983088 billion in 983090983088983089983090 Te monthly import and export

numbers in 983090983088983089983091 show a continuation of this trend

A noticeable trend in Canada in the last 983095 years reveals that less GDP is

derived from trade (and thus more from Canadarsquos domestic market) while in

the United States the trade versus domestic market share of GDP is on a ris-

ing trend (table 983090) When we examine the US share of Canadarsquos total exports

and imports over a longer period (983089983097983097983091ndash983090983088983089983090) we notice the overall down-

ward trend (figures 983091 983092) Te main causal factors are the higher value of the

Canadian dollar the post-983090983088983088983096 slump in US demand and a certain amount

of diversification in Canadarsquos trade as well as stronger relative growth inCanadarsquos domestic market

1048625 All figures are in real Canadian dollars unless otherwise noted

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

A breakdown of the top export and import sectors in Canada-US trade

shows that the traditionally strong machinery and automotive sectors are

holding well in terms of US exports to Canada but the same sector is weaker

on the Canadian side Te gains on our side are in minerals and energy prod-

ucts (tables 983091 983092) Te slow decline in Canadian exports of manufactured prod-

ucts suggests a weakening on Canadarsquos side in the integrated supply-chain in

this sector Lower productivity and border costs may well play a role

Table 983089 Canadian merchandise trade 983090983088983088983095ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2007 2008 2009 2010 2011 2012

Total exports 41380 42705 32099 34675 38099 38006

Exports to US 31795 32331 23610 25332 27517 27809

Total imports 37291 38877 32691 35508 38036 38993

Imports from US 24215 24666 20641 22312 23475 24360

Total balance 4089 3827 -592 -833 063 -987

Balance with US 7579 7666 2969 3020 4042 3450

Note On a balance of payments basis

Source Statistics Canada (2013d)

15

20

25

30

35

2 0 1 3 - 0 5

2 0 1 3 - 0 1

2 0 1 2 - 0 9

2 0 1 2 - 0 5

2 0 1 2 - 0 1

2 0 1 1 - 0 9

2 0 1 1 - 0 5

2 0 1 1 - 0 1

2 0 1 0 - 0 9

2 0 1 0 - 0 5

2 0 1 0 - 0 1

2 0 0 9 - 0 9

2 0 0 9 - 0 5

2 0 0 9 - 0 1

2 0 0 8 - 0 9

2 0 0 8 - 0 5

2 0 0 8 - 0 1

2 0 0 7 - 0 9

2 0 0 7 - 0 5

2 0 0 7 - 0 1

Import Export

2 0 0 2 C A $ b i l l i o n s

Figure Canadarsquos merchandise trade (monthly) ndash

Source Statistics Canada (2013c) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091

fraserinstituteorg

Table 983090 Merchandise trade as a of GDP 983090983088983088983093ndash983090983088983089983090 (current US$)

2005 2006 2007 2008 2009 2010 2011 2012

Canada 602 584 569 583 483 501 515 510

Growth 02 -30 -26 25 -172 37 28 -10

US 210 221 227 243 191 225 250 248

Growth 61 52 27 70 -214 178 111 -08

Source The World Bank (2013a)

0

1

2

3

4

5

6

7

8

9

2 0 1 3

- 0 5

2 0 1 3

- 0 1

2 0 1 2

- 0 9

2 0 1 2

- 0 5

2 0 1 2

- 0 1

2 0 1 1

- 0 9

2 0 1 1

- 0 5

2 0 1 1

- 0 1

2 0 1 0

- 0 9

2 0 1 0

- 0 5

2 0 1 0

- 0 1

2 0 0 9

- 0 9

2 0 0 9

- 0 5

2 0 0 9

- 0 1

2 0 0 8

- 0 9

2 0 0 8

- 0 5

2 0 0 8

- 0 1

2 0 0 7

- 0 9

2 0 0 7

- 0 5

2 0 0 7

- 0 1

2 0 0 2 C A $ b i l l i o n s

Figure Canada-US net merchandise trade (monthly) ndash

Source Statistics Canada (2013c) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

-5

-4

-3

-2

-1

0

1

2

3

2012201120102009200820072006200520042003200220012000

G r o

w t h ( )

Figure GrowthUS share of Canadarsquos annual merchandise trade ()

ndash

Source Industry Canada (2013b) calculations by authors

Import Export

45

50

55

60

65

70

75

80

85

90

2011200920072005200320011999199719951993

Import Export

Figure US share of Canadarsquos annual merchandise trade () ndash

Source Industry Canada (2013b)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093

fraserinstituteorg

Table 983091 Top sectors for Canadian merchandise exports to the US 983090983088983089983090

Industry Exports

2002 CA$ bi llions Percentage

Mineral products 886 318

Products of chemical or allied industries 163 59

Plastics and related articles 118 43

Base metals and articles of base metals 200 72

Machinery mechanical appliances electrical equipment and related articles 276 99

Vehicles aircraft vessels and associated transport equipment 530 191

Note On a customs basis

Source Statistics Canada (2013a)

Table 983092 Top industries for Canadian merchandise imports from the US 983090983088983089983090

Industry Imports

2002 CA$ bi llions Percentage

Mineral products 163 85

Products of chemical or allied industries 171 89

Plastics and related articles 127 66

Base metals and articles of base metals 158 82

Machinery mechanical appliances electrical equipment and related articles 413 215

Vehicles aircraft vessels and associated transport equipment 413 215

Note On a customs basis

Source Statistics Canada (2013a)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Trade in services

As a share of overall bilateral trade trade in services is growing gradually otal

bilateral services trade in 983090983088983089983088 amounted to 983089983096 percent of bilateral merchan-

dise trade It was 983089983093 percent in 983090983088983088983095983090 Te United States is by far the largest

trading partner in Canadarsquos international trade in services rade with the

US is nearly ten times the amount with the next largest partner the United

Kingdom But unlike merchandise trade the value of non-US services trade

is nearly half (983092983092 percent in 983090983088983089983088) of that with the USA (table 983093) In other

words there is more diversification from the US market in services than in

merchandise983091

Te trend reveals rising competitiveness on the US side (and non-USA)

as Canadian imports are growing considerably while Canadian exports are

stagnant resulting in a growing services trade deficit (figure 983093)

Bilateral trade in services was not impacted by the US recession as

merchandise trade was otal volume of trade is slightly up in the three years

after 983090983088983088983095 (figure 983094) Most of this gain is from growth in Canadian imports

from the US (and from non-US) while Canadian exports to the USA are

slightly down

Given that there is no growth in Americans traveling to Canada during

this time period (as we will show later) the relative strength of US exports vis-

agrave-vis Canadian exports appears to lie in the commercial sector (tables 983094 983095)

In conclusion in both merchandise and services trade the post 983090983088983088983095

period shows that Canada is relatively losing in trade competitiveness in rela-

tion to the United States Te relative loss of trade competitiveness in our

relationship may be a surprise to many Canadians who believe Canada has

simply been doing better than the US since 983090983088983088983096 Te lsquodoing betterrsquo part may

apply to domestic economic activity but not to external trade

1048626 Data on trade in services is not as recent as merchandise trade

1048627 op export destinations in 983090983088983089983088 after the USA are the UK France and Germany op

importers to Canada in 983090983088983089983088 after the USA include UK Hong Kong (China) France

Germany and Mexico Te case with importers to Canada is similar to that with export-

ing countries Imports from the UK make up roughly 983089983088 percent that of imports from the

US Imports from Hong Kong are 983093983089 percent that from the UK with France at 983092983090 percent

and both Germany and Mexico rest at roughly 983091983096 percent each

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983095

fraserinstituteorg

Table 983093 Services trade between Canada and the US 983090983088983088983093ndash983090983088983089983088 (983090983088983088983090 CA$ billions)

2005 2006 2007 2008 2009 2010

Exports to USA 3988 3815 3834 3966 3718 3700

Imports from USA 4358 4395 4544 4833 4783 4960

Trade balance with USA -370 -580 -710 -866 -1065 -1260

Trade balance with USA -443 -707 -847 -985 -1240 -1455

Exports to non-USA 2832 3080 2985 3052 3142 3102

Imports from non-USA 3022 3187 3380 3518 3496 3722

Trade balance with non-USA -189 -108 -395 -466 -354 -620

Trade balance with non-USA -323 -172 -621 -710 -540 -909

Total services exports 6820 6894 6819 7018 6860 6802

Total services imports 7379 7582 7924 8350 8279 8682

Total trade balance -559 -688 -1105 -1333 -1419 -1880

Total trade balance -394 -475 -750 -867 -937 -1214

Bilateral (X+I) USA 8346 8210 8378 8799 8589 8660

Bilateral (X+I) non-USA 5854 6267 6365 6569 6551 6824

Bilateral (X+I) total 14200 14477 14742 15368 15140 15484

Source Foreign Affairs Trade and Development Canada (2013a)

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983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

80

81

82

83

84

85

86

87

88

89

90

201020092008200720062005

2 0

0 2 C A $ b i l l i o n s

Figure Canada-US net services trade ndash

Source Foreign Affairs Trade and Development Canada (2013a)

-20

-16

-12

-8

-4

0

201020092008200720062005

Trade balance with USA Total trade balance

Figure Canadarsquos trade deficit with US and the world ndash

Source Foreign Affairs Trade and Development Canada (2013a)

2 0 0 2 C A $ b i l

l i o n s

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983097

fraserinstituteorg

Table 983094 Top categories for service trade exports Canada-World 983090983088983089983090

Category Subcategory Exports

2002 CA$ bi llions Percentage

Government services 13 19

Travel services 143 207

Personal travel 119 172

Transportation services 111 161

Air transport 52 76

Commercial services 424 614

Financial services 57 82

Computer and information services 64 93

Intellectual property use 31 44

Management services 90 130

Research and development 33 47

Architectural engineering 39 57

Source Foreign Affairs Trade and Development Canada (2013a)

Table 983095 Top categories for service trade imports Canada-World 983090983088983089983090

Category Subcategory Imports

2002 CA$ billions Percentage

Government services 11 12

Travel services 288 323

Personal travel 253 284

Transportation services 195 219

Water transport 82 92

Air transport 84 95

Commercial services 396 446

Insurance services 44 50

Financial services 44 50

Intellectual property use 89 100

Management services 75 84

Source Foreign Affairs Trade and Development Canada (2013a)

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983089983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

075

080

085

090

095

100

105

2 0 1 3

- 0 7

2 0 1 3

- 0 1

2 0 1 2

- 0 7

2 0 1 2

- 0 1

2 0 1 1

- 0 7

2 0 1 1

- 0 1

2 0 1 0

- 0 7

2 0 1 0

- 0 1

2 0 0 9

- 0 7

2 0 0 9

- 0 1

2 0 0 8

- 0 7

2 0 0 8

- 0 1

2 0 0 7

- 0 7

2 0 0 7

- 0 1

Figure CanadaUS dollar exchange rate ndash

Source Bank of Canada (2013b)

C A U S e x c h a n g e r a t e

Dollar value and productivity trends

Te first factor to consider regarding Canadarsquos trade competitiveness vis-agrave-vis

the United States is the value of the Canadian dollar Te substantial appre-

ciation of the Canadian dollar against the US dollar that began in the early

983090983088983088983088s has stabilized at a much higher average value of the loonie ( figure 983095)

As is well documented such exchange rate appreciation tends to have a strong

effect on current account balances as exports decline (Kappler et al 983090983088983089983089)

A growing account deficit will likely push the value of the Canadian dollar

downward in the longer term and thus offer some remedy

ProductivityOf more concern to Canadians should be the data indicating that Canadian

labour productivity rates are lagging those in the United States (figures 983096 983097)

One would expect that Canadarsquos higher dollar has provided industry in recent

years with an opportunity to improve productivity as imported machinery

and technology would be available at a lower price However Canadarsquos pro-

ductivity rate of growth is modest and in 983090983088983089983090 dips into negative territory

again

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983089983089

fraserinstituteorg

-1

0

1

2

3

20122011201020092008

Canada US

Figure Canada and US rates of output productivity growth ()

ndash

Source Statistics Canada (2013g)

R a t e o f p r o d u c t i v i t y g r o

w t h ( )

-10

-5

0

5

20122011201020092008

Labour productivity (Canada) Real GDP (Canada) Hours worked (Canada)

Labour productivity (US) Real GDP (US) Hours worked (US)

Figure Real US-Canadian output and hours worked () ndash

Source Statistics Canada (2013g)

A n n u a l c

h a n g e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983089983090 fraserinstituteorg

Trade and regulatory barriersdisputes

Table 983096 provides a synopsis of the major trade disputesbarriers that have

played a role in bilateral relations in the last five years and that are pertinent

for the 983090983088983089983092 period (pages 983089983094-983089983095) Te two large disputesmdashKeystone XL and

Mandatory Country-of-Origin Labeling (MCOOL) on red meatmdashare more

ominous than they may seem First both in crude oil products and in cattle

and hogs the United States is unilaterally disrupting or dismantling a well-

established integrated sector Canada has started attempts to diversify its oil

transportation structure including more rail and new pipeline routes But

as all proposed alternative pipelines have shown the alternatives are contro-

versial and at best years away from making a difference Meanwhile there is

considerable risk in putting too much crude oil on rail as its accident rates

are higher than pipe

Canadian threats to counter US MCOOL action with tariffs on food

products are not going to have much impact in the near future Moreover

an escalating tariff war on food products cannot be won by Canada and will

ultimately harm consumers on both sides of the border US defiance of two

WO rulings also means more uncertainty for Canadian traders

Keystone XL pipeline

Proposed in 983090983088983088983096 the Keystone XL (KXL) extension is part of a pipeline sys-

tem connecting Alberta oil sands and US mid-West and Gulf region refineries

KXL is a 983089983096983097983095 km crude oil pipeline with a capacity of 983092983094983093983088983088983088 barrels per

day (Hussain 983090983088983089983091) It is a substantial private infrastructure proposal that

will create employment and guarantee a secure energy source for the United

States (Millington and Murillo 983090983088983089983091) It is by no means a new feature in

Canada-US energy relations as a dense network of oil and electricity carri-ers cross the border at multiple points

What is unprecedented is that the permit process is now in its sixth

year and the final resolution remains uncertain (by US law a cross-border line

requires Department of State approval) If not resolved in 983090983088983089983092 the question

may well be handed over to the next president after 983090983088983089983094 Te policy uncertainty

associated with KXL approval has by far the largest impact on Canada-US trade

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The state of Canada-US relations in 983090983088983089983092 983089983091

fraserinstituteorg

relations Te dragged-out procedure has chilled relations Te southern leg of

KXL has been completed and the original route objection by Nebraska has been

resolved What remains ostensibly the problem is that the US administration

has identified this heavy oil as a component of its policy objective of curbing

the emission of greenhouses gasses to reduce global warming

Te impact of this pipeline delay in the 983090983095 million barrels per day (bpd)

export of Canadian oil products to the USA reverberates at various levels

Across Canada investment in mining oil and gas extraction for 983090983088983089983091 is pre-

dicted to decrease by 983090983095 percentmdashthe largest decline since the 983090983088983088983096 recession

(Statistics Canada 983090983088983089983091f) In Alberta investment is predicted to increase by

only 983088983089 percent (Statistics Canada 983090983088983089983091f) Capital investment in oil and gas

extraction has not recovered to pre-983090983088983088983096 levels (Industry Canada 983090983088983089983091a)

While the industry has become increasingly dependent on rail trans-

port to move product it is a costly alternative It can cost up to three times

as much as pipeline transport (Millington and Murillo 983090983088983089983091) and its limita-

tions are self-evident because rail movement of oil is constrained by the lim-

ited availability of rail cars In 983090983088983089983090 983089983091983088983088983088983088 bpd of heavy crude was being

transported by rail Tis is expected to rise to 983092983090983093983088983088983088 bpd by the end of

983090983088983089983092 falling short of the 983092983094983093983088983088983088 bpd which could have been moved through

KXL (Hussain 983090983088983089983091) Te forced increase in rail transport has resulted in

unintended costs for the industry a total of US$983089 billion must be invested for

new rail terminals and another US$983092ndash983093 billion for new rail cars (Lewis 983090983088983089983091)

Rail transport is both more costly and more dangerous A recent study

concluded that ldquopipeline transportation is safer than transportation by road

rail or barge as measured by incidents injuries and fatalitiesrdquo (Green amp

Furchtgott-Roth 983090983088983089983091) It is not inconceivable that another major oil acci-

dent either in Canada or the USAmdashsuch as took place in Quebec in July 983090983088983089983091

killing 983092983095 peoplemdashwould result in a moratorium on oil transport by rail with

grave consequences for Canadian producers

983090983088983088983090 Mandatory Country-of-Origin Labeling

Mandatory Country-of-Origin Labeling (MCOOL) is a provision mandated

by Congressional law and first implemented in 983090983088983088983096 Te measure imposes

strict segregation rules on American Canadian and Mexican cattle and hogs

and the subsequent slaughtering and processing of these animals to producebeef and pork products for retail sale Te stated purpose is to create labels

that indicate the origin in part or in whole of the product In effect it is a

veiled trade barrier because it gives US animals and products a competitive

advantage due to higher labeling inventory and processing costs for equiva-

lent Canadian products

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983089983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983096 Synopsis of trade disputes in Canadian-American relations in 983090983088983089983091

Dispute Impact and cost Prospect for resolution

Keystone XL Pipeline Very serious Poor

2008 proposal for a 1897

km 465000 bpd crude oilpipeline spanning fromAlberta down to Nebraska

Downward pressure on investment

Lost wages January 2012postponement is costing US $47million a day in lost wages (ConsumerEnergy Alliance 2013)

Continuation of crude oil pricediscounts due to lack of infrastructure

Costly alternative rail has emerged as atransportation alternative but can costup to three times as much as pipelinetravel (Millington and Murillo 2013)

Permit postponed twice

Resolution is not transparent

Rising risk of decision deferral past 2016

Mandatory Country-of-OriginLabelling (MCOOL)

Serious Poor

2008 CongressionalLaw mandating rulesfor segregated livestockprocessing and packagingand a labeling structure inorder to have food labelsindicate origin of product

Annual cost to Canadian beef and porksector of $1 billion

Deconstruction of a highly integratedtrilateral supply chain industry

MCOOL adds no animal health or foodsafety benefits

US has defied both WTO complaint andthe core part of the WTO Appeal ruling

2013 US reaction has been to strengthenthe discriminatory provision banning co-mingling of meats altogether

Canada plans to retaliate with tariffs butthis is a costly gambit with low chance ofsuccess

Softwood Lumber Agreement Moderate Good

In 2011 American softwoodcompanies took theirCanadian counterparts to theLondon Court of InternationalArbitration accusing themof circumventing the SLA(Foreign Affairs Trade andDevelopment Canada 2012a)

If in violation Canadian industry wouldface $380 million in penalties (TheCanadian Press 2012)

The London Court of InternationalArbitration in 2012 ruled in favor ofCanada (Foreign Affairs Trade andDevelopment Canada 2012a)

SLA was to expire in 2013 but Canadaand the USA extended it until 2015 (CBCNews 2012)

Long-term free trade in lumber needs toreplace SLA

Buy American Provision Serious Partial resolution but high risk ofrecurring Buy American legislation

2009 American Recovery andReinvestment Act

Exclusion of Canadian products andproduction sharing in US public worksprocurement

Canada-US Procurement Agreement in2010 which allowed for the purchaseof Canadian goods on seven US

infrastructure projects valued at morethan $7777000

Canada needs to seek a comprehensiveagreement in order to escape futureAmerican protectionism with allprovinces on board and compliant withthe WTO provision

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The state of Canada-US relations in 983090983088983089983092 983089983093

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Dispute Impact and cost Prospect for resolution

Canadian Wheat Board Long-term benefit Completed

Canadarsquos mandatory wheat

marketing board monopsonyended in 2011

Frequent US action against CWB in the

past will now end as wheat marketingin Canada turns fully market based

Intellectual Property Rights Moderate potential cost Partially resolved

Canada has been on theSpecial 301 Priority Watch Listby the United States TradeRepresentative since 1995

Ongoing threat of US Trade Action andlegal action

Canadian domestic complianceincluding

Strengthening data protection

Participation in Anti-counterfeiting TradeAgreement (ACTA in 2013)

Enacted the Combating CounterfeitProducts Act (2013)

Started the process of strengthening

the Copyright Act and implementingWorld Intellectual Property OrganizationInternet Treaties

In recognition of which Canada has beenremoved from the Special 301 PriorityWatch List

Prescription drugs Serious potential for trade action Indirect progress

The US complaint againstCanada

Imposing price ceilings thatshifts the cost burden of RampDto US firms

Weak protection ofintellectual property rights rethird party sales

Slow prescription drugapproval process causingreduced market access

US firms experience lost revenues andtrade action is a risk

In 2013 CETA agreement with theEuropean Union Canada agrees to givefull patent protection to new drugs fortwo years

Two-year rule may be transferable tofuture Canada-US resolution

Table 983096 continued

Canada and the United States have had a deeply integrated market in

this sector since the early 983089983097983097983088s Animal health and food safety standards have

been largely harmonized As a result highly efficient supply-chain production

methods have made this industry quite efficient However the imposition of

MCOOL has changed all that (Moens amp Leon 983090983088983089983090) Te cost differential haswidened and Canadian exports have dropped dramatically Since 983090983088983088983096 the

cattle sector has lost $983094983092983088 million per year and the hog sector has lost $983093983088983088

million a year (Te Canadian Press 983090983088983089983091a)

In 983090983088983089983090 the World rade Organization (WO) ruled in Canadarsquos favor by

concluding that MCOOL is discriminatory Te WO gave the US until May 983090983091

983090983088983089983091 to act but on that same day the USDA imposed regulatory changes that

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983089983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

actually strengthened the provisions of MCOOL In retaliation the Canadian

government released a list of US exports to Canada that would be subjected

to tariffs and it is preparing to seek a compliance panel at the WO Until this

situation is resolved the Canadian government predicts a continuing annual

loss of $983089 billion for the Canadian red meat sector (Te Canadian Press 983090983088983089983091a)

Softwood lumber

In 983090983088983089983089 several American softwood companies took their Canadian counter-

parts to the Court of International Arbitration in London accusing them of cir-

cumventing the Softwood Lumber Agreement of 983090983088983088983094 (Foreign Affairs rade

and Development Canada 983090983088983089983090a) Te dispute centered on the accelerating pace

of lumber harvests resulting from the pine beetle infestation Te stakes were

high $983091983096983088 million in penalties should Canada lose (Te Canadian Press 983090983088983089983090)

In 983090983088983089983090 the Court of International Arbitration ruled in Canadarsquos favor

(Foreign Affairs rade and Development Canada 983090983088983089983090a) In addition while

the Softwood Lumber Agreement was set to expire in 983090983088983089983091 the Canadian

and American governments successfully negotiated an extension of the

Agreement until 983090983088983089983093 (CBC News 983090983088983089983090) Te fact remains that as long as a

large part of Canadarsquos softwood lumber is managed in terms of quotas and

the stumpage fee system US trade action is very likely

lsquoBuy Americanrsquo provision

Te 983090983088983088983097 American Recovery and Reinvestment Act (ARRA which expired

on September 983091983088 983090983088983089983089) and the more recent 983090983088983089983089 American Jobs Act stipu-

lated that steel iron and other goods used in the repair and construction of

infrastructure projects in the US (highways bridges mass transit and fed-

eral buildings) must be manufactured in the United States (Matthiesen 983090983088983089983089)

In response to ARRA Canada and the US signed the Canada-US

Procurement Agreement in 983090983088983089983088 which allowed for the purchase of Canadian

goods on seven US infrastructure projects valued at more than $983095983095983095983095983088983088983088

or within the 983091983095 states subject to the WO GPA (Government of Canada

983090983088983089983091a) Te 983090983088983089983089 American Jobs Act did not pass in Senate and is thus moot

While the ARRA dispute was partially resolved lsquoBuy Americanrsquo anda counter position of lsquoBuy Canadianrsquo can flare up on either side of the bor-

der Canadian industry is most vulnerable in this uncertainty Te Canadian

government ought to seek a comprehensive Buy American exemption to

escape future American protectionism In so doing all provincial govern-

ments need to be on board in order to make the WO and NAFA rules

function optimally

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The state of Canada-US relations in 983090983088983089983092 983089983095

fraserinstituteorg

Canadian Wheat Board (CWB)

In 983090983088983089983089 the Canadian government removed the monopsony held by the

Canadian Wheat Board Tis unilateral action offers a successful reduction

in bilateral trade distortion oday the CWB continues to operate as a mar-

keting group

Intellectual Property Rights (IPR)

From 983089983097983097983093 through 983090983088983089983091 Canada was on the Special 983091983088983089 Priority Watch

List by the United States rade Representative Te US complaint was that

protection and enforcement of IPR in Canada were weak Te Special 983091983088983089

Priority Watch List is designed to identify US trading partners that are the

worst offenders in IPR protection (Embassy of the United States Ottawa

Canada 983090983088983089983091)

Although the issue is not completely resolved Canada has made sig-

nificant progress in recent years Te federal government has strengthened

data protection regulations criminalized the use of camcorders in theaters

and participates in the Anti-Counterfeiting rade Agreement (ACA) nego-

tiations (983090983088983089983091) Most recently Canada enacted the Combatting Counterfeit

Products Act (Embassy of the United States Ottawa Canada 983090983088983089983091) Te

Canadian Government is in the process of strengthening the Copyright Act

and implementing World Intellectual Property Organization Internet reaties

(Embassy of the United States Ottawa Canada 983090983088983089983091)

As a result of these steps Canada was removed from the Special 983091983088983089

Priority Watch List in 983090983088983089983091

Prescription drugs

Prescription drug prices in Canada are relatively low due to a price ceil-

ing mandated by Canadarsquos healthcare system In addition Health Canada

approval times for prescription drugs significantly lag behind their counter-

parts in the United States and the European Union (Barua and Esmail 983090983088983089983091)

US lawmakers have repeatedly expressed their concerns over cheap prescrip-

tion drugs re-entering the US from Canada (Moens and Gabler 983090983088983089983089) TeEU also asked Canada to strengthen IPR protections for prescription drugs

(Lexchin and Gagnon 983090983088983089983091) Since the signing of the CEA agreement in

principle on October 983089983096 983090983088983089983091 the issue between Canada and the EU is now

resolved (Waldie 983090983088983089983091) Canada has agreed to ldquoEU demands for patent pro-

tection for up to two years on brand-name drugsrdquo (Blanchfield 983090983088983089983091)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983089983096 fraserinstituteorg

State of the border andregulatory cooperation

Te decline in Americans traveling to Canada corresponds with the US

Greenback losing value against the Canadian dollar (figures 983089983088 983089983089) However

when we consider the extent of the decline in total numbers it appears dispro-

portionate Te change in American travel suggests instead a bigger problem

following the 983097-983089983089 shock Te imposition of new border transit requirements

such as passports as well as longer wait times and more security screening

has likely dampened US travel across this international boundary Given the

modest economic recovery in the USA from the beginning of 983090983088983089983088 onward

one would expect disposable income including for travel to trend back up

Instead the numbers remain stagnant at around 983090983088 million less than half the

number of 983090983088983088983090

While an overall national average for border wait times is not avail-

able data on major border crossings in both Central Canada and British

Columbia indicate that no reductions in wait times have been achieved

between 983090983088983088983094 and 983090983088983089983089 (figure 983089983090) Te problem of inefficiency as presented

by the Canada-US border goes well beyond wait times It includes inefficient

activity away from the border such as extra warehousing and costs of com-

plying with various facilitated traveler and goods programs such as FAS for

trucks loads and drivers

Tere are consistent cost differences between domestic and cross-bor-

der truck-borne trade which point to significant border costs ldquoFor exports

to the US these costs added 983088983097 percent to the delivered price of goods in

983090983088983088983092 Tis figure fell to 983088983092 percent in 983090983088983088983097 hellip Higher fixed costs per shipment

accounted for most of the additional cost of transporting goods to the USrdquo

(Brown and Anderson 983090983088983089983090) When we consider that in the manufacturingsector parts cross the border several times in various stages of assembly we

realize how this cost accumulates and defeats the efficiency gains otherwise

generated by integrated supply chain manufacturing Border costs are typ-

ically passed on to the consumer as fixed costs per shipment

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The state of Canada-US relations in 983090983088983089983092 983089983097

fraserinstituteorg

An unprecedented border problem has arisen in the current USAdministrationrsquos lengthy (six years) review of the permitting of a pipeline

border crossing as proposed in the Keystone XL project As a result oil-by-

rail transport has recently increased while the pipeline mode of Canada-US

trade has seen a drop in growth in the 983090983088983089983089983089983090 period ( figures 983089983091 983089983092)

0

10

20

30

40

50

201220112010200920082007200620052004200320022001200019991998

Figure Travellers entering Canada ndash

Source Statistics Canada (2013e)

US residents Non-US residents

0

3

6

9

12

15

18

0

03

06

09

12

15

18

20122011201020092008200720062005200420032002

Trips Spending US$CA$ (Secondary axis)

Figure US overnight travel to Canada ndash

Source Statistics Canada (2011) Bank of Canada (2013b)

M i l l i o n s o f t r i p

s N o m i n a l C A $ b i l l i o n s

U S $ C A $ ex c h a n

g er a t e

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983090983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

5

10

15

20

201120102009200820072006

Northbound average delay Southbound average delay

Figure Peace Arch average border wait time ndash

Source Cascade Gateway Data (2013)

M i n u t e s

0

25

50

75

100

125

150

175

200

225

250

275

300

201220112010200920082007200620052004

2 0 0 4

U S $ b

i l l i o n s

Figure All surface modes of freight flow data based on value of goods

ndash

Source Bureau of Transportation Statistics (2013)

Truck Rail Pipeline

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983089

fraserinstituteorg

lsquoBeyond the Borderrsquo and Regulatory Cooperation

In 983090983088983089983089 Canada and the United States announced an ambitious agreement

to reduce border costs by means of deeper bilateral regulatory and secur-

ity cooperation Te accord seeks to streamline various border proceduresmdash

some already in existence and some newmdashto improve intelligence-sharing

between law enforcement agencies mutual recognition of passenger baggage

screening improved frameworks for trusted trade programs harmoniza-

tion of NEXUS protocols streamlined supply chains enhanced trade com-

petitiveness collaboration in border infrastructure investment and deeper

cooperation in national security investigations Te agreement is known as

Beyond the Border A Shared Vision for Perimeter Security and Economic

Competitiveness (February 983092 983090983088983089983089)

Te Beyond the Border Vision accord also set up a Regulatory

Cooperation Council In it Canadian and American officials seek to reduce

red tape and harmonize regulations in certain key sectors o date the

Council has announced various plans affecting agriculture and food trans-

portation health personal care products workplace chemicals environmentnano materials and small business loans We summarize the key points of

progress made since 983090983088983089983089 in table 983097

-35

-25

-15

-5

5

15

25

35

20122011201020092008200720062005

Truck Rail Pipeline

Figure Growth rate of all surface modes of freight flows () ndash

Source Bureau of Transportation Statistics (2013) calculations by authors

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983090983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983097 Key elements of Beyond the Border and Regulatory Cooperation

Beyond the Border Program

Integrated Cargo Security Strategy (ICSS)December 2011

Reduces administrative duplication between Canada and the US byaddressing security risks in advance within the shipment supply chainand at the border (Canada Border Services Agency 2013)

Prince Rupert Pilot October 2012 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry via rail is examined by Canadian officials onbehalf of the US (Government of Canada 2013c)

Montreal Pilot January 2013 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry to the US via truck is examined by Canadianofficials on behalf of the US (Government of Canada 2013c)

Pre-load Air Cargo Targeting (PACT) Joint pilot by CBSA and Transport Canada to screen cargo pre-flight onCanada-bound airplanes at foreign airports (Canada Border ServicesAgency 2013)

Tamper Evident Technology PilotOctober 2012

Pilot collaboration between CBSA and US CBP to ensure containersremain sealed upon arrival at the US border (Canada Border Services

Agency 2013)

Truck Cargo Pre-Inspection PilotMarch 2013

Pilot program between the CBSA and the US CBP for pre-inspection ofsouthbound traffic into US (Canada Border Services Agency 2013)

Free and Secure Trade (FAST) PilotSarnia Ontario

Pilot program for usage of FAST lanes without Partners in Protection andCustoms Self Assessment programs (Government of Canada 2013c)

Canada-US Shiprider June 2013 Removal of jurisdictional barriers to improve law enforcement personnelin Windsor-Detroit and Vancouver-Blaine waterways (Government ofCanada 2013c)

EntryExit Initiative Phase II June 2013 Exchange entryexit data between the CBSA and US DHS on individualsat Canada-US land border crossings (Government of Canada 2013c)

Regulatory Cooperation ProgramMemorandum of Understanding between Transport Canada and the RailwayAssociation of Canada September 2013

Framework for Canadian rail emissions between 2011 to 2015(Government of Canada 2013d)

Canada-United States Perimeter Approachto Plant Protection September 2013

Draft framework for increased cooperation and reduction inadministrative duplication between the Canadian Food InspectionAgency (CFIA) and United States Animal and Plant Health InspectionService (APHIS) on trade in plants and plant products (Government ofCanada 2013d)

Common Electronic Submission GatewayPilot (CESG) August 2013

FDA and Health Canada will allow pharmaceutical firms to electronicallysubmit drug applications (Government of Canada 2013d)

Initiative to Align Veterinary DrugApprovals December 2012

Joint reviews between US FDA and Health Canada on veterinary drugproducts (Government of Canada 2013d)

Stricter Air Pollutant Emissions Environment Canada aligns car emissions beginning in 2017 with theUS Environmental Protection Agencyrsquos ldquoTier 3rdquo (Government of Canada2013d)

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The state of Canada-US relations in 983090983088983089983092 983090983091

fraserinstituteorg

On September 983092 983090983088983089983091 $983092983094983094 million in investment was allocated to the

Border Action plan by the Government of Canada in order expand two marine

container examination facilities (Government of Canada 983090983088983089983091c) $983091983091 million

was invested by the Government of Canada in the Asia Pacific Gateway and

rade Corridor Initiative (Government of Canada 983090983088983089983091c) Te Plan includes

an additional 983090983097 harmonization initiatives that will enhance trade activity

between Canada and the US

Neither Beyond the Border nor the Regulatory Cooperation Council

offer further investment or cost estimates on the initiatives described in table

983097 Moens and Gabler (983090983088983089983090) pointed to the need for both the Canadian and

American governments to provide data on border costs so that a cost-benefit

analysis can ensue Nonetheless the small steps of progress towards inte-

grating and harmonizing US and Canadian border practices remains a very

important (long-term) part of reducing the profile of the border

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983090983092 fraserinstituteorg

Canadian and American public perceptions

Tree observations are noteworthy in recent assessments of public percep-

tions between Americans and Canadians First Americans consistently have

a very high favourability rating of Canadians typically in the 983097983088 plus range

(table 983089983088 figure 983089983093) Both as a friend and a strategic ally Americans hold

Canadians in the most favourable light possible (table 983089983089) Disagreements over

policy between the two countries whether in defence and foreign affairs or

over border and trade issues do not move this fundamental asset Canadians

enjoy in dealing with their neighbour

Second Canadians do not have high expectations of either the

American or Canadian government regarding progress in bilateral relations

As table 983089983090 shows Canadians hold Obama in high regard (983094983091 percent) but

only 983093983092 percent expect progress from him in trade relations Prime Minister

Harper is rated slightly ahead of President Obama in terms of working hard

towards improving Canada-US relations (table 983089983091)

Tird and most significant in light of Canadarsquos Catch-983090983090 situation both

Canadians and Americans are more supportive of closer cooperation and inte-

gration policies than is the case for political representatives in either the United

States or Canada In two recent studies we showed how US Senators and House

Representatives are quite critical of Canada with regard to NAFA issues and bor-

der security (Moens and Gabler 983090983088983089983089) Similarly we found that among the three

major political parties in Canadarsquos parliament only one consistently expressed

itself in favour of closer ties with the United States (Moens and Gabler 983090983088983089983089)

A recent survey of American and Canadian (and Mexican) attitudes

towards free trade and NAFA show surprisingly strong data for more trade

integration In response to the statement ldquoTere should be more free trade

between the US Canada and Mexicordquo 983096983088 percent of Canadians approved

as did 983095983092 percent of Americans Even on border security Canadians andAmericans are more pro-cooperation and integration than their governmental

policies suggest In the US 983092983089 percent support a common perimeter while

983090983088 percent are opposed In Canada 983092983091 percent support it and 983091983088 percent are

opposed (Graves Pastor and Basaacutentildeez 983090983088983089983091) Terefore in terms of public

mandate both governments would have a case to work towards broader bilat-

eral (or trilateral) cooperation to lower trade barriers

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The state of Canada-US relations in 983090983088983089983092 983090983093

fraserinstituteorg

Table 983089983088 Canadian favourability rating among Americans (February 983090983088983089983090)

Veryfavourable

Mostlyfavourable

Mostlyunfavourable

Veryfavourable Not sure Total

favourableTotal

unfavourable

53 38 3 2 3 91 5

Note n=1015

Source Gallup Poll (2012)

Table 983089983089 Ally or enemy for Americans (June 983090983088983089983091)

Country Ally Friendly Unfriendly Enemy Total Ally andFriendly

Great Britain 66 25 2 1 91

Canada 61 33 2 1 94

China 11 44 26 14 55

Note n=1529Source Gallup Poll (2013)

88

90

92

94

96

98

201220112010200920082007

Figure Canadian favourability among Americans () ndash

Source Gallup Poll (2012)

f a

v o u r a

b l e

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983090983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983090 What effect will Obama have on Canada-US relations (November 983090983088983089983090)

Canadians Americans

Positive Negative None Positive Negative None

Relationship 62 5 34 48 12 40

Trade 54 10 35 48 12 39

Harmonizing 53 8 40 47 14 39

Note n=1066

Source Abacus Data (2012)

Table 983089983091 Has each leader worked hard to improve Canada-US relations

(July 983090983088983089983090)

Country Agree Disagree Not sure

Stephen Harper 58 32 10

Barack Obama 53 32 15

Note Sample of Canadians

Source HarrisDecima (2012)

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fraserinstituteorg 983090983095

US policy uncertainty

Canadian economic prospects face their most important challenge in the

United States Te US economic recovery has been modest and real GDP

growth so far has remained below the post-World War II average of post-

recession periods (figure 983089983094) As we noted above the less-than-stellar US

recovery is made even more challenging for Canadian traders in that pro-

ductivity gains in Canada are lagging while the Canadian dollar remains high

On top of that several American-imposed regulatory obstacles to free trade

are depressing trade prospects in crude oil red meat and public works pro-

curement Tese impediments reduce Canadian competitive access to the

US market

A high level of public spending until the January 983090983088983089983091 sequester and

ongoing monetary stimulation have not produced notable US GDP growth

Te seven post-recession periods below show the current average to be well

below the historical average (Young 983090983088983089983091)

983089983097983092983096-983089983097983093983095 983091983096983088

983089983097983093983096-983089983097983094983095 983092983090983096

983089983097983094983096-983089983097983095983095 983091983089983096

983089983097983095983096-983089983097983096983095 983091983089983093

983089983097983096983096-983089983097983097983095 983091983088983093

983089983097983097983096-983090983088983088983095 983090983097983097

983090983088983088983096-983090983088983089983091 983088983095983091

While economic growth has been modest growth in the public debt

has not (figure 983089983095) Publicly held debt in the US is now at 983095983091 percent of GDP

the highest since 983089983097983092983094 (Congressional Budget Office 983090983088983089983091)

Te widening gap between federal government outlays and revenueshas only recently been capped by the Sequester (figure 983089983096) However the

budget Sequester is temporary and final resolution of public spending and

taxation levels remains unclear given repeated gridlock in presidential-con-

gressional policy making High debt levels combined with stalemate over

taxes and budget cuts have produced a case of policy instability or uncer-

tainty in the last five years (Baker Bloom and Davis 983090983088983089983091)

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983090983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

US policy uncertainty is further aggravated by inaction on the large

lsquoentitlementrsquo programsmdashSocial Security Medicare and Medicaidmdashwhich are

the major drivers of the long-term gap in revenues and spending

-4

-2

0

2

4

6

8

201220062000199419881982197619701964

Figure US GDP growth rate ndash ( forecast)

Source The World Bank (2013b) OECD (2013)

-10

-8

-6

-4

-2

0

0

20

40

60

80

100

20122011201020092008200720062005200420032002

Government deficit as a percentage of GDP Government debt as a percentage of GDP

Figure US Government deficit and debt as a percentage of GDP ndash

Source Congressional Budget Office (2013)

D e fi c i t p e r c e n t a g e ( ) D

e b t p er c en t a g e ( )

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983097

fraserinstituteorg

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

20122003199319831973

Revenue Outlays

Figure US Government revenue and outlays ndash ( US$ billions)

Source Congressional Budget Office (2013)

1 9 8 3 U S $ b i l l i o n s

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983091983088 fraserinstituteorg

Trade diversification

Given the weakness in near-term US opportunities Canadians are (again)

wondering how to pursue trade diversification away from the United States

Te objective is logical and if achieved will prove advantageous but various

trends in trade and investment show that diversification for Canada is a slow

and arduous journey (table 983089983092)

In terms of overall share exports to China in the last five years have

doubled but the numbersmdashfrom 983090983089983095 percent to 983092983090983094 percentmdashremain rela-

tively low In the same period the US-bound share declined by 983091 percent but

remains a towering 983095983092983093983092 percent Te pattern of small overall impact applies

to all the other top trading partners For example exports to the UK have

increased but exports to Japan and Mexico have essentially stalled When we

consider average export growth rates over the last five years (table 983089983093) we see

a very strong rate for China (983089983093983093 percent) and strong rates for the UK and

South Korea (983096983097 percent and 983094983097 percent) However a 983089983093 percent increase in a

983092 percent overall trade share produces little change Te point we are making

is that at this rate and pattern of trade lsquodiversificationrsquo it will actually take a

very long timemdashwhile relatively small upward trends in trade with the United

States could have a quick and very large impact in the opposite direction

On the import side we notice more trade diversification with the US

share at 983093983088 percent and the Chinese share at 983089983089 percent (table 983089983094) Te Chinese

growth rate on the import side is less than on the export side (table 983089983095) Te

most revealing number may be the high average over five years for Mexico

at 983097 percent Tis could be indicative of a growing supply chain with Mexico

While foreign direct investment (FDI) is not a direct indicator of future

trade trends in investment may harbinger change In terms of outbound

FDI we notice that only a small segment (less than 983089983088 percent) is targeted

for manufacturing (table 983089983096) It is investment in this category in which onewould expect growth in supply chains

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983089

fraserinstituteorg

Table 983089983092 Canadarsquos merchandise exports top ten destinations 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 3291 1 777 2361 1 751 2564 1 749

China 92 4 22 97 3 31 114 3 33

UK 114 2 27 105 2 33 141 2 41

Japan 97 3 23 73 4 23 79 4 23

Mexico 51 5 12 42 5 13 43 5 13

Netherlands 32 8 08 24 8 08 28 8 08

South Korea 34 7 08 31 7 10 32 7 09

Germany 39 6 09 33 6 10 34 6 10

France 28 9 07 23 9 07 20 10 06

Brazil 23 10 05 14 10 04 22 9 06

Total 4237 3145 3424

2011 2012Average

shareValue Rank Share Value Rank Share

US 2750 1 737 2783 1 745 752

China 140 3 38 159 2 43 33

UK 157 2 42 154 3 41 37

Japan 89 4 24 85 4 23 23

Mexico 46 5 12 44 5 12 12

Netherlands 40 7 11 37 6 10 09

South Korea 43 6 11 30 7 08 09

Germany 33 8 09 29 8 08 09

France 26 9 07 26 9 07 07

Brazil 24 10 06 21 10 06 06

Total 3732 3734

Source Industry Canada (2013b)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983091983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983093 Canadian export growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 56 7 -281 9 106 = 5

China 101 6 65 1 187 3

UK 16 9 -73 2 358 2

Japan 202 3 -250 7 106 = 5

Mexico 179 4 -178 6 43 9

Netherlands -85 10 -255 8 183 4

South Korea 276 2 -80 3 52 8

Germany 160 5 -167 4 54 7

France 36 8 -174 5 -122 10

Brazil 706 1 -380 10 603 1

2011 2012Average

Rank Rank

US 104 8 27 2 02

China 270 4 152 1 155

UK 148 6 -02 4 90

Japan 161 5 -29 6 38

Mexico 94 9 -16 5 24

Netherlands 475 1 -55 7 53

South Korea 374 2 -272 10 70

Germany 05 10 -95 9 -09

France 311 3 23 3 15

Brazil 109 7 -92 8 189

Source Industry Canada (2013b) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983091

fraserinstituteorg

Table 983089983094 Canadarsquos merchandise imports top ten sources 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 1992 1 524 1633 1 511 1745 1 504

China 374 2 98 347 2 109 382 2 110

Mexico 157 3 41 145 3 45 190 3 55

Japan 134 4 35 108 4 34 115 4 33

Germany 111 5 29 95 5 30 97 5 28

UK 110 6 29 82 6 26 92 6 27

South Korea 53 9 14 52 7 16 53 7 15

Algeria 67 7 18 33 10 10 31 10 09

Italy 45 10 12 39 9 12 40 9 12

France 53 8 14 49 8 15 47 8 13

Total 3804 3194 3465

2011 2012Average

shareValue Rank Share Value Rank Share

US 1846 1 496 1922 1 506 508

China 402 2 108 417 2 110 107

Mexico 205 3 55 210 3 55 50

Japan 109 4 29 123 4 33 33

Germany 107 5 29 118 5 31 29

UK 86 6 23 70 6 18 25

South Korea 55 7 15 52 7 14 15

Algeria 46 9 12 49 8 13 12

Italy 43 10 11 43 9 11 12

France 46 8 12 41 10 11 13

Total 3723 3796

Source Industry Canada (2013b)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4162

983091983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983095 Old and new trade prospectsmdashimport growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 29 8 -178 7 89 5

China 112 4 -70 2 123 3

Mexico 43 7 -77 4 337 1

Japan -11 10 -192 8 89 4

Germany 105 5 -149 6 44 7

UK 95 6 -252 9 141 2

South Korea 120 3 -14 1 36 8

Algeria 518 1 -511 10 -50 10

Italy 11 9 -132 5 48 6

France 191 2 -70 3 -35 9

2011 2012Average

Rank Rank

US 88 5 57 4 17

China 82 6 53 5 60

Mexico 111 3 39 6 91

Japan -29 9 151 1 01

Germany 132 2 117 2 50

UK -36 10 -173 10 -45

South Korea 76 7 -37 8 37

Algeria 533 1 91 3 116

Italy 95 4 23 7 09

France 22 8 -97 9 02

Source Industry Canada (2013b) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983093

fraserinstituteorg

In terms of overall Canadian outbound FDI stocks in the US remain

very high despite the recent US recession while growth in stock in Asia is

modest (figure 983089983097) When we examine Canadian FDI in the so-called BRIC

states we notice that investment in both China and India is relatively small

Canadian mining investment in Brazil is much larger (figure 983090983088) In fact when

we examine amounts of FDI we find that Canada is not really a big BRIC

investor other than Brazil Chile Hong Kong and Peru are larger FDI recipi-

ents than China and India (figure 983090983089)

In terms of FDI flowing into Canada we notice the very large share

(983090983096983094983093 percent) in manufacturing which indicates both the predominant

share of US FDI and the extensive integrated supply chains in Canada-US

manufacturing (table 983089983097) Even more than for outbound FDI inflow stocks

show very large US preponderance (figure 983090983090) Such continued concentra-

tion of US FDI in Canada suggests that Canadian trade diversification is not

just a decision to be made by Canadian producers

Like trade growth Chinese FDI growth in Canada is positive but the

overall numbers are small and do not show rapid growth in the last 983091 years

(figure 983090983091)

Table 983089983096 Top industries for outward stocks of FDI 983090983088983089983090

Category Value Share

Mining oil and gas extraction 1099 188

Oil and gas subcategory 542 93

Manufacturing 569 97

Finance and insurance 2334 399

Management of companies and enterprises 757 129

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4362

983091983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

1

2

3

4

5

6

7

8

9

10

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n s

Figure Canadian foreign direct investment (stock) BRIC ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Brazil PRC India Russia

0

20

4060

80

100

120

140

160

180

200

220

240

260

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) various regions

ndash

Notes Excluding Mexico Canadian FDI to Mexico in 2012 was $557 billion

Foreign Direct Investment measures the purchase of various forms of capital stock abroad

However tax havens (Barbados Bermuda etc) are frequently found to be some of the highest

recipients of FDI In reality tax havens do not reflect economic growth as FDI figures invested

into tax havens are often reinvested back to the source country in a concept known as

round-tripping (Financial Post 2013) We have accounted for tax havens by removing them from

tables and figures in this section The numbers corresponding to Figure 19 would be Barbados

($593 billion) Bermuda ($118 billion) British Virgin Islands ($21 billion) Cayman Islands ($302

billion)

Source Foreign Affairs Trade and Development Canada (2013c)

US Europe Asia amp Oceania Central amp South America Africa

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4462

The state of Canada-US relations in 983090983088983089983092 983091983095

fraserinstituteorg

Table 983089983097 Top industries for inward stocks of FDI 983090983088983089983090

Category Value Share

Oil and gas extraction 766 147

Manufacturing 1492 287

Petroleum and coal products manufacturing 377 72

Wholesale trade 395 76

Finance and insurance 699 134

Management of companies and enterprises 999 192

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

0

2

4

6

8

10

12

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) Chile Hong Kong

Peru amp Korea ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Chile Hong Kong Peru Korea

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4562

983091983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

40

80

120

160

200

240

280

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Foreign direct investment (stock) in Canada from top three

countries ndash

Source Foreign Affairs Trade and Development Canada (2013c)

US Netherlands UK

0

2

4

6

8

10

12

201220112010200920082007

2 0 0 2 C A $ b

i l l i o n s

Figure Foreign direct investment (stock) in Canada from China

ndash

Source Foreign Affairs Trade and Development Canada (2013c)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4662

fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4762

983092983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4862

fraserinstituteorg 983092983089

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Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

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983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 3: Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 462

fraserinstituteorg i

Contents

Executive summary iii

Bilateral trade relations 1

Trade and regulatory barriersdisputes 12

State of the border and regulatory cooperation 18

Canadian and American public perceptions 24

US policy uncertainty 27

Trade diversification 30

Conclusion the bilateral and diversification agenda 39

References 41

About the authors 49

Acknowledgments 50

Publishing information 51

Supporting the Fraser Institute 52

Purpose funding amp independence 53

About the Fraser Institute 54

Editorial Advisory Board 55

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg

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fraserinstituteorg iii

Executive summary

Economic and political relations between Canada and the United States

our most important foreign relationship have worsened since the Fraser

Institutersquos previous report on the state of Canada-US relations Skating on

Tin Ice (Moens 983090983088983089983088) Te recovery of the US economy after the financial

crash in 983090983088983088983096 has been slow Te long-term uncertainty in US budget politics

and public debt resolution remains and the concomitant policy instabilitymdash

as we first noted in US Election 983090983088983089983090 Implications for Canada (Moens and

Clemens 983090983088983089983091)mdashcontinues to put a drag on economic growth Te across-

the-board budget cuts that took effect on January 983089 983090983088983089983091 better known as

sequestration offer a ray of light in the present context as they have imposed

cuts on spending of $983096983092 billion in both 983090983088983089983091 and 983090983088983089983092

Canadian merchandise exports to the United States have weakened

in relative terms At the same time there is not enough Canadian export

diversification to other destinations to make up this relative loss Te natural

resources component of Canadian exports is the only major growing segment

of overall trade In both merchandise and services trade the post-983090983088983088983095 per-

iod shows Canada is losing in trade competitiveness in relation to the United

States Te negative trend in trade competitiveness in services is even big-

ger than in merchandise trade Te relative loss of trade competitiveness in

our relationship may be a surprise to many Canadians who believe Canada

is simply doing better than the United States

Canadarsquos weakening competitiveness vis-agrave-vis the United States is

occurring at the same time as political relations at the top are in a slump

Te main sector in US-bound trade showing growth in the last decade crude

oil products is also the one facing most political interference from US deci-

sion makers Te six-year delay in the international permit for KXL to cross

the Canada-USA border is without precedent in our bilateral relations Atthe same time the US mandatory country-of-origin labeling rule which

took effect in 983090983088983088983097 has severely damaged the decades-old and deeply inte-

grated supply chain in beef and pork costing Canadian producers some $983089

billion per year ldquoBuy Americanrdquo in the public procurement sector remains a

latent threat to bilateral relations While American trade barriers have risen

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983089

Bilateral trade relations

Merchandise trade

Tere is a significant decline in both exports and imports from 983090983088983088983096 to 983090983088983088983097

as a result of the US recession (table 983089) Te sharpest decline is in Canadian

merchandise exports to the US which decreased by 983090983095 percent in 983090983088983088983097 and

still have not recovered to the 983090983088983088983096 level in 983090983088983089983090 Canadian merchandise

imports from the US on the other hand did not fall as sharplymdash983089983094 percent in

983090983088983088983097mdashand in 983090983088983089983090 are only slightly below the 983090983088983088983096 number Tus on balance

Canadian exports to the US have suffered significantly more from the reces-

sion than American exports to Canada (figures 983089 983090) Given this re-balancing

Canadarsquos merchandise trade balance surplus with the USA has been virtu-

ally cut in half (983092983094 percent) from $983095983095 billion in 983090983088983088983096 to $983091983093 billion in 983090983088983089983090983089

Te traditionally large gap between merchandise exports and imports

between Canada and its largest trading partner have shrunk substantially As

a result Canadarsquos trade balance with the world has declined from $983092983089 billion

in 983090983088983088983096 to a deficit of $983089983088 billion in 983090983088983089983090 Te monthly import and export

numbers in 983090983088983089983091 show a continuation of this trend

A noticeable trend in Canada in the last 983095 years reveals that less GDP is

derived from trade (and thus more from Canadarsquos domestic market) while in

the United States the trade versus domestic market share of GDP is on a ris-

ing trend (table 983090) When we examine the US share of Canadarsquos total exports

and imports over a longer period (983089983097983097983091ndash983090983088983089983090) we notice the overall down-

ward trend (figures 983091 983092) Te main causal factors are the higher value of the

Canadian dollar the post-983090983088983088983096 slump in US demand and a certain amount

of diversification in Canadarsquos trade as well as stronger relative growth inCanadarsquos domestic market

1048625 All figures are in real Canadian dollars unless otherwise noted

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

A breakdown of the top export and import sectors in Canada-US trade

shows that the traditionally strong machinery and automotive sectors are

holding well in terms of US exports to Canada but the same sector is weaker

on the Canadian side Te gains on our side are in minerals and energy prod-

ucts (tables 983091 983092) Te slow decline in Canadian exports of manufactured prod-

ucts suggests a weakening on Canadarsquos side in the integrated supply-chain in

this sector Lower productivity and border costs may well play a role

Table 983089 Canadian merchandise trade 983090983088983088983095ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2007 2008 2009 2010 2011 2012

Total exports 41380 42705 32099 34675 38099 38006

Exports to US 31795 32331 23610 25332 27517 27809

Total imports 37291 38877 32691 35508 38036 38993

Imports from US 24215 24666 20641 22312 23475 24360

Total balance 4089 3827 -592 -833 063 -987

Balance with US 7579 7666 2969 3020 4042 3450

Note On a balance of payments basis

Source Statistics Canada (2013d)

15

20

25

30

35

2 0 1 3 - 0 5

2 0 1 3 - 0 1

2 0 1 2 - 0 9

2 0 1 2 - 0 5

2 0 1 2 - 0 1

2 0 1 1 - 0 9

2 0 1 1 - 0 5

2 0 1 1 - 0 1

2 0 1 0 - 0 9

2 0 1 0 - 0 5

2 0 1 0 - 0 1

2 0 0 9 - 0 9

2 0 0 9 - 0 5

2 0 0 9 - 0 1

2 0 0 8 - 0 9

2 0 0 8 - 0 5

2 0 0 8 - 0 1

2 0 0 7 - 0 9

2 0 0 7 - 0 5

2 0 0 7 - 0 1

Import Export

2 0 0 2 C A $ b i l l i o n s

Figure Canadarsquos merchandise trade (monthly) ndash

Source Statistics Canada (2013c) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091

fraserinstituteorg

Table 983090 Merchandise trade as a of GDP 983090983088983088983093ndash983090983088983089983090 (current US$)

2005 2006 2007 2008 2009 2010 2011 2012

Canada 602 584 569 583 483 501 515 510

Growth 02 -30 -26 25 -172 37 28 -10

US 210 221 227 243 191 225 250 248

Growth 61 52 27 70 -214 178 111 -08

Source The World Bank (2013a)

0

1

2

3

4

5

6

7

8

9

2 0 1 3

- 0 5

2 0 1 3

- 0 1

2 0 1 2

- 0 9

2 0 1 2

- 0 5

2 0 1 2

- 0 1

2 0 1 1

- 0 9

2 0 1 1

- 0 5

2 0 1 1

- 0 1

2 0 1 0

- 0 9

2 0 1 0

- 0 5

2 0 1 0

- 0 1

2 0 0 9

- 0 9

2 0 0 9

- 0 5

2 0 0 9

- 0 1

2 0 0 8

- 0 9

2 0 0 8

- 0 5

2 0 0 8

- 0 1

2 0 0 7

- 0 9

2 0 0 7

- 0 5

2 0 0 7

- 0 1

2 0 0 2 C A $ b i l l i o n s

Figure Canada-US net merchandise trade (monthly) ndash

Source Statistics Canada (2013c) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

-5

-4

-3

-2

-1

0

1

2

3

2012201120102009200820072006200520042003200220012000

G r o

w t h ( )

Figure GrowthUS share of Canadarsquos annual merchandise trade ()

ndash

Source Industry Canada (2013b) calculations by authors

Import Export

45

50

55

60

65

70

75

80

85

90

2011200920072005200320011999199719951993

Import Export

Figure US share of Canadarsquos annual merchandise trade () ndash

Source Industry Canada (2013b)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093

fraserinstituteorg

Table 983091 Top sectors for Canadian merchandise exports to the US 983090983088983089983090

Industry Exports

2002 CA$ bi llions Percentage

Mineral products 886 318

Products of chemical or allied industries 163 59

Plastics and related articles 118 43

Base metals and articles of base metals 200 72

Machinery mechanical appliances electrical equipment and related articles 276 99

Vehicles aircraft vessels and associated transport equipment 530 191

Note On a customs basis

Source Statistics Canada (2013a)

Table 983092 Top industries for Canadian merchandise imports from the US 983090983088983089983090

Industry Imports

2002 CA$ bi llions Percentage

Mineral products 163 85

Products of chemical or allied industries 171 89

Plastics and related articles 127 66

Base metals and articles of base metals 158 82

Machinery mechanical appliances electrical equipment and related articles 413 215

Vehicles aircraft vessels and associated transport equipment 413 215

Note On a customs basis

Source Statistics Canada (2013a)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Trade in services

As a share of overall bilateral trade trade in services is growing gradually otal

bilateral services trade in 983090983088983089983088 amounted to 983089983096 percent of bilateral merchan-

dise trade It was 983089983093 percent in 983090983088983088983095983090 Te United States is by far the largest

trading partner in Canadarsquos international trade in services rade with the

US is nearly ten times the amount with the next largest partner the United

Kingdom But unlike merchandise trade the value of non-US services trade

is nearly half (983092983092 percent in 983090983088983089983088) of that with the USA (table 983093) In other

words there is more diversification from the US market in services than in

merchandise983091

Te trend reveals rising competitiveness on the US side (and non-USA)

as Canadian imports are growing considerably while Canadian exports are

stagnant resulting in a growing services trade deficit (figure 983093)

Bilateral trade in services was not impacted by the US recession as

merchandise trade was otal volume of trade is slightly up in the three years

after 983090983088983088983095 (figure 983094) Most of this gain is from growth in Canadian imports

from the US (and from non-US) while Canadian exports to the USA are

slightly down

Given that there is no growth in Americans traveling to Canada during

this time period (as we will show later) the relative strength of US exports vis-

agrave-vis Canadian exports appears to lie in the commercial sector (tables 983094 983095)

In conclusion in both merchandise and services trade the post 983090983088983088983095

period shows that Canada is relatively losing in trade competitiveness in rela-

tion to the United States Te relative loss of trade competitiveness in our

relationship may be a surprise to many Canadians who believe Canada has

simply been doing better than the US since 983090983088983088983096 Te lsquodoing betterrsquo part may

apply to domestic economic activity but not to external trade

1048626 Data on trade in services is not as recent as merchandise trade

1048627 op export destinations in 983090983088983089983088 after the USA are the UK France and Germany op

importers to Canada in 983090983088983089983088 after the USA include UK Hong Kong (China) France

Germany and Mexico Te case with importers to Canada is similar to that with export-

ing countries Imports from the UK make up roughly 983089983088 percent that of imports from the

US Imports from Hong Kong are 983093983089 percent that from the UK with France at 983092983090 percent

and both Germany and Mexico rest at roughly 983091983096 percent each

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983095

fraserinstituteorg

Table 983093 Services trade between Canada and the US 983090983088983088983093ndash983090983088983089983088 (983090983088983088983090 CA$ billions)

2005 2006 2007 2008 2009 2010

Exports to USA 3988 3815 3834 3966 3718 3700

Imports from USA 4358 4395 4544 4833 4783 4960

Trade balance with USA -370 -580 -710 -866 -1065 -1260

Trade balance with USA -443 -707 -847 -985 -1240 -1455

Exports to non-USA 2832 3080 2985 3052 3142 3102

Imports from non-USA 3022 3187 3380 3518 3496 3722

Trade balance with non-USA -189 -108 -395 -466 -354 -620

Trade balance with non-USA -323 -172 -621 -710 -540 -909

Total services exports 6820 6894 6819 7018 6860 6802

Total services imports 7379 7582 7924 8350 8279 8682

Total trade balance -559 -688 -1105 -1333 -1419 -1880

Total trade balance -394 -475 -750 -867 -937 -1214

Bilateral (X+I) USA 8346 8210 8378 8799 8589 8660

Bilateral (X+I) non-USA 5854 6267 6365 6569 6551 6824

Bilateral (X+I) total 14200 14477 14742 15368 15140 15484

Source Foreign Affairs Trade and Development Canada (2013a)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

80

81

82

83

84

85

86

87

88

89

90

201020092008200720062005

2 0

0 2 C A $ b i l l i o n s

Figure Canada-US net services trade ndash

Source Foreign Affairs Trade and Development Canada (2013a)

-20

-16

-12

-8

-4

0

201020092008200720062005

Trade balance with USA Total trade balance

Figure Canadarsquos trade deficit with US and the world ndash

Source Foreign Affairs Trade and Development Canada (2013a)

2 0 0 2 C A $ b i l

l i o n s

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983097

fraserinstituteorg

Table 983094 Top categories for service trade exports Canada-World 983090983088983089983090

Category Subcategory Exports

2002 CA$ bi llions Percentage

Government services 13 19

Travel services 143 207

Personal travel 119 172

Transportation services 111 161

Air transport 52 76

Commercial services 424 614

Financial services 57 82

Computer and information services 64 93

Intellectual property use 31 44

Management services 90 130

Research and development 33 47

Architectural engineering 39 57

Source Foreign Affairs Trade and Development Canada (2013a)

Table 983095 Top categories for service trade imports Canada-World 983090983088983089983090

Category Subcategory Imports

2002 CA$ billions Percentage

Government services 11 12

Travel services 288 323

Personal travel 253 284

Transportation services 195 219

Water transport 82 92

Air transport 84 95

Commercial services 396 446

Insurance services 44 50

Financial services 44 50

Intellectual property use 89 100

Management services 75 84

Source Foreign Affairs Trade and Development Canada (2013a)

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983089983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

075

080

085

090

095

100

105

2 0 1 3

- 0 7

2 0 1 3

- 0 1

2 0 1 2

- 0 7

2 0 1 2

- 0 1

2 0 1 1

- 0 7

2 0 1 1

- 0 1

2 0 1 0

- 0 7

2 0 1 0

- 0 1

2 0 0 9

- 0 7

2 0 0 9

- 0 1

2 0 0 8

- 0 7

2 0 0 8

- 0 1

2 0 0 7

- 0 7

2 0 0 7

- 0 1

Figure CanadaUS dollar exchange rate ndash

Source Bank of Canada (2013b)

C A U S e x c h a n g e r a t e

Dollar value and productivity trends

Te first factor to consider regarding Canadarsquos trade competitiveness vis-agrave-vis

the United States is the value of the Canadian dollar Te substantial appre-

ciation of the Canadian dollar against the US dollar that began in the early

983090983088983088983088s has stabilized at a much higher average value of the loonie ( figure 983095)

As is well documented such exchange rate appreciation tends to have a strong

effect on current account balances as exports decline (Kappler et al 983090983088983089983089)

A growing account deficit will likely push the value of the Canadian dollar

downward in the longer term and thus offer some remedy

ProductivityOf more concern to Canadians should be the data indicating that Canadian

labour productivity rates are lagging those in the United States (figures 983096 983097)

One would expect that Canadarsquos higher dollar has provided industry in recent

years with an opportunity to improve productivity as imported machinery

and technology would be available at a lower price However Canadarsquos pro-

ductivity rate of growth is modest and in 983090983088983089983090 dips into negative territory

again

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983089983089

fraserinstituteorg

-1

0

1

2

3

20122011201020092008

Canada US

Figure Canada and US rates of output productivity growth ()

ndash

Source Statistics Canada (2013g)

R a t e o f p r o d u c t i v i t y g r o

w t h ( )

-10

-5

0

5

20122011201020092008

Labour productivity (Canada) Real GDP (Canada) Hours worked (Canada)

Labour productivity (US) Real GDP (US) Hours worked (US)

Figure Real US-Canadian output and hours worked () ndash

Source Statistics Canada (2013g)

A n n u a l c

h a n g e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983089983090 fraserinstituteorg

Trade and regulatory barriersdisputes

Table 983096 provides a synopsis of the major trade disputesbarriers that have

played a role in bilateral relations in the last five years and that are pertinent

for the 983090983088983089983092 period (pages 983089983094-983089983095) Te two large disputesmdashKeystone XL and

Mandatory Country-of-Origin Labeling (MCOOL) on red meatmdashare more

ominous than they may seem First both in crude oil products and in cattle

and hogs the United States is unilaterally disrupting or dismantling a well-

established integrated sector Canada has started attempts to diversify its oil

transportation structure including more rail and new pipeline routes But

as all proposed alternative pipelines have shown the alternatives are contro-

versial and at best years away from making a difference Meanwhile there is

considerable risk in putting too much crude oil on rail as its accident rates

are higher than pipe

Canadian threats to counter US MCOOL action with tariffs on food

products are not going to have much impact in the near future Moreover

an escalating tariff war on food products cannot be won by Canada and will

ultimately harm consumers on both sides of the border US defiance of two

WO rulings also means more uncertainty for Canadian traders

Keystone XL pipeline

Proposed in 983090983088983088983096 the Keystone XL (KXL) extension is part of a pipeline sys-

tem connecting Alberta oil sands and US mid-West and Gulf region refineries

KXL is a 983089983096983097983095 km crude oil pipeline with a capacity of 983092983094983093983088983088983088 barrels per

day (Hussain 983090983088983089983091) It is a substantial private infrastructure proposal that

will create employment and guarantee a secure energy source for the United

States (Millington and Murillo 983090983088983089983091) It is by no means a new feature in

Canada-US energy relations as a dense network of oil and electricity carri-ers cross the border at multiple points

What is unprecedented is that the permit process is now in its sixth

year and the final resolution remains uncertain (by US law a cross-border line

requires Department of State approval) If not resolved in 983090983088983089983092 the question

may well be handed over to the next president after 983090983088983089983094 Te policy uncertainty

associated with KXL approval has by far the largest impact on Canada-US trade

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The state of Canada-US relations in 983090983088983089983092 983089983091

fraserinstituteorg

relations Te dragged-out procedure has chilled relations Te southern leg of

KXL has been completed and the original route objection by Nebraska has been

resolved What remains ostensibly the problem is that the US administration

has identified this heavy oil as a component of its policy objective of curbing

the emission of greenhouses gasses to reduce global warming

Te impact of this pipeline delay in the 983090983095 million barrels per day (bpd)

export of Canadian oil products to the USA reverberates at various levels

Across Canada investment in mining oil and gas extraction for 983090983088983089983091 is pre-

dicted to decrease by 983090983095 percentmdashthe largest decline since the 983090983088983088983096 recession

(Statistics Canada 983090983088983089983091f) In Alberta investment is predicted to increase by

only 983088983089 percent (Statistics Canada 983090983088983089983091f) Capital investment in oil and gas

extraction has not recovered to pre-983090983088983088983096 levels (Industry Canada 983090983088983089983091a)

While the industry has become increasingly dependent on rail trans-

port to move product it is a costly alternative It can cost up to three times

as much as pipeline transport (Millington and Murillo 983090983088983089983091) and its limita-

tions are self-evident because rail movement of oil is constrained by the lim-

ited availability of rail cars In 983090983088983089983090 983089983091983088983088983088983088 bpd of heavy crude was being

transported by rail Tis is expected to rise to 983092983090983093983088983088983088 bpd by the end of

983090983088983089983092 falling short of the 983092983094983093983088983088983088 bpd which could have been moved through

KXL (Hussain 983090983088983089983091) Te forced increase in rail transport has resulted in

unintended costs for the industry a total of US$983089 billion must be invested for

new rail terminals and another US$983092ndash983093 billion for new rail cars (Lewis 983090983088983089983091)

Rail transport is both more costly and more dangerous A recent study

concluded that ldquopipeline transportation is safer than transportation by road

rail or barge as measured by incidents injuries and fatalitiesrdquo (Green amp

Furchtgott-Roth 983090983088983089983091) It is not inconceivable that another major oil acci-

dent either in Canada or the USAmdashsuch as took place in Quebec in July 983090983088983089983091

killing 983092983095 peoplemdashwould result in a moratorium on oil transport by rail with

grave consequences for Canadian producers

983090983088983088983090 Mandatory Country-of-Origin Labeling

Mandatory Country-of-Origin Labeling (MCOOL) is a provision mandated

by Congressional law and first implemented in 983090983088983088983096 Te measure imposes

strict segregation rules on American Canadian and Mexican cattle and hogs

and the subsequent slaughtering and processing of these animals to producebeef and pork products for retail sale Te stated purpose is to create labels

that indicate the origin in part or in whole of the product In effect it is a

veiled trade barrier because it gives US animals and products a competitive

advantage due to higher labeling inventory and processing costs for equiva-

lent Canadian products

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983089983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983096 Synopsis of trade disputes in Canadian-American relations in 983090983088983089983091

Dispute Impact and cost Prospect for resolution

Keystone XL Pipeline Very serious Poor

2008 proposal for a 1897

km 465000 bpd crude oilpipeline spanning fromAlberta down to Nebraska

Downward pressure on investment

Lost wages January 2012postponement is costing US $47million a day in lost wages (ConsumerEnergy Alliance 2013)

Continuation of crude oil pricediscounts due to lack of infrastructure

Costly alternative rail has emerged as atransportation alternative but can costup to three times as much as pipelinetravel (Millington and Murillo 2013)

Permit postponed twice

Resolution is not transparent

Rising risk of decision deferral past 2016

Mandatory Country-of-OriginLabelling (MCOOL)

Serious Poor

2008 CongressionalLaw mandating rulesfor segregated livestockprocessing and packagingand a labeling structure inorder to have food labelsindicate origin of product

Annual cost to Canadian beef and porksector of $1 billion

Deconstruction of a highly integratedtrilateral supply chain industry

MCOOL adds no animal health or foodsafety benefits

US has defied both WTO complaint andthe core part of the WTO Appeal ruling

2013 US reaction has been to strengthenthe discriminatory provision banning co-mingling of meats altogether

Canada plans to retaliate with tariffs butthis is a costly gambit with low chance ofsuccess

Softwood Lumber Agreement Moderate Good

In 2011 American softwoodcompanies took theirCanadian counterparts to theLondon Court of InternationalArbitration accusing themof circumventing the SLA(Foreign Affairs Trade andDevelopment Canada 2012a)

If in violation Canadian industry wouldface $380 million in penalties (TheCanadian Press 2012)

The London Court of InternationalArbitration in 2012 ruled in favor ofCanada (Foreign Affairs Trade andDevelopment Canada 2012a)

SLA was to expire in 2013 but Canadaand the USA extended it until 2015 (CBCNews 2012)

Long-term free trade in lumber needs toreplace SLA

Buy American Provision Serious Partial resolution but high risk ofrecurring Buy American legislation

2009 American Recovery andReinvestment Act

Exclusion of Canadian products andproduction sharing in US public worksprocurement

Canada-US Procurement Agreement in2010 which allowed for the purchaseof Canadian goods on seven US

infrastructure projects valued at morethan $7777000

Canada needs to seek a comprehensiveagreement in order to escape futureAmerican protectionism with allprovinces on board and compliant withthe WTO provision

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The state of Canada-US relations in 983090983088983089983092 983089983093

fraserinstituteorg

Dispute Impact and cost Prospect for resolution

Canadian Wheat Board Long-term benefit Completed

Canadarsquos mandatory wheat

marketing board monopsonyended in 2011

Frequent US action against CWB in the

past will now end as wheat marketingin Canada turns fully market based

Intellectual Property Rights Moderate potential cost Partially resolved

Canada has been on theSpecial 301 Priority Watch Listby the United States TradeRepresentative since 1995

Ongoing threat of US Trade Action andlegal action

Canadian domestic complianceincluding

Strengthening data protection

Participation in Anti-counterfeiting TradeAgreement (ACTA in 2013)

Enacted the Combating CounterfeitProducts Act (2013)

Started the process of strengthening

the Copyright Act and implementingWorld Intellectual Property OrganizationInternet Treaties

In recognition of which Canada has beenremoved from the Special 301 PriorityWatch List

Prescription drugs Serious potential for trade action Indirect progress

The US complaint againstCanada

Imposing price ceilings thatshifts the cost burden of RampDto US firms

Weak protection ofintellectual property rights rethird party sales

Slow prescription drugapproval process causingreduced market access

US firms experience lost revenues andtrade action is a risk

In 2013 CETA agreement with theEuropean Union Canada agrees to givefull patent protection to new drugs fortwo years

Two-year rule may be transferable tofuture Canada-US resolution

Table 983096 continued

Canada and the United States have had a deeply integrated market in

this sector since the early 983089983097983097983088s Animal health and food safety standards have

been largely harmonized As a result highly efficient supply-chain production

methods have made this industry quite efficient However the imposition of

MCOOL has changed all that (Moens amp Leon 983090983088983089983090) Te cost differential haswidened and Canadian exports have dropped dramatically Since 983090983088983088983096 the

cattle sector has lost $983094983092983088 million per year and the hog sector has lost $983093983088983088

million a year (Te Canadian Press 983090983088983089983091a)

In 983090983088983089983090 the World rade Organization (WO) ruled in Canadarsquos favor by

concluding that MCOOL is discriminatory Te WO gave the US until May 983090983091

983090983088983089983091 to act but on that same day the USDA imposed regulatory changes that

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983089983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

actually strengthened the provisions of MCOOL In retaliation the Canadian

government released a list of US exports to Canada that would be subjected

to tariffs and it is preparing to seek a compliance panel at the WO Until this

situation is resolved the Canadian government predicts a continuing annual

loss of $983089 billion for the Canadian red meat sector (Te Canadian Press 983090983088983089983091a)

Softwood lumber

In 983090983088983089983089 several American softwood companies took their Canadian counter-

parts to the Court of International Arbitration in London accusing them of cir-

cumventing the Softwood Lumber Agreement of 983090983088983088983094 (Foreign Affairs rade

and Development Canada 983090983088983089983090a) Te dispute centered on the accelerating pace

of lumber harvests resulting from the pine beetle infestation Te stakes were

high $983091983096983088 million in penalties should Canada lose (Te Canadian Press 983090983088983089983090)

In 983090983088983089983090 the Court of International Arbitration ruled in Canadarsquos favor

(Foreign Affairs rade and Development Canada 983090983088983089983090a) In addition while

the Softwood Lumber Agreement was set to expire in 983090983088983089983091 the Canadian

and American governments successfully negotiated an extension of the

Agreement until 983090983088983089983093 (CBC News 983090983088983089983090) Te fact remains that as long as a

large part of Canadarsquos softwood lumber is managed in terms of quotas and

the stumpage fee system US trade action is very likely

lsquoBuy Americanrsquo provision

Te 983090983088983088983097 American Recovery and Reinvestment Act (ARRA which expired

on September 983091983088 983090983088983089983089) and the more recent 983090983088983089983089 American Jobs Act stipu-

lated that steel iron and other goods used in the repair and construction of

infrastructure projects in the US (highways bridges mass transit and fed-

eral buildings) must be manufactured in the United States (Matthiesen 983090983088983089983089)

In response to ARRA Canada and the US signed the Canada-US

Procurement Agreement in 983090983088983089983088 which allowed for the purchase of Canadian

goods on seven US infrastructure projects valued at more than $983095983095983095983095983088983088983088

or within the 983091983095 states subject to the WO GPA (Government of Canada

983090983088983089983091a) Te 983090983088983089983089 American Jobs Act did not pass in Senate and is thus moot

While the ARRA dispute was partially resolved lsquoBuy Americanrsquo anda counter position of lsquoBuy Canadianrsquo can flare up on either side of the bor-

der Canadian industry is most vulnerable in this uncertainty Te Canadian

government ought to seek a comprehensive Buy American exemption to

escape future American protectionism In so doing all provincial govern-

ments need to be on board in order to make the WO and NAFA rules

function optimally

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The state of Canada-US relations in 983090983088983089983092 983089983095

fraserinstituteorg

Canadian Wheat Board (CWB)

In 983090983088983089983089 the Canadian government removed the monopsony held by the

Canadian Wheat Board Tis unilateral action offers a successful reduction

in bilateral trade distortion oday the CWB continues to operate as a mar-

keting group

Intellectual Property Rights (IPR)

From 983089983097983097983093 through 983090983088983089983091 Canada was on the Special 983091983088983089 Priority Watch

List by the United States rade Representative Te US complaint was that

protection and enforcement of IPR in Canada were weak Te Special 983091983088983089

Priority Watch List is designed to identify US trading partners that are the

worst offenders in IPR protection (Embassy of the United States Ottawa

Canada 983090983088983089983091)

Although the issue is not completely resolved Canada has made sig-

nificant progress in recent years Te federal government has strengthened

data protection regulations criminalized the use of camcorders in theaters

and participates in the Anti-Counterfeiting rade Agreement (ACA) nego-

tiations (983090983088983089983091) Most recently Canada enacted the Combatting Counterfeit

Products Act (Embassy of the United States Ottawa Canada 983090983088983089983091) Te

Canadian Government is in the process of strengthening the Copyright Act

and implementing World Intellectual Property Organization Internet reaties

(Embassy of the United States Ottawa Canada 983090983088983089983091)

As a result of these steps Canada was removed from the Special 983091983088983089

Priority Watch List in 983090983088983089983091

Prescription drugs

Prescription drug prices in Canada are relatively low due to a price ceil-

ing mandated by Canadarsquos healthcare system In addition Health Canada

approval times for prescription drugs significantly lag behind their counter-

parts in the United States and the European Union (Barua and Esmail 983090983088983089983091)

US lawmakers have repeatedly expressed their concerns over cheap prescrip-

tion drugs re-entering the US from Canada (Moens and Gabler 983090983088983089983089) TeEU also asked Canada to strengthen IPR protections for prescription drugs

(Lexchin and Gagnon 983090983088983089983091) Since the signing of the CEA agreement in

principle on October 983089983096 983090983088983089983091 the issue between Canada and the EU is now

resolved (Waldie 983090983088983089983091) Canada has agreed to ldquoEU demands for patent pro-

tection for up to two years on brand-name drugsrdquo (Blanchfield 983090983088983089983091)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983089983096 fraserinstituteorg

State of the border andregulatory cooperation

Te decline in Americans traveling to Canada corresponds with the US

Greenback losing value against the Canadian dollar (figures 983089983088 983089983089) However

when we consider the extent of the decline in total numbers it appears dispro-

portionate Te change in American travel suggests instead a bigger problem

following the 983097-983089983089 shock Te imposition of new border transit requirements

such as passports as well as longer wait times and more security screening

has likely dampened US travel across this international boundary Given the

modest economic recovery in the USA from the beginning of 983090983088983089983088 onward

one would expect disposable income including for travel to trend back up

Instead the numbers remain stagnant at around 983090983088 million less than half the

number of 983090983088983088983090

While an overall national average for border wait times is not avail-

able data on major border crossings in both Central Canada and British

Columbia indicate that no reductions in wait times have been achieved

between 983090983088983088983094 and 983090983088983089983089 (figure 983089983090) Te problem of inefficiency as presented

by the Canada-US border goes well beyond wait times It includes inefficient

activity away from the border such as extra warehousing and costs of com-

plying with various facilitated traveler and goods programs such as FAS for

trucks loads and drivers

Tere are consistent cost differences between domestic and cross-bor-

der truck-borne trade which point to significant border costs ldquoFor exports

to the US these costs added 983088983097 percent to the delivered price of goods in

983090983088983088983092 Tis figure fell to 983088983092 percent in 983090983088983088983097 hellip Higher fixed costs per shipment

accounted for most of the additional cost of transporting goods to the USrdquo

(Brown and Anderson 983090983088983089983090) When we consider that in the manufacturingsector parts cross the border several times in various stages of assembly we

realize how this cost accumulates and defeats the efficiency gains otherwise

generated by integrated supply chain manufacturing Border costs are typ-

ically passed on to the consumer as fixed costs per shipment

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The state of Canada-US relations in 983090983088983089983092 983089983097

fraserinstituteorg

An unprecedented border problem has arisen in the current USAdministrationrsquos lengthy (six years) review of the permitting of a pipeline

border crossing as proposed in the Keystone XL project As a result oil-by-

rail transport has recently increased while the pipeline mode of Canada-US

trade has seen a drop in growth in the 983090983088983089983089983089983090 period ( figures 983089983091 983089983092)

0

10

20

30

40

50

201220112010200920082007200620052004200320022001200019991998

Figure Travellers entering Canada ndash

Source Statistics Canada (2013e)

US residents Non-US residents

0

3

6

9

12

15

18

0

03

06

09

12

15

18

20122011201020092008200720062005200420032002

Trips Spending US$CA$ (Secondary axis)

Figure US overnight travel to Canada ndash

Source Statistics Canada (2011) Bank of Canada (2013b)

M i l l i o n s o f t r i p

s N o m i n a l C A $ b i l l i o n s

U S $ C A $ ex c h a n

g er a t e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 2762

983090983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

5

10

15

20

201120102009200820072006

Northbound average delay Southbound average delay

Figure Peace Arch average border wait time ndash

Source Cascade Gateway Data (2013)

M i n u t e s

0

25

50

75

100

125

150

175

200

225

250

275

300

201220112010200920082007200620052004

2 0 0 4

U S $ b

i l l i o n s

Figure All surface modes of freight flow data based on value of goods

ndash

Source Bureau of Transportation Statistics (2013)

Truck Rail Pipeline

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 2862

The state of Canada-US relations in 983090983088983089983092 983090983089

fraserinstituteorg

lsquoBeyond the Borderrsquo and Regulatory Cooperation

In 983090983088983089983089 Canada and the United States announced an ambitious agreement

to reduce border costs by means of deeper bilateral regulatory and secur-

ity cooperation Te accord seeks to streamline various border proceduresmdash

some already in existence and some newmdashto improve intelligence-sharing

between law enforcement agencies mutual recognition of passenger baggage

screening improved frameworks for trusted trade programs harmoniza-

tion of NEXUS protocols streamlined supply chains enhanced trade com-

petitiveness collaboration in border infrastructure investment and deeper

cooperation in national security investigations Te agreement is known as

Beyond the Border A Shared Vision for Perimeter Security and Economic

Competitiveness (February 983092 983090983088983089983089)

Te Beyond the Border Vision accord also set up a Regulatory

Cooperation Council In it Canadian and American officials seek to reduce

red tape and harmonize regulations in certain key sectors o date the

Council has announced various plans affecting agriculture and food trans-

portation health personal care products workplace chemicals environmentnano materials and small business loans We summarize the key points of

progress made since 983090983088983089983089 in table 983097

-35

-25

-15

-5

5

15

25

35

20122011201020092008200720062005

Truck Rail Pipeline

Figure Growth rate of all surface modes of freight flows () ndash

Source Bureau of Transportation Statistics (2013) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983097 Key elements of Beyond the Border and Regulatory Cooperation

Beyond the Border Program

Integrated Cargo Security Strategy (ICSS)December 2011

Reduces administrative duplication between Canada and the US byaddressing security risks in advance within the shipment supply chainand at the border (Canada Border Services Agency 2013)

Prince Rupert Pilot October 2012 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry via rail is examined by Canadian officials onbehalf of the US (Government of Canada 2013c)

Montreal Pilot January 2013 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry to the US via truck is examined by Canadianofficials on behalf of the US (Government of Canada 2013c)

Pre-load Air Cargo Targeting (PACT) Joint pilot by CBSA and Transport Canada to screen cargo pre-flight onCanada-bound airplanes at foreign airports (Canada Border ServicesAgency 2013)

Tamper Evident Technology PilotOctober 2012

Pilot collaboration between CBSA and US CBP to ensure containersremain sealed upon arrival at the US border (Canada Border Services

Agency 2013)

Truck Cargo Pre-Inspection PilotMarch 2013

Pilot program between the CBSA and the US CBP for pre-inspection ofsouthbound traffic into US (Canada Border Services Agency 2013)

Free and Secure Trade (FAST) PilotSarnia Ontario

Pilot program for usage of FAST lanes without Partners in Protection andCustoms Self Assessment programs (Government of Canada 2013c)

Canada-US Shiprider June 2013 Removal of jurisdictional barriers to improve law enforcement personnelin Windsor-Detroit and Vancouver-Blaine waterways (Government ofCanada 2013c)

EntryExit Initiative Phase II June 2013 Exchange entryexit data between the CBSA and US DHS on individualsat Canada-US land border crossings (Government of Canada 2013c)

Regulatory Cooperation ProgramMemorandum of Understanding between Transport Canada and the RailwayAssociation of Canada September 2013

Framework for Canadian rail emissions between 2011 to 2015(Government of Canada 2013d)

Canada-United States Perimeter Approachto Plant Protection September 2013

Draft framework for increased cooperation and reduction inadministrative duplication between the Canadian Food InspectionAgency (CFIA) and United States Animal and Plant Health InspectionService (APHIS) on trade in plants and plant products (Government ofCanada 2013d)

Common Electronic Submission GatewayPilot (CESG) August 2013

FDA and Health Canada will allow pharmaceutical firms to electronicallysubmit drug applications (Government of Canada 2013d)

Initiative to Align Veterinary DrugApprovals December 2012

Joint reviews between US FDA and Health Canada on veterinary drugproducts (Government of Canada 2013d)

Stricter Air Pollutant Emissions Environment Canada aligns car emissions beginning in 2017 with theUS Environmental Protection Agencyrsquos ldquoTier 3rdquo (Government of Canada2013d)

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The state of Canada-US relations in 983090983088983089983092 983090983091

fraserinstituteorg

On September 983092 983090983088983089983091 $983092983094983094 million in investment was allocated to the

Border Action plan by the Government of Canada in order expand two marine

container examination facilities (Government of Canada 983090983088983089983091c) $983091983091 million

was invested by the Government of Canada in the Asia Pacific Gateway and

rade Corridor Initiative (Government of Canada 983090983088983089983091c) Te Plan includes

an additional 983090983097 harmonization initiatives that will enhance trade activity

between Canada and the US

Neither Beyond the Border nor the Regulatory Cooperation Council

offer further investment or cost estimates on the initiatives described in table

983097 Moens and Gabler (983090983088983089983090) pointed to the need for both the Canadian and

American governments to provide data on border costs so that a cost-benefit

analysis can ensue Nonetheless the small steps of progress towards inte-

grating and harmonizing US and Canadian border practices remains a very

important (long-term) part of reducing the profile of the border

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983090983092 fraserinstituteorg

Canadian and American public perceptions

Tree observations are noteworthy in recent assessments of public percep-

tions between Americans and Canadians First Americans consistently have

a very high favourability rating of Canadians typically in the 983097983088 plus range

(table 983089983088 figure 983089983093) Both as a friend and a strategic ally Americans hold

Canadians in the most favourable light possible (table 983089983089) Disagreements over

policy between the two countries whether in defence and foreign affairs or

over border and trade issues do not move this fundamental asset Canadians

enjoy in dealing with their neighbour

Second Canadians do not have high expectations of either the

American or Canadian government regarding progress in bilateral relations

As table 983089983090 shows Canadians hold Obama in high regard (983094983091 percent) but

only 983093983092 percent expect progress from him in trade relations Prime Minister

Harper is rated slightly ahead of President Obama in terms of working hard

towards improving Canada-US relations (table 983089983091)

Tird and most significant in light of Canadarsquos Catch-983090983090 situation both

Canadians and Americans are more supportive of closer cooperation and inte-

gration policies than is the case for political representatives in either the United

States or Canada In two recent studies we showed how US Senators and House

Representatives are quite critical of Canada with regard to NAFA issues and bor-

der security (Moens and Gabler 983090983088983089983089) Similarly we found that among the three

major political parties in Canadarsquos parliament only one consistently expressed

itself in favour of closer ties with the United States (Moens and Gabler 983090983088983089983089)

A recent survey of American and Canadian (and Mexican) attitudes

towards free trade and NAFA show surprisingly strong data for more trade

integration In response to the statement ldquoTere should be more free trade

between the US Canada and Mexicordquo 983096983088 percent of Canadians approved

as did 983095983092 percent of Americans Even on border security Canadians andAmericans are more pro-cooperation and integration than their governmental

policies suggest In the US 983092983089 percent support a common perimeter while

983090983088 percent are opposed In Canada 983092983091 percent support it and 983091983088 percent are

opposed (Graves Pastor and Basaacutentildeez 983090983088983089983091) Terefore in terms of public

mandate both governments would have a case to work towards broader bilat-

eral (or trilateral) cooperation to lower trade barriers

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The state of Canada-US relations in 983090983088983089983092 983090983093

fraserinstituteorg

Table 983089983088 Canadian favourability rating among Americans (February 983090983088983089983090)

Veryfavourable

Mostlyfavourable

Mostlyunfavourable

Veryfavourable Not sure Total

favourableTotal

unfavourable

53 38 3 2 3 91 5

Note n=1015

Source Gallup Poll (2012)

Table 983089983089 Ally or enemy for Americans (June 983090983088983089983091)

Country Ally Friendly Unfriendly Enemy Total Ally andFriendly

Great Britain 66 25 2 1 91

Canada 61 33 2 1 94

China 11 44 26 14 55

Note n=1529Source Gallup Poll (2013)

88

90

92

94

96

98

201220112010200920082007

Figure Canadian favourability among Americans () ndash

Source Gallup Poll (2012)

f a

v o u r a

b l e

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983090983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983090 What effect will Obama have on Canada-US relations (November 983090983088983089983090)

Canadians Americans

Positive Negative None Positive Negative None

Relationship 62 5 34 48 12 40

Trade 54 10 35 48 12 39

Harmonizing 53 8 40 47 14 39

Note n=1066

Source Abacus Data (2012)

Table 983089983091 Has each leader worked hard to improve Canada-US relations

(July 983090983088983089983090)

Country Agree Disagree Not sure

Stephen Harper 58 32 10

Barack Obama 53 32 15

Note Sample of Canadians

Source HarrisDecima (2012)

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fraserinstituteorg 983090983095

US policy uncertainty

Canadian economic prospects face their most important challenge in the

United States Te US economic recovery has been modest and real GDP

growth so far has remained below the post-World War II average of post-

recession periods (figure 983089983094) As we noted above the less-than-stellar US

recovery is made even more challenging for Canadian traders in that pro-

ductivity gains in Canada are lagging while the Canadian dollar remains high

On top of that several American-imposed regulatory obstacles to free trade

are depressing trade prospects in crude oil red meat and public works pro-

curement Tese impediments reduce Canadian competitive access to the

US market

A high level of public spending until the January 983090983088983089983091 sequester and

ongoing monetary stimulation have not produced notable US GDP growth

Te seven post-recession periods below show the current average to be well

below the historical average (Young 983090983088983089983091)

983089983097983092983096-983089983097983093983095 983091983096983088

983089983097983093983096-983089983097983094983095 983092983090983096

983089983097983094983096-983089983097983095983095 983091983089983096

983089983097983095983096-983089983097983096983095 983091983089983093

983089983097983096983096-983089983097983097983095 983091983088983093

983089983097983097983096-983090983088983088983095 983090983097983097

983090983088983088983096-983090983088983089983091 983088983095983091

While economic growth has been modest growth in the public debt

has not (figure 983089983095) Publicly held debt in the US is now at 983095983091 percent of GDP

the highest since 983089983097983092983094 (Congressional Budget Office 983090983088983089983091)

Te widening gap between federal government outlays and revenueshas only recently been capped by the Sequester (figure 983089983096) However the

budget Sequester is temporary and final resolution of public spending and

taxation levels remains unclear given repeated gridlock in presidential-con-

gressional policy making High debt levels combined with stalemate over

taxes and budget cuts have produced a case of policy instability or uncer-

tainty in the last five years (Baker Bloom and Davis 983090983088983089983091)

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fraserinstituteorg

US policy uncertainty is further aggravated by inaction on the large

lsquoentitlementrsquo programsmdashSocial Security Medicare and Medicaidmdashwhich are

the major drivers of the long-term gap in revenues and spending

-4

-2

0

2

4

6

8

201220062000199419881982197619701964

Figure US GDP growth rate ndash ( forecast)

Source The World Bank (2013b) OECD (2013)

-10

-8

-6

-4

-2

0

0

20

40

60

80

100

20122011201020092008200720062005200420032002

Government deficit as a percentage of GDP Government debt as a percentage of GDP

Figure US Government deficit and debt as a percentage of GDP ndash

Source Congressional Budget Office (2013)

D e fi c i t p e r c e n t a g e ( ) D

e b t p er c en t a g e ( )

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The state of Canada-US relations in 983090983088983089983092 983090983097

fraserinstituteorg

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

20122003199319831973

Revenue Outlays

Figure US Government revenue and outlays ndash ( US$ billions)

Source Congressional Budget Office (2013)

1 9 8 3 U S $ b i l l i o n s

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983091983088 fraserinstituteorg

Trade diversification

Given the weakness in near-term US opportunities Canadians are (again)

wondering how to pursue trade diversification away from the United States

Te objective is logical and if achieved will prove advantageous but various

trends in trade and investment show that diversification for Canada is a slow

and arduous journey (table 983089983092)

In terms of overall share exports to China in the last five years have

doubled but the numbersmdashfrom 983090983089983095 percent to 983092983090983094 percentmdashremain rela-

tively low In the same period the US-bound share declined by 983091 percent but

remains a towering 983095983092983093983092 percent Te pattern of small overall impact applies

to all the other top trading partners For example exports to the UK have

increased but exports to Japan and Mexico have essentially stalled When we

consider average export growth rates over the last five years (table 983089983093) we see

a very strong rate for China (983089983093983093 percent) and strong rates for the UK and

South Korea (983096983097 percent and 983094983097 percent) However a 983089983093 percent increase in a

983092 percent overall trade share produces little change Te point we are making

is that at this rate and pattern of trade lsquodiversificationrsquo it will actually take a

very long timemdashwhile relatively small upward trends in trade with the United

States could have a quick and very large impact in the opposite direction

On the import side we notice more trade diversification with the US

share at 983093983088 percent and the Chinese share at 983089983089 percent (table 983089983094) Te Chinese

growth rate on the import side is less than on the export side (table 983089983095) Te

most revealing number may be the high average over five years for Mexico

at 983097 percent Tis could be indicative of a growing supply chain with Mexico

While foreign direct investment (FDI) is not a direct indicator of future

trade trends in investment may harbinger change In terms of outbound

FDI we notice that only a small segment (less than 983089983088 percent) is targeted

for manufacturing (table 983089983096) It is investment in this category in which onewould expect growth in supply chains

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The state of Canada-US relations in 983090983088983089983092 983091983089

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Table 983089983092 Canadarsquos merchandise exports top ten destinations 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 3291 1 777 2361 1 751 2564 1 749

China 92 4 22 97 3 31 114 3 33

UK 114 2 27 105 2 33 141 2 41

Japan 97 3 23 73 4 23 79 4 23

Mexico 51 5 12 42 5 13 43 5 13

Netherlands 32 8 08 24 8 08 28 8 08

South Korea 34 7 08 31 7 10 32 7 09

Germany 39 6 09 33 6 10 34 6 10

France 28 9 07 23 9 07 20 10 06

Brazil 23 10 05 14 10 04 22 9 06

Total 4237 3145 3424

2011 2012Average

shareValue Rank Share Value Rank Share

US 2750 1 737 2783 1 745 752

China 140 3 38 159 2 43 33

UK 157 2 42 154 3 41 37

Japan 89 4 24 85 4 23 23

Mexico 46 5 12 44 5 12 12

Netherlands 40 7 11 37 6 10 09

South Korea 43 6 11 30 7 08 09

Germany 33 8 09 29 8 08 09

France 26 9 07 26 9 07 07

Brazil 24 10 06 21 10 06 06

Total 3732 3734

Source Industry Canada (2013b)

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983091983090 The state of Canada-US relations in 983090983088983089983092

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Table 983089983093 Canadian export growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 56 7 -281 9 106 = 5

China 101 6 65 1 187 3

UK 16 9 -73 2 358 2

Japan 202 3 -250 7 106 = 5

Mexico 179 4 -178 6 43 9

Netherlands -85 10 -255 8 183 4

South Korea 276 2 -80 3 52 8

Germany 160 5 -167 4 54 7

France 36 8 -174 5 -122 10

Brazil 706 1 -380 10 603 1

2011 2012Average

Rank Rank

US 104 8 27 2 02

China 270 4 152 1 155

UK 148 6 -02 4 90

Japan 161 5 -29 6 38

Mexico 94 9 -16 5 24

Netherlands 475 1 -55 7 53

South Korea 374 2 -272 10 70

Germany 05 10 -95 9 -09

France 311 3 23 3 15

Brazil 109 7 -92 8 189

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983091

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Table 983089983094 Canadarsquos merchandise imports top ten sources 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 1992 1 524 1633 1 511 1745 1 504

China 374 2 98 347 2 109 382 2 110

Mexico 157 3 41 145 3 45 190 3 55

Japan 134 4 35 108 4 34 115 4 33

Germany 111 5 29 95 5 30 97 5 28

UK 110 6 29 82 6 26 92 6 27

South Korea 53 9 14 52 7 16 53 7 15

Algeria 67 7 18 33 10 10 31 10 09

Italy 45 10 12 39 9 12 40 9 12

France 53 8 14 49 8 15 47 8 13

Total 3804 3194 3465

2011 2012Average

shareValue Rank Share Value Rank Share

US 1846 1 496 1922 1 506 508

China 402 2 108 417 2 110 107

Mexico 205 3 55 210 3 55 50

Japan 109 4 29 123 4 33 33

Germany 107 5 29 118 5 31 29

UK 86 6 23 70 6 18 25

South Korea 55 7 15 52 7 14 15

Algeria 46 9 12 49 8 13 12

Italy 43 10 11 43 9 11 12

France 46 8 12 41 10 11 13

Total 3723 3796

Source Industry Canada (2013b)

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983091983092 The state of Canada-US relations in 983090983088983089983092

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Table 983089983095 Old and new trade prospectsmdashimport growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 29 8 -178 7 89 5

China 112 4 -70 2 123 3

Mexico 43 7 -77 4 337 1

Japan -11 10 -192 8 89 4

Germany 105 5 -149 6 44 7

UK 95 6 -252 9 141 2

South Korea 120 3 -14 1 36 8

Algeria 518 1 -511 10 -50 10

Italy 11 9 -132 5 48 6

France 191 2 -70 3 -35 9

2011 2012Average

Rank Rank

US 88 5 57 4 17

China 82 6 53 5 60

Mexico 111 3 39 6 91

Japan -29 9 151 1 01

Germany 132 2 117 2 50

UK -36 10 -173 10 -45

South Korea 76 7 -37 8 37

Algeria 533 1 91 3 116

Italy 95 4 23 7 09

France 22 8 -97 9 02

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983093

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In terms of overall Canadian outbound FDI stocks in the US remain

very high despite the recent US recession while growth in stock in Asia is

modest (figure 983089983097) When we examine Canadian FDI in the so-called BRIC

states we notice that investment in both China and India is relatively small

Canadian mining investment in Brazil is much larger (figure 983090983088) In fact when

we examine amounts of FDI we find that Canada is not really a big BRIC

investor other than Brazil Chile Hong Kong and Peru are larger FDI recipi-

ents than China and India (figure 983090983089)

In terms of FDI flowing into Canada we notice the very large share

(983090983096983094983093 percent) in manufacturing which indicates both the predominant

share of US FDI and the extensive integrated supply chains in Canada-US

manufacturing (table 983089983097) Even more than for outbound FDI inflow stocks

show very large US preponderance (figure 983090983090) Such continued concentra-

tion of US FDI in Canada suggests that Canadian trade diversification is not

just a decision to be made by Canadian producers

Like trade growth Chinese FDI growth in Canada is positive but the

overall numbers are small and do not show rapid growth in the last 983091 years

(figure 983090983091)

Table 983089983096 Top industries for outward stocks of FDI 983090983088983089983090

Category Value Share

Mining oil and gas extraction 1099 188

Oil and gas subcategory 542 93

Manufacturing 569 97

Finance and insurance 2334 399

Management of companies and enterprises 757 129

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

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983091983094 The state of Canada-US relations in 983090983088983089983092

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0

1

2

3

4

5

6

7

8

9

10

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n s

Figure Canadian foreign direct investment (stock) BRIC ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Brazil PRC India Russia

0

20

4060

80

100

120

140

160

180

200

220

240

260

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) various regions

ndash

Notes Excluding Mexico Canadian FDI to Mexico in 2012 was $557 billion

Foreign Direct Investment measures the purchase of various forms of capital stock abroad

However tax havens (Barbados Bermuda etc) are frequently found to be some of the highest

recipients of FDI In reality tax havens do not reflect economic growth as FDI figures invested

into tax havens are often reinvested back to the source country in a concept known as

round-tripping (Financial Post 2013) We have accounted for tax havens by removing them from

tables and figures in this section The numbers corresponding to Figure 19 would be Barbados

($593 billion) Bermuda ($118 billion) British Virgin Islands ($21 billion) Cayman Islands ($302

billion)

Source Foreign Affairs Trade and Development Canada (2013c)

US Europe Asia amp Oceania Central amp South America Africa

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The state of Canada-US relations in 983090983088983089983092 983091983095

fraserinstituteorg

Table 983089983097 Top industries for inward stocks of FDI 983090983088983089983090

Category Value Share

Oil and gas extraction 766 147

Manufacturing 1492 287

Petroleum and coal products manufacturing 377 72

Wholesale trade 395 76

Finance and insurance 699 134

Management of companies and enterprises 999 192

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

0

2

4

6

8

10

12

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) Chile Hong Kong

Peru amp Korea ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Chile Hong Kong Peru Korea

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0

40

80

120

160

200

240

280

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Foreign direct investment (stock) in Canada from top three

countries ndash

Source Foreign Affairs Trade and Development Canada (2013c)

US Netherlands UK

0

2

4

6

8

10

12

201220112010200920082007

2 0 0 2 C A $ b

i l l i o n s

Figure Foreign direct investment (stock) in Canada from China

ndash

Source Foreign Affairs Trade and Development Canada (2013c)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

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Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

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References

Abacus Data (983090983088983089983090 November 983090983088) Beyond the Canadian-American Border

lthttpabacusdatacawp-contentuploads983090983088983089983090983089983089Can-AM_Report_CABC_

Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5662

The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5762

983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5862

The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

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983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

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Bill Mackness

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Jack Pirie

Con Riley

Catherine Windels

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The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

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983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 4: Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg i

Contents

Executive summary iii

Bilateral trade relations 1

Trade and regulatory barriersdisputes 12

State of the border and regulatory cooperation 18

Canadian and American public perceptions 24

US policy uncertainty 27

Trade diversification 30

Conclusion the bilateral and diversification agenda 39

References 41

About the authors 49

Acknowledgments 50

Publishing information 51

Supporting the Fraser Institute 52

Purpose funding amp independence 53

About the Fraser Institute 54

Editorial Advisory Board 55

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fraserinstituteorg

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fraserinstituteorg iii

Executive summary

Economic and political relations between Canada and the United States

our most important foreign relationship have worsened since the Fraser

Institutersquos previous report on the state of Canada-US relations Skating on

Tin Ice (Moens 983090983088983089983088) Te recovery of the US economy after the financial

crash in 983090983088983088983096 has been slow Te long-term uncertainty in US budget politics

and public debt resolution remains and the concomitant policy instabilitymdash

as we first noted in US Election 983090983088983089983090 Implications for Canada (Moens and

Clemens 983090983088983089983091)mdashcontinues to put a drag on economic growth Te across-

the-board budget cuts that took effect on January 983089 983090983088983089983091 better known as

sequestration offer a ray of light in the present context as they have imposed

cuts on spending of $983096983092 billion in both 983090983088983089983091 and 983090983088983089983092

Canadian merchandise exports to the United States have weakened

in relative terms At the same time there is not enough Canadian export

diversification to other destinations to make up this relative loss Te natural

resources component of Canadian exports is the only major growing segment

of overall trade In both merchandise and services trade the post-983090983088983088983095 per-

iod shows Canada is losing in trade competitiveness in relation to the United

States Te negative trend in trade competitiveness in services is even big-

ger than in merchandise trade Te relative loss of trade competitiveness in

our relationship may be a surprise to many Canadians who believe Canada

is simply doing better than the United States

Canadarsquos weakening competitiveness vis-agrave-vis the United States is

occurring at the same time as political relations at the top are in a slump

Te main sector in US-bound trade showing growth in the last decade crude

oil products is also the one facing most political interference from US deci-

sion makers Te six-year delay in the international permit for KXL to cross

the Canada-USA border is without precedent in our bilateral relations Atthe same time the US mandatory country-of-origin labeling rule which

took effect in 983090983088983088983097 has severely damaged the decades-old and deeply inte-

grated supply chain in beef and pork costing Canadian producers some $983089

billion per year ldquoBuy Americanrdquo in the public procurement sector remains a

latent threat to bilateral relations While American trade barriers have risen

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fraserinstituteorg 983089

Bilateral trade relations

Merchandise trade

Tere is a significant decline in both exports and imports from 983090983088983088983096 to 983090983088983088983097

as a result of the US recession (table 983089) Te sharpest decline is in Canadian

merchandise exports to the US which decreased by 983090983095 percent in 983090983088983088983097 and

still have not recovered to the 983090983088983088983096 level in 983090983088983089983090 Canadian merchandise

imports from the US on the other hand did not fall as sharplymdash983089983094 percent in

983090983088983088983097mdashand in 983090983088983089983090 are only slightly below the 983090983088983088983096 number Tus on balance

Canadian exports to the US have suffered significantly more from the reces-

sion than American exports to Canada (figures 983089 983090) Given this re-balancing

Canadarsquos merchandise trade balance surplus with the USA has been virtu-

ally cut in half (983092983094 percent) from $983095983095 billion in 983090983088983088983096 to $983091983093 billion in 983090983088983089983090983089

Te traditionally large gap between merchandise exports and imports

between Canada and its largest trading partner have shrunk substantially As

a result Canadarsquos trade balance with the world has declined from $983092983089 billion

in 983090983088983088983096 to a deficit of $983089983088 billion in 983090983088983089983090 Te monthly import and export

numbers in 983090983088983089983091 show a continuation of this trend

A noticeable trend in Canada in the last 983095 years reveals that less GDP is

derived from trade (and thus more from Canadarsquos domestic market) while in

the United States the trade versus domestic market share of GDP is on a ris-

ing trend (table 983090) When we examine the US share of Canadarsquos total exports

and imports over a longer period (983089983097983097983091ndash983090983088983089983090) we notice the overall down-

ward trend (figures 983091 983092) Te main causal factors are the higher value of the

Canadian dollar the post-983090983088983088983096 slump in US demand and a certain amount

of diversification in Canadarsquos trade as well as stronger relative growth inCanadarsquos domestic market

1048625 All figures are in real Canadian dollars unless otherwise noted

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983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

A breakdown of the top export and import sectors in Canada-US trade

shows that the traditionally strong machinery and automotive sectors are

holding well in terms of US exports to Canada but the same sector is weaker

on the Canadian side Te gains on our side are in minerals and energy prod-

ucts (tables 983091 983092) Te slow decline in Canadian exports of manufactured prod-

ucts suggests a weakening on Canadarsquos side in the integrated supply-chain in

this sector Lower productivity and border costs may well play a role

Table 983089 Canadian merchandise trade 983090983088983088983095ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2007 2008 2009 2010 2011 2012

Total exports 41380 42705 32099 34675 38099 38006

Exports to US 31795 32331 23610 25332 27517 27809

Total imports 37291 38877 32691 35508 38036 38993

Imports from US 24215 24666 20641 22312 23475 24360

Total balance 4089 3827 -592 -833 063 -987

Balance with US 7579 7666 2969 3020 4042 3450

Note On a balance of payments basis

Source Statistics Canada (2013d)

15

20

25

30

35

2 0 1 3 - 0 5

2 0 1 3 - 0 1

2 0 1 2 - 0 9

2 0 1 2 - 0 5

2 0 1 2 - 0 1

2 0 1 1 - 0 9

2 0 1 1 - 0 5

2 0 1 1 - 0 1

2 0 1 0 - 0 9

2 0 1 0 - 0 5

2 0 1 0 - 0 1

2 0 0 9 - 0 9

2 0 0 9 - 0 5

2 0 0 9 - 0 1

2 0 0 8 - 0 9

2 0 0 8 - 0 5

2 0 0 8 - 0 1

2 0 0 7 - 0 9

2 0 0 7 - 0 5

2 0 0 7 - 0 1

Import Export

2 0 0 2 C A $ b i l l i o n s

Figure Canadarsquos merchandise trade (monthly) ndash

Source Statistics Canada (2013c) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091

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Table 983090 Merchandise trade as a of GDP 983090983088983088983093ndash983090983088983089983090 (current US$)

2005 2006 2007 2008 2009 2010 2011 2012

Canada 602 584 569 583 483 501 515 510

Growth 02 -30 -26 25 -172 37 28 -10

US 210 221 227 243 191 225 250 248

Growth 61 52 27 70 -214 178 111 -08

Source The World Bank (2013a)

0

1

2

3

4

5

6

7

8

9

2 0 1 3

- 0 5

2 0 1 3

- 0 1

2 0 1 2

- 0 9

2 0 1 2

- 0 5

2 0 1 2

- 0 1

2 0 1 1

- 0 9

2 0 1 1

- 0 5

2 0 1 1

- 0 1

2 0 1 0

- 0 9

2 0 1 0

- 0 5

2 0 1 0

- 0 1

2 0 0 9

- 0 9

2 0 0 9

- 0 5

2 0 0 9

- 0 1

2 0 0 8

- 0 9

2 0 0 8

- 0 5

2 0 0 8

- 0 1

2 0 0 7

- 0 9

2 0 0 7

- 0 5

2 0 0 7

- 0 1

2 0 0 2 C A $ b i l l i o n s

Figure Canada-US net merchandise trade (monthly) ndash

Source Statistics Canada (2013c) calculations by authors

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983092 The state of Canada-US relations in 983090983088983089983092

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-5

-4

-3

-2

-1

0

1

2

3

2012201120102009200820072006200520042003200220012000

G r o

w t h ( )

Figure GrowthUS share of Canadarsquos annual merchandise trade ()

ndash

Source Industry Canada (2013b) calculations by authors

Import Export

45

50

55

60

65

70

75

80

85

90

2011200920072005200320011999199719951993

Import Export

Figure US share of Canadarsquos annual merchandise trade () ndash

Source Industry Canada (2013b)

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The state of Canada-US relations in 983090983088983089983092 983093

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Table 983091 Top sectors for Canadian merchandise exports to the US 983090983088983089983090

Industry Exports

2002 CA$ bi llions Percentage

Mineral products 886 318

Products of chemical or allied industries 163 59

Plastics and related articles 118 43

Base metals and articles of base metals 200 72

Machinery mechanical appliances electrical equipment and related articles 276 99

Vehicles aircraft vessels and associated transport equipment 530 191

Note On a customs basis

Source Statistics Canada (2013a)

Table 983092 Top industries for Canadian merchandise imports from the US 983090983088983089983090

Industry Imports

2002 CA$ bi llions Percentage

Mineral products 163 85

Products of chemical or allied industries 171 89

Plastics and related articles 127 66

Base metals and articles of base metals 158 82

Machinery mechanical appliances electrical equipment and related articles 413 215

Vehicles aircraft vessels and associated transport equipment 413 215

Note On a customs basis

Source Statistics Canada (2013a)

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983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Trade in services

As a share of overall bilateral trade trade in services is growing gradually otal

bilateral services trade in 983090983088983089983088 amounted to 983089983096 percent of bilateral merchan-

dise trade It was 983089983093 percent in 983090983088983088983095983090 Te United States is by far the largest

trading partner in Canadarsquos international trade in services rade with the

US is nearly ten times the amount with the next largest partner the United

Kingdom But unlike merchandise trade the value of non-US services trade

is nearly half (983092983092 percent in 983090983088983089983088) of that with the USA (table 983093) In other

words there is more diversification from the US market in services than in

merchandise983091

Te trend reveals rising competitiveness on the US side (and non-USA)

as Canadian imports are growing considerably while Canadian exports are

stagnant resulting in a growing services trade deficit (figure 983093)

Bilateral trade in services was not impacted by the US recession as

merchandise trade was otal volume of trade is slightly up in the three years

after 983090983088983088983095 (figure 983094) Most of this gain is from growth in Canadian imports

from the US (and from non-US) while Canadian exports to the USA are

slightly down

Given that there is no growth in Americans traveling to Canada during

this time period (as we will show later) the relative strength of US exports vis-

agrave-vis Canadian exports appears to lie in the commercial sector (tables 983094 983095)

In conclusion in both merchandise and services trade the post 983090983088983088983095

period shows that Canada is relatively losing in trade competitiveness in rela-

tion to the United States Te relative loss of trade competitiveness in our

relationship may be a surprise to many Canadians who believe Canada has

simply been doing better than the US since 983090983088983088983096 Te lsquodoing betterrsquo part may

apply to domestic economic activity but not to external trade

1048626 Data on trade in services is not as recent as merchandise trade

1048627 op export destinations in 983090983088983089983088 after the USA are the UK France and Germany op

importers to Canada in 983090983088983089983088 after the USA include UK Hong Kong (China) France

Germany and Mexico Te case with importers to Canada is similar to that with export-

ing countries Imports from the UK make up roughly 983089983088 percent that of imports from the

US Imports from Hong Kong are 983093983089 percent that from the UK with France at 983092983090 percent

and both Germany and Mexico rest at roughly 983091983096 percent each

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The state of Canada-US relations in 983090983088983089983092 983095

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Table 983093 Services trade between Canada and the US 983090983088983088983093ndash983090983088983089983088 (983090983088983088983090 CA$ billions)

2005 2006 2007 2008 2009 2010

Exports to USA 3988 3815 3834 3966 3718 3700

Imports from USA 4358 4395 4544 4833 4783 4960

Trade balance with USA -370 -580 -710 -866 -1065 -1260

Trade balance with USA -443 -707 -847 -985 -1240 -1455

Exports to non-USA 2832 3080 2985 3052 3142 3102

Imports from non-USA 3022 3187 3380 3518 3496 3722

Trade balance with non-USA -189 -108 -395 -466 -354 -620

Trade balance with non-USA -323 -172 -621 -710 -540 -909

Total services exports 6820 6894 6819 7018 6860 6802

Total services imports 7379 7582 7924 8350 8279 8682

Total trade balance -559 -688 -1105 -1333 -1419 -1880

Total trade balance -394 -475 -750 -867 -937 -1214

Bilateral (X+I) USA 8346 8210 8378 8799 8589 8660

Bilateral (X+I) non-USA 5854 6267 6365 6569 6551 6824

Bilateral (X+I) total 14200 14477 14742 15368 15140 15484

Source Foreign Affairs Trade and Development Canada (2013a)

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983096 The state of Canada-US relations in 983090983088983089983092

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80

81

82

83

84

85

86

87

88

89

90

201020092008200720062005

2 0

0 2 C A $ b i l l i o n s

Figure Canada-US net services trade ndash

Source Foreign Affairs Trade and Development Canada (2013a)

-20

-16

-12

-8

-4

0

201020092008200720062005

Trade balance with USA Total trade balance

Figure Canadarsquos trade deficit with US and the world ndash

Source Foreign Affairs Trade and Development Canada (2013a)

2 0 0 2 C A $ b i l

l i o n s

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The state of Canada-US relations in 983090983088983089983092 983097

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Table 983094 Top categories for service trade exports Canada-World 983090983088983089983090

Category Subcategory Exports

2002 CA$ bi llions Percentage

Government services 13 19

Travel services 143 207

Personal travel 119 172

Transportation services 111 161

Air transport 52 76

Commercial services 424 614

Financial services 57 82

Computer and information services 64 93

Intellectual property use 31 44

Management services 90 130

Research and development 33 47

Architectural engineering 39 57

Source Foreign Affairs Trade and Development Canada (2013a)

Table 983095 Top categories for service trade imports Canada-World 983090983088983089983090

Category Subcategory Imports

2002 CA$ billions Percentage

Government services 11 12

Travel services 288 323

Personal travel 253 284

Transportation services 195 219

Water transport 82 92

Air transport 84 95

Commercial services 396 446

Insurance services 44 50

Financial services 44 50

Intellectual property use 89 100

Management services 75 84

Source Foreign Affairs Trade and Development Canada (2013a)

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983089983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

075

080

085

090

095

100

105

2 0 1 3

- 0 7

2 0 1 3

- 0 1

2 0 1 2

- 0 7

2 0 1 2

- 0 1

2 0 1 1

- 0 7

2 0 1 1

- 0 1

2 0 1 0

- 0 7

2 0 1 0

- 0 1

2 0 0 9

- 0 7

2 0 0 9

- 0 1

2 0 0 8

- 0 7

2 0 0 8

- 0 1

2 0 0 7

- 0 7

2 0 0 7

- 0 1

Figure CanadaUS dollar exchange rate ndash

Source Bank of Canada (2013b)

C A U S e x c h a n g e r a t e

Dollar value and productivity trends

Te first factor to consider regarding Canadarsquos trade competitiveness vis-agrave-vis

the United States is the value of the Canadian dollar Te substantial appre-

ciation of the Canadian dollar against the US dollar that began in the early

983090983088983088983088s has stabilized at a much higher average value of the loonie ( figure 983095)

As is well documented such exchange rate appreciation tends to have a strong

effect on current account balances as exports decline (Kappler et al 983090983088983089983089)

A growing account deficit will likely push the value of the Canadian dollar

downward in the longer term and thus offer some remedy

ProductivityOf more concern to Canadians should be the data indicating that Canadian

labour productivity rates are lagging those in the United States (figures 983096 983097)

One would expect that Canadarsquos higher dollar has provided industry in recent

years with an opportunity to improve productivity as imported machinery

and technology would be available at a lower price However Canadarsquos pro-

ductivity rate of growth is modest and in 983090983088983089983090 dips into negative territory

again

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983089983089

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-1

0

1

2

3

20122011201020092008

Canada US

Figure Canada and US rates of output productivity growth ()

ndash

Source Statistics Canada (2013g)

R a t e o f p r o d u c t i v i t y g r o

w t h ( )

-10

-5

0

5

20122011201020092008

Labour productivity (Canada) Real GDP (Canada) Hours worked (Canada)

Labour productivity (US) Real GDP (US) Hours worked (US)

Figure Real US-Canadian output and hours worked () ndash

Source Statistics Canada (2013g)

A n n u a l c

h a n g e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983089983090 fraserinstituteorg

Trade and regulatory barriersdisputes

Table 983096 provides a synopsis of the major trade disputesbarriers that have

played a role in bilateral relations in the last five years and that are pertinent

for the 983090983088983089983092 period (pages 983089983094-983089983095) Te two large disputesmdashKeystone XL and

Mandatory Country-of-Origin Labeling (MCOOL) on red meatmdashare more

ominous than they may seem First both in crude oil products and in cattle

and hogs the United States is unilaterally disrupting or dismantling a well-

established integrated sector Canada has started attempts to diversify its oil

transportation structure including more rail and new pipeline routes But

as all proposed alternative pipelines have shown the alternatives are contro-

versial and at best years away from making a difference Meanwhile there is

considerable risk in putting too much crude oil on rail as its accident rates

are higher than pipe

Canadian threats to counter US MCOOL action with tariffs on food

products are not going to have much impact in the near future Moreover

an escalating tariff war on food products cannot be won by Canada and will

ultimately harm consumers on both sides of the border US defiance of two

WO rulings also means more uncertainty for Canadian traders

Keystone XL pipeline

Proposed in 983090983088983088983096 the Keystone XL (KXL) extension is part of a pipeline sys-

tem connecting Alberta oil sands and US mid-West and Gulf region refineries

KXL is a 983089983096983097983095 km crude oil pipeline with a capacity of 983092983094983093983088983088983088 barrels per

day (Hussain 983090983088983089983091) It is a substantial private infrastructure proposal that

will create employment and guarantee a secure energy source for the United

States (Millington and Murillo 983090983088983089983091) It is by no means a new feature in

Canada-US energy relations as a dense network of oil and electricity carri-ers cross the border at multiple points

What is unprecedented is that the permit process is now in its sixth

year and the final resolution remains uncertain (by US law a cross-border line

requires Department of State approval) If not resolved in 983090983088983089983092 the question

may well be handed over to the next president after 983090983088983089983094 Te policy uncertainty

associated with KXL approval has by far the largest impact on Canada-US trade

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 2062

The state of Canada-US relations in 983090983088983089983092 983089983091

fraserinstituteorg

relations Te dragged-out procedure has chilled relations Te southern leg of

KXL has been completed and the original route objection by Nebraska has been

resolved What remains ostensibly the problem is that the US administration

has identified this heavy oil as a component of its policy objective of curbing

the emission of greenhouses gasses to reduce global warming

Te impact of this pipeline delay in the 983090983095 million barrels per day (bpd)

export of Canadian oil products to the USA reverberates at various levels

Across Canada investment in mining oil and gas extraction for 983090983088983089983091 is pre-

dicted to decrease by 983090983095 percentmdashthe largest decline since the 983090983088983088983096 recession

(Statistics Canada 983090983088983089983091f) In Alberta investment is predicted to increase by

only 983088983089 percent (Statistics Canada 983090983088983089983091f) Capital investment in oil and gas

extraction has not recovered to pre-983090983088983088983096 levels (Industry Canada 983090983088983089983091a)

While the industry has become increasingly dependent on rail trans-

port to move product it is a costly alternative It can cost up to three times

as much as pipeline transport (Millington and Murillo 983090983088983089983091) and its limita-

tions are self-evident because rail movement of oil is constrained by the lim-

ited availability of rail cars In 983090983088983089983090 983089983091983088983088983088983088 bpd of heavy crude was being

transported by rail Tis is expected to rise to 983092983090983093983088983088983088 bpd by the end of

983090983088983089983092 falling short of the 983092983094983093983088983088983088 bpd which could have been moved through

KXL (Hussain 983090983088983089983091) Te forced increase in rail transport has resulted in

unintended costs for the industry a total of US$983089 billion must be invested for

new rail terminals and another US$983092ndash983093 billion for new rail cars (Lewis 983090983088983089983091)

Rail transport is both more costly and more dangerous A recent study

concluded that ldquopipeline transportation is safer than transportation by road

rail or barge as measured by incidents injuries and fatalitiesrdquo (Green amp

Furchtgott-Roth 983090983088983089983091) It is not inconceivable that another major oil acci-

dent either in Canada or the USAmdashsuch as took place in Quebec in July 983090983088983089983091

killing 983092983095 peoplemdashwould result in a moratorium on oil transport by rail with

grave consequences for Canadian producers

983090983088983088983090 Mandatory Country-of-Origin Labeling

Mandatory Country-of-Origin Labeling (MCOOL) is a provision mandated

by Congressional law and first implemented in 983090983088983088983096 Te measure imposes

strict segregation rules on American Canadian and Mexican cattle and hogs

and the subsequent slaughtering and processing of these animals to producebeef and pork products for retail sale Te stated purpose is to create labels

that indicate the origin in part or in whole of the product In effect it is a

veiled trade barrier because it gives US animals and products a competitive

advantage due to higher labeling inventory and processing costs for equiva-

lent Canadian products

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983089983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983096 Synopsis of trade disputes in Canadian-American relations in 983090983088983089983091

Dispute Impact and cost Prospect for resolution

Keystone XL Pipeline Very serious Poor

2008 proposal for a 1897

km 465000 bpd crude oilpipeline spanning fromAlberta down to Nebraska

Downward pressure on investment

Lost wages January 2012postponement is costing US $47million a day in lost wages (ConsumerEnergy Alliance 2013)

Continuation of crude oil pricediscounts due to lack of infrastructure

Costly alternative rail has emerged as atransportation alternative but can costup to three times as much as pipelinetravel (Millington and Murillo 2013)

Permit postponed twice

Resolution is not transparent

Rising risk of decision deferral past 2016

Mandatory Country-of-OriginLabelling (MCOOL)

Serious Poor

2008 CongressionalLaw mandating rulesfor segregated livestockprocessing and packagingand a labeling structure inorder to have food labelsindicate origin of product

Annual cost to Canadian beef and porksector of $1 billion

Deconstruction of a highly integratedtrilateral supply chain industry

MCOOL adds no animal health or foodsafety benefits

US has defied both WTO complaint andthe core part of the WTO Appeal ruling

2013 US reaction has been to strengthenthe discriminatory provision banning co-mingling of meats altogether

Canada plans to retaliate with tariffs butthis is a costly gambit with low chance ofsuccess

Softwood Lumber Agreement Moderate Good

In 2011 American softwoodcompanies took theirCanadian counterparts to theLondon Court of InternationalArbitration accusing themof circumventing the SLA(Foreign Affairs Trade andDevelopment Canada 2012a)

If in violation Canadian industry wouldface $380 million in penalties (TheCanadian Press 2012)

The London Court of InternationalArbitration in 2012 ruled in favor ofCanada (Foreign Affairs Trade andDevelopment Canada 2012a)

SLA was to expire in 2013 but Canadaand the USA extended it until 2015 (CBCNews 2012)

Long-term free trade in lumber needs toreplace SLA

Buy American Provision Serious Partial resolution but high risk ofrecurring Buy American legislation

2009 American Recovery andReinvestment Act

Exclusion of Canadian products andproduction sharing in US public worksprocurement

Canada-US Procurement Agreement in2010 which allowed for the purchaseof Canadian goods on seven US

infrastructure projects valued at morethan $7777000

Canada needs to seek a comprehensiveagreement in order to escape futureAmerican protectionism with allprovinces on board and compliant withthe WTO provision

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The state of Canada-US relations in 983090983088983089983092 983089983093

fraserinstituteorg

Dispute Impact and cost Prospect for resolution

Canadian Wheat Board Long-term benefit Completed

Canadarsquos mandatory wheat

marketing board monopsonyended in 2011

Frequent US action against CWB in the

past will now end as wheat marketingin Canada turns fully market based

Intellectual Property Rights Moderate potential cost Partially resolved

Canada has been on theSpecial 301 Priority Watch Listby the United States TradeRepresentative since 1995

Ongoing threat of US Trade Action andlegal action

Canadian domestic complianceincluding

Strengthening data protection

Participation in Anti-counterfeiting TradeAgreement (ACTA in 2013)

Enacted the Combating CounterfeitProducts Act (2013)

Started the process of strengthening

the Copyright Act and implementingWorld Intellectual Property OrganizationInternet Treaties

In recognition of which Canada has beenremoved from the Special 301 PriorityWatch List

Prescription drugs Serious potential for trade action Indirect progress

The US complaint againstCanada

Imposing price ceilings thatshifts the cost burden of RampDto US firms

Weak protection ofintellectual property rights rethird party sales

Slow prescription drugapproval process causingreduced market access

US firms experience lost revenues andtrade action is a risk

In 2013 CETA agreement with theEuropean Union Canada agrees to givefull patent protection to new drugs fortwo years

Two-year rule may be transferable tofuture Canada-US resolution

Table 983096 continued

Canada and the United States have had a deeply integrated market in

this sector since the early 983089983097983097983088s Animal health and food safety standards have

been largely harmonized As a result highly efficient supply-chain production

methods have made this industry quite efficient However the imposition of

MCOOL has changed all that (Moens amp Leon 983090983088983089983090) Te cost differential haswidened and Canadian exports have dropped dramatically Since 983090983088983088983096 the

cattle sector has lost $983094983092983088 million per year and the hog sector has lost $983093983088983088

million a year (Te Canadian Press 983090983088983089983091a)

In 983090983088983089983090 the World rade Organization (WO) ruled in Canadarsquos favor by

concluding that MCOOL is discriminatory Te WO gave the US until May 983090983091

983090983088983089983091 to act but on that same day the USDA imposed regulatory changes that

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983089983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

actually strengthened the provisions of MCOOL In retaliation the Canadian

government released a list of US exports to Canada that would be subjected

to tariffs and it is preparing to seek a compliance panel at the WO Until this

situation is resolved the Canadian government predicts a continuing annual

loss of $983089 billion for the Canadian red meat sector (Te Canadian Press 983090983088983089983091a)

Softwood lumber

In 983090983088983089983089 several American softwood companies took their Canadian counter-

parts to the Court of International Arbitration in London accusing them of cir-

cumventing the Softwood Lumber Agreement of 983090983088983088983094 (Foreign Affairs rade

and Development Canada 983090983088983089983090a) Te dispute centered on the accelerating pace

of lumber harvests resulting from the pine beetle infestation Te stakes were

high $983091983096983088 million in penalties should Canada lose (Te Canadian Press 983090983088983089983090)

In 983090983088983089983090 the Court of International Arbitration ruled in Canadarsquos favor

(Foreign Affairs rade and Development Canada 983090983088983089983090a) In addition while

the Softwood Lumber Agreement was set to expire in 983090983088983089983091 the Canadian

and American governments successfully negotiated an extension of the

Agreement until 983090983088983089983093 (CBC News 983090983088983089983090) Te fact remains that as long as a

large part of Canadarsquos softwood lumber is managed in terms of quotas and

the stumpage fee system US trade action is very likely

lsquoBuy Americanrsquo provision

Te 983090983088983088983097 American Recovery and Reinvestment Act (ARRA which expired

on September 983091983088 983090983088983089983089) and the more recent 983090983088983089983089 American Jobs Act stipu-

lated that steel iron and other goods used in the repair and construction of

infrastructure projects in the US (highways bridges mass transit and fed-

eral buildings) must be manufactured in the United States (Matthiesen 983090983088983089983089)

In response to ARRA Canada and the US signed the Canada-US

Procurement Agreement in 983090983088983089983088 which allowed for the purchase of Canadian

goods on seven US infrastructure projects valued at more than $983095983095983095983095983088983088983088

or within the 983091983095 states subject to the WO GPA (Government of Canada

983090983088983089983091a) Te 983090983088983089983089 American Jobs Act did not pass in Senate and is thus moot

While the ARRA dispute was partially resolved lsquoBuy Americanrsquo anda counter position of lsquoBuy Canadianrsquo can flare up on either side of the bor-

der Canadian industry is most vulnerable in this uncertainty Te Canadian

government ought to seek a comprehensive Buy American exemption to

escape future American protectionism In so doing all provincial govern-

ments need to be on board in order to make the WO and NAFA rules

function optimally

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The state of Canada-US relations in 983090983088983089983092 983089983095

fraserinstituteorg

Canadian Wheat Board (CWB)

In 983090983088983089983089 the Canadian government removed the monopsony held by the

Canadian Wheat Board Tis unilateral action offers a successful reduction

in bilateral trade distortion oday the CWB continues to operate as a mar-

keting group

Intellectual Property Rights (IPR)

From 983089983097983097983093 through 983090983088983089983091 Canada was on the Special 983091983088983089 Priority Watch

List by the United States rade Representative Te US complaint was that

protection and enforcement of IPR in Canada were weak Te Special 983091983088983089

Priority Watch List is designed to identify US trading partners that are the

worst offenders in IPR protection (Embassy of the United States Ottawa

Canada 983090983088983089983091)

Although the issue is not completely resolved Canada has made sig-

nificant progress in recent years Te federal government has strengthened

data protection regulations criminalized the use of camcorders in theaters

and participates in the Anti-Counterfeiting rade Agreement (ACA) nego-

tiations (983090983088983089983091) Most recently Canada enacted the Combatting Counterfeit

Products Act (Embassy of the United States Ottawa Canada 983090983088983089983091) Te

Canadian Government is in the process of strengthening the Copyright Act

and implementing World Intellectual Property Organization Internet reaties

(Embassy of the United States Ottawa Canada 983090983088983089983091)

As a result of these steps Canada was removed from the Special 983091983088983089

Priority Watch List in 983090983088983089983091

Prescription drugs

Prescription drug prices in Canada are relatively low due to a price ceil-

ing mandated by Canadarsquos healthcare system In addition Health Canada

approval times for prescription drugs significantly lag behind their counter-

parts in the United States and the European Union (Barua and Esmail 983090983088983089983091)

US lawmakers have repeatedly expressed their concerns over cheap prescrip-

tion drugs re-entering the US from Canada (Moens and Gabler 983090983088983089983089) TeEU also asked Canada to strengthen IPR protections for prescription drugs

(Lexchin and Gagnon 983090983088983089983091) Since the signing of the CEA agreement in

principle on October 983089983096 983090983088983089983091 the issue between Canada and the EU is now

resolved (Waldie 983090983088983089983091) Canada has agreed to ldquoEU demands for patent pro-

tection for up to two years on brand-name drugsrdquo (Blanchfield 983090983088983089983091)

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983089983096 fraserinstituteorg

State of the border andregulatory cooperation

Te decline in Americans traveling to Canada corresponds with the US

Greenback losing value against the Canadian dollar (figures 983089983088 983089983089) However

when we consider the extent of the decline in total numbers it appears dispro-

portionate Te change in American travel suggests instead a bigger problem

following the 983097-983089983089 shock Te imposition of new border transit requirements

such as passports as well as longer wait times and more security screening

has likely dampened US travel across this international boundary Given the

modest economic recovery in the USA from the beginning of 983090983088983089983088 onward

one would expect disposable income including for travel to trend back up

Instead the numbers remain stagnant at around 983090983088 million less than half the

number of 983090983088983088983090

While an overall national average for border wait times is not avail-

able data on major border crossings in both Central Canada and British

Columbia indicate that no reductions in wait times have been achieved

between 983090983088983088983094 and 983090983088983089983089 (figure 983089983090) Te problem of inefficiency as presented

by the Canada-US border goes well beyond wait times It includes inefficient

activity away from the border such as extra warehousing and costs of com-

plying with various facilitated traveler and goods programs such as FAS for

trucks loads and drivers

Tere are consistent cost differences between domestic and cross-bor-

der truck-borne trade which point to significant border costs ldquoFor exports

to the US these costs added 983088983097 percent to the delivered price of goods in

983090983088983088983092 Tis figure fell to 983088983092 percent in 983090983088983088983097 hellip Higher fixed costs per shipment

accounted for most of the additional cost of transporting goods to the USrdquo

(Brown and Anderson 983090983088983089983090) When we consider that in the manufacturingsector parts cross the border several times in various stages of assembly we

realize how this cost accumulates and defeats the efficiency gains otherwise

generated by integrated supply chain manufacturing Border costs are typ-

ically passed on to the consumer as fixed costs per shipment

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The state of Canada-US relations in 983090983088983089983092 983089983097

fraserinstituteorg

An unprecedented border problem has arisen in the current USAdministrationrsquos lengthy (six years) review of the permitting of a pipeline

border crossing as proposed in the Keystone XL project As a result oil-by-

rail transport has recently increased while the pipeline mode of Canada-US

trade has seen a drop in growth in the 983090983088983089983089983089983090 period ( figures 983089983091 983089983092)

0

10

20

30

40

50

201220112010200920082007200620052004200320022001200019991998

Figure Travellers entering Canada ndash

Source Statistics Canada (2013e)

US residents Non-US residents

0

3

6

9

12

15

18

0

03

06

09

12

15

18

20122011201020092008200720062005200420032002

Trips Spending US$CA$ (Secondary axis)

Figure US overnight travel to Canada ndash

Source Statistics Canada (2011) Bank of Canada (2013b)

M i l l i o n s o f t r i p

s N o m i n a l C A $ b i l l i o n s

U S $ C A $ ex c h a n

g er a t e

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983090983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

5

10

15

20

201120102009200820072006

Northbound average delay Southbound average delay

Figure Peace Arch average border wait time ndash

Source Cascade Gateway Data (2013)

M i n u t e s

0

25

50

75

100

125

150

175

200

225

250

275

300

201220112010200920082007200620052004

2 0 0 4

U S $ b

i l l i o n s

Figure All surface modes of freight flow data based on value of goods

ndash

Source Bureau of Transportation Statistics (2013)

Truck Rail Pipeline

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983089

fraserinstituteorg

lsquoBeyond the Borderrsquo and Regulatory Cooperation

In 983090983088983089983089 Canada and the United States announced an ambitious agreement

to reduce border costs by means of deeper bilateral regulatory and secur-

ity cooperation Te accord seeks to streamline various border proceduresmdash

some already in existence and some newmdashto improve intelligence-sharing

between law enforcement agencies mutual recognition of passenger baggage

screening improved frameworks for trusted trade programs harmoniza-

tion of NEXUS protocols streamlined supply chains enhanced trade com-

petitiveness collaboration in border infrastructure investment and deeper

cooperation in national security investigations Te agreement is known as

Beyond the Border A Shared Vision for Perimeter Security and Economic

Competitiveness (February 983092 983090983088983089983089)

Te Beyond the Border Vision accord also set up a Regulatory

Cooperation Council In it Canadian and American officials seek to reduce

red tape and harmonize regulations in certain key sectors o date the

Council has announced various plans affecting agriculture and food trans-

portation health personal care products workplace chemicals environmentnano materials and small business loans We summarize the key points of

progress made since 983090983088983089983089 in table 983097

-35

-25

-15

-5

5

15

25

35

20122011201020092008200720062005

Truck Rail Pipeline

Figure Growth rate of all surface modes of freight flows () ndash

Source Bureau of Transportation Statistics (2013) calculations by authors

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983090983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983097 Key elements of Beyond the Border and Regulatory Cooperation

Beyond the Border Program

Integrated Cargo Security Strategy (ICSS)December 2011

Reduces administrative duplication between Canada and the US byaddressing security risks in advance within the shipment supply chainand at the border (Canada Border Services Agency 2013)

Prince Rupert Pilot October 2012 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry via rail is examined by Canadian officials onbehalf of the US (Government of Canada 2013c)

Montreal Pilot January 2013 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry to the US via truck is examined by Canadianofficials on behalf of the US (Government of Canada 2013c)

Pre-load Air Cargo Targeting (PACT) Joint pilot by CBSA and Transport Canada to screen cargo pre-flight onCanada-bound airplanes at foreign airports (Canada Border ServicesAgency 2013)

Tamper Evident Technology PilotOctober 2012

Pilot collaboration between CBSA and US CBP to ensure containersremain sealed upon arrival at the US border (Canada Border Services

Agency 2013)

Truck Cargo Pre-Inspection PilotMarch 2013

Pilot program between the CBSA and the US CBP for pre-inspection ofsouthbound traffic into US (Canada Border Services Agency 2013)

Free and Secure Trade (FAST) PilotSarnia Ontario

Pilot program for usage of FAST lanes without Partners in Protection andCustoms Self Assessment programs (Government of Canada 2013c)

Canada-US Shiprider June 2013 Removal of jurisdictional barriers to improve law enforcement personnelin Windsor-Detroit and Vancouver-Blaine waterways (Government ofCanada 2013c)

EntryExit Initiative Phase II June 2013 Exchange entryexit data between the CBSA and US DHS on individualsat Canada-US land border crossings (Government of Canada 2013c)

Regulatory Cooperation ProgramMemorandum of Understanding between Transport Canada and the RailwayAssociation of Canada September 2013

Framework for Canadian rail emissions between 2011 to 2015(Government of Canada 2013d)

Canada-United States Perimeter Approachto Plant Protection September 2013

Draft framework for increased cooperation and reduction inadministrative duplication between the Canadian Food InspectionAgency (CFIA) and United States Animal and Plant Health InspectionService (APHIS) on trade in plants and plant products (Government ofCanada 2013d)

Common Electronic Submission GatewayPilot (CESG) August 2013

FDA and Health Canada will allow pharmaceutical firms to electronicallysubmit drug applications (Government of Canada 2013d)

Initiative to Align Veterinary DrugApprovals December 2012

Joint reviews between US FDA and Health Canada on veterinary drugproducts (Government of Canada 2013d)

Stricter Air Pollutant Emissions Environment Canada aligns car emissions beginning in 2017 with theUS Environmental Protection Agencyrsquos ldquoTier 3rdquo (Government of Canada2013d)

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The state of Canada-US relations in 983090983088983089983092 983090983091

fraserinstituteorg

On September 983092 983090983088983089983091 $983092983094983094 million in investment was allocated to the

Border Action plan by the Government of Canada in order expand two marine

container examination facilities (Government of Canada 983090983088983089983091c) $983091983091 million

was invested by the Government of Canada in the Asia Pacific Gateway and

rade Corridor Initiative (Government of Canada 983090983088983089983091c) Te Plan includes

an additional 983090983097 harmonization initiatives that will enhance trade activity

between Canada and the US

Neither Beyond the Border nor the Regulatory Cooperation Council

offer further investment or cost estimates on the initiatives described in table

983097 Moens and Gabler (983090983088983089983090) pointed to the need for both the Canadian and

American governments to provide data on border costs so that a cost-benefit

analysis can ensue Nonetheless the small steps of progress towards inte-

grating and harmonizing US and Canadian border practices remains a very

important (long-term) part of reducing the profile of the border

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983090983092 fraserinstituteorg

Canadian and American public perceptions

Tree observations are noteworthy in recent assessments of public percep-

tions between Americans and Canadians First Americans consistently have

a very high favourability rating of Canadians typically in the 983097983088 plus range

(table 983089983088 figure 983089983093) Both as a friend and a strategic ally Americans hold

Canadians in the most favourable light possible (table 983089983089) Disagreements over

policy between the two countries whether in defence and foreign affairs or

over border and trade issues do not move this fundamental asset Canadians

enjoy in dealing with their neighbour

Second Canadians do not have high expectations of either the

American or Canadian government regarding progress in bilateral relations

As table 983089983090 shows Canadians hold Obama in high regard (983094983091 percent) but

only 983093983092 percent expect progress from him in trade relations Prime Minister

Harper is rated slightly ahead of President Obama in terms of working hard

towards improving Canada-US relations (table 983089983091)

Tird and most significant in light of Canadarsquos Catch-983090983090 situation both

Canadians and Americans are more supportive of closer cooperation and inte-

gration policies than is the case for political representatives in either the United

States or Canada In two recent studies we showed how US Senators and House

Representatives are quite critical of Canada with regard to NAFA issues and bor-

der security (Moens and Gabler 983090983088983089983089) Similarly we found that among the three

major political parties in Canadarsquos parliament only one consistently expressed

itself in favour of closer ties with the United States (Moens and Gabler 983090983088983089983089)

A recent survey of American and Canadian (and Mexican) attitudes

towards free trade and NAFA show surprisingly strong data for more trade

integration In response to the statement ldquoTere should be more free trade

between the US Canada and Mexicordquo 983096983088 percent of Canadians approved

as did 983095983092 percent of Americans Even on border security Canadians andAmericans are more pro-cooperation and integration than their governmental

policies suggest In the US 983092983089 percent support a common perimeter while

983090983088 percent are opposed In Canada 983092983091 percent support it and 983091983088 percent are

opposed (Graves Pastor and Basaacutentildeez 983090983088983089983091) Terefore in terms of public

mandate both governments would have a case to work towards broader bilat-

eral (or trilateral) cooperation to lower trade barriers

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The state of Canada-US relations in 983090983088983089983092 983090983093

fraserinstituteorg

Table 983089983088 Canadian favourability rating among Americans (February 983090983088983089983090)

Veryfavourable

Mostlyfavourable

Mostlyunfavourable

Veryfavourable Not sure Total

favourableTotal

unfavourable

53 38 3 2 3 91 5

Note n=1015

Source Gallup Poll (2012)

Table 983089983089 Ally or enemy for Americans (June 983090983088983089983091)

Country Ally Friendly Unfriendly Enemy Total Ally andFriendly

Great Britain 66 25 2 1 91

Canada 61 33 2 1 94

China 11 44 26 14 55

Note n=1529Source Gallup Poll (2013)

88

90

92

94

96

98

201220112010200920082007

Figure Canadian favourability among Americans () ndash

Source Gallup Poll (2012)

f a

v o u r a

b l e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983090 What effect will Obama have on Canada-US relations (November 983090983088983089983090)

Canadians Americans

Positive Negative None Positive Negative None

Relationship 62 5 34 48 12 40

Trade 54 10 35 48 12 39

Harmonizing 53 8 40 47 14 39

Note n=1066

Source Abacus Data (2012)

Table 983089983091 Has each leader worked hard to improve Canada-US relations

(July 983090983088983089983090)

Country Agree Disagree Not sure

Stephen Harper 58 32 10

Barack Obama 53 32 15

Note Sample of Canadians

Source HarrisDecima (2012)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983090983095

US policy uncertainty

Canadian economic prospects face their most important challenge in the

United States Te US economic recovery has been modest and real GDP

growth so far has remained below the post-World War II average of post-

recession periods (figure 983089983094) As we noted above the less-than-stellar US

recovery is made even more challenging for Canadian traders in that pro-

ductivity gains in Canada are lagging while the Canadian dollar remains high

On top of that several American-imposed regulatory obstacles to free trade

are depressing trade prospects in crude oil red meat and public works pro-

curement Tese impediments reduce Canadian competitive access to the

US market

A high level of public spending until the January 983090983088983089983091 sequester and

ongoing monetary stimulation have not produced notable US GDP growth

Te seven post-recession periods below show the current average to be well

below the historical average (Young 983090983088983089983091)

983089983097983092983096-983089983097983093983095 983091983096983088

983089983097983093983096-983089983097983094983095 983092983090983096

983089983097983094983096-983089983097983095983095 983091983089983096

983089983097983095983096-983089983097983096983095 983091983089983093

983089983097983096983096-983089983097983097983095 983091983088983093

983089983097983097983096-983090983088983088983095 983090983097983097

983090983088983088983096-983090983088983089983091 983088983095983091

While economic growth has been modest growth in the public debt

has not (figure 983089983095) Publicly held debt in the US is now at 983095983091 percent of GDP

the highest since 983089983097983092983094 (Congressional Budget Office 983090983088983089983091)

Te widening gap between federal government outlays and revenueshas only recently been capped by the Sequester (figure 983089983096) However the

budget Sequester is temporary and final resolution of public spending and

taxation levels remains unclear given repeated gridlock in presidential-con-

gressional policy making High debt levels combined with stalemate over

taxes and budget cuts have produced a case of policy instability or uncer-

tainty in the last five years (Baker Bloom and Davis 983090983088983089983091)

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983090983096 The state of Canada-US relations in 983090983088983089983092

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US policy uncertainty is further aggravated by inaction on the large

lsquoentitlementrsquo programsmdashSocial Security Medicare and Medicaidmdashwhich are

the major drivers of the long-term gap in revenues and spending

-4

-2

0

2

4

6

8

201220062000199419881982197619701964

Figure US GDP growth rate ndash ( forecast)

Source The World Bank (2013b) OECD (2013)

-10

-8

-6

-4

-2

0

0

20

40

60

80

100

20122011201020092008200720062005200420032002

Government deficit as a percentage of GDP Government debt as a percentage of GDP

Figure US Government deficit and debt as a percentage of GDP ndash

Source Congressional Budget Office (2013)

D e fi c i t p e r c e n t a g e ( ) D

e b t p er c en t a g e ( )

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The state of Canada-US relations in 983090983088983089983092 983090983097

fraserinstituteorg

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

20122003199319831973

Revenue Outlays

Figure US Government revenue and outlays ndash ( US$ billions)

Source Congressional Budget Office (2013)

1 9 8 3 U S $ b i l l i o n s

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983091983088 fraserinstituteorg

Trade diversification

Given the weakness in near-term US opportunities Canadians are (again)

wondering how to pursue trade diversification away from the United States

Te objective is logical and if achieved will prove advantageous but various

trends in trade and investment show that diversification for Canada is a slow

and arduous journey (table 983089983092)

In terms of overall share exports to China in the last five years have

doubled but the numbersmdashfrom 983090983089983095 percent to 983092983090983094 percentmdashremain rela-

tively low In the same period the US-bound share declined by 983091 percent but

remains a towering 983095983092983093983092 percent Te pattern of small overall impact applies

to all the other top trading partners For example exports to the UK have

increased but exports to Japan and Mexico have essentially stalled When we

consider average export growth rates over the last five years (table 983089983093) we see

a very strong rate for China (983089983093983093 percent) and strong rates for the UK and

South Korea (983096983097 percent and 983094983097 percent) However a 983089983093 percent increase in a

983092 percent overall trade share produces little change Te point we are making

is that at this rate and pattern of trade lsquodiversificationrsquo it will actually take a

very long timemdashwhile relatively small upward trends in trade with the United

States could have a quick and very large impact in the opposite direction

On the import side we notice more trade diversification with the US

share at 983093983088 percent and the Chinese share at 983089983089 percent (table 983089983094) Te Chinese

growth rate on the import side is less than on the export side (table 983089983095) Te

most revealing number may be the high average over five years for Mexico

at 983097 percent Tis could be indicative of a growing supply chain with Mexico

While foreign direct investment (FDI) is not a direct indicator of future

trade trends in investment may harbinger change In terms of outbound

FDI we notice that only a small segment (less than 983089983088 percent) is targeted

for manufacturing (table 983089983096) It is investment in this category in which onewould expect growth in supply chains

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The state of Canada-US relations in 983090983088983089983092 983091983089

fraserinstituteorg

Table 983089983092 Canadarsquos merchandise exports top ten destinations 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 3291 1 777 2361 1 751 2564 1 749

China 92 4 22 97 3 31 114 3 33

UK 114 2 27 105 2 33 141 2 41

Japan 97 3 23 73 4 23 79 4 23

Mexico 51 5 12 42 5 13 43 5 13

Netherlands 32 8 08 24 8 08 28 8 08

South Korea 34 7 08 31 7 10 32 7 09

Germany 39 6 09 33 6 10 34 6 10

France 28 9 07 23 9 07 20 10 06

Brazil 23 10 05 14 10 04 22 9 06

Total 4237 3145 3424

2011 2012Average

shareValue Rank Share Value Rank Share

US 2750 1 737 2783 1 745 752

China 140 3 38 159 2 43 33

UK 157 2 42 154 3 41 37

Japan 89 4 24 85 4 23 23

Mexico 46 5 12 44 5 12 12

Netherlands 40 7 11 37 6 10 09

South Korea 43 6 11 30 7 08 09

Germany 33 8 09 29 8 08 09

France 26 9 07 26 9 07 07

Brazil 24 10 06 21 10 06 06

Total 3732 3734

Source Industry Canada (2013b)

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983091983090 The state of Canada-US relations in 983090983088983089983092

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Table 983089983093 Canadian export growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 56 7 -281 9 106 = 5

China 101 6 65 1 187 3

UK 16 9 -73 2 358 2

Japan 202 3 -250 7 106 = 5

Mexico 179 4 -178 6 43 9

Netherlands -85 10 -255 8 183 4

South Korea 276 2 -80 3 52 8

Germany 160 5 -167 4 54 7

France 36 8 -174 5 -122 10

Brazil 706 1 -380 10 603 1

2011 2012Average

Rank Rank

US 104 8 27 2 02

China 270 4 152 1 155

UK 148 6 -02 4 90

Japan 161 5 -29 6 38

Mexico 94 9 -16 5 24

Netherlands 475 1 -55 7 53

South Korea 374 2 -272 10 70

Germany 05 10 -95 9 -09

France 311 3 23 3 15

Brazil 109 7 -92 8 189

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983091

fraserinstituteorg

Table 983089983094 Canadarsquos merchandise imports top ten sources 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 1992 1 524 1633 1 511 1745 1 504

China 374 2 98 347 2 109 382 2 110

Mexico 157 3 41 145 3 45 190 3 55

Japan 134 4 35 108 4 34 115 4 33

Germany 111 5 29 95 5 30 97 5 28

UK 110 6 29 82 6 26 92 6 27

South Korea 53 9 14 52 7 16 53 7 15

Algeria 67 7 18 33 10 10 31 10 09

Italy 45 10 12 39 9 12 40 9 12

France 53 8 14 49 8 15 47 8 13

Total 3804 3194 3465

2011 2012Average

shareValue Rank Share Value Rank Share

US 1846 1 496 1922 1 506 508

China 402 2 108 417 2 110 107

Mexico 205 3 55 210 3 55 50

Japan 109 4 29 123 4 33 33

Germany 107 5 29 118 5 31 29

UK 86 6 23 70 6 18 25

South Korea 55 7 15 52 7 14 15

Algeria 46 9 12 49 8 13 12

Italy 43 10 11 43 9 11 12

France 46 8 12 41 10 11 13

Total 3723 3796

Source Industry Canada (2013b)

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983091983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983095 Old and new trade prospectsmdashimport growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 29 8 -178 7 89 5

China 112 4 -70 2 123 3

Mexico 43 7 -77 4 337 1

Japan -11 10 -192 8 89 4

Germany 105 5 -149 6 44 7

UK 95 6 -252 9 141 2

South Korea 120 3 -14 1 36 8

Algeria 518 1 -511 10 -50 10

Italy 11 9 -132 5 48 6

France 191 2 -70 3 -35 9

2011 2012Average

Rank Rank

US 88 5 57 4 17

China 82 6 53 5 60

Mexico 111 3 39 6 91

Japan -29 9 151 1 01

Germany 132 2 117 2 50

UK -36 10 -173 10 -45

South Korea 76 7 -37 8 37

Algeria 533 1 91 3 116

Italy 95 4 23 7 09

France 22 8 -97 9 02

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983093

fraserinstituteorg

In terms of overall Canadian outbound FDI stocks in the US remain

very high despite the recent US recession while growth in stock in Asia is

modest (figure 983089983097) When we examine Canadian FDI in the so-called BRIC

states we notice that investment in both China and India is relatively small

Canadian mining investment in Brazil is much larger (figure 983090983088) In fact when

we examine amounts of FDI we find that Canada is not really a big BRIC

investor other than Brazil Chile Hong Kong and Peru are larger FDI recipi-

ents than China and India (figure 983090983089)

In terms of FDI flowing into Canada we notice the very large share

(983090983096983094983093 percent) in manufacturing which indicates both the predominant

share of US FDI and the extensive integrated supply chains in Canada-US

manufacturing (table 983089983097) Even more than for outbound FDI inflow stocks

show very large US preponderance (figure 983090983090) Such continued concentra-

tion of US FDI in Canada suggests that Canadian trade diversification is not

just a decision to be made by Canadian producers

Like trade growth Chinese FDI growth in Canada is positive but the

overall numbers are small and do not show rapid growth in the last 983091 years

(figure 983090983091)

Table 983089983096 Top industries for outward stocks of FDI 983090983088983089983090

Category Value Share

Mining oil and gas extraction 1099 188

Oil and gas subcategory 542 93

Manufacturing 569 97

Finance and insurance 2334 399

Management of companies and enterprises 757 129

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

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983091983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

1

2

3

4

5

6

7

8

9

10

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n s

Figure Canadian foreign direct investment (stock) BRIC ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Brazil PRC India Russia

0

20

4060

80

100

120

140

160

180

200

220

240

260

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) various regions

ndash

Notes Excluding Mexico Canadian FDI to Mexico in 2012 was $557 billion

Foreign Direct Investment measures the purchase of various forms of capital stock abroad

However tax havens (Barbados Bermuda etc) are frequently found to be some of the highest

recipients of FDI In reality tax havens do not reflect economic growth as FDI figures invested

into tax havens are often reinvested back to the source country in a concept known as

round-tripping (Financial Post 2013) We have accounted for tax havens by removing them from

tables and figures in this section The numbers corresponding to Figure 19 would be Barbados

($593 billion) Bermuda ($118 billion) British Virgin Islands ($21 billion) Cayman Islands ($302

billion)

Source Foreign Affairs Trade and Development Canada (2013c)

US Europe Asia amp Oceania Central amp South America Africa

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The state of Canada-US relations in 983090983088983089983092 983091983095

fraserinstituteorg

Table 983089983097 Top industries for inward stocks of FDI 983090983088983089983090

Category Value Share

Oil and gas extraction 766 147

Manufacturing 1492 287

Petroleum and coal products manufacturing 377 72

Wholesale trade 395 76

Finance and insurance 699 134

Management of companies and enterprises 999 192

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

0

2

4

6

8

10

12

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) Chile Hong Kong

Peru amp Korea ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Chile Hong Kong Peru Korea

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0

40

80

120

160

200

240

280

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Foreign direct investment (stock) in Canada from top three

countries ndash

Source Foreign Affairs Trade and Development Canada (2013c)

US Netherlands UK

0

2

4

6

8

10

12

201220112010200920082007

2 0 0 2 C A $ b

i l l i o n s

Figure Foreign direct investment (stock) in Canada from China

ndash

Source Foreign Affairs Trade and Development Canada (2013c)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

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Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

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References

Abacus Data (983090983088983089983090 November 983090983088) Beyond the Canadian-American Border

lthttpabacusdatacawp-contentuploads983090983088983089983090983089983089Can-AM_Report_CABC_

Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5662

The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

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983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5862

The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5962

983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6062

The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6162

983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 5: Canadas Catch 22 State of Canada Us Relations in 2014

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 662

fraserinstituteorg iii

Executive summary

Economic and political relations between Canada and the United States

our most important foreign relationship have worsened since the Fraser

Institutersquos previous report on the state of Canada-US relations Skating on

Tin Ice (Moens 983090983088983089983088) Te recovery of the US economy after the financial

crash in 983090983088983088983096 has been slow Te long-term uncertainty in US budget politics

and public debt resolution remains and the concomitant policy instabilitymdash

as we first noted in US Election 983090983088983089983090 Implications for Canada (Moens and

Clemens 983090983088983089983091)mdashcontinues to put a drag on economic growth Te across-

the-board budget cuts that took effect on January 983089 983090983088983089983091 better known as

sequestration offer a ray of light in the present context as they have imposed

cuts on spending of $983096983092 billion in both 983090983088983089983091 and 983090983088983089983092

Canadian merchandise exports to the United States have weakened

in relative terms At the same time there is not enough Canadian export

diversification to other destinations to make up this relative loss Te natural

resources component of Canadian exports is the only major growing segment

of overall trade In both merchandise and services trade the post-983090983088983088983095 per-

iod shows Canada is losing in trade competitiveness in relation to the United

States Te negative trend in trade competitiveness in services is even big-

ger than in merchandise trade Te relative loss of trade competitiveness in

our relationship may be a surprise to many Canadians who believe Canada

is simply doing better than the United States

Canadarsquos weakening competitiveness vis-agrave-vis the United States is

occurring at the same time as political relations at the top are in a slump

Te main sector in US-bound trade showing growth in the last decade crude

oil products is also the one facing most political interference from US deci-

sion makers Te six-year delay in the international permit for KXL to cross

the Canada-USA border is without precedent in our bilateral relations Atthe same time the US mandatory country-of-origin labeling rule which

took effect in 983090983088983088983097 has severely damaged the decades-old and deeply inte-

grated supply chain in beef and pork costing Canadian producers some $983089

billion per year ldquoBuy Americanrdquo in the public procurement sector remains a

latent threat to bilateral relations While American trade barriers have risen

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983089

Bilateral trade relations

Merchandise trade

Tere is a significant decline in both exports and imports from 983090983088983088983096 to 983090983088983088983097

as a result of the US recession (table 983089) Te sharpest decline is in Canadian

merchandise exports to the US which decreased by 983090983095 percent in 983090983088983088983097 and

still have not recovered to the 983090983088983088983096 level in 983090983088983089983090 Canadian merchandise

imports from the US on the other hand did not fall as sharplymdash983089983094 percent in

983090983088983088983097mdashand in 983090983088983089983090 are only slightly below the 983090983088983088983096 number Tus on balance

Canadian exports to the US have suffered significantly more from the reces-

sion than American exports to Canada (figures 983089 983090) Given this re-balancing

Canadarsquos merchandise trade balance surplus with the USA has been virtu-

ally cut in half (983092983094 percent) from $983095983095 billion in 983090983088983088983096 to $983091983093 billion in 983090983088983089983090983089

Te traditionally large gap between merchandise exports and imports

between Canada and its largest trading partner have shrunk substantially As

a result Canadarsquos trade balance with the world has declined from $983092983089 billion

in 983090983088983088983096 to a deficit of $983089983088 billion in 983090983088983089983090 Te monthly import and export

numbers in 983090983088983089983091 show a continuation of this trend

A noticeable trend in Canada in the last 983095 years reveals that less GDP is

derived from trade (and thus more from Canadarsquos domestic market) while in

the United States the trade versus domestic market share of GDP is on a ris-

ing trend (table 983090) When we examine the US share of Canadarsquos total exports

and imports over a longer period (983089983097983097983091ndash983090983088983089983090) we notice the overall down-

ward trend (figures 983091 983092) Te main causal factors are the higher value of the

Canadian dollar the post-983090983088983088983096 slump in US demand and a certain amount

of diversification in Canadarsquos trade as well as stronger relative growth inCanadarsquos domestic market

1048625 All figures are in real Canadian dollars unless otherwise noted

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983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

A breakdown of the top export and import sectors in Canada-US trade

shows that the traditionally strong machinery and automotive sectors are

holding well in terms of US exports to Canada but the same sector is weaker

on the Canadian side Te gains on our side are in minerals and energy prod-

ucts (tables 983091 983092) Te slow decline in Canadian exports of manufactured prod-

ucts suggests a weakening on Canadarsquos side in the integrated supply-chain in

this sector Lower productivity and border costs may well play a role

Table 983089 Canadian merchandise trade 983090983088983088983095ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2007 2008 2009 2010 2011 2012

Total exports 41380 42705 32099 34675 38099 38006

Exports to US 31795 32331 23610 25332 27517 27809

Total imports 37291 38877 32691 35508 38036 38993

Imports from US 24215 24666 20641 22312 23475 24360

Total balance 4089 3827 -592 -833 063 -987

Balance with US 7579 7666 2969 3020 4042 3450

Note On a balance of payments basis

Source Statistics Canada (2013d)

15

20

25

30

35

2 0 1 3 - 0 5

2 0 1 3 - 0 1

2 0 1 2 - 0 9

2 0 1 2 - 0 5

2 0 1 2 - 0 1

2 0 1 1 - 0 9

2 0 1 1 - 0 5

2 0 1 1 - 0 1

2 0 1 0 - 0 9

2 0 1 0 - 0 5

2 0 1 0 - 0 1

2 0 0 9 - 0 9

2 0 0 9 - 0 5

2 0 0 9 - 0 1

2 0 0 8 - 0 9

2 0 0 8 - 0 5

2 0 0 8 - 0 1

2 0 0 7 - 0 9

2 0 0 7 - 0 5

2 0 0 7 - 0 1

Import Export

2 0 0 2 C A $ b i l l i o n s

Figure Canadarsquos merchandise trade (monthly) ndash

Source Statistics Canada (2013c) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091

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Table 983090 Merchandise trade as a of GDP 983090983088983088983093ndash983090983088983089983090 (current US$)

2005 2006 2007 2008 2009 2010 2011 2012

Canada 602 584 569 583 483 501 515 510

Growth 02 -30 -26 25 -172 37 28 -10

US 210 221 227 243 191 225 250 248

Growth 61 52 27 70 -214 178 111 -08

Source The World Bank (2013a)

0

1

2

3

4

5

6

7

8

9

2 0 1 3

- 0 5

2 0 1 3

- 0 1

2 0 1 2

- 0 9

2 0 1 2

- 0 5

2 0 1 2

- 0 1

2 0 1 1

- 0 9

2 0 1 1

- 0 5

2 0 1 1

- 0 1

2 0 1 0

- 0 9

2 0 1 0

- 0 5

2 0 1 0

- 0 1

2 0 0 9

- 0 9

2 0 0 9

- 0 5

2 0 0 9

- 0 1

2 0 0 8

- 0 9

2 0 0 8

- 0 5

2 0 0 8

- 0 1

2 0 0 7

- 0 9

2 0 0 7

- 0 5

2 0 0 7

- 0 1

2 0 0 2 C A $ b i l l i o n s

Figure Canada-US net merchandise trade (monthly) ndash

Source Statistics Canada (2013c) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

-5

-4

-3

-2

-1

0

1

2

3

2012201120102009200820072006200520042003200220012000

G r o

w t h ( )

Figure GrowthUS share of Canadarsquos annual merchandise trade ()

ndash

Source Industry Canada (2013b) calculations by authors

Import Export

45

50

55

60

65

70

75

80

85

90

2011200920072005200320011999199719951993

Import Export

Figure US share of Canadarsquos annual merchandise trade () ndash

Source Industry Canada (2013b)

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The state of Canada-US relations in 983090983088983089983092 983093

fraserinstituteorg

Table 983091 Top sectors for Canadian merchandise exports to the US 983090983088983089983090

Industry Exports

2002 CA$ bi llions Percentage

Mineral products 886 318

Products of chemical or allied industries 163 59

Plastics and related articles 118 43

Base metals and articles of base metals 200 72

Machinery mechanical appliances electrical equipment and related articles 276 99

Vehicles aircraft vessels and associated transport equipment 530 191

Note On a customs basis

Source Statistics Canada (2013a)

Table 983092 Top industries for Canadian merchandise imports from the US 983090983088983089983090

Industry Imports

2002 CA$ bi llions Percentage

Mineral products 163 85

Products of chemical or allied industries 171 89

Plastics and related articles 127 66

Base metals and articles of base metals 158 82

Machinery mechanical appliances electrical equipment and related articles 413 215

Vehicles aircraft vessels and associated transport equipment 413 215

Note On a customs basis

Source Statistics Canada (2013a)

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983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Trade in services

As a share of overall bilateral trade trade in services is growing gradually otal

bilateral services trade in 983090983088983089983088 amounted to 983089983096 percent of bilateral merchan-

dise trade It was 983089983093 percent in 983090983088983088983095983090 Te United States is by far the largest

trading partner in Canadarsquos international trade in services rade with the

US is nearly ten times the amount with the next largest partner the United

Kingdom But unlike merchandise trade the value of non-US services trade

is nearly half (983092983092 percent in 983090983088983089983088) of that with the USA (table 983093) In other

words there is more diversification from the US market in services than in

merchandise983091

Te trend reveals rising competitiveness on the US side (and non-USA)

as Canadian imports are growing considerably while Canadian exports are

stagnant resulting in a growing services trade deficit (figure 983093)

Bilateral trade in services was not impacted by the US recession as

merchandise trade was otal volume of trade is slightly up in the three years

after 983090983088983088983095 (figure 983094) Most of this gain is from growth in Canadian imports

from the US (and from non-US) while Canadian exports to the USA are

slightly down

Given that there is no growth in Americans traveling to Canada during

this time period (as we will show later) the relative strength of US exports vis-

agrave-vis Canadian exports appears to lie in the commercial sector (tables 983094 983095)

In conclusion in both merchandise and services trade the post 983090983088983088983095

period shows that Canada is relatively losing in trade competitiveness in rela-

tion to the United States Te relative loss of trade competitiveness in our

relationship may be a surprise to many Canadians who believe Canada has

simply been doing better than the US since 983090983088983088983096 Te lsquodoing betterrsquo part may

apply to domestic economic activity but not to external trade

1048626 Data on trade in services is not as recent as merchandise trade

1048627 op export destinations in 983090983088983089983088 after the USA are the UK France and Germany op

importers to Canada in 983090983088983089983088 after the USA include UK Hong Kong (China) France

Germany and Mexico Te case with importers to Canada is similar to that with export-

ing countries Imports from the UK make up roughly 983089983088 percent that of imports from the

US Imports from Hong Kong are 983093983089 percent that from the UK with France at 983092983090 percent

and both Germany and Mexico rest at roughly 983091983096 percent each

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The state of Canada-US relations in 983090983088983089983092 983095

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Table 983093 Services trade between Canada and the US 983090983088983088983093ndash983090983088983089983088 (983090983088983088983090 CA$ billions)

2005 2006 2007 2008 2009 2010

Exports to USA 3988 3815 3834 3966 3718 3700

Imports from USA 4358 4395 4544 4833 4783 4960

Trade balance with USA -370 -580 -710 -866 -1065 -1260

Trade balance with USA -443 -707 -847 -985 -1240 -1455

Exports to non-USA 2832 3080 2985 3052 3142 3102

Imports from non-USA 3022 3187 3380 3518 3496 3722

Trade balance with non-USA -189 -108 -395 -466 -354 -620

Trade balance with non-USA -323 -172 -621 -710 -540 -909

Total services exports 6820 6894 6819 7018 6860 6802

Total services imports 7379 7582 7924 8350 8279 8682

Total trade balance -559 -688 -1105 -1333 -1419 -1880

Total trade balance -394 -475 -750 -867 -937 -1214

Bilateral (X+I) USA 8346 8210 8378 8799 8589 8660

Bilateral (X+I) non-USA 5854 6267 6365 6569 6551 6824

Bilateral (X+I) total 14200 14477 14742 15368 15140 15484

Source Foreign Affairs Trade and Development Canada (2013a)

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983096 The state of Canada-US relations in 983090983088983089983092

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80

81

82

83

84

85

86

87

88

89

90

201020092008200720062005

2 0

0 2 C A $ b i l l i o n s

Figure Canada-US net services trade ndash

Source Foreign Affairs Trade and Development Canada (2013a)

-20

-16

-12

-8

-4

0

201020092008200720062005

Trade balance with USA Total trade balance

Figure Canadarsquos trade deficit with US and the world ndash

Source Foreign Affairs Trade and Development Canada (2013a)

2 0 0 2 C A $ b i l

l i o n s

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The state of Canada-US relations in 983090983088983089983092 983097

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Table 983094 Top categories for service trade exports Canada-World 983090983088983089983090

Category Subcategory Exports

2002 CA$ bi llions Percentage

Government services 13 19

Travel services 143 207

Personal travel 119 172

Transportation services 111 161

Air transport 52 76

Commercial services 424 614

Financial services 57 82

Computer and information services 64 93

Intellectual property use 31 44

Management services 90 130

Research and development 33 47

Architectural engineering 39 57

Source Foreign Affairs Trade and Development Canada (2013a)

Table 983095 Top categories for service trade imports Canada-World 983090983088983089983090

Category Subcategory Imports

2002 CA$ billions Percentage

Government services 11 12

Travel services 288 323

Personal travel 253 284

Transportation services 195 219

Water transport 82 92

Air transport 84 95

Commercial services 396 446

Insurance services 44 50

Financial services 44 50

Intellectual property use 89 100

Management services 75 84

Source Foreign Affairs Trade and Development Canada (2013a)

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983089983088 The state of Canada-US relations in 983090983088983089983092

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075

080

085

090

095

100

105

2 0 1 3

- 0 7

2 0 1 3

- 0 1

2 0 1 2

- 0 7

2 0 1 2

- 0 1

2 0 1 1

- 0 7

2 0 1 1

- 0 1

2 0 1 0

- 0 7

2 0 1 0

- 0 1

2 0 0 9

- 0 7

2 0 0 9

- 0 1

2 0 0 8

- 0 7

2 0 0 8

- 0 1

2 0 0 7

- 0 7

2 0 0 7

- 0 1

Figure CanadaUS dollar exchange rate ndash

Source Bank of Canada (2013b)

C A U S e x c h a n g e r a t e

Dollar value and productivity trends

Te first factor to consider regarding Canadarsquos trade competitiveness vis-agrave-vis

the United States is the value of the Canadian dollar Te substantial appre-

ciation of the Canadian dollar against the US dollar that began in the early

983090983088983088983088s has stabilized at a much higher average value of the loonie ( figure 983095)

As is well documented such exchange rate appreciation tends to have a strong

effect on current account balances as exports decline (Kappler et al 983090983088983089983089)

A growing account deficit will likely push the value of the Canadian dollar

downward in the longer term and thus offer some remedy

ProductivityOf more concern to Canadians should be the data indicating that Canadian

labour productivity rates are lagging those in the United States (figures 983096 983097)

One would expect that Canadarsquos higher dollar has provided industry in recent

years with an opportunity to improve productivity as imported machinery

and technology would be available at a lower price However Canadarsquos pro-

ductivity rate of growth is modest and in 983090983088983089983090 dips into negative territory

again

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-1

0

1

2

3

20122011201020092008

Canada US

Figure Canada and US rates of output productivity growth ()

ndash

Source Statistics Canada (2013g)

R a t e o f p r o d u c t i v i t y g r o

w t h ( )

-10

-5

0

5

20122011201020092008

Labour productivity (Canada) Real GDP (Canada) Hours worked (Canada)

Labour productivity (US) Real GDP (US) Hours worked (US)

Figure Real US-Canadian output and hours worked () ndash

Source Statistics Canada (2013g)

A n n u a l c

h a n g e

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983089983090 fraserinstituteorg

Trade and regulatory barriersdisputes

Table 983096 provides a synopsis of the major trade disputesbarriers that have

played a role in bilateral relations in the last five years and that are pertinent

for the 983090983088983089983092 period (pages 983089983094-983089983095) Te two large disputesmdashKeystone XL and

Mandatory Country-of-Origin Labeling (MCOOL) on red meatmdashare more

ominous than they may seem First both in crude oil products and in cattle

and hogs the United States is unilaterally disrupting or dismantling a well-

established integrated sector Canada has started attempts to diversify its oil

transportation structure including more rail and new pipeline routes But

as all proposed alternative pipelines have shown the alternatives are contro-

versial and at best years away from making a difference Meanwhile there is

considerable risk in putting too much crude oil on rail as its accident rates

are higher than pipe

Canadian threats to counter US MCOOL action with tariffs on food

products are not going to have much impact in the near future Moreover

an escalating tariff war on food products cannot be won by Canada and will

ultimately harm consumers on both sides of the border US defiance of two

WO rulings also means more uncertainty for Canadian traders

Keystone XL pipeline

Proposed in 983090983088983088983096 the Keystone XL (KXL) extension is part of a pipeline sys-

tem connecting Alberta oil sands and US mid-West and Gulf region refineries

KXL is a 983089983096983097983095 km crude oil pipeline with a capacity of 983092983094983093983088983088983088 barrels per

day (Hussain 983090983088983089983091) It is a substantial private infrastructure proposal that

will create employment and guarantee a secure energy source for the United

States (Millington and Murillo 983090983088983089983091) It is by no means a new feature in

Canada-US energy relations as a dense network of oil and electricity carri-ers cross the border at multiple points

What is unprecedented is that the permit process is now in its sixth

year and the final resolution remains uncertain (by US law a cross-border line

requires Department of State approval) If not resolved in 983090983088983089983092 the question

may well be handed over to the next president after 983090983088983089983094 Te policy uncertainty

associated with KXL approval has by far the largest impact on Canada-US trade

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The state of Canada-US relations in 983090983088983089983092 983089983091

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relations Te dragged-out procedure has chilled relations Te southern leg of

KXL has been completed and the original route objection by Nebraska has been

resolved What remains ostensibly the problem is that the US administration

has identified this heavy oil as a component of its policy objective of curbing

the emission of greenhouses gasses to reduce global warming

Te impact of this pipeline delay in the 983090983095 million barrels per day (bpd)

export of Canadian oil products to the USA reverberates at various levels

Across Canada investment in mining oil and gas extraction for 983090983088983089983091 is pre-

dicted to decrease by 983090983095 percentmdashthe largest decline since the 983090983088983088983096 recession

(Statistics Canada 983090983088983089983091f) In Alberta investment is predicted to increase by

only 983088983089 percent (Statistics Canada 983090983088983089983091f) Capital investment in oil and gas

extraction has not recovered to pre-983090983088983088983096 levels (Industry Canada 983090983088983089983091a)

While the industry has become increasingly dependent on rail trans-

port to move product it is a costly alternative It can cost up to three times

as much as pipeline transport (Millington and Murillo 983090983088983089983091) and its limita-

tions are self-evident because rail movement of oil is constrained by the lim-

ited availability of rail cars In 983090983088983089983090 983089983091983088983088983088983088 bpd of heavy crude was being

transported by rail Tis is expected to rise to 983092983090983093983088983088983088 bpd by the end of

983090983088983089983092 falling short of the 983092983094983093983088983088983088 bpd which could have been moved through

KXL (Hussain 983090983088983089983091) Te forced increase in rail transport has resulted in

unintended costs for the industry a total of US$983089 billion must be invested for

new rail terminals and another US$983092ndash983093 billion for new rail cars (Lewis 983090983088983089983091)

Rail transport is both more costly and more dangerous A recent study

concluded that ldquopipeline transportation is safer than transportation by road

rail or barge as measured by incidents injuries and fatalitiesrdquo (Green amp

Furchtgott-Roth 983090983088983089983091) It is not inconceivable that another major oil acci-

dent either in Canada or the USAmdashsuch as took place in Quebec in July 983090983088983089983091

killing 983092983095 peoplemdashwould result in a moratorium on oil transport by rail with

grave consequences for Canadian producers

983090983088983088983090 Mandatory Country-of-Origin Labeling

Mandatory Country-of-Origin Labeling (MCOOL) is a provision mandated

by Congressional law and first implemented in 983090983088983088983096 Te measure imposes

strict segregation rules on American Canadian and Mexican cattle and hogs

and the subsequent slaughtering and processing of these animals to producebeef and pork products for retail sale Te stated purpose is to create labels

that indicate the origin in part or in whole of the product In effect it is a

veiled trade barrier because it gives US animals and products a competitive

advantage due to higher labeling inventory and processing costs for equiva-

lent Canadian products

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983089983092 The state of Canada-US relations in 983090983088983089983092

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Table 983096 Synopsis of trade disputes in Canadian-American relations in 983090983088983089983091

Dispute Impact and cost Prospect for resolution

Keystone XL Pipeline Very serious Poor

2008 proposal for a 1897

km 465000 bpd crude oilpipeline spanning fromAlberta down to Nebraska

Downward pressure on investment

Lost wages January 2012postponement is costing US $47million a day in lost wages (ConsumerEnergy Alliance 2013)

Continuation of crude oil pricediscounts due to lack of infrastructure

Costly alternative rail has emerged as atransportation alternative but can costup to three times as much as pipelinetravel (Millington and Murillo 2013)

Permit postponed twice

Resolution is not transparent

Rising risk of decision deferral past 2016

Mandatory Country-of-OriginLabelling (MCOOL)

Serious Poor

2008 CongressionalLaw mandating rulesfor segregated livestockprocessing and packagingand a labeling structure inorder to have food labelsindicate origin of product

Annual cost to Canadian beef and porksector of $1 billion

Deconstruction of a highly integratedtrilateral supply chain industry

MCOOL adds no animal health or foodsafety benefits

US has defied both WTO complaint andthe core part of the WTO Appeal ruling

2013 US reaction has been to strengthenthe discriminatory provision banning co-mingling of meats altogether

Canada plans to retaliate with tariffs butthis is a costly gambit with low chance ofsuccess

Softwood Lumber Agreement Moderate Good

In 2011 American softwoodcompanies took theirCanadian counterparts to theLondon Court of InternationalArbitration accusing themof circumventing the SLA(Foreign Affairs Trade andDevelopment Canada 2012a)

If in violation Canadian industry wouldface $380 million in penalties (TheCanadian Press 2012)

The London Court of InternationalArbitration in 2012 ruled in favor ofCanada (Foreign Affairs Trade andDevelopment Canada 2012a)

SLA was to expire in 2013 but Canadaand the USA extended it until 2015 (CBCNews 2012)

Long-term free trade in lumber needs toreplace SLA

Buy American Provision Serious Partial resolution but high risk ofrecurring Buy American legislation

2009 American Recovery andReinvestment Act

Exclusion of Canadian products andproduction sharing in US public worksprocurement

Canada-US Procurement Agreement in2010 which allowed for the purchaseof Canadian goods on seven US

infrastructure projects valued at morethan $7777000

Canada needs to seek a comprehensiveagreement in order to escape futureAmerican protectionism with allprovinces on board and compliant withthe WTO provision

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Dispute Impact and cost Prospect for resolution

Canadian Wheat Board Long-term benefit Completed

Canadarsquos mandatory wheat

marketing board monopsonyended in 2011

Frequent US action against CWB in the

past will now end as wheat marketingin Canada turns fully market based

Intellectual Property Rights Moderate potential cost Partially resolved

Canada has been on theSpecial 301 Priority Watch Listby the United States TradeRepresentative since 1995

Ongoing threat of US Trade Action andlegal action

Canadian domestic complianceincluding

Strengthening data protection

Participation in Anti-counterfeiting TradeAgreement (ACTA in 2013)

Enacted the Combating CounterfeitProducts Act (2013)

Started the process of strengthening

the Copyright Act and implementingWorld Intellectual Property OrganizationInternet Treaties

In recognition of which Canada has beenremoved from the Special 301 PriorityWatch List

Prescription drugs Serious potential for trade action Indirect progress

The US complaint againstCanada

Imposing price ceilings thatshifts the cost burden of RampDto US firms

Weak protection ofintellectual property rights rethird party sales

Slow prescription drugapproval process causingreduced market access

US firms experience lost revenues andtrade action is a risk

In 2013 CETA agreement with theEuropean Union Canada agrees to givefull patent protection to new drugs fortwo years

Two-year rule may be transferable tofuture Canada-US resolution

Table 983096 continued

Canada and the United States have had a deeply integrated market in

this sector since the early 983089983097983097983088s Animal health and food safety standards have

been largely harmonized As a result highly efficient supply-chain production

methods have made this industry quite efficient However the imposition of

MCOOL has changed all that (Moens amp Leon 983090983088983089983090) Te cost differential haswidened and Canadian exports have dropped dramatically Since 983090983088983088983096 the

cattle sector has lost $983094983092983088 million per year and the hog sector has lost $983093983088983088

million a year (Te Canadian Press 983090983088983089983091a)

In 983090983088983089983090 the World rade Organization (WO) ruled in Canadarsquos favor by

concluding that MCOOL is discriminatory Te WO gave the US until May 983090983091

983090983088983089983091 to act but on that same day the USDA imposed regulatory changes that

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actually strengthened the provisions of MCOOL In retaliation the Canadian

government released a list of US exports to Canada that would be subjected

to tariffs and it is preparing to seek a compliance panel at the WO Until this

situation is resolved the Canadian government predicts a continuing annual

loss of $983089 billion for the Canadian red meat sector (Te Canadian Press 983090983088983089983091a)

Softwood lumber

In 983090983088983089983089 several American softwood companies took their Canadian counter-

parts to the Court of International Arbitration in London accusing them of cir-

cumventing the Softwood Lumber Agreement of 983090983088983088983094 (Foreign Affairs rade

and Development Canada 983090983088983089983090a) Te dispute centered on the accelerating pace

of lumber harvests resulting from the pine beetle infestation Te stakes were

high $983091983096983088 million in penalties should Canada lose (Te Canadian Press 983090983088983089983090)

In 983090983088983089983090 the Court of International Arbitration ruled in Canadarsquos favor

(Foreign Affairs rade and Development Canada 983090983088983089983090a) In addition while

the Softwood Lumber Agreement was set to expire in 983090983088983089983091 the Canadian

and American governments successfully negotiated an extension of the

Agreement until 983090983088983089983093 (CBC News 983090983088983089983090) Te fact remains that as long as a

large part of Canadarsquos softwood lumber is managed in terms of quotas and

the stumpage fee system US trade action is very likely

lsquoBuy Americanrsquo provision

Te 983090983088983088983097 American Recovery and Reinvestment Act (ARRA which expired

on September 983091983088 983090983088983089983089) and the more recent 983090983088983089983089 American Jobs Act stipu-

lated that steel iron and other goods used in the repair and construction of

infrastructure projects in the US (highways bridges mass transit and fed-

eral buildings) must be manufactured in the United States (Matthiesen 983090983088983089983089)

In response to ARRA Canada and the US signed the Canada-US

Procurement Agreement in 983090983088983089983088 which allowed for the purchase of Canadian

goods on seven US infrastructure projects valued at more than $983095983095983095983095983088983088983088

or within the 983091983095 states subject to the WO GPA (Government of Canada

983090983088983089983091a) Te 983090983088983089983089 American Jobs Act did not pass in Senate and is thus moot

While the ARRA dispute was partially resolved lsquoBuy Americanrsquo anda counter position of lsquoBuy Canadianrsquo can flare up on either side of the bor-

der Canadian industry is most vulnerable in this uncertainty Te Canadian

government ought to seek a comprehensive Buy American exemption to

escape future American protectionism In so doing all provincial govern-

ments need to be on board in order to make the WO and NAFA rules

function optimally

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983089983095

fraserinstituteorg

Canadian Wheat Board (CWB)

In 983090983088983089983089 the Canadian government removed the monopsony held by the

Canadian Wheat Board Tis unilateral action offers a successful reduction

in bilateral trade distortion oday the CWB continues to operate as a mar-

keting group

Intellectual Property Rights (IPR)

From 983089983097983097983093 through 983090983088983089983091 Canada was on the Special 983091983088983089 Priority Watch

List by the United States rade Representative Te US complaint was that

protection and enforcement of IPR in Canada were weak Te Special 983091983088983089

Priority Watch List is designed to identify US trading partners that are the

worst offenders in IPR protection (Embassy of the United States Ottawa

Canada 983090983088983089983091)

Although the issue is not completely resolved Canada has made sig-

nificant progress in recent years Te federal government has strengthened

data protection regulations criminalized the use of camcorders in theaters

and participates in the Anti-Counterfeiting rade Agreement (ACA) nego-

tiations (983090983088983089983091) Most recently Canada enacted the Combatting Counterfeit

Products Act (Embassy of the United States Ottawa Canada 983090983088983089983091) Te

Canadian Government is in the process of strengthening the Copyright Act

and implementing World Intellectual Property Organization Internet reaties

(Embassy of the United States Ottawa Canada 983090983088983089983091)

As a result of these steps Canada was removed from the Special 983091983088983089

Priority Watch List in 983090983088983089983091

Prescription drugs

Prescription drug prices in Canada are relatively low due to a price ceil-

ing mandated by Canadarsquos healthcare system In addition Health Canada

approval times for prescription drugs significantly lag behind their counter-

parts in the United States and the European Union (Barua and Esmail 983090983088983089983091)

US lawmakers have repeatedly expressed their concerns over cheap prescrip-

tion drugs re-entering the US from Canada (Moens and Gabler 983090983088983089983089) TeEU also asked Canada to strengthen IPR protections for prescription drugs

(Lexchin and Gagnon 983090983088983089983091) Since the signing of the CEA agreement in

principle on October 983089983096 983090983088983089983091 the issue between Canada and the EU is now

resolved (Waldie 983090983088983089983091) Canada has agreed to ldquoEU demands for patent pro-

tection for up to two years on brand-name drugsrdquo (Blanchfield 983090983088983089983091)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983089983096 fraserinstituteorg

State of the border andregulatory cooperation

Te decline in Americans traveling to Canada corresponds with the US

Greenback losing value against the Canadian dollar (figures 983089983088 983089983089) However

when we consider the extent of the decline in total numbers it appears dispro-

portionate Te change in American travel suggests instead a bigger problem

following the 983097-983089983089 shock Te imposition of new border transit requirements

such as passports as well as longer wait times and more security screening

has likely dampened US travel across this international boundary Given the

modest economic recovery in the USA from the beginning of 983090983088983089983088 onward

one would expect disposable income including for travel to trend back up

Instead the numbers remain stagnant at around 983090983088 million less than half the

number of 983090983088983088983090

While an overall national average for border wait times is not avail-

able data on major border crossings in both Central Canada and British

Columbia indicate that no reductions in wait times have been achieved

between 983090983088983088983094 and 983090983088983089983089 (figure 983089983090) Te problem of inefficiency as presented

by the Canada-US border goes well beyond wait times It includes inefficient

activity away from the border such as extra warehousing and costs of com-

plying with various facilitated traveler and goods programs such as FAS for

trucks loads and drivers

Tere are consistent cost differences between domestic and cross-bor-

der truck-borne trade which point to significant border costs ldquoFor exports

to the US these costs added 983088983097 percent to the delivered price of goods in

983090983088983088983092 Tis figure fell to 983088983092 percent in 983090983088983088983097 hellip Higher fixed costs per shipment

accounted for most of the additional cost of transporting goods to the USrdquo

(Brown and Anderson 983090983088983089983090) When we consider that in the manufacturingsector parts cross the border several times in various stages of assembly we

realize how this cost accumulates and defeats the efficiency gains otherwise

generated by integrated supply chain manufacturing Border costs are typ-

ically passed on to the consumer as fixed costs per shipment

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983089983097

fraserinstituteorg

An unprecedented border problem has arisen in the current USAdministrationrsquos lengthy (six years) review of the permitting of a pipeline

border crossing as proposed in the Keystone XL project As a result oil-by-

rail transport has recently increased while the pipeline mode of Canada-US

trade has seen a drop in growth in the 983090983088983089983089983089983090 period ( figures 983089983091 983089983092)

0

10

20

30

40

50

201220112010200920082007200620052004200320022001200019991998

Figure Travellers entering Canada ndash

Source Statistics Canada (2013e)

US residents Non-US residents

0

3

6

9

12

15

18

0

03

06

09

12

15

18

20122011201020092008200720062005200420032002

Trips Spending US$CA$ (Secondary axis)

Figure US overnight travel to Canada ndash

Source Statistics Canada (2011) Bank of Canada (2013b)

M i l l i o n s o f t r i p

s N o m i n a l C A $ b i l l i o n s

U S $ C A $ ex c h a n

g er a t e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

5

10

15

20

201120102009200820072006

Northbound average delay Southbound average delay

Figure Peace Arch average border wait time ndash

Source Cascade Gateway Data (2013)

M i n u t e s

0

25

50

75

100

125

150

175

200

225

250

275

300

201220112010200920082007200620052004

2 0 0 4

U S $ b

i l l i o n s

Figure All surface modes of freight flow data based on value of goods

ndash

Source Bureau of Transportation Statistics (2013)

Truck Rail Pipeline

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983089

fraserinstituteorg

lsquoBeyond the Borderrsquo and Regulatory Cooperation

In 983090983088983089983089 Canada and the United States announced an ambitious agreement

to reduce border costs by means of deeper bilateral regulatory and secur-

ity cooperation Te accord seeks to streamline various border proceduresmdash

some already in existence and some newmdashto improve intelligence-sharing

between law enforcement agencies mutual recognition of passenger baggage

screening improved frameworks for trusted trade programs harmoniza-

tion of NEXUS protocols streamlined supply chains enhanced trade com-

petitiveness collaboration in border infrastructure investment and deeper

cooperation in national security investigations Te agreement is known as

Beyond the Border A Shared Vision for Perimeter Security and Economic

Competitiveness (February 983092 983090983088983089983089)

Te Beyond the Border Vision accord also set up a Regulatory

Cooperation Council In it Canadian and American officials seek to reduce

red tape and harmonize regulations in certain key sectors o date the

Council has announced various plans affecting agriculture and food trans-

portation health personal care products workplace chemicals environmentnano materials and small business loans We summarize the key points of

progress made since 983090983088983089983089 in table 983097

-35

-25

-15

-5

5

15

25

35

20122011201020092008200720062005

Truck Rail Pipeline

Figure Growth rate of all surface modes of freight flows () ndash

Source Bureau of Transportation Statistics (2013) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983097 Key elements of Beyond the Border and Regulatory Cooperation

Beyond the Border Program

Integrated Cargo Security Strategy (ICSS)December 2011

Reduces administrative duplication between Canada and the US byaddressing security risks in advance within the shipment supply chainand at the border (Canada Border Services Agency 2013)

Prince Rupert Pilot October 2012 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry via rail is examined by Canadian officials onbehalf of the US (Government of Canada 2013c)

Montreal Pilot January 2013 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry to the US via truck is examined by Canadianofficials on behalf of the US (Government of Canada 2013c)

Pre-load Air Cargo Targeting (PACT) Joint pilot by CBSA and Transport Canada to screen cargo pre-flight onCanada-bound airplanes at foreign airports (Canada Border ServicesAgency 2013)

Tamper Evident Technology PilotOctober 2012

Pilot collaboration between CBSA and US CBP to ensure containersremain sealed upon arrival at the US border (Canada Border Services

Agency 2013)

Truck Cargo Pre-Inspection PilotMarch 2013

Pilot program between the CBSA and the US CBP for pre-inspection ofsouthbound traffic into US (Canada Border Services Agency 2013)

Free and Secure Trade (FAST) PilotSarnia Ontario

Pilot program for usage of FAST lanes without Partners in Protection andCustoms Self Assessment programs (Government of Canada 2013c)

Canada-US Shiprider June 2013 Removal of jurisdictional barriers to improve law enforcement personnelin Windsor-Detroit and Vancouver-Blaine waterways (Government ofCanada 2013c)

EntryExit Initiative Phase II June 2013 Exchange entryexit data between the CBSA and US DHS on individualsat Canada-US land border crossings (Government of Canada 2013c)

Regulatory Cooperation ProgramMemorandum of Understanding between Transport Canada and the RailwayAssociation of Canada September 2013

Framework for Canadian rail emissions between 2011 to 2015(Government of Canada 2013d)

Canada-United States Perimeter Approachto Plant Protection September 2013

Draft framework for increased cooperation and reduction inadministrative duplication between the Canadian Food InspectionAgency (CFIA) and United States Animal and Plant Health InspectionService (APHIS) on trade in plants and plant products (Government ofCanada 2013d)

Common Electronic Submission GatewayPilot (CESG) August 2013

FDA and Health Canada will allow pharmaceutical firms to electronicallysubmit drug applications (Government of Canada 2013d)

Initiative to Align Veterinary DrugApprovals December 2012

Joint reviews between US FDA and Health Canada on veterinary drugproducts (Government of Canada 2013d)

Stricter Air Pollutant Emissions Environment Canada aligns car emissions beginning in 2017 with theUS Environmental Protection Agencyrsquos ldquoTier 3rdquo (Government of Canada2013d)

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The state of Canada-US relations in 983090983088983089983092 983090983091

fraserinstituteorg

On September 983092 983090983088983089983091 $983092983094983094 million in investment was allocated to the

Border Action plan by the Government of Canada in order expand two marine

container examination facilities (Government of Canada 983090983088983089983091c) $983091983091 million

was invested by the Government of Canada in the Asia Pacific Gateway and

rade Corridor Initiative (Government of Canada 983090983088983089983091c) Te Plan includes

an additional 983090983097 harmonization initiatives that will enhance trade activity

between Canada and the US

Neither Beyond the Border nor the Regulatory Cooperation Council

offer further investment or cost estimates on the initiatives described in table

983097 Moens and Gabler (983090983088983089983090) pointed to the need for both the Canadian and

American governments to provide data on border costs so that a cost-benefit

analysis can ensue Nonetheless the small steps of progress towards inte-

grating and harmonizing US and Canadian border practices remains a very

important (long-term) part of reducing the profile of the border

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983090983092 fraserinstituteorg

Canadian and American public perceptions

Tree observations are noteworthy in recent assessments of public percep-

tions between Americans and Canadians First Americans consistently have

a very high favourability rating of Canadians typically in the 983097983088 plus range

(table 983089983088 figure 983089983093) Both as a friend and a strategic ally Americans hold

Canadians in the most favourable light possible (table 983089983089) Disagreements over

policy between the two countries whether in defence and foreign affairs or

over border and trade issues do not move this fundamental asset Canadians

enjoy in dealing with their neighbour

Second Canadians do not have high expectations of either the

American or Canadian government regarding progress in bilateral relations

As table 983089983090 shows Canadians hold Obama in high regard (983094983091 percent) but

only 983093983092 percent expect progress from him in trade relations Prime Minister

Harper is rated slightly ahead of President Obama in terms of working hard

towards improving Canada-US relations (table 983089983091)

Tird and most significant in light of Canadarsquos Catch-983090983090 situation both

Canadians and Americans are more supportive of closer cooperation and inte-

gration policies than is the case for political representatives in either the United

States or Canada In two recent studies we showed how US Senators and House

Representatives are quite critical of Canada with regard to NAFA issues and bor-

der security (Moens and Gabler 983090983088983089983089) Similarly we found that among the three

major political parties in Canadarsquos parliament only one consistently expressed

itself in favour of closer ties with the United States (Moens and Gabler 983090983088983089983089)

A recent survey of American and Canadian (and Mexican) attitudes

towards free trade and NAFA show surprisingly strong data for more trade

integration In response to the statement ldquoTere should be more free trade

between the US Canada and Mexicordquo 983096983088 percent of Canadians approved

as did 983095983092 percent of Americans Even on border security Canadians andAmericans are more pro-cooperation and integration than their governmental

policies suggest In the US 983092983089 percent support a common perimeter while

983090983088 percent are opposed In Canada 983092983091 percent support it and 983091983088 percent are

opposed (Graves Pastor and Basaacutentildeez 983090983088983089983091) Terefore in terms of public

mandate both governments would have a case to work towards broader bilat-

eral (or trilateral) cooperation to lower trade barriers

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The state of Canada-US relations in 983090983088983089983092 983090983093

fraserinstituteorg

Table 983089983088 Canadian favourability rating among Americans (February 983090983088983089983090)

Veryfavourable

Mostlyfavourable

Mostlyunfavourable

Veryfavourable Not sure Total

favourableTotal

unfavourable

53 38 3 2 3 91 5

Note n=1015

Source Gallup Poll (2012)

Table 983089983089 Ally or enemy for Americans (June 983090983088983089983091)

Country Ally Friendly Unfriendly Enemy Total Ally andFriendly

Great Britain 66 25 2 1 91

Canada 61 33 2 1 94

China 11 44 26 14 55

Note n=1529Source Gallup Poll (2013)

88

90

92

94

96

98

201220112010200920082007

Figure Canadian favourability among Americans () ndash

Source Gallup Poll (2012)

f a

v o u r a

b l e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983090 What effect will Obama have on Canada-US relations (November 983090983088983089983090)

Canadians Americans

Positive Negative None Positive Negative None

Relationship 62 5 34 48 12 40

Trade 54 10 35 48 12 39

Harmonizing 53 8 40 47 14 39

Note n=1066

Source Abacus Data (2012)

Table 983089983091 Has each leader worked hard to improve Canada-US relations

(July 983090983088983089983090)

Country Agree Disagree Not sure

Stephen Harper 58 32 10

Barack Obama 53 32 15

Note Sample of Canadians

Source HarrisDecima (2012)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983090983095

US policy uncertainty

Canadian economic prospects face their most important challenge in the

United States Te US economic recovery has been modest and real GDP

growth so far has remained below the post-World War II average of post-

recession periods (figure 983089983094) As we noted above the less-than-stellar US

recovery is made even more challenging for Canadian traders in that pro-

ductivity gains in Canada are lagging while the Canadian dollar remains high

On top of that several American-imposed regulatory obstacles to free trade

are depressing trade prospects in crude oil red meat and public works pro-

curement Tese impediments reduce Canadian competitive access to the

US market

A high level of public spending until the January 983090983088983089983091 sequester and

ongoing monetary stimulation have not produced notable US GDP growth

Te seven post-recession periods below show the current average to be well

below the historical average (Young 983090983088983089983091)

983089983097983092983096-983089983097983093983095 983091983096983088

983089983097983093983096-983089983097983094983095 983092983090983096

983089983097983094983096-983089983097983095983095 983091983089983096

983089983097983095983096-983089983097983096983095 983091983089983093

983089983097983096983096-983089983097983097983095 983091983088983093

983089983097983097983096-983090983088983088983095 983090983097983097

983090983088983088983096-983090983088983089983091 983088983095983091

While economic growth has been modest growth in the public debt

has not (figure 983089983095) Publicly held debt in the US is now at 983095983091 percent of GDP

the highest since 983089983097983092983094 (Congressional Budget Office 983090983088983089983091)

Te widening gap between federal government outlays and revenueshas only recently been capped by the Sequester (figure 983089983096) However the

budget Sequester is temporary and final resolution of public spending and

taxation levels remains unclear given repeated gridlock in presidential-con-

gressional policy making High debt levels combined with stalemate over

taxes and budget cuts have produced a case of policy instability or uncer-

tainty in the last five years (Baker Bloom and Davis 983090983088983089983091)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

US policy uncertainty is further aggravated by inaction on the large

lsquoentitlementrsquo programsmdashSocial Security Medicare and Medicaidmdashwhich are

the major drivers of the long-term gap in revenues and spending

-4

-2

0

2

4

6

8

201220062000199419881982197619701964

Figure US GDP growth rate ndash ( forecast)

Source The World Bank (2013b) OECD (2013)

-10

-8

-6

-4

-2

0

0

20

40

60

80

100

20122011201020092008200720062005200420032002

Government deficit as a percentage of GDP Government debt as a percentage of GDP

Figure US Government deficit and debt as a percentage of GDP ndash

Source Congressional Budget Office (2013)

D e fi c i t p e r c e n t a g e ( ) D

e b t p er c en t a g e ( )

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983097

fraserinstituteorg

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

20122003199319831973

Revenue Outlays

Figure US Government revenue and outlays ndash ( US$ billions)

Source Congressional Budget Office (2013)

1 9 8 3 U S $ b i l l i o n s

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 3762

983091983088 fraserinstituteorg

Trade diversification

Given the weakness in near-term US opportunities Canadians are (again)

wondering how to pursue trade diversification away from the United States

Te objective is logical and if achieved will prove advantageous but various

trends in trade and investment show that diversification for Canada is a slow

and arduous journey (table 983089983092)

In terms of overall share exports to China in the last five years have

doubled but the numbersmdashfrom 983090983089983095 percent to 983092983090983094 percentmdashremain rela-

tively low In the same period the US-bound share declined by 983091 percent but

remains a towering 983095983092983093983092 percent Te pattern of small overall impact applies

to all the other top trading partners For example exports to the UK have

increased but exports to Japan and Mexico have essentially stalled When we

consider average export growth rates over the last five years (table 983089983093) we see

a very strong rate for China (983089983093983093 percent) and strong rates for the UK and

South Korea (983096983097 percent and 983094983097 percent) However a 983089983093 percent increase in a

983092 percent overall trade share produces little change Te point we are making

is that at this rate and pattern of trade lsquodiversificationrsquo it will actually take a

very long timemdashwhile relatively small upward trends in trade with the United

States could have a quick and very large impact in the opposite direction

On the import side we notice more trade diversification with the US

share at 983093983088 percent and the Chinese share at 983089983089 percent (table 983089983094) Te Chinese

growth rate on the import side is less than on the export side (table 983089983095) Te

most revealing number may be the high average over five years for Mexico

at 983097 percent Tis could be indicative of a growing supply chain with Mexico

While foreign direct investment (FDI) is not a direct indicator of future

trade trends in investment may harbinger change In terms of outbound

FDI we notice that only a small segment (less than 983089983088 percent) is targeted

for manufacturing (table 983089983096) It is investment in this category in which onewould expect growth in supply chains

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983089

fraserinstituteorg

Table 983089983092 Canadarsquos merchandise exports top ten destinations 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 3291 1 777 2361 1 751 2564 1 749

China 92 4 22 97 3 31 114 3 33

UK 114 2 27 105 2 33 141 2 41

Japan 97 3 23 73 4 23 79 4 23

Mexico 51 5 12 42 5 13 43 5 13

Netherlands 32 8 08 24 8 08 28 8 08

South Korea 34 7 08 31 7 10 32 7 09

Germany 39 6 09 33 6 10 34 6 10

France 28 9 07 23 9 07 20 10 06

Brazil 23 10 05 14 10 04 22 9 06

Total 4237 3145 3424

2011 2012Average

shareValue Rank Share Value Rank Share

US 2750 1 737 2783 1 745 752

China 140 3 38 159 2 43 33

UK 157 2 42 154 3 41 37

Japan 89 4 24 85 4 23 23

Mexico 46 5 12 44 5 12 12

Netherlands 40 7 11 37 6 10 09

South Korea 43 6 11 30 7 08 09

Germany 33 8 09 29 8 08 09

France 26 9 07 26 9 07 07

Brazil 24 10 06 21 10 06 06

Total 3732 3734

Source Industry Canada (2013b)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 3962

983091983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983093 Canadian export growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 56 7 -281 9 106 = 5

China 101 6 65 1 187 3

UK 16 9 -73 2 358 2

Japan 202 3 -250 7 106 = 5

Mexico 179 4 -178 6 43 9

Netherlands -85 10 -255 8 183 4

South Korea 276 2 -80 3 52 8

Germany 160 5 -167 4 54 7

France 36 8 -174 5 -122 10

Brazil 706 1 -380 10 603 1

2011 2012Average

Rank Rank

US 104 8 27 2 02

China 270 4 152 1 155

UK 148 6 -02 4 90

Japan 161 5 -29 6 38

Mexico 94 9 -16 5 24

Netherlands 475 1 -55 7 53

South Korea 374 2 -272 10 70

Germany 05 10 -95 9 -09

France 311 3 23 3 15

Brazil 109 7 -92 8 189

Source Industry Canada (2013b) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983091

fraserinstituteorg

Table 983089983094 Canadarsquos merchandise imports top ten sources 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 1992 1 524 1633 1 511 1745 1 504

China 374 2 98 347 2 109 382 2 110

Mexico 157 3 41 145 3 45 190 3 55

Japan 134 4 35 108 4 34 115 4 33

Germany 111 5 29 95 5 30 97 5 28

UK 110 6 29 82 6 26 92 6 27

South Korea 53 9 14 52 7 16 53 7 15

Algeria 67 7 18 33 10 10 31 10 09

Italy 45 10 12 39 9 12 40 9 12

France 53 8 14 49 8 15 47 8 13

Total 3804 3194 3465

2011 2012Average

shareValue Rank Share Value Rank Share

US 1846 1 496 1922 1 506 508

China 402 2 108 417 2 110 107

Mexico 205 3 55 210 3 55 50

Japan 109 4 29 123 4 33 33

Germany 107 5 29 118 5 31 29

UK 86 6 23 70 6 18 25

South Korea 55 7 15 52 7 14 15

Algeria 46 9 12 49 8 13 12

Italy 43 10 11 43 9 11 12

France 46 8 12 41 10 11 13

Total 3723 3796

Source Industry Canada (2013b)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983091983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983095 Old and new trade prospectsmdashimport growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 29 8 -178 7 89 5

China 112 4 -70 2 123 3

Mexico 43 7 -77 4 337 1

Japan -11 10 -192 8 89 4

Germany 105 5 -149 6 44 7

UK 95 6 -252 9 141 2

South Korea 120 3 -14 1 36 8

Algeria 518 1 -511 10 -50 10

Italy 11 9 -132 5 48 6

France 191 2 -70 3 -35 9

2011 2012Average

Rank Rank

US 88 5 57 4 17

China 82 6 53 5 60

Mexico 111 3 39 6 91

Japan -29 9 151 1 01

Germany 132 2 117 2 50

UK -36 10 -173 10 -45

South Korea 76 7 -37 8 37

Algeria 533 1 91 3 116

Italy 95 4 23 7 09

France 22 8 -97 9 02

Source Industry Canada (2013b) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983093

fraserinstituteorg

In terms of overall Canadian outbound FDI stocks in the US remain

very high despite the recent US recession while growth in stock in Asia is

modest (figure 983089983097) When we examine Canadian FDI in the so-called BRIC

states we notice that investment in both China and India is relatively small

Canadian mining investment in Brazil is much larger (figure 983090983088) In fact when

we examine amounts of FDI we find that Canada is not really a big BRIC

investor other than Brazil Chile Hong Kong and Peru are larger FDI recipi-

ents than China and India (figure 983090983089)

In terms of FDI flowing into Canada we notice the very large share

(983090983096983094983093 percent) in manufacturing which indicates both the predominant

share of US FDI and the extensive integrated supply chains in Canada-US

manufacturing (table 983089983097) Even more than for outbound FDI inflow stocks

show very large US preponderance (figure 983090983090) Such continued concentra-

tion of US FDI in Canada suggests that Canadian trade diversification is not

just a decision to be made by Canadian producers

Like trade growth Chinese FDI growth in Canada is positive but the

overall numbers are small and do not show rapid growth in the last 983091 years

(figure 983090983091)

Table 983089983096 Top industries for outward stocks of FDI 983090983088983089983090

Category Value Share

Mining oil and gas extraction 1099 188

Oil and gas subcategory 542 93

Manufacturing 569 97

Finance and insurance 2334 399

Management of companies and enterprises 757 129

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983091983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

1

2

3

4

5

6

7

8

9

10

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n s

Figure Canadian foreign direct investment (stock) BRIC ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Brazil PRC India Russia

0

20

4060

80

100

120

140

160

180

200

220

240

260

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) various regions

ndash

Notes Excluding Mexico Canadian FDI to Mexico in 2012 was $557 billion

Foreign Direct Investment measures the purchase of various forms of capital stock abroad

However tax havens (Barbados Bermuda etc) are frequently found to be some of the highest

recipients of FDI In reality tax havens do not reflect economic growth as FDI figures invested

into tax havens are often reinvested back to the source country in a concept known as

round-tripping (Financial Post 2013) We have accounted for tax havens by removing them from

tables and figures in this section The numbers corresponding to Figure 19 would be Barbados

($593 billion) Bermuda ($118 billion) British Virgin Islands ($21 billion) Cayman Islands ($302

billion)

Source Foreign Affairs Trade and Development Canada (2013c)

US Europe Asia amp Oceania Central amp South America Africa

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983095

fraserinstituteorg

Table 983089983097 Top industries for inward stocks of FDI 983090983088983089983090

Category Value Share

Oil and gas extraction 766 147

Manufacturing 1492 287

Petroleum and coal products manufacturing 377 72

Wholesale trade 395 76

Finance and insurance 699 134

Management of companies and enterprises 999 192

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

0

2

4

6

8

10

12

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) Chile Hong Kong

Peru amp Korea ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Chile Hong Kong Peru Korea

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983091983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

40

80

120

160

200

240

280

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Foreign direct investment (stock) in Canada from top three

countries ndash

Source Foreign Affairs Trade and Development Canada (2013c)

US Netherlands UK

0

2

4

6

8

10

12

201220112010200920082007

2 0 0 2 C A $ b

i l l i o n s

Figure Foreign direct investment (stock) in Canada from China

ndash

Source Foreign Affairs Trade and Development Canada (2013c)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983092983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4862

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References

Abacus Data (983090983088983089983090 November 983090983088) Beyond the Canadian-American Border

lthttpabacusdatacawp-contentuploads983090983088983089983090983089983089Can-AM_Report_CABC_

Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

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983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5962

983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 6: Canadas Catch 22 State of Canada Us Relations in 2014

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg iii

Executive summary

Economic and political relations between Canada and the United States

our most important foreign relationship have worsened since the Fraser

Institutersquos previous report on the state of Canada-US relations Skating on

Tin Ice (Moens 983090983088983089983088) Te recovery of the US economy after the financial

crash in 983090983088983088983096 has been slow Te long-term uncertainty in US budget politics

and public debt resolution remains and the concomitant policy instabilitymdash

as we first noted in US Election 983090983088983089983090 Implications for Canada (Moens and

Clemens 983090983088983089983091)mdashcontinues to put a drag on economic growth Te across-

the-board budget cuts that took effect on January 983089 983090983088983089983091 better known as

sequestration offer a ray of light in the present context as they have imposed

cuts on spending of $983096983092 billion in both 983090983088983089983091 and 983090983088983089983092

Canadian merchandise exports to the United States have weakened

in relative terms At the same time there is not enough Canadian export

diversification to other destinations to make up this relative loss Te natural

resources component of Canadian exports is the only major growing segment

of overall trade In both merchandise and services trade the post-983090983088983088983095 per-

iod shows Canada is losing in trade competitiveness in relation to the United

States Te negative trend in trade competitiveness in services is even big-

ger than in merchandise trade Te relative loss of trade competitiveness in

our relationship may be a surprise to many Canadians who believe Canada

is simply doing better than the United States

Canadarsquos weakening competitiveness vis-agrave-vis the United States is

occurring at the same time as political relations at the top are in a slump

Te main sector in US-bound trade showing growth in the last decade crude

oil products is also the one facing most political interference from US deci-

sion makers Te six-year delay in the international permit for KXL to cross

the Canada-USA border is without precedent in our bilateral relations Atthe same time the US mandatory country-of-origin labeling rule which

took effect in 983090983088983088983097 has severely damaged the decades-old and deeply inte-

grated supply chain in beef and pork costing Canadian producers some $983089

billion per year ldquoBuy Americanrdquo in the public procurement sector remains a

latent threat to bilateral relations While American trade barriers have risen

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983089

Bilateral trade relations

Merchandise trade

Tere is a significant decline in both exports and imports from 983090983088983088983096 to 983090983088983088983097

as a result of the US recession (table 983089) Te sharpest decline is in Canadian

merchandise exports to the US which decreased by 983090983095 percent in 983090983088983088983097 and

still have not recovered to the 983090983088983088983096 level in 983090983088983089983090 Canadian merchandise

imports from the US on the other hand did not fall as sharplymdash983089983094 percent in

983090983088983088983097mdashand in 983090983088983089983090 are only slightly below the 983090983088983088983096 number Tus on balance

Canadian exports to the US have suffered significantly more from the reces-

sion than American exports to Canada (figures 983089 983090) Given this re-balancing

Canadarsquos merchandise trade balance surplus with the USA has been virtu-

ally cut in half (983092983094 percent) from $983095983095 billion in 983090983088983088983096 to $983091983093 billion in 983090983088983089983090983089

Te traditionally large gap between merchandise exports and imports

between Canada and its largest trading partner have shrunk substantially As

a result Canadarsquos trade balance with the world has declined from $983092983089 billion

in 983090983088983088983096 to a deficit of $983089983088 billion in 983090983088983089983090 Te monthly import and export

numbers in 983090983088983089983091 show a continuation of this trend

A noticeable trend in Canada in the last 983095 years reveals that less GDP is

derived from trade (and thus more from Canadarsquos domestic market) while in

the United States the trade versus domestic market share of GDP is on a ris-

ing trend (table 983090) When we examine the US share of Canadarsquos total exports

and imports over a longer period (983089983097983097983091ndash983090983088983089983090) we notice the overall down-

ward trend (figures 983091 983092) Te main causal factors are the higher value of the

Canadian dollar the post-983090983088983088983096 slump in US demand and a certain amount

of diversification in Canadarsquos trade as well as stronger relative growth inCanadarsquos domestic market

1048625 All figures are in real Canadian dollars unless otherwise noted

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

A breakdown of the top export and import sectors in Canada-US trade

shows that the traditionally strong machinery and automotive sectors are

holding well in terms of US exports to Canada but the same sector is weaker

on the Canadian side Te gains on our side are in minerals and energy prod-

ucts (tables 983091 983092) Te slow decline in Canadian exports of manufactured prod-

ucts suggests a weakening on Canadarsquos side in the integrated supply-chain in

this sector Lower productivity and border costs may well play a role

Table 983089 Canadian merchandise trade 983090983088983088983095ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2007 2008 2009 2010 2011 2012

Total exports 41380 42705 32099 34675 38099 38006

Exports to US 31795 32331 23610 25332 27517 27809

Total imports 37291 38877 32691 35508 38036 38993

Imports from US 24215 24666 20641 22312 23475 24360

Total balance 4089 3827 -592 -833 063 -987

Balance with US 7579 7666 2969 3020 4042 3450

Note On a balance of payments basis

Source Statistics Canada (2013d)

15

20

25

30

35

2 0 1 3 - 0 5

2 0 1 3 - 0 1

2 0 1 2 - 0 9

2 0 1 2 - 0 5

2 0 1 2 - 0 1

2 0 1 1 - 0 9

2 0 1 1 - 0 5

2 0 1 1 - 0 1

2 0 1 0 - 0 9

2 0 1 0 - 0 5

2 0 1 0 - 0 1

2 0 0 9 - 0 9

2 0 0 9 - 0 5

2 0 0 9 - 0 1

2 0 0 8 - 0 9

2 0 0 8 - 0 5

2 0 0 8 - 0 1

2 0 0 7 - 0 9

2 0 0 7 - 0 5

2 0 0 7 - 0 1

Import Export

2 0 0 2 C A $ b i l l i o n s

Figure Canadarsquos merchandise trade (monthly) ndash

Source Statistics Canada (2013c) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091

fraserinstituteorg

Table 983090 Merchandise trade as a of GDP 983090983088983088983093ndash983090983088983089983090 (current US$)

2005 2006 2007 2008 2009 2010 2011 2012

Canada 602 584 569 583 483 501 515 510

Growth 02 -30 -26 25 -172 37 28 -10

US 210 221 227 243 191 225 250 248

Growth 61 52 27 70 -214 178 111 -08

Source The World Bank (2013a)

0

1

2

3

4

5

6

7

8

9

2 0 1 3

- 0 5

2 0 1 3

- 0 1

2 0 1 2

- 0 9

2 0 1 2

- 0 5

2 0 1 2

- 0 1

2 0 1 1

- 0 9

2 0 1 1

- 0 5

2 0 1 1

- 0 1

2 0 1 0

- 0 9

2 0 1 0

- 0 5

2 0 1 0

- 0 1

2 0 0 9

- 0 9

2 0 0 9

- 0 5

2 0 0 9

- 0 1

2 0 0 8

- 0 9

2 0 0 8

- 0 5

2 0 0 8

- 0 1

2 0 0 7

- 0 9

2 0 0 7

- 0 5

2 0 0 7

- 0 1

2 0 0 2 C A $ b i l l i o n s

Figure Canada-US net merchandise trade (monthly) ndash

Source Statistics Canada (2013c) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

-5

-4

-3

-2

-1

0

1

2

3

2012201120102009200820072006200520042003200220012000

G r o

w t h ( )

Figure GrowthUS share of Canadarsquos annual merchandise trade ()

ndash

Source Industry Canada (2013b) calculations by authors

Import Export

45

50

55

60

65

70

75

80

85

90

2011200920072005200320011999199719951993

Import Export

Figure US share of Canadarsquos annual merchandise trade () ndash

Source Industry Canada (2013b)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093

fraserinstituteorg

Table 983091 Top sectors for Canadian merchandise exports to the US 983090983088983089983090

Industry Exports

2002 CA$ bi llions Percentage

Mineral products 886 318

Products of chemical or allied industries 163 59

Plastics and related articles 118 43

Base metals and articles of base metals 200 72

Machinery mechanical appliances electrical equipment and related articles 276 99

Vehicles aircraft vessels and associated transport equipment 530 191

Note On a customs basis

Source Statistics Canada (2013a)

Table 983092 Top industries for Canadian merchandise imports from the US 983090983088983089983090

Industry Imports

2002 CA$ bi llions Percentage

Mineral products 163 85

Products of chemical or allied industries 171 89

Plastics and related articles 127 66

Base metals and articles of base metals 158 82

Machinery mechanical appliances electrical equipment and related articles 413 215

Vehicles aircraft vessels and associated transport equipment 413 215

Note On a customs basis

Source Statistics Canada (2013a)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Trade in services

As a share of overall bilateral trade trade in services is growing gradually otal

bilateral services trade in 983090983088983089983088 amounted to 983089983096 percent of bilateral merchan-

dise trade It was 983089983093 percent in 983090983088983088983095983090 Te United States is by far the largest

trading partner in Canadarsquos international trade in services rade with the

US is nearly ten times the amount with the next largest partner the United

Kingdom But unlike merchandise trade the value of non-US services trade

is nearly half (983092983092 percent in 983090983088983089983088) of that with the USA (table 983093) In other

words there is more diversification from the US market in services than in

merchandise983091

Te trend reveals rising competitiveness on the US side (and non-USA)

as Canadian imports are growing considerably while Canadian exports are

stagnant resulting in a growing services trade deficit (figure 983093)

Bilateral trade in services was not impacted by the US recession as

merchandise trade was otal volume of trade is slightly up in the three years

after 983090983088983088983095 (figure 983094) Most of this gain is from growth in Canadian imports

from the US (and from non-US) while Canadian exports to the USA are

slightly down

Given that there is no growth in Americans traveling to Canada during

this time period (as we will show later) the relative strength of US exports vis-

agrave-vis Canadian exports appears to lie in the commercial sector (tables 983094 983095)

In conclusion in both merchandise and services trade the post 983090983088983088983095

period shows that Canada is relatively losing in trade competitiveness in rela-

tion to the United States Te relative loss of trade competitiveness in our

relationship may be a surprise to many Canadians who believe Canada has

simply been doing better than the US since 983090983088983088983096 Te lsquodoing betterrsquo part may

apply to domestic economic activity but not to external trade

1048626 Data on trade in services is not as recent as merchandise trade

1048627 op export destinations in 983090983088983089983088 after the USA are the UK France and Germany op

importers to Canada in 983090983088983089983088 after the USA include UK Hong Kong (China) France

Germany and Mexico Te case with importers to Canada is similar to that with export-

ing countries Imports from the UK make up roughly 983089983088 percent that of imports from the

US Imports from Hong Kong are 983093983089 percent that from the UK with France at 983092983090 percent

and both Germany and Mexico rest at roughly 983091983096 percent each

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983095

fraserinstituteorg

Table 983093 Services trade between Canada and the US 983090983088983088983093ndash983090983088983089983088 (983090983088983088983090 CA$ billions)

2005 2006 2007 2008 2009 2010

Exports to USA 3988 3815 3834 3966 3718 3700

Imports from USA 4358 4395 4544 4833 4783 4960

Trade balance with USA -370 -580 -710 -866 -1065 -1260

Trade balance with USA -443 -707 -847 -985 -1240 -1455

Exports to non-USA 2832 3080 2985 3052 3142 3102

Imports from non-USA 3022 3187 3380 3518 3496 3722

Trade balance with non-USA -189 -108 -395 -466 -354 -620

Trade balance with non-USA -323 -172 -621 -710 -540 -909

Total services exports 6820 6894 6819 7018 6860 6802

Total services imports 7379 7582 7924 8350 8279 8682

Total trade balance -559 -688 -1105 -1333 -1419 -1880

Total trade balance -394 -475 -750 -867 -937 -1214

Bilateral (X+I) USA 8346 8210 8378 8799 8589 8660

Bilateral (X+I) non-USA 5854 6267 6365 6569 6551 6824

Bilateral (X+I) total 14200 14477 14742 15368 15140 15484

Source Foreign Affairs Trade and Development Canada (2013a)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

80

81

82

83

84

85

86

87

88

89

90

201020092008200720062005

2 0

0 2 C A $ b i l l i o n s

Figure Canada-US net services trade ndash

Source Foreign Affairs Trade and Development Canada (2013a)

-20

-16

-12

-8

-4

0

201020092008200720062005

Trade balance with USA Total trade balance

Figure Canadarsquos trade deficit with US and the world ndash

Source Foreign Affairs Trade and Development Canada (2013a)

2 0 0 2 C A $ b i l

l i o n s

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983097

fraserinstituteorg

Table 983094 Top categories for service trade exports Canada-World 983090983088983089983090

Category Subcategory Exports

2002 CA$ bi llions Percentage

Government services 13 19

Travel services 143 207

Personal travel 119 172

Transportation services 111 161

Air transport 52 76

Commercial services 424 614

Financial services 57 82

Computer and information services 64 93

Intellectual property use 31 44

Management services 90 130

Research and development 33 47

Architectural engineering 39 57

Source Foreign Affairs Trade and Development Canada (2013a)

Table 983095 Top categories for service trade imports Canada-World 983090983088983089983090

Category Subcategory Imports

2002 CA$ billions Percentage

Government services 11 12

Travel services 288 323

Personal travel 253 284

Transportation services 195 219

Water transport 82 92

Air transport 84 95

Commercial services 396 446

Insurance services 44 50

Financial services 44 50

Intellectual property use 89 100

Management services 75 84

Source Foreign Affairs Trade and Development Canada (2013a)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983089983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

075

080

085

090

095

100

105

2 0 1 3

- 0 7

2 0 1 3

- 0 1

2 0 1 2

- 0 7

2 0 1 2

- 0 1

2 0 1 1

- 0 7

2 0 1 1

- 0 1

2 0 1 0

- 0 7

2 0 1 0

- 0 1

2 0 0 9

- 0 7

2 0 0 9

- 0 1

2 0 0 8

- 0 7

2 0 0 8

- 0 1

2 0 0 7

- 0 7

2 0 0 7

- 0 1

Figure CanadaUS dollar exchange rate ndash

Source Bank of Canada (2013b)

C A U S e x c h a n g e r a t e

Dollar value and productivity trends

Te first factor to consider regarding Canadarsquos trade competitiveness vis-agrave-vis

the United States is the value of the Canadian dollar Te substantial appre-

ciation of the Canadian dollar against the US dollar that began in the early

983090983088983088983088s has stabilized at a much higher average value of the loonie ( figure 983095)

As is well documented such exchange rate appreciation tends to have a strong

effect on current account balances as exports decline (Kappler et al 983090983088983089983089)

A growing account deficit will likely push the value of the Canadian dollar

downward in the longer term and thus offer some remedy

ProductivityOf more concern to Canadians should be the data indicating that Canadian

labour productivity rates are lagging those in the United States (figures 983096 983097)

One would expect that Canadarsquos higher dollar has provided industry in recent

years with an opportunity to improve productivity as imported machinery

and technology would be available at a lower price However Canadarsquos pro-

ductivity rate of growth is modest and in 983090983088983089983090 dips into negative territory

again

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983089983089

fraserinstituteorg

-1

0

1

2

3

20122011201020092008

Canada US

Figure Canada and US rates of output productivity growth ()

ndash

Source Statistics Canada (2013g)

R a t e o f p r o d u c t i v i t y g r o

w t h ( )

-10

-5

0

5

20122011201020092008

Labour productivity (Canada) Real GDP (Canada) Hours worked (Canada)

Labour productivity (US) Real GDP (US) Hours worked (US)

Figure Real US-Canadian output and hours worked () ndash

Source Statistics Canada (2013g)

A n n u a l c

h a n g e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983089983090 fraserinstituteorg

Trade and regulatory barriersdisputes

Table 983096 provides a synopsis of the major trade disputesbarriers that have

played a role in bilateral relations in the last five years and that are pertinent

for the 983090983088983089983092 period (pages 983089983094-983089983095) Te two large disputesmdashKeystone XL and

Mandatory Country-of-Origin Labeling (MCOOL) on red meatmdashare more

ominous than they may seem First both in crude oil products and in cattle

and hogs the United States is unilaterally disrupting or dismantling a well-

established integrated sector Canada has started attempts to diversify its oil

transportation structure including more rail and new pipeline routes But

as all proposed alternative pipelines have shown the alternatives are contro-

versial and at best years away from making a difference Meanwhile there is

considerable risk in putting too much crude oil on rail as its accident rates

are higher than pipe

Canadian threats to counter US MCOOL action with tariffs on food

products are not going to have much impact in the near future Moreover

an escalating tariff war on food products cannot be won by Canada and will

ultimately harm consumers on both sides of the border US defiance of two

WO rulings also means more uncertainty for Canadian traders

Keystone XL pipeline

Proposed in 983090983088983088983096 the Keystone XL (KXL) extension is part of a pipeline sys-

tem connecting Alberta oil sands and US mid-West and Gulf region refineries

KXL is a 983089983096983097983095 km crude oil pipeline with a capacity of 983092983094983093983088983088983088 barrels per

day (Hussain 983090983088983089983091) It is a substantial private infrastructure proposal that

will create employment and guarantee a secure energy source for the United

States (Millington and Murillo 983090983088983089983091) It is by no means a new feature in

Canada-US energy relations as a dense network of oil and electricity carri-ers cross the border at multiple points

What is unprecedented is that the permit process is now in its sixth

year and the final resolution remains uncertain (by US law a cross-border line

requires Department of State approval) If not resolved in 983090983088983089983092 the question

may well be handed over to the next president after 983090983088983089983094 Te policy uncertainty

associated with KXL approval has by far the largest impact on Canada-US trade

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The state of Canada-US relations in 983090983088983089983092 983089983091

fraserinstituteorg

relations Te dragged-out procedure has chilled relations Te southern leg of

KXL has been completed and the original route objection by Nebraska has been

resolved What remains ostensibly the problem is that the US administration

has identified this heavy oil as a component of its policy objective of curbing

the emission of greenhouses gasses to reduce global warming

Te impact of this pipeline delay in the 983090983095 million barrels per day (bpd)

export of Canadian oil products to the USA reverberates at various levels

Across Canada investment in mining oil and gas extraction for 983090983088983089983091 is pre-

dicted to decrease by 983090983095 percentmdashthe largest decline since the 983090983088983088983096 recession

(Statistics Canada 983090983088983089983091f) In Alberta investment is predicted to increase by

only 983088983089 percent (Statistics Canada 983090983088983089983091f) Capital investment in oil and gas

extraction has not recovered to pre-983090983088983088983096 levels (Industry Canada 983090983088983089983091a)

While the industry has become increasingly dependent on rail trans-

port to move product it is a costly alternative It can cost up to three times

as much as pipeline transport (Millington and Murillo 983090983088983089983091) and its limita-

tions are self-evident because rail movement of oil is constrained by the lim-

ited availability of rail cars In 983090983088983089983090 983089983091983088983088983088983088 bpd of heavy crude was being

transported by rail Tis is expected to rise to 983092983090983093983088983088983088 bpd by the end of

983090983088983089983092 falling short of the 983092983094983093983088983088983088 bpd which could have been moved through

KXL (Hussain 983090983088983089983091) Te forced increase in rail transport has resulted in

unintended costs for the industry a total of US$983089 billion must be invested for

new rail terminals and another US$983092ndash983093 billion for new rail cars (Lewis 983090983088983089983091)

Rail transport is both more costly and more dangerous A recent study

concluded that ldquopipeline transportation is safer than transportation by road

rail or barge as measured by incidents injuries and fatalitiesrdquo (Green amp

Furchtgott-Roth 983090983088983089983091) It is not inconceivable that another major oil acci-

dent either in Canada or the USAmdashsuch as took place in Quebec in July 983090983088983089983091

killing 983092983095 peoplemdashwould result in a moratorium on oil transport by rail with

grave consequences for Canadian producers

983090983088983088983090 Mandatory Country-of-Origin Labeling

Mandatory Country-of-Origin Labeling (MCOOL) is a provision mandated

by Congressional law and first implemented in 983090983088983088983096 Te measure imposes

strict segregation rules on American Canadian and Mexican cattle and hogs

and the subsequent slaughtering and processing of these animals to producebeef and pork products for retail sale Te stated purpose is to create labels

that indicate the origin in part or in whole of the product In effect it is a

veiled trade barrier because it gives US animals and products a competitive

advantage due to higher labeling inventory and processing costs for equiva-

lent Canadian products

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983089983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983096 Synopsis of trade disputes in Canadian-American relations in 983090983088983089983091

Dispute Impact and cost Prospect for resolution

Keystone XL Pipeline Very serious Poor

2008 proposal for a 1897

km 465000 bpd crude oilpipeline spanning fromAlberta down to Nebraska

Downward pressure on investment

Lost wages January 2012postponement is costing US $47million a day in lost wages (ConsumerEnergy Alliance 2013)

Continuation of crude oil pricediscounts due to lack of infrastructure

Costly alternative rail has emerged as atransportation alternative but can costup to three times as much as pipelinetravel (Millington and Murillo 2013)

Permit postponed twice

Resolution is not transparent

Rising risk of decision deferral past 2016

Mandatory Country-of-OriginLabelling (MCOOL)

Serious Poor

2008 CongressionalLaw mandating rulesfor segregated livestockprocessing and packagingand a labeling structure inorder to have food labelsindicate origin of product

Annual cost to Canadian beef and porksector of $1 billion

Deconstruction of a highly integratedtrilateral supply chain industry

MCOOL adds no animal health or foodsafety benefits

US has defied both WTO complaint andthe core part of the WTO Appeal ruling

2013 US reaction has been to strengthenthe discriminatory provision banning co-mingling of meats altogether

Canada plans to retaliate with tariffs butthis is a costly gambit with low chance ofsuccess

Softwood Lumber Agreement Moderate Good

In 2011 American softwoodcompanies took theirCanadian counterparts to theLondon Court of InternationalArbitration accusing themof circumventing the SLA(Foreign Affairs Trade andDevelopment Canada 2012a)

If in violation Canadian industry wouldface $380 million in penalties (TheCanadian Press 2012)

The London Court of InternationalArbitration in 2012 ruled in favor ofCanada (Foreign Affairs Trade andDevelopment Canada 2012a)

SLA was to expire in 2013 but Canadaand the USA extended it until 2015 (CBCNews 2012)

Long-term free trade in lumber needs toreplace SLA

Buy American Provision Serious Partial resolution but high risk ofrecurring Buy American legislation

2009 American Recovery andReinvestment Act

Exclusion of Canadian products andproduction sharing in US public worksprocurement

Canada-US Procurement Agreement in2010 which allowed for the purchaseof Canadian goods on seven US

infrastructure projects valued at morethan $7777000

Canada needs to seek a comprehensiveagreement in order to escape futureAmerican protectionism with allprovinces on board and compliant withthe WTO provision

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The state of Canada-US relations in 983090983088983089983092 983089983093

fraserinstituteorg

Dispute Impact and cost Prospect for resolution

Canadian Wheat Board Long-term benefit Completed

Canadarsquos mandatory wheat

marketing board monopsonyended in 2011

Frequent US action against CWB in the

past will now end as wheat marketingin Canada turns fully market based

Intellectual Property Rights Moderate potential cost Partially resolved

Canada has been on theSpecial 301 Priority Watch Listby the United States TradeRepresentative since 1995

Ongoing threat of US Trade Action andlegal action

Canadian domestic complianceincluding

Strengthening data protection

Participation in Anti-counterfeiting TradeAgreement (ACTA in 2013)

Enacted the Combating CounterfeitProducts Act (2013)

Started the process of strengthening

the Copyright Act and implementingWorld Intellectual Property OrganizationInternet Treaties

In recognition of which Canada has beenremoved from the Special 301 PriorityWatch List

Prescription drugs Serious potential for trade action Indirect progress

The US complaint againstCanada

Imposing price ceilings thatshifts the cost burden of RampDto US firms

Weak protection ofintellectual property rights rethird party sales

Slow prescription drugapproval process causingreduced market access

US firms experience lost revenues andtrade action is a risk

In 2013 CETA agreement with theEuropean Union Canada agrees to givefull patent protection to new drugs fortwo years

Two-year rule may be transferable tofuture Canada-US resolution

Table 983096 continued

Canada and the United States have had a deeply integrated market in

this sector since the early 983089983097983097983088s Animal health and food safety standards have

been largely harmonized As a result highly efficient supply-chain production

methods have made this industry quite efficient However the imposition of

MCOOL has changed all that (Moens amp Leon 983090983088983089983090) Te cost differential haswidened and Canadian exports have dropped dramatically Since 983090983088983088983096 the

cattle sector has lost $983094983092983088 million per year and the hog sector has lost $983093983088983088

million a year (Te Canadian Press 983090983088983089983091a)

In 983090983088983089983090 the World rade Organization (WO) ruled in Canadarsquos favor by

concluding that MCOOL is discriminatory Te WO gave the US until May 983090983091

983090983088983089983091 to act but on that same day the USDA imposed regulatory changes that

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983089983094 The state of Canada-US relations in 983090983088983089983092

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actually strengthened the provisions of MCOOL In retaliation the Canadian

government released a list of US exports to Canada that would be subjected

to tariffs and it is preparing to seek a compliance panel at the WO Until this

situation is resolved the Canadian government predicts a continuing annual

loss of $983089 billion for the Canadian red meat sector (Te Canadian Press 983090983088983089983091a)

Softwood lumber

In 983090983088983089983089 several American softwood companies took their Canadian counter-

parts to the Court of International Arbitration in London accusing them of cir-

cumventing the Softwood Lumber Agreement of 983090983088983088983094 (Foreign Affairs rade

and Development Canada 983090983088983089983090a) Te dispute centered on the accelerating pace

of lumber harvests resulting from the pine beetle infestation Te stakes were

high $983091983096983088 million in penalties should Canada lose (Te Canadian Press 983090983088983089983090)

In 983090983088983089983090 the Court of International Arbitration ruled in Canadarsquos favor

(Foreign Affairs rade and Development Canada 983090983088983089983090a) In addition while

the Softwood Lumber Agreement was set to expire in 983090983088983089983091 the Canadian

and American governments successfully negotiated an extension of the

Agreement until 983090983088983089983093 (CBC News 983090983088983089983090) Te fact remains that as long as a

large part of Canadarsquos softwood lumber is managed in terms of quotas and

the stumpage fee system US trade action is very likely

lsquoBuy Americanrsquo provision

Te 983090983088983088983097 American Recovery and Reinvestment Act (ARRA which expired

on September 983091983088 983090983088983089983089) and the more recent 983090983088983089983089 American Jobs Act stipu-

lated that steel iron and other goods used in the repair and construction of

infrastructure projects in the US (highways bridges mass transit and fed-

eral buildings) must be manufactured in the United States (Matthiesen 983090983088983089983089)

In response to ARRA Canada and the US signed the Canada-US

Procurement Agreement in 983090983088983089983088 which allowed for the purchase of Canadian

goods on seven US infrastructure projects valued at more than $983095983095983095983095983088983088983088

or within the 983091983095 states subject to the WO GPA (Government of Canada

983090983088983089983091a) Te 983090983088983089983089 American Jobs Act did not pass in Senate and is thus moot

While the ARRA dispute was partially resolved lsquoBuy Americanrsquo anda counter position of lsquoBuy Canadianrsquo can flare up on either side of the bor-

der Canadian industry is most vulnerable in this uncertainty Te Canadian

government ought to seek a comprehensive Buy American exemption to

escape future American protectionism In so doing all provincial govern-

ments need to be on board in order to make the WO and NAFA rules

function optimally

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The state of Canada-US relations in 983090983088983089983092 983089983095

fraserinstituteorg

Canadian Wheat Board (CWB)

In 983090983088983089983089 the Canadian government removed the monopsony held by the

Canadian Wheat Board Tis unilateral action offers a successful reduction

in bilateral trade distortion oday the CWB continues to operate as a mar-

keting group

Intellectual Property Rights (IPR)

From 983089983097983097983093 through 983090983088983089983091 Canada was on the Special 983091983088983089 Priority Watch

List by the United States rade Representative Te US complaint was that

protection and enforcement of IPR in Canada were weak Te Special 983091983088983089

Priority Watch List is designed to identify US trading partners that are the

worst offenders in IPR protection (Embassy of the United States Ottawa

Canada 983090983088983089983091)

Although the issue is not completely resolved Canada has made sig-

nificant progress in recent years Te federal government has strengthened

data protection regulations criminalized the use of camcorders in theaters

and participates in the Anti-Counterfeiting rade Agreement (ACA) nego-

tiations (983090983088983089983091) Most recently Canada enacted the Combatting Counterfeit

Products Act (Embassy of the United States Ottawa Canada 983090983088983089983091) Te

Canadian Government is in the process of strengthening the Copyright Act

and implementing World Intellectual Property Organization Internet reaties

(Embassy of the United States Ottawa Canada 983090983088983089983091)

As a result of these steps Canada was removed from the Special 983091983088983089

Priority Watch List in 983090983088983089983091

Prescription drugs

Prescription drug prices in Canada are relatively low due to a price ceil-

ing mandated by Canadarsquos healthcare system In addition Health Canada

approval times for prescription drugs significantly lag behind their counter-

parts in the United States and the European Union (Barua and Esmail 983090983088983089983091)

US lawmakers have repeatedly expressed their concerns over cheap prescrip-

tion drugs re-entering the US from Canada (Moens and Gabler 983090983088983089983089) TeEU also asked Canada to strengthen IPR protections for prescription drugs

(Lexchin and Gagnon 983090983088983089983091) Since the signing of the CEA agreement in

principle on October 983089983096 983090983088983089983091 the issue between Canada and the EU is now

resolved (Waldie 983090983088983089983091) Canada has agreed to ldquoEU demands for patent pro-

tection for up to two years on brand-name drugsrdquo (Blanchfield 983090983088983089983091)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983089983096 fraserinstituteorg

State of the border andregulatory cooperation

Te decline in Americans traveling to Canada corresponds with the US

Greenback losing value against the Canadian dollar (figures 983089983088 983089983089) However

when we consider the extent of the decline in total numbers it appears dispro-

portionate Te change in American travel suggests instead a bigger problem

following the 983097-983089983089 shock Te imposition of new border transit requirements

such as passports as well as longer wait times and more security screening

has likely dampened US travel across this international boundary Given the

modest economic recovery in the USA from the beginning of 983090983088983089983088 onward

one would expect disposable income including for travel to trend back up

Instead the numbers remain stagnant at around 983090983088 million less than half the

number of 983090983088983088983090

While an overall national average for border wait times is not avail-

able data on major border crossings in both Central Canada and British

Columbia indicate that no reductions in wait times have been achieved

between 983090983088983088983094 and 983090983088983089983089 (figure 983089983090) Te problem of inefficiency as presented

by the Canada-US border goes well beyond wait times It includes inefficient

activity away from the border such as extra warehousing and costs of com-

plying with various facilitated traveler and goods programs such as FAS for

trucks loads and drivers

Tere are consistent cost differences between domestic and cross-bor-

der truck-borne trade which point to significant border costs ldquoFor exports

to the US these costs added 983088983097 percent to the delivered price of goods in

983090983088983088983092 Tis figure fell to 983088983092 percent in 983090983088983088983097 hellip Higher fixed costs per shipment

accounted for most of the additional cost of transporting goods to the USrdquo

(Brown and Anderson 983090983088983089983090) When we consider that in the manufacturingsector parts cross the border several times in various stages of assembly we

realize how this cost accumulates and defeats the efficiency gains otherwise

generated by integrated supply chain manufacturing Border costs are typ-

ically passed on to the consumer as fixed costs per shipment

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The state of Canada-US relations in 983090983088983089983092 983089983097

fraserinstituteorg

An unprecedented border problem has arisen in the current USAdministrationrsquos lengthy (six years) review of the permitting of a pipeline

border crossing as proposed in the Keystone XL project As a result oil-by-

rail transport has recently increased while the pipeline mode of Canada-US

trade has seen a drop in growth in the 983090983088983089983089983089983090 period ( figures 983089983091 983089983092)

0

10

20

30

40

50

201220112010200920082007200620052004200320022001200019991998

Figure Travellers entering Canada ndash

Source Statistics Canada (2013e)

US residents Non-US residents

0

3

6

9

12

15

18

0

03

06

09

12

15

18

20122011201020092008200720062005200420032002

Trips Spending US$CA$ (Secondary axis)

Figure US overnight travel to Canada ndash

Source Statistics Canada (2011) Bank of Canada (2013b)

M i l l i o n s o f t r i p

s N o m i n a l C A $ b i l l i o n s

U S $ C A $ ex c h a n

g er a t e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 2762

983090983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

5

10

15

20

201120102009200820072006

Northbound average delay Southbound average delay

Figure Peace Arch average border wait time ndash

Source Cascade Gateway Data (2013)

M i n u t e s

0

25

50

75

100

125

150

175

200

225

250

275

300

201220112010200920082007200620052004

2 0 0 4

U S $ b

i l l i o n s

Figure All surface modes of freight flow data based on value of goods

ndash

Source Bureau of Transportation Statistics (2013)

Truck Rail Pipeline

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983089

fraserinstituteorg

lsquoBeyond the Borderrsquo and Regulatory Cooperation

In 983090983088983089983089 Canada and the United States announced an ambitious agreement

to reduce border costs by means of deeper bilateral regulatory and secur-

ity cooperation Te accord seeks to streamline various border proceduresmdash

some already in existence and some newmdashto improve intelligence-sharing

between law enforcement agencies mutual recognition of passenger baggage

screening improved frameworks for trusted trade programs harmoniza-

tion of NEXUS protocols streamlined supply chains enhanced trade com-

petitiveness collaboration in border infrastructure investment and deeper

cooperation in national security investigations Te agreement is known as

Beyond the Border A Shared Vision for Perimeter Security and Economic

Competitiveness (February 983092 983090983088983089983089)

Te Beyond the Border Vision accord also set up a Regulatory

Cooperation Council In it Canadian and American officials seek to reduce

red tape and harmonize regulations in certain key sectors o date the

Council has announced various plans affecting agriculture and food trans-

portation health personal care products workplace chemicals environmentnano materials and small business loans We summarize the key points of

progress made since 983090983088983089983089 in table 983097

-35

-25

-15

-5

5

15

25

35

20122011201020092008200720062005

Truck Rail Pipeline

Figure Growth rate of all surface modes of freight flows () ndash

Source Bureau of Transportation Statistics (2013) calculations by authors

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983090983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983097 Key elements of Beyond the Border and Regulatory Cooperation

Beyond the Border Program

Integrated Cargo Security Strategy (ICSS)December 2011

Reduces administrative duplication between Canada and the US byaddressing security risks in advance within the shipment supply chainand at the border (Canada Border Services Agency 2013)

Prince Rupert Pilot October 2012 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry via rail is examined by Canadian officials onbehalf of the US (Government of Canada 2013c)

Montreal Pilot January 2013 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry to the US via truck is examined by Canadianofficials on behalf of the US (Government of Canada 2013c)

Pre-load Air Cargo Targeting (PACT) Joint pilot by CBSA and Transport Canada to screen cargo pre-flight onCanada-bound airplanes at foreign airports (Canada Border ServicesAgency 2013)

Tamper Evident Technology PilotOctober 2012

Pilot collaboration between CBSA and US CBP to ensure containersremain sealed upon arrival at the US border (Canada Border Services

Agency 2013)

Truck Cargo Pre-Inspection PilotMarch 2013

Pilot program between the CBSA and the US CBP for pre-inspection ofsouthbound traffic into US (Canada Border Services Agency 2013)

Free and Secure Trade (FAST) PilotSarnia Ontario

Pilot program for usage of FAST lanes without Partners in Protection andCustoms Self Assessment programs (Government of Canada 2013c)

Canada-US Shiprider June 2013 Removal of jurisdictional barriers to improve law enforcement personnelin Windsor-Detroit and Vancouver-Blaine waterways (Government ofCanada 2013c)

EntryExit Initiative Phase II June 2013 Exchange entryexit data between the CBSA and US DHS on individualsat Canada-US land border crossings (Government of Canada 2013c)

Regulatory Cooperation ProgramMemorandum of Understanding between Transport Canada and the RailwayAssociation of Canada September 2013

Framework for Canadian rail emissions between 2011 to 2015(Government of Canada 2013d)

Canada-United States Perimeter Approachto Plant Protection September 2013

Draft framework for increased cooperation and reduction inadministrative duplication between the Canadian Food InspectionAgency (CFIA) and United States Animal and Plant Health InspectionService (APHIS) on trade in plants and plant products (Government ofCanada 2013d)

Common Electronic Submission GatewayPilot (CESG) August 2013

FDA and Health Canada will allow pharmaceutical firms to electronicallysubmit drug applications (Government of Canada 2013d)

Initiative to Align Veterinary DrugApprovals December 2012

Joint reviews between US FDA and Health Canada on veterinary drugproducts (Government of Canada 2013d)

Stricter Air Pollutant Emissions Environment Canada aligns car emissions beginning in 2017 with theUS Environmental Protection Agencyrsquos ldquoTier 3rdquo (Government of Canada2013d)

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The state of Canada-US relations in 983090983088983089983092 983090983091

fraserinstituteorg

On September 983092 983090983088983089983091 $983092983094983094 million in investment was allocated to the

Border Action plan by the Government of Canada in order expand two marine

container examination facilities (Government of Canada 983090983088983089983091c) $983091983091 million

was invested by the Government of Canada in the Asia Pacific Gateway and

rade Corridor Initiative (Government of Canada 983090983088983089983091c) Te Plan includes

an additional 983090983097 harmonization initiatives that will enhance trade activity

between Canada and the US

Neither Beyond the Border nor the Regulatory Cooperation Council

offer further investment or cost estimates on the initiatives described in table

983097 Moens and Gabler (983090983088983089983090) pointed to the need for both the Canadian and

American governments to provide data on border costs so that a cost-benefit

analysis can ensue Nonetheless the small steps of progress towards inte-

grating and harmonizing US and Canadian border practices remains a very

important (long-term) part of reducing the profile of the border

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983090983092 fraserinstituteorg

Canadian and American public perceptions

Tree observations are noteworthy in recent assessments of public percep-

tions between Americans and Canadians First Americans consistently have

a very high favourability rating of Canadians typically in the 983097983088 plus range

(table 983089983088 figure 983089983093) Both as a friend and a strategic ally Americans hold

Canadians in the most favourable light possible (table 983089983089) Disagreements over

policy between the two countries whether in defence and foreign affairs or

over border and trade issues do not move this fundamental asset Canadians

enjoy in dealing with their neighbour

Second Canadians do not have high expectations of either the

American or Canadian government regarding progress in bilateral relations

As table 983089983090 shows Canadians hold Obama in high regard (983094983091 percent) but

only 983093983092 percent expect progress from him in trade relations Prime Minister

Harper is rated slightly ahead of President Obama in terms of working hard

towards improving Canada-US relations (table 983089983091)

Tird and most significant in light of Canadarsquos Catch-983090983090 situation both

Canadians and Americans are more supportive of closer cooperation and inte-

gration policies than is the case for political representatives in either the United

States or Canada In two recent studies we showed how US Senators and House

Representatives are quite critical of Canada with regard to NAFA issues and bor-

der security (Moens and Gabler 983090983088983089983089) Similarly we found that among the three

major political parties in Canadarsquos parliament only one consistently expressed

itself in favour of closer ties with the United States (Moens and Gabler 983090983088983089983089)

A recent survey of American and Canadian (and Mexican) attitudes

towards free trade and NAFA show surprisingly strong data for more trade

integration In response to the statement ldquoTere should be more free trade

between the US Canada and Mexicordquo 983096983088 percent of Canadians approved

as did 983095983092 percent of Americans Even on border security Canadians andAmericans are more pro-cooperation and integration than their governmental

policies suggest In the US 983092983089 percent support a common perimeter while

983090983088 percent are opposed In Canada 983092983091 percent support it and 983091983088 percent are

opposed (Graves Pastor and Basaacutentildeez 983090983088983089983091) Terefore in terms of public

mandate both governments would have a case to work towards broader bilat-

eral (or trilateral) cooperation to lower trade barriers

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The state of Canada-US relations in 983090983088983089983092 983090983093

fraserinstituteorg

Table 983089983088 Canadian favourability rating among Americans (February 983090983088983089983090)

Veryfavourable

Mostlyfavourable

Mostlyunfavourable

Veryfavourable Not sure Total

favourableTotal

unfavourable

53 38 3 2 3 91 5

Note n=1015

Source Gallup Poll (2012)

Table 983089983089 Ally or enemy for Americans (June 983090983088983089983091)

Country Ally Friendly Unfriendly Enemy Total Ally andFriendly

Great Britain 66 25 2 1 91

Canada 61 33 2 1 94

China 11 44 26 14 55

Note n=1529Source Gallup Poll (2013)

88

90

92

94

96

98

201220112010200920082007

Figure Canadian favourability among Americans () ndash

Source Gallup Poll (2012)

f a

v o u r a

b l e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983090 What effect will Obama have on Canada-US relations (November 983090983088983089983090)

Canadians Americans

Positive Negative None Positive Negative None

Relationship 62 5 34 48 12 40

Trade 54 10 35 48 12 39

Harmonizing 53 8 40 47 14 39

Note n=1066

Source Abacus Data (2012)

Table 983089983091 Has each leader worked hard to improve Canada-US relations

(July 983090983088983089983090)

Country Agree Disagree Not sure

Stephen Harper 58 32 10

Barack Obama 53 32 15

Note Sample of Canadians

Source HarrisDecima (2012)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983090983095

US policy uncertainty

Canadian economic prospects face their most important challenge in the

United States Te US economic recovery has been modest and real GDP

growth so far has remained below the post-World War II average of post-

recession periods (figure 983089983094) As we noted above the less-than-stellar US

recovery is made even more challenging for Canadian traders in that pro-

ductivity gains in Canada are lagging while the Canadian dollar remains high

On top of that several American-imposed regulatory obstacles to free trade

are depressing trade prospects in crude oil red meat and public works pro-

curement Tese impediments reduce Canadian competitive access to the

US market

A high level of public spending until the January 983090983088983089983091 sequester and

ongoing monetary stimulation have not produced notable US GDP growth

Te seven post-recession periods below show the current average to be well

below the historical average (Young 983090983088983089983091)

983089983097983092983096-983089983097983093983095 983091983096983088

983089983097983093983096-983089983097983094983095 983092983090983096

983089983097983094983096-983089983097983095983095 983091983089983096

983089983097983095983096-983089983097983096983095 983091983089983093

983089983097983096983096-983089983097983097983095 983091983088983093

983089983097983097983096-983090983088983088983095 983090983097983097

983090983088983088983096-983090983088983089983091 983088983095983091

While economic growth has been modest growth in the public debt

has not (figure 983089983095) Publicly held debt in the US is now at 983095983091 percent of GDP

the highest since 983089983097983092983094 (Congressional Budget Office 983090983088983089983091)

Te widening gap between federal government outlays and revenueshas only recently been capped by the Sequester (figure 983089983096) However the

budget Sequester is temporary and final resolution of public spending and

taxation levels remains unclear given repeated gridlock in presidential-con-

gressional policy making High debt levels combined with stalemate over

taxes and budget cuts have produced a case of policy instability or uncer-

tainty in the last five years (Baker Bloom and Davis 983090983088983089983091)

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fraserinstituteorg

US policy uncertainty is further aggravated by inaction on the large

lsquoentitlementrsquo programsmdashSocial Security Medicare and Medicaidmdashwhich are

the major drivers of the long-term gap in revenues and spending

-4

-2

0

2

4

6

8

201220062000199419881982197619701964

Figure US GDP growth rate ndash ( forecast)

Source The World Bank (2013b) OECD (2013)

-10

-8

-6

-4

-2

0

0

20

40

60

80

100

20122011201020092008200720062005200420032002

Government deficit as a percentage of GDP Government debt as a percentage of GDP

Figure US Government deficit and debt as a percentage of GDP ndash

Source Congressional Budget Office (2013)

D e fi c i t p e r c e n t a g e ( ) D

e b t p er c en t a g e ( )

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The state of Canada-US relations in 983090983088983089983092 983090983097

fraserinstituteorg

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

20122003199319831973

Revenue Outlays

Figure US Government revenue and outlays ndash ( US$ billions)

Source Congressional Budget Office (2013)

1 9 8 3 U S $ b i l l i o n s

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983091983088 fraserinstituteorg

Trade diversification

Given the weakness in near-term US opportunities Canadians are (again)

wondering how to pursue trade diversification away from the United States

Te objective is logical and if achieved will prove advantageous but various

trends in trade and investment show that diversification for Canada is a slow

and arduous journey (table 983089983092)

In terms of overall share exports to China in the last five years have

doubled but the numbersmdashfrom 983090983089983095 percent to 983092983090983094 percentmdashremain rela-

tively low In the same period the US-bound share declined by 983091 percent but

remains a towering 983095983092983093983092 percent Te pattern of small overall impact applies

to all the other top trading partners For example exports to the UK have

increased but exports to Japan and Mexico have essentially stalled When we

consider average export growth rates over the last five years (table 983089983093) we see

a very strong rate for China (983089983093983093 percent) and strong rates for the UK and

South Korea (983096983097 percent and 983094983097 percent) However a 983089983093 percent increase in a

983092 percent overall trade share produces little change Te point we are making

is that at this rate and pattern of trade lsquodiversificationrsquo it will actually take a

very long timemdashwhile relatively small upward trends in trade with the United

States could have a quick and very large impact in the opposite direction

On the import side we notice more trade diversification with the US

share at 983093983088 percent and the Chinese share at 983089983089 percent (table 983089983094) Te Chinese

growth rate on the import side is less than on the export side (table 983089983095) Te

most revealing number may be the high average over five years for Mexico

at 983097 percent Tis could be indicative of a growing supply chain with Mexico

While foreign direct investment (FDI) is not a direct indicator of future

trade trends in investment may harbinger change In terms of outbound

FDI we notice that only a small segment (less than 983089983088 percent) is targeted

for manufacturing (table 983089983096) It is investment in this category in which onewould expect growth in supply chains

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The state of Canada-US relations in 983090983088983089983092 983091983089

fraserinstituteorg

Table 983089983092 Canadarsquos merchandise exports top ten destinations 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 3291 1 777 2361 1 751 2564 1 749

China 92 4 22 97 3 31 114 3 33

UK 114 2 27 105 2 33 141 2 41

Japan 97 3 23 73 4 23 79 4 23

Mexico 51 5 12 42 5 13 43 5 13

Netherlands 32 8 08 24 8 08 28 8 08

South Korea 34 7 08 31 7 10 32 7 09

Germany 39 6 09 33 6 10 34 6 10

France 28 9 07 23 9 07 20 10 06

Brazil 23 10 05 14 10 04 22 9 06

Total 4237 3145 3424

2011 2012Average

shareValue Rank Share Value Rank Share

US 2750 1 737 2783 1 745 752

China 140 3 38 159 2 43 33

UK 157 2 42 154 3 41 37

Japan 89 4 24 85 4 23 23

Mexico 46 5 12 44 5 12 12

Netherlands 40 7 11 37 6 10 09

South Korea 43 6 11 30 7 08 09

Germany 33 8 09 29 8 08 09

France 26 9 07 26 9 07 07

Brazil 24 10 06 21 10 06 06

Total 3732 3734

Source Industry Canada (2013b)

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983091983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983093 Canadian export growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 56 7 -281 9 106 = 5

China 101 6 65 1 187 3

UK 16 9 -73 2 358 2

Japan 202 3 -250 7 106 = 5

Mexico 179 4 -178 6 43 9

Netherlands -85 10 -255 8 183 4

South Korea 276 2 -80 3 52 8

Germany 160 5 -167 4 54 7

France 36 8 -174 5 -122 10

Brazil 706 1 -380 10 603 1

2011 2012Average

Rank Rank

US 104 8 27 2 02

China 270 4 152 1 155

UK 148 6 -02 4 90

Japan 161 5 -29 6 38

Mexico 94 9 -16 5 24

Netherlands 475 1 -55 7 53

South Korea 374 2 -272 10 70

Germany 05 10 -95 9 -09

France 311 3 23 3 15

Brazil 109 7 -92 8 189

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983091

fraserinstituteorg

Table 983089983094 Canadarsquos merchandise imports top ten sources 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 1992 1 524 1633 1 511 1745 1 504

China 374 2 98 347 2 109 382 2 110

Mexico 157 3 41 145 3 45 190 3 55

Japan 134 4 35 108 4 34 115 4 33

Germany 111 5 29 95 5 30 97 5 28

UK 110 6 29 82 6 26 92 6 27

South Korea 53 9 14 52 7 16 53 7 15

Algeria 67 7 18 33 10 10 31 10 09

Italy 45 10 12 39 9 12 40 9 12

France 53 8 14 49 8 15 47 8 13

Total 3804 3194 3465

2011 2012Average

shareValue Rank Share Value Rank Share

US 1846 1 496 1922 1 506 508

China 402 2 108 417 2 110 107

Mexico 205 3 55 210 3 55 50

Japan 109 4 29 123 4 33 33

Germany 107 5 29 118 5 31 29

UK 86 6 23 70 6 18 25

South Korea 55 7 15 52 7 14 15

Algeria 46 9 12 49 8 13 12

Italy 43 10 11 43 9 11 12

France 46 8 12 41 10 11 13

Total 3723 3796

Source Industry Canada (2013b)

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983091983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983095 Old and new trade prospectsmdashimport growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 29 8 -178 7 89 5

China 112 4 -70 2 123 3

Mexico 43 7 -77 4 337 1

Japan -11 10 -192 8 89 4

Germany 105 5 -149 6 44 7

UK 95 6 -252 9 141 2

South Korea 120 3 -14 1 36 8

Algeria 518 1 -511 10 -50 10

Italy 11 9 -132 5 48 6

France 191 2 -70 3 -35 9

2011 2012Average

Rank Rank

US 88 5 57 4 17

China 82 6 53 5 60

Mexico 111 3 39 6 91

Japan -29 9 151 1 01

Germany 132 2 117 2 50

UK -36 10 -173 10 -45

South Korea 76 7 -37 8 37

Algeria 533 1 91 3 116

Italy 95 4 23 7 09

France 22 8 -97 9 02

Source Industry Canada (2013b) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983093

fraserinstituteorg

In terms of overall Canadian outbound FDI stocks in the US remain

very high despite the recent US recession while growth in stock in Asia is

modest (figure 983089983097) When we examine Canadian FDI in the so-called BRIC

states we notice that investment in both China and India is relatively small

Canadian mining investment in Brazil is much larger (figure 983090983088) In fact when

we examine amounts of FDI we find that Canada is not really a big BRIC

investor other than Brazil Chile Hong Kong and Peru are larger FDI recipi-

ents than China and India (figure 983090983089)

In terms of FDI flowing into Canada we notice the very large share

(983090983096983094983093 percent) in manufacturing which indicates both the predominant

share of US FDI and the extensive integrated supply chains in Canada-US

manufacturing (table 983089983097) Even more than for outbound FDI inflow stocks

show very large US preponderance (figure 983090983090) Such continued concentra-

tion of US FDI in Canada suggests that Canadian trade diversification is not

just a decision to be made by Canadian producers

Like trade growth Chinese FDI growth in Canada is positive but the

overall numbers are small and do not show rapid growth in the last 983091 years

(figure 983090983091)

Table 983089983096 Top industries for outward stocks of FDI 983090983088983089983090

Category Value Share

Mining oil and gas extraction 1099 188

Oil and gas subcategory 542 93

Manufacturing 569 97

Finance and insurance 2334 399

Management of companies and enterprises 757 129

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

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983091983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

1

2

3

4

5

6

7

8

9

10

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n s

Figure Canadian foreign direct investment (stock) BRIC ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Brazil PRC India Russia

0

20

4060

80

100

120

140

160

180

200

220

240

260

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) various regions

ndash

Notes Excluding Mexico Canadian FDI to Mexico in 2012 was $557 billion

Foreign Direct Investment measures the purchase of various forms of capital stock abroad

However tax havens (Barbados Bermuda etc) are frequently found to be some of the highest

recipients of FDI In reality tax havens do not reflect economic growth as FDI figures invested

into tax havens are often reinvested back to the source country in a concept known as

round-tripping (Financial Post 2013) We have accounted for tax havens by removing them from

tables and figures in this section The numbers corresponding to Figure 19 would be Barbados

($593 billion) Bermuda ($118 billion) British Virgin Islands ($21 billion) Cayman Islands ($302

billion)

Source Foreign Affairs Trade and Development Canada (2013c)

US Europe Asia amp Oceania Central amp South America Africa

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983095

fraserinstituteorg

Table 983089983097 Top industries for inward stocks of FDI 983090983088983089983090

Category Value Share

Oil and gas extraction 766 147

Manufacturing 1492 287

Petroleum and coal products manufacturing 377 72

Wholesale trade 395 76

Finance and insurance 699 134

Management of companies and enterprises 999 192

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

0

2

4

6

8

10

12

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) Chile Hong Kong

Peru amp Korea ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Chile Hong Kong Peru Korea

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983091983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

40

80

120

160

200

240

280

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Foreign direct investment (stock) in Canada from top three

countries ndash

Source Foreign Affairs Trade and Development Canada (2013c)

US Netherlands UK

0

2

4

6

8

10

12

201220112010200920082007

2 0 0 2 C A $ b

i l l i o n s

Figure Foreign direct investment (stock) in Canada from China

ndash

Source Foreign Affairs Trade and Development Canada (2013c)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4762

983092983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4862

fraserinstituteorg 983092983089

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lthttpabacusdatacawp-contentuploads983090983088983089983090983089983089Can-AM_Report_CABC_

Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5662

The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5762

983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

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The state of Canada-US relations in 983090983088983089983092 983093983089

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Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

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CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

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the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

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Jack Pirie

Con Riley

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The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

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of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

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As a healthy part of public discussion among fellow citizens who de-

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fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 7: Canadas Catch 22 State of Canada Us Relations in 2014

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8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983089

Bilateral trade relations

Merchandise trade

Tere is a significant decline in both exports and imports from 983090983088983088983096 to 983090983088983088983097

as a result of the US recession (table 983089) Te sharpest decline is in Canadian

merchandise exports to the US which decreased by 983090983095 percent in 983090983088983088983097 and

still have not recovered to the 983090983088983088983096 level in 983090983088983089983090 Canadian merchandise

imports from the US on the other hand did not fall as sharplymdash983089983094 percent in

983090983088983088983097mdashand in 983090983088983089983090 are only slightly below the 983090983088983088983096 number Tus on balance

Canadian exports to the US have suffered significantly more from the reces-

sion than American exports to Canada (figures 983089 983090) Given this re-balancing

Canadarsquos merchandise trade balance surplus with the USA has been virtu-

ally cut in half (983092983094 percent) from $983095983095 billion in 983090983088983088983096 to $983091983093 billion in 983090983088983089983090983089

Te traditionally large gap between merchandise exports and imports

between Canada and its largest trading partner have shrunk substantially As

a result Canadarsquos trade balance with the world has declined from $983092983089 billion

in 983090983088983088983096 to a deficit of $983089983088 billion in 983090983088983089983090 Te monthly import and export

numbers in 983090983088983089983091 show a continuation of this trend

A noticeable trend in Canada in the last 983095 years reveals that less GDP is

derived from trade (and thus more from Canadarsquos domestic market) while in

the United States the trade versus domestic market share of GDP is on a ris-

ing trend (table 983090) When we examine the US share of Canadarsquos total exports

and imports over a longer period (983089983097983097983091ndash983090983088983089983090) we notice the overall down-

ward trend (figures 983091 983092) Te main causal factors are the higher value of the

Canadian dollar the post-983090983088983088983096 slump in US demand and a certain amount

of diversification in Canadarsquos trade as well as stronger relative growth inCanadarsquos domestic market

1048625 All figures are in real Canadian dollars unless otherwise noted

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983090 The state of Canada-US relations in 983090983088983089983092

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A breakdown of the top export and import sectors in Canada-US trade

shows that the traditionally strong machinery and automotive sectors are

holding well in terms of US exports to Canada but the same sector is weaker

on the Canadian side Te gains on our side are in minerals and energy prod-

ucts (tables 983091 983092) Te slow decline in Canadian exports of manufactured prod-

ucts suggests a weakening on Canadarsquos side in the integrated supply-chain in

this sector Lower productivity and border costs may well play a role

Table 983089 Canadian merchandise trade 983090983088983088983095ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2007 2008 2009 2010 2011 2012

Total exports 41380 42705 32099 34675 38099 38006

Exports to US 31795 32331 23610 25332 27517 27809

Total imports 37291 38877 32691 35508 38036 38993

Imports from US 24215 24666 20641 22312 23475 24360

Total balance 4089 3827 -592 -833 063 -987

Balance with US 7579 7666 2969 3020 4042 3450

Note On a balance of payments basis

Source Statistics Canada (2013d)

15

20

25

30

35

2 0 1 3 - 0 5

2 0 1 3 - 0 1

2 0 1 2 - 0 9

2 0 1 2 - 0 5

2 0 1 2 - 0 1

2 0 1 1 - 0 9

2 0 1 1 - 0 5

2 0 1 1 - 0 1

2 0 1 0 - 0 9

2 0 1 0 - 0 5

2 0 1 0 - 0 1

2 0 0 9 - 0 9

2 0 0 9 - 0 5

2 0 0 9 - 0 1

2 0 0 8 - 0 9

2 0 0 8 - 0 5

2 0 0 8 - 0 1

2 0 0 7 - 0 9

2 0 0 7 - 0 5

2 0 0 7 - 0 1

Import Export

2 0 0 2 C A $ b i l l i o n s

Figure Canadarsquos merchandise trade (monthly) ndash

Source Statistics Canada (2013c) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091

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Table 983090 Merchandise trade as a of GDP 983090983088983088983093ndash983090983088983089983090 (current US$)

2005 2006 2007 2008 2009 2010 2011 2012

Canada 602 584 569 583 483 501 515 510

Growth 02 -30 -26 25 -172 37 28 -10

US 210 221 227 243 191 225 250 248

Growth 61 52 27 70 -214 178 111 -08

Source The World Bank (2013a)

0

1

2

3

4

5

6

7

8

9

2 0 1 3

- 0 5

2 0 1 3

- 0 1

2 0 1 2

- 0 9

2 0 1 2

- 0 5

2 0 1 2

- 0 1

2 0 1 1

- 0 9

2 0 1 1

- 0 5

2 0 1 1

- 0 1

2 0 1 0

- 0 9

2 0 1 0

- 0 5

2 0 1 0

- 0 1

2 0 0 9

- 0 9

2 0 0 9

- 0 5

2 0 0 9

- 0 1

2 0 0 8

- 0 9

2 0 0 8

- 0 5

2 0 0 8

- 0 1

2 0 0 7

- 0 9

2 0 0 7

- 0 5

2 0 0 7

- 0 1

2 0 0 2 C A $ b i l l i o n s

Figure Canada-US net merchandise trade (monthly) ndash

Source Statistics Canada (2013c) calculations by authors

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-5

-4

-3

-2

-1

0

1

2

3

2012201120102009200820072006200520042003200220012000

G r o

w t h ( )

Figure GrowthUS share of Canadarsquos annual merchandise trade ()

ndash

Source Industry Canada (2013b) calculations by authors

Import Export

45

50

55

60

65

70

75

80

85

90

2011200920072005200320011999199719951993

Import Export

Figure US share of Canadarsquos annual merchandise trade () ndash

Source Industry Canada (2013b)

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The state of Canada-US relations in 983090983088983089983092 983093

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Table 983091 Top sectors for Canadian merchandise exports to the US 983090983088983089983090

Industry Exports

2002 CA$ bi llions Percentage

Mineral products 886 318

Products of chemical or allied industries 163 59

Plastics and related articles 118 43

Base metals and articles of base metals 200 72

Machinery mechanical appliances electrical equipment and related articles 276 99

Vehicles aircraft vessels and associated transport equipment 530 191

Note On a customs basis

Source Statistics Canada (2013a)

Table 983092 Top industries for Canadian merchandise imports from the US 983090983088983089983090

Industry Imports

2002 CA$ bi llions Percentage

Mineral products 163 85

Products of chemical or allied industries 171 89

Plastics and related articles 127 66

Base metals and articles of base metals 158 82

Machinery mechanical appliances electrical equipment and related articles 413 215

Vehicles aircraft vessels and associated transport equipment 413 215

Note On a customs basis

Source Statistics Canada (2013a)

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983094 The state of Canada-US relations in 983090983088983089983092

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Trade in services

As a share of overall bilateral trade trade in services is growing gradually otal

bilateral services trade in 983090983088983089983088 amounted to 983089983096 percent of bilateral merchan-

dise trade It was 983089983093 percent in 983090983088983088983095983090 Te United States is by far the largest

trading partner in Canadarsquos international trade in services rade with the

US is nearly ten times the amount with the next largest partner the United

Kingdom But unlike merchandise trade the value of non-US services trade

is nearly half (983092983092 percent in 983090983088983089983088) of that with the USA (table 983093) In other

words there is more diversification from the US market in services than in

merchandise983091

Te trend reveals rising competitiveness on the US side (and non-USA)

as Canadian imports are growing considerably while Canadian exports are

stagnant resulting in a growing services trade deficit (figure 983093)

Bilateral trade in services was not impacted by the US recession as

merchandise trade was otal volume of trade is slightly up in the three years

after 983090983088983088983095 (figure 983094) Most of this gain is from growth in Canadian imports

from the US (and from non-US) while Canadian exports to the USA are

slightly down

Given that there is no growth in Americans traveling to Canada during

this time period (as we will show later) the relative strength of US exports vis-

agrave-vis Canadian exports appears to lie in the commercial sector (tables 983094 983095)

In conclusion in both merchandise and services trade the post 983090983088983088983095

period shows that Canada is relatively losing in trade competitiveness in rela-

tion to the United States Te relative loss of trade competitiveness in our

relationship may be a surprise to many Canadians who believe Canada has

simply been doing better than the US since 983090983088983088983096 Te lsquodoing betterrsquo part may

apply to domestic economic activity but not to external trade

1048626 Data on trade in services is not as recent as merchandise trade

1048627 op export destinations in 983090983088983089983088 after the USA are the UK France and Germany op

importers to Canada in 983090983088983089983088 after the USA include UK Hong Kong (China) France

Germany and Mexico Te case with importers to Canada is similar to that with export-

ing countries Imports from the UK make up roughly 983089983088 percent that of imports from the

US Imports from Hong Kong are 983093983089 percent that from the UK with France at 983092983090 percent

and both Germany and Mexico rest at roughly 983091983096 percent each

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The state of Canada-US relations in 983090983088983089983092 983095

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Table 983093 Services trade between Canada and the US 983090983088983088983093ndash983090983088983089983088 (983090983088983088983090 CA$ billions)

2005 2006 2007 2008 2009 2010

Exports to USA 3988 3815 3834 3966 3718 3700

Imports from USA 4358 4395 4544 4833 4783 4960

Trade balance with USA -370 -580 -710 -866 -1065 -1260

Trade balance with USA -443 -707 -847 -985 -1240 -1455

Exports to non-USA 2832 3080 2985 3052 3142 3102

Imports from non-USA 3022 3187 3380 3518 3496 3722

Trade balance with non-USA -189 -108 -395 -466 -354 -620

Trade balance with non-USA -323 -172 -621 -710 -540 -909

Total services exports 6820 6894 6819 7018 6860 6802

Total services imports 7379 7582 7924 8350 8279 8682

Total trade balance -559 -688 -1105 -1333 -1419 -1880

Total trade balance -394 -475 -750 -867 -937 -1214

Bilateral (X+I) USA 8346 8210 8378 8799 8589 8660

Bilateral (X+I) non-USA 5854 6267 6365 6569 6551 6824

Bilateral (X+I) total 14200 14477 14742 15368 15140 15484

Source Foreign Affairs Trade and Development Canada (2013a)

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983096 The state of Canada-US relations in 983090983088983089983092

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80

81

82

83

84

85

86

87

88

89

90

201020092008200720062005

2 0

0 2 C A $ b i l l i o n s

Figure Canada-US net services trade ndash

Source Foreign Affairs Trade and Development Canada (2013a)

-20

-16

-12

-8

-4

0

201020092008200720062005

Trade balance with USA Total trade balance

Figure Canadarsquos trade deficit with US and the world ndash

Source Foreign Affairs Trade and Development Canada (2013a)

2 0 0 2 C A $ b i l

l i o n s

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The state of Canada-US relations in 983090983088983089983092 983097

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Table 983094 Top categories for service trade exports Canada-World 983090983088983089983090

Category Subcategory Exports

2002 CA$ bi llions Percentage

Government services 13 19

Travel services 143 207

Personal travel 119 172

Transportation services 111 161

Air transport 52 76

Commercial services 424 614

Financial services 57 82

Computer and information services 64 93

Intellectual property use 31 44

Management services 90 130

Research and development 33 47

Architectural engineering 39 57

Source Foreign Affairs Trade and Development Canada (2013a)

Table 983095 Top categories for service trade imports Canada-World 983090983088983089983090

Category Subcategory Imports

2002 CA$ billions Percentage

Government services 11 12

Travel services 288 323

Personal travel 253 284

Transportation services 195 219

Water transport 82 92

Air transport 84 95

Commercial services 396 446

Insurance services 44 50

Financial services 44 50

Intellectual property use 89 100

Management services 75 84

Source Foreign Affairs Trade and Development Canada (2013a)

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983089983088 The state of Canada-US relations in 983090983088983089983092

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075

080

085

090

095

100

105

2 0 1 3

- 0 7

2 0 1 3

- 0 1

2 0 1 2

- 0 7

2 0 1 2

- 0 1

2 0 1 1

- 0 7

2 0 1 1

- 0 1

2 0 1 0

- 0 7

2 0 1 0

- 0 1

2 0 0 9

- 0 7

2 0 0 9

- 0 1

2 0 0 8

- 0 7

2 0 0 8

- 0 1

2 0 0 7

- 0 7

2 0 0 7

- 0 1

Figure CanadaUS dollar exchange rate ndash

Source Bank of Canada (2013b)

C A U S e x c h a n g e r a t e

Dollar value and productivity trends

Te first factor to consider regarding Canadarsquos trade competitiveness vis-agrave-vis

the United States is the value of the Canadian dollar Te substantial appre-

ciation of the Canadian dollar against the US dollar that began in the early

983090983088983088983088s has stabilized at a much higher average value of the loonie ( figure 983095)

As is well documented such exchange rate appreciation tends to have a strong

effect on current account balances as exports decline (Kappler et al 983090983088983089983089)

A growing account deficit will likely push the value of the Canadian dollar

downward in the longer term and thus offer some remedy

ProductivityOf more concern to Canadians should be the data indicating that Canadian

labour productivity rates are lagging those in the United States (figures 983096 983097)

One would expect that Canadarsquos higher dollar has provided industry in recent

years with an opportunity to improve productivity as imported machinery

and technology would be available at a lower price However Canadarsquos pro-

ductivity rate of growth is modest and in 983090983088983089983090 dips into negative territory

again

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The state of Canada-US relations in 983090983088983089983092 983089983089

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-1

0

1

2

3

20122011201020092008

Canada US

Figure Canada and US rates of output productivity growth ()

ndash

Source Statistics Canada (2013g)

R a t e o f p r o d u c t i v i t y g r o

w t h ( )

-10

-5

0

5

20122011201020092008

Labour productivity (Canada) Real GDP (Canada) Hours worked (Canada)

Labour productivity (US) Real GDP (US) Hours worked (US)

Figure Real US-Canadian output and hours worked () ndash

Source Statistics Canada (2013g)

A n n u a l c

h a n g e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983089983090 fraserinstituteorg

Trade and regulatory barriersdisputes

Table 983096 provides a synopsis of the major trade disputesbarriers that have

played a role in bilateral relations in the last five years and that are pertinent

for the 983090983088983089983092 period (pages 983089983094-983089983095) Te two large disputesmdashKeystone XL and

Mandatory Country-of-Origin Labeling (MCOOL) on red meatmdashare more

ominous than they may seem First both in crude oil products and in cattle

and hogs the United States is unilaterally disrupting or dismantling a well-

established integrated sector Canada has started attempts to diversify its oil

transportation structure including more rail and new pipeline routes But

as all proposed alternative pipelines have shown the alternatives are contro-

versial and at best years away from making a difference Meanwhile there is

considerable risk in putting too much crude oil on rail as its accident rates

are higher than pipe

Canadian threats to counter US MCOOL action with tariffs on food

products are not going to have much impact in the near future Moreover

an escalating tariff war on food products cannot be won by Canada and will

ultimately harm consumers on both sides of the border US defiance of two

WO rulings also means more uncertainty for Canadian traders

Keystone XL pipeline

Proposed in 983090983088983088983096 the Keystone XL (KXL) extension is part of a pipeline sys-

tem connecting Alberta oil sands and US mid-West and Gulf region refineries

KXL is a 983089983096983097983095 km crude oil pipeline with a capacity of 983092983094983093983088983088983088 barrels per

day (Hussain 983090983088983089983091) It is a substantial private infrastructure proposal that

will create employment and guarantee a secure energy source for the United

States (Millington and Murillo 983090983088983089983091) It is by no means a new feature in

Canada-US energy relations as a dense network of oil and electricity carri-ers cross the border at multiple points

What is unprecedented is that the permit process is now in its sixth

year and the final resolution remains uncertain (by US law a cross-border line

requires Department of State approval) If not resolved in 983090983088983089983092 the question

may well be handed over to the next president after 983090983088983089983094 Te policy uncertainty

associated with KXL approval has by far the largest impact on Canada-US trade

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The state of Canada-US relations in 983090983088983089983092 983089983091

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relations Te dragged-out procedure has chilled relations Te southern leg of

KXL has been completed and the original route objection by Nebraska has been

resolved What remains ostensibly the problem is that the US administration

has identified this heavy oil as a component of its policy objective of curbing

the emission of greenhouses gasses to reduce global warming

Te impact of this pipeline delay in the 983090983095 million barrels per day (bpd)

export of Canadian oil products to the USA reverberates at various levels

Across Canada investment in mining oil and gas extraction for 983090983088983089983091 is pre-

dicted to decrease by 983090983095 percentmdashthe largest decline since the 983090983088983088983096 recession

(Statistics Canada 983090983088983089983091f) In Alberta investment is predicted to increase by

only 983088983089 percent (Statistics Canada 983090983088983089983091f) Capital investment in oil and gas

extraction has not recovered to pre-983090983088983088983096 levels (Industry Canada 983090983088983089983091a)

While the industry has become increasingly dependent on rail trans-

port to move product it is a costly alternative It can cost up to three times

as much as pipeline transport (Millington and Murillo 983090983088983089983091) and its limita-

tions are self-evident because rail movement of oil is constrained by the lim-

ited availability of rail cars In 983090983088983089983090 983089983091983088983088983088983088 bpd of heavy crude was being

transported by rail Tis is expected to rise to 983092983090983093983088983088983088 bpd by the end of

983090983088983089983092 falling short of the 983092983094983093983088983088983088 bpd which could have been moved through

KXL (Hussain 983090983088983089983091) Te forced increase in rail transport has resulted in

unintended costs for the industry a total of US$983089 billion must be invested for

new rail terminals and another US$983092ndash983093 billion for new rail cars (Lewis 983090983088983089983091)

Rail transport is both more costly and more dangerous A recent study

concluded that ldquopipeline transportation is safer than transportation by road

rail or barge as measured by incidents injuries and fatalitiesrdquo (Green amp

Furchtgott-Roth 983090983088983089983091) It is not inconceivable that another major oil acci-

dent either in Canada or the USAmdashsuch as took place in Quebec in July 983090983088983089983091

killing 983092983095 peoplemdashwould result in a moratorium on oil transport by rail with

grave consequences for Canadian producers

983090983088983088983090 Mandatory Country-of-Origin Labeling

Mandatory Country-of-Origin Labeling (MCOOL) is a provision mandated

by Congressional law and first implemented in 983090983088983088983096 Te measure imposes

strict segregation rules on American Canadian and Mexican cattle and hogs

and the subsequent slaughtering and processing of these animals to producebeef and pork products for retail sale Te stated purpose is to create labels

that indicate the origin in part or in whole of the product In effect it is a

veiled trade barrier because it gives US animals and products a competitive

advantage due to higher labeling inventory and processing costs for equiva-

lent Canadian products

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983089983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983096 Synopsis of trade disputes in Canadian-American relations in 983090983088983089983091

Dispute Impact and cost Prospect for resolution

Keystone XL Pipeline Very serious Poor

2008 proposal for a 1897

km 465000 bpd crude oilpipeline spanning fromAlberta down to Nebraska

Downward pressure on investment

Lost wages January 2012postponement is costing US $47million a day in lost wages (ConsumerEnergy Alliance 2013)

Continuation of crude oil pricediscounts due to lack of infrastructure

Costly alternative rail has emerged as atransportation alternative but can costup to three times as much as pipelinetravel (Millington and Murillo 2013)

Permit postponed twice

Resolution is not transparent

Rising risk of decision deferral past 2016

Mandatory Country-of-OriginLabelling (MCOOL)

Serious Poor

2008 CongressionalLaw mandating rulesfor segregated livestockprocessing and packagingand a labeling structure inorder to have food labelsindicate origin of product

Annual cost to Canadian beef and porksector of $1 billion

Deconstruction of a highly integratedtrilateral supply chain industry

MCOOL adds no animal health or foodsafety benefits

US has defied both WTO complaint andthe core part of the WTO Appeal ruling

2013 US reaction has been to strengthenthe discriminatory provision banning co-mingling of meats altogether

Canada plans to retaliate with tariffs butthis is a costly gambit with low chance ofsuccess

Softwood Lumber Agreement Moderate Good

In 2011 American softwoodcompanies took theirCanadian counterparts to theLondon Court of InternationalArbitration accusing themof circumventing the SLA(Foreign Affairs Trade andDevelopment Canada 2012a)

If in violation Canadian industry wouldface $380 million in penalties (TheCanadian Press 2012)

The London Court of InternationalArbitration in 2012 ruled in favor ofCanada (Foreign Affairs Trade andDevelopment Canada 2012a)

SLA was to expire in 2013 but Canadaand the USA extended it until 2015 (CBCNews 2012)

Long-term free trade in lumber needs toreplace SLA

Buy American Provision Serious Partial resolution but high risk ofrecurring Buy American legislation

2009 American Recovery andReinvestment Act

Exclusion of Canadian products andproduction sharing in US public worksprocurement

Canada-US Procurement Agreement in2010 which allowed for the purchaseof Canadian goods on seven US

infrastructure projects valued at morethan $7777000

Canada needs to seek a comprehensiveagreement in order to escape futureAmerican protectionism with allprovinces on board and compliant withthe WTO provision

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The state of Canada-US relations in 983090983088983089983092 983089983093

fraserinstituteorg

Dispute Impact and cost Prospect for resolution

Canadian Wheat Board Long-term benefit Completed

Canadarsquos mandatory wheat

marketing board monopsonyended in 2011

Frequent US action against CWB in the

past will now end as wheat marketingin Canada turns fully market based

Intellectual Property Rights Moderate potential cost Partially resolved

Canada has been on theSpecial 301 Priority Watch Listby the United States TradeRepresentative since 1995

Ongoing threat of US Trade Action andlegal action

Canadian domestic complianceincluding

Strengthening data protection

Participation in Anti-counterfeiting TradeAgreement (ACTA in 2013)

Enacted the Combating CounterfeitProducts Act (2013)

Started the process of strengthening

the Copyright Act and implementingWorld Intellectual Property OrganizationInternet Treaties

In recognition of which Canada has beenremoved from the Special 301 PriorityWatch List

Prescription drugs Serious potential for trade action Indirect progress

The US complaint againstCanada

Imposing price ceilings thatshifts the cost burden of RampDto US firms

Weak protection ofintellectual property rights rethird party sales

Slow prescription drugapproval process causingreduced market access

US firms experience lost revenues andtrade action is a risk

In 2013 CETA agreement with theEuropean Union Canada agrees to givefull patent protection to new drugs fortwo years

Two-year rule may be transferable tofuture Canada-US resolution

Table 983096 continued

Canada and the United States have had a deeply integrated market in

this sector since the early 983089983097983097983088s Animal health and food safety standards have

been largely harmonized As a result highly efficient supply-chain production

methods have made this industry quite efficient However the imposition of

MCOOL has changed all that (Moens amp Leon 983090983088983089983090) Te cost differential haswidened and Canadian exports have dropped dramatically Since 983090983088983088983096 the

cattle sector has lost $983094983092983088 million per year and the hog sector has lost $983093983088983088

million a year (Te Canadian Press 983090983088983089983091a)

In 983090983088983089983090 the World rade Organization (WO) ruled in Canadarsquos favor by

concluding that MCOOL is discriminatory Te WO gave the US until May 983090983091

983090983088983089983091 to act but on that same day the USDA imposed regulatory changes that

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983089983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

actually strengthened the provisions of MCOOL In retaliation the Canadian

government released a list of US exports to Canada that would be subjected

to tariffs and it is preparing to seek a compliance panel at the WO Until this

situation is resolved the Canadian government predicts a continuing annual

loss of $983089 billion for the Canadian red meat sector (Te Canadian Press 983090983088983089983091a)

Softwood lumber

In 983090983088983089983089 several American softwood companies took their Canadian counter-

parts to the Court of International Arbitration in London accusing them of cir-

cumventing the Softwood Lumber Agreement of 983090983088983088983094 (Foreign Affairs rade

and Development Canada 983090983088983089983090a) Te dispute centered on the accelerating pace

of lumber harvests resulting from the pine beetle infestation Te stakes were

high $983091983096983088 million in penalties should Canada lose (Te Canadian Press 983090983088983089983090)

In 983090983088983089983090 the Court of International Arbitration ruled in Canadarsquos favor

(Foreign Affairs rade and Development Canada 983090983088983089983090a) In addition while

the Softwood Lumber Agreement was set to expire in 983090983088983089983091 the Canadian

and American governments successfully negotiated an extension of the

Agreement until 983090983088983089983093 (CBC News 983090983088983089983090) Te fact remains that as long as a

large part of Canadarsquos softwood lumber is managed in terms of quotas and

the stumpage fee system US trade action is very likely

lsquoBuy Americanrsquo provision

Te 983090983088983088983097 American Recovery and Reinvestment Act (ARRA which expired

on September 983091983088 983090983088983089983089) and the more recent 983090983088983089983089 American Jobs Act stipu-

lated that steel iron and other goods used in the repair and construction of

infrastructure projects in the US (highways bridges mass transit and fed-

eral buildings) must be manufactured in the United States (Matthiesen 983090983088983089983089)

In response to ARRA Canada and the US signed the Canada-US

Procurement Agreement in 983090983088983089983088 which allowed for the purchase of Canadian

goods on seven US infrastructure projects valued at more than $983095983095983095983095983088983088983088

or within the 983091983095 states subject to the WO GPA (Government of Canada

983090983088983089983091a) Te 983090983088983089983089 American Jobs Act did not pass in Senate and is thus moot

While the ARRA dispute was partially resolved lsquoBuy Americanrsquo anda counter position of lsquoBuy Canadianrsquo can flare up on either side of the bor-

der Canadian industry is most vulnerable in this uncertainty Te Canadian

government ought to seek a comprehensive Buy American exemption to

escape future American protectionism In so doing all provincial govern-

ments need to be on board in order to make the WO and NAFA rules

function optimally

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983089983095

fraserinstituteorg

Canadian Wheat Board (CWB)

In 983090983088983089983089 the Canadian government removed the monopsony held by the

Canadian Wheat Board Tis unilateral action offers a successful reduction

in bilateral trade distortion oday the CWB continues to operate as a mar-

keting group

Intellectual Property Rights (IPR)

From 983089983097983097983093 through 983090983088983089983091 Canada was on the Special 983091983088983089 Priority Watch

List by the United States rade Representative Te US complaint was that

protection and enforcement of IPR in Canada were weak Te Special 983091983088983089

Priority Watch List is designed to identify US trading partners that are the

worst offenders in IPR protection (Embassy of the United States Ottawa

Canada 983090983088983089983091)

Although the issue is not completely resolved Canada has made sig-

nificant progress in recent years Te federal government has strengthened

data protection regulations criminalized the use of camcorders in theaters

and participates in the Anti-Counterfeiting rade Agreement (ACA) nego-

tiations (983090983088983089983091) Most recently Canada enacted the Combatting Counterfeit

Products Act (Embassy of the United States Ottawa Canada 983090983088983089983091) Te

Canadian Government is in the process of strengthening the Copyright Act

and implementing World Intellectual Property Organization Internet reaties

(Embassy of the United States Ottawa Canada 983090983088983089983091)

As a result of these steps Canada was removed from the Special 983091983088983089

Priority Watch List in 983090983088983089983091

Prescription drugs

Prescription drug prices in Canada are relatively low due to a price ceil-

ing mandated by Canadarsquos healthcare system In addition Health Canada

approval times for prescription drugs significantly lag behind their counter-

parts in the United States and the European Union (Barua and Esmail 983090983088983089983091)

US lawmakers have repeatedly expressed their concerns over cheap prescrip-

tion drugs re-entering the US from Canada (Moens and Gabler 983090983088983089983089) TeEU also asked Canada to strengthen IPR protections for prescription drugs

(Lexchin and Gagnon 983090983088983089983091) Since the signing of the CEA agreement in

principle on October 983089983096 983090983088983089983091 the issue between Canada and the EU is now

resolved (Waldie 983090983088983089983091) Canada has agreed to ldquoEU demands for patent pro-

tection for up to two years on brand-name drugsrdquo (Blanchfield 983090983088983089983091)

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983089983096 fraserinstituteorg

State of the border andregulatory cooperation

Te decline in Americans traveling to Canada corresponds with the US

Greenback losing value against the Canadian dollar (figures 983089983088 983089983089) However

when we consider the extent of the decline in total numbers it appears dispro-

portionate Te change in American travel suggests instead a bigger problem

following the 983097-983089983089 shock Te imposition of new border transit requirements

such as passports as well as longer wait times and more security screening

has likely dampened US travel across this international boundary Given the

modest economic recovery in the USA from the beginning of 983090983088983089983088 onward

one would expect disposable income including for travel to trend back up

Instead the numbers remain stagnant at around 983090983088 million less than half the

number of 983090983088983088983090

While an overall national average for border wait times is not avail-

able data on major border crossings in both Central Canada and British

Columbia indicate that no reductions in wait times have been achieved

between 983090983088983088983094 and 983090983088983089983089 (figure 983089983090) Te problem of inefficiency as presented

by the Canada-US border goes well beyond wait times It includes inefficient

activity away from the border such as extra warehousing and costs of com-

plying with various facilitated traveler and goods programs such as FAS for

trucks loads and drivers

Tere are consistent cost differences between domestic and cross-bor-

der truck-borne trade which point to significant border costs ldquoFor exports

to the US these costs added 983088983097 percent to the delivered price of goods in

983090983088983088983092 Tis figure fell to 983088983092 percent in 983090983088983088983097 hellip Higher fixed costs per shipment

accounted for most of the additional cost of transporting goods to the USrdquo

(Brown and Anderson 983090983088983089983090) When we consider that in the manufacturingsector parts cross the border several times in various stages of assembly we

realize how this cost accumulates and defeats the efficiency gains otherwise

generated by integrated supply chain manufacturing Border costs are typ-

ically passed on to the consumer as fixed costs per shipment

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The state of Canada-US relations in 983090983088983089983092 983089983097

fraserinstituteorg

An unprecedented border problem has arisen in the current USAdministrationrsquos lengthy (six years) review of the permitting of a pipeline

border crossing as proposed in the Keystone XL project As a result oil-by-

rail transport has recently increased while the pipeline mode of Canada-US

trade has seen a drop in growth in the 983090983088983089983089983089983090 period ( figures 983089983091 983089983092)

0

10

20

30

40

50

201220112010200920082007200620052004200320022001200019991998

Figure Travellers entering Canada ndash

Source Statistics Canada (2013e)

US residents Non-US residents

0

3

6

9

12

15

18

0

03

06

09

12

15

18

20122011201020092008200720062005200420032002

Trips Spending US$CA$ (Secondary axis)

Figure US overnight travel to Canada ndash

Source Statistics Canada (2011) Bank of Canada (2013b)

M i l l i o n s o f t r i p

s N o m i n a l C A $ b i l l i o n s

U S $ C A $ ex c h a n

g er a t e

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983090983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

5

10

15

20

201120102009200820072006

Northbound average delay Southbound average delay

Figure Peace Arch average border wait time ndash

Source Cascade Gateway Data (2013)

M i n u t e s

0

25

50

75

100

125

150

175

200

225

250

275

300

201220112010200920082007200620052004

2 0 0 4

U S $ b

i l l i o n s

Figure All surface modes of freight flow data based on value of goods

ndash

Source Bureau of Transportation Statistics (2013)

Truck Rail Pipeline

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983089

fraserinstituteorg

lsquoBeyond the Borderrsquo and Regulatory Cooperation

In 983090983088983089983089 Canada and the United States announced an ambitious agreement

to reduce border costs by means of deeper bilateral regulatory and secur-

ity cooperation Te accord seeks to streamline various border proceduresmdash

some already in existence and some newmdashto improve intelligence-sharing

between law enforcement agencies mutual recognition of passenger baggage

screening improved frameworks for trusted trade programs harmoniza-

tion of NEXUS protocols streamlined supply chains enhanced trade com-

petitiveness collaboration in border infrastructure investment and deeper

cooperation in national security investigations Te agreement is known as

Beyond the Border A Shared Vision for Perimeter Security and Economic

Competitiveness (February 983092 983090983088983089983089)

Te Beyond the Border Vision accord also set up a Regulatory

Cooperation Council In it Canadian and American officials seek to reduce

red tape and harmonize regulations in certain key sectors o date the

Council has announced various plans affecting agriculture and food trans-

portation health personal care products workplace chemicals environmentnano materials and small business loans We summarize the key points of

progress made since 983090983088983089983089 in table 983097

-35

-25

-15

-5

5

15

25

35

20122011201020092008200720062005

Truck Rail Pipeline

Figure Growth rate of all surface modes of freight flows () ndash

Source Bureau of Transportation Statistics (2013) calculations by authors

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983090983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983097 Key elements of Beyond the Border and Regulatory Cooperation

Beyond the Border Program

Integrated Cargo Security Strategy (ICSS)December 2011

Reduces administrative duplication between Canada and the US byaddressing security risks in advance within the shipment supply chainand at the border (Canada Border Services Agency 2013)

Prince Rupert Pilot October 2012 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry via rail is examined by Canadian officials onbehalf of the US (Government of Canada 2013c)

Montreal Pilot January 2013 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry to the US via truck is examined by Canadianofficials on behalf of the US (Government of Canada 2013c)

Pre-load Air Cargo Targeting (PACT) Joint pilot by CBSA and Transport Canada to screen cargo pre-flight onCanada-bound airplanes at foreign airports (Canada Border ServicesAgency 2013)

Tamper Evident Technology PilotOctober 2012

Pilot collaboration between CBSA and US CBP to ensure containersremain sealed upon arrival at the US border (Canada Border Services

Agency 2013)

Truck Cargo Pre-Inspection PilotMarch 2013

Pilot program between the CBSA and the US CBP for pre-inspection ofsouthbound traffic into US (Canada Border Services Agency 2013)

Free and Secure Trade (FAST) PilotSarnia Ontario

Pilot program for usage of FAST lanes without Partners in Protection andCustoms Self Assessment programs (Government of Canada 2013c)

Canada-US Shiprider June 2013 Removal of jurisdictional barriers to improve law enforcement personnelin Windsor-Detroit and Vancouver-Blaine waterways (Government ofCanada 2013c)

EntryExit Initiative Phase II June 2013 Exchange entryexit data between the CBSA and US DHS on individualsat Canada-US land border crossings (Government of Canada 2013c)

Regulatory Cooperation ProgramMemorandum of Understanding between Transport Canada and the RailwayAssociation of Canada September 2013

Framework for Canadian rail emissions between 2011 to 2015(Government of Canada 2013d)

Canada-United States Perimeter Approachto Plant Protection September 2013

Draft framework for increased cooperation and reduction inadministrative duplication between the Canadian Food InspectionAgency (CFIA) and United States Animal and Plant Health InspectionService (APHIS) on trade in plants and plant products (Government ofCanada 2013d)

Common Electronic Submission GatewayPilot (CESG) August 2013

FDA and Health Canada will allow pharmaceutical firms to electronicallysubmit drug applications (Government of Canada 2013d)

Initiative to Align Veterinary DrugApprovals December 2012

Joint reviews between US FDA and Health Canada on veterinary drugproducts (Government of Canada 2013d)

Stricter Air Pollutant Emissions Environment Canada aligns car emissions beginning in 2017 with theUS Environmental Protection Agencyrsquos ldquoTier 3rdquo (Government of Canada2013d)

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The state of Canada-US relations in 983090983088983089983092 983090983091

fraserinstituteorg

On September 983092 983090983088983089983091 $983092983094983094 million in investment was allocated to the

Border Action plan by the Government of Canada in order expand two marine

container examination facilities (Government of Canada 983090983088983089983091c) $983091983091 million

was invested by the Government of Canada in the Asia Pacific Gateway and

rade Corridor Initiative (Government of Canada 983090983088983089983091c) Te Plan includes

an additional 983090983097 harmonization initiatives that will enhance trade activity

between Canada and the US

Neither Beyond the Border nor the Regulatory Cooperation Council

offer further investment or cost estimates on the initiatives described in table

983097 Moens and Gabler (983090983088983089983090) pointed to the need for both the Canadian and

American governments to provide data on border costs so that a cost-benefit

analysis can ensue Nonetheless the small steps of progress towards inte-

grating and harmonizing US and Canadian border practices remains a very

important (long-term) part of reducing the profile of the border

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983090983092 fraserinstituteorg

Canadian and American public perceptions

Tree observations are noteworthy in recent assessments of public percep-

tions between Americans and Canadians First Americans consistently have

a very high favourability rating of Canadians typically in the 983097983088 plus range

(table 983089983088 figure 983089983093) Both as a friend and a strategic ally Americans hold

Canadians in the most favourable light possible (table 983089983089) Disagreements over

policy between the two countries whether in defence and foreign affairs or

over border and trade issues do not move this fundamental asset Canadians

enjoy in dealing with their neighbour

Second Canadians do not have high expectations of either the

American or Canadian government regarding progress in bilateral relations

As table 983089983090 shows Canadians hold Obama in high regard (983094983091 percent) but

only 983093983092 percent expect progress from him in trade relations Prime Minister

Harper is rated slightly ahead of President Obama in terms of working hard

towards improving Canada-US relations (table 983089983091)

Tird and most significant in light of Canadarsquos Catch-983090983090 situation both

Canadians and Americans are more supportive of closer cooperation and inte-

gration policies than is the case for political representatives in either the United

States or Canada In two recent studies we showed how US Senators and House

Representatives are quite critical of Canada with regard to NAFA issues and bor-

der security (Moens and Gabler 983090983088983089983089) Similarly we found that among the three

major political parties in Canadarsquos parliament only one consistently expressed

itself in favour of closer ties with the United States (Moens and Gabler 983090983088983089983089)

A recent survey of American and Canadian (and Mexican) attitudes

towards free trade and NAFA show surprisingly strong data for more trade

integration In response to the statement ldquoTere should be more free trade

between the US Canada and Mexicordquo 983096983088 percent of Canadians approved

as did 983095983092 percent of Americans Even on border security Canadians andAmericans are more pro-cooperation and integration than their governmental

policies suggest In the US 983092983089 percent support a common perimeter while

983090983088 percent are opposed In Canada 983092983091 percent support it and 983091983088 percent are

opposed (Graves Pastor and Basaacutentildeez 983090983088983089983091) Terefore in terms of public

mandate both governments would have a case to work towards broader bilat-

eral (or trilateral) cooperation to lower trade barriers

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The state of Canada-US relations in 983090983088983089983092 983090983093

fraserinstituteorg

Table 983089983088 Canadian favourability rating among Americans (February 983090983088983089983090)

Veryfavourable

Mostlyfavourable

Mostlyunfavourable

Veryfavourable Not sure Total

favourableTotal

unfavourable

53 38 3 2 3 91 5

Note n=1015

Source Gallup Poll (2012)

Table 983089983089 Ally or enemy for Americans (June 983090983088983089983091)

Country Ally Friendly Unfriendly Enemy Total Ally andFriendly

Great Britain 66 25 2 1 91

Canada 61 33 2 1 94

China 11 44 26 14 55

Note n=1529Source Gallup Poll (2013)

88

90

92

94

96

98

201220112010200920082007

Figure Canadian favourability among Americans () ndash

Source Gallup Poll (2012)

f a

v o u r a

b l e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983090 What effect will Obama have on Canada-US relations (November 983090983088983089983090)

Canadians Americans

Positive Negative None Positive Negative None

Relationship 62 5 34 48 12 40

Trade 54 10 35 48 12 39

Harmonizing 53 8 40 47 14 39

Note n=1066

Source Abacus Data (2012)

Table 983089983091 Has each leader worked hard to improve Canada-US relations

(July 983090983088983089983090)

Country Agree Disagree Not sure

Stephen Harper 58 32 10

Barack Obama 53 32 15

Note Sample of Canadians

Source HarrisDecima (2012)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983090983095

US policy uncertainty

Canadian economic prospects face their most important challenge in the

United States Te US economic recovery has been modest and real GDP

growth so far has remained below the post-World War II average of post-

recession periods (figure 983089983094) As we noted above the less-than-stellar US

recovery is made even more challenging for Canadian traders in that pro-

ductivity gains in Canada are lagging while the Canadian dollar remains high

On top of that several American-imposed regulatory obstacles to free trade

are depressing trade prospects in crude oil red meat and public works pro-

curement Tese impediments reduce Canadian competitive access to the

US market

A high level of public spending until the January 983090983088983089983091 sequester and

ongoing monetary stimulation have not produced notable US GDP growth

Te seven post-recession periods below show the current average to be well

below the historical average (Young 983090983088983089983091)

983089983097983092983096-983089983097983093983095 983091983096983088

983089983097983093983096-983089983097983094983095 983092983090983096

983089983097983094983096-983089983097983095983095 983091983089983096

983089983097983095983096-983089983097983096983095 983091983089983093

983089983097983096983096-983089983097983097983095 983091983088983093

983089983097983097983096-983090983088983088983095 983090983097983097

983090983088983088983096-983090983088983089983091 983088983095983091

While economic growth has been modest growth in the public debt

has not (figure 983089983095) Publicly held debt in the US is now at 983095983091 percent of GDP

the highest since 983089983097983092983094 (Congressional Budget Office 983090983088983089983091)

Te widening gap between federal government outlays and revenueshas only recently been capped by the Sequester (figure 983089983096) However the

budget Sequester is temporary and final resolution of public spending and

taxation levels remains unclear given repeated gridlock in presidential-con-

gressional policy making High debt levels combined with stalemate over

taxes and budget cuts have produced a case of policy instability or uncer-

tainty in the last five years (Baker Bloom and Davis 983090983088983089983091)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

US policy uncertainty is further aggravated by inaction on the large

lsquoentitlementrsquo programsmdashSocial Security Medicare and Medicaidmdashwhich are

the major drivers of the long-term gap in revenues and spending

-4

-2

0

2

4

6

8

201220062000199419881982197619701964

Figure US GDP growth rate ndash ( forecast)

Source The World Bank (2013b) OECD (2013)

-10

-8

-6

-4

-2

0

0

20

40

60

80

100

20122011201020092008200720062005200420032002

Government deficit as a percentage of GDP Government debt as a percentage of GDP

Figure US Government deficit and debt as a percentage of GDP ndash

Source Congressional Budget Office (2013)

D e fi c i t p e r c e n t a g e ( ) D

e b t p er c en t a g e ( )

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The state of Canada-US relations in 983090983088983089983092 983090983097

fraserinstituteorg

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

20122003199319831973

Revenue Outlays

Figure US Government revenue and outlays ndash ( US$ billions)

Source Congressional Budget Office (2013)

1 9 8 3 U S $ b i l l i o n s

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983091983088 fraserinstituteorg

Trade diversification

Given the weakness in near-term US opportunities Canadians are (again)

wondering how to pursue trade diversification away from the United States

Te objective is logical and if achieved will prove advantageous but various

trends in trade and investment show that diversification for Canada is a slow

and arduous journey (table 983089983092)

In terms of overall share exports to China in the last five years have

doubled but the numbersmdashfrom 983090983089983095 percent to 983092983090983094 percentmdashremain rela-

tively low In the same period the US-bound share declined by 983091 percent but

remains a towering 983095983092983093983092 percent Te pattern of small overall impact applies

to all the other top trading partners For example exports to the UK have

increased but exports to Japan and Mexico have essentially stalled When we

consider average export growth rates over the last five years (table 983089983093) we see

a very strong rate for China (983089983093983093 percent) and strong rates for the UK and

South Korea (983096983097 percent and 983094983097 percent) However a 983089983093 percent increase in a

983092 percent overall trade share produces little change Te point we are making

is that at this rate and pattern of trade lsquodiversificationrsquo it will actually take a

very long timemdashwhile relatively small upward trends in trade with the United

States could have a quick and very large impact in the opposite direction

On the import side we notice more trade diversification with the US

share at 983093983088 percent and the Chinese share at 983089983089 percent (table 983089983094) Te Chinese

growth rate on the import side is less than on the export side (table 983089983095) Te

most revealing number may be the high average over five years for Mexico

at 983097 percent Tis could be indicative of a growing supply chain with Mexico

While foreign direct investment (FDI) is not a direct indicator of future

trade trends in investment may harbinger change In terms of outbound

FDI we notice that only a small segment (less than 983089983088 percent) is targeted

for manufacturing (table 983089983096) It is investment in this category in which onewould expect growth in supply chains

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983089

fraserinstituteorg

Table 983089983092 Canadarsquos merchandise exports top ten destinations 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 3291 1 777 2361 1 751 2564 1 749

China 92 4 22 97 3 31 114 3 33

UK 114 2 27 105 2 33 141 2 41

Japan 97 3 23 73 4 23 79 4 23

Mexico 51 5 12 42 5 13 43 5 13

Netherlands 32 8 08 24 8 08 28 8 08

South Korea 34 7 08 31 7 10 32 7 09

Germany 39 6 09 33 6 10 34 6 10

France 28 9 07 23 9 07 20 10 06

Brazil 23 10 05 14 10 04 22 9 06

Total 4237 3145 3424

2011 2012Average

shareValue Rank Share Value Rank Share

US 2750 1 737 2783 1 745 752

China 140 3 38 159 2 43 33

UK 157 2 42 154 3 41 37

Japan 89 4 24 85 4 23 23

Mexico 46 5 12 44 5 12 12

Netherlands 40 7 11 37 6 10 09

South Korea 43 6 11 30 7 08 09

Germany 33 8 09 29 8 08 09

France 26 9 07 26 9 07 07

Brazil 24 10 06 21 10 06 06

Total 3732 3734

Source Industry Canada (2013b)

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983091983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983093 Canadian export growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 56 7 -281 9 106 = 5

China 101 6 65 1 187 3

UK 16 9 -73 2 358 2

Japan 202 3 -250 7 106 = 5

Mexico 179 4 -178 6 43 9

Netherlands -85 10 -255 8 183 4

South Korea 276 2 -80 3 52 8

Germany 160 5 -167 4 54 7

France 36 8 -174 5 -122 10

Brazil 706 1 -380 10 603 1

2011 2012Average

Rank Rank

US 104 8 27 2 02

China 270 4 152 1 155

UK 148 6 -02 4 90

Japan 161 5 -29 6 38

Mexico 94 9 -16 5 24

Netherlands 475 1 -55 7 53

South Korea 374 2 -272 10 70

Germany 05 10 -95 9 -09

France 311 3 23 3 15

Brazil 109 7 -92 8 189

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983091

fraserinstituteorg

Table 983089983094 Canadarsquos merchandise imports top ten sources 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 1992 1 524 1633 1 511 1745 1 504

China 374 2 98 347 2 109 382 2 110

Mexico 157 3 41 145 3 45 190 3 55

Japan 134 4 35 108 4 34 115 4 33

Germany 111 5 29 95 5 30 97 5 28

UK 110 6 29 82 6 26 92 6 27

South Korea 53 9 14 52 7 16 53 7 15

Algeria 67 7 18 33 10 10 31 10 09

Italy 45 10 12 39 9 12 40 9 12

France 53 8 14 49 8 15 47 8 13

Total 3804 3194 3465

2011 2012Average

shareValue Rank Share Value Rank Share

US 1846 1 496 1922 1 506 508

China 402 2 108 417 2 110 107

Mexico 205 3 55 210 3 55 50

Japan 109 4 29 123 4 33 33

Germany 107 5 29 118 5 31 29

UK 86 6 23 70 6 18 25

South Korea 55 7 15 52 7 14 15

Algeria 46 9 12 49 8 13 12

Italy 43 10 11 43 9 11 12

France 46 8 12 41 10 11 13

Total 3723 3796

Source Industry Canada (2013b)

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983091983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983095 Old and new trade prospectsmdashimport growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 29 8 -178 7 89 5

China 112 4 -70 2 123 3

Mexico 43 7 -77 4 337 1

Japan -11 10 -192 8 89 4

Germany 105 5 -149 6 44 7

UK 95 6 -252 9 141 2

South Korea 120 3 -14 1 36 8

Algeria 518 1 -511 10 -50 10

Italy 11 9 -132 5 48 6

France 191 2 -70 3 -35 9

2011 2012Average

Rank Rank

US 88 5 57 4 17

China 82 6 53 5 60

Mexico 111 3 39 6 91

Japan -29 9 151 1 01

Germany 132 2 117 2 50

UK -36 10 -173 10 -45

South Korea 76 7 -37 8 37

Algeria 533 1 91 3 116

Italy 95 4 23 7 09

France 22 8 -97 9 02

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983093

fraserinstituteorg

In terms of overall Canadian outbound FDI stocks in the US remain

very high despite the recent US recession while growth in stock in Asia is

modest (figure 983089983097) When we examine Canadian FDI in the so-called BRIC

states we notice that investment in both China and India is relatively small

Canadian mining investment in Brazil is much larger (figure 983090983088) In fact when

we examine amounts of FDI we find that Canada is not really a big BRIC

investor other than Brazil Chile Hong Kong and Peru are larger FDI recipi-

ents than China and India (figure 983090983089)

In terms of FDI flowing into Canada we notice the very large share

(983090983096983094983093 percent) in manufacturing which indicates both the predominant

share of US FDI and the extensive integrated supply chains in Canada-US

manufacturing (table 983089983097) Even more than for outbound FDI inflow stocks

show very large US preponderance (figure 983090983090) Such continued concentra-

tion of US FDI in Canada suggests that Canadian trade diversification is not

just a decision to be made by Canadian producers

Like trade growth Chinese FDI growth in Canada is positive but the

overall numbers are small and do not show rapid growth in the last 983091 years

(figure 983090983091)

Table 983089983096 Top industries for outward stocks of FDI 983090983088983089983090

Category Value Share

Mining oil and gas extraction 1099 188

Oil and gas subcategory 542 93

Manufacturing 569 97

Finance and insurance 2334 399

Management of companies and enterprises 757 129

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

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983091983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

1

2

3

4

5

6

7

8

9

10

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n s

Figure Canadian foreign direct investment (stock) BRIC ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Brazil PRC India Russia

0

20

4060

80

100

120

140

160

180

200

220

240

260

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) various regions

ndash

Notes Excluding Mexico Canadian FDI to Mexico in 2012 was $557 billion

Foreign Direct Investment measures the purchase of various forms of capital stock abroad

However tax havens (Barbados Bermuda etc) are frequently found to be some of the highest

recipients of FDI In reality tax havens do not reflect economic growth as FDI figures invested

into tax havens are often reinvested back to the source country in a concept known as

round-tripping (Financial Post 2013) We have accounted for tax havens by removing them from

tables and figures in this section The numbers corresponding to Figure 19 would be Barbados

($593 billion) Bermuda ($118 billion) British Virgin Islands ($21 billion) Cayman Islands ($302

billion)

Source Foreign Affairs Trade and Development Canada (2013c)

US Europe Asia amp Oceania Central amp South America Africa

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The state of Canada-US relations in 983090983088983089983092 983091983095

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Table 983089983097 Top industries for inward stocks of FDI 983090983088983089983090

Category Value Share

Oil and gas extraction 766 147

Manufacturing 1492 287

Petroleum and coal products manufacturing 377 72

Wholesale trade 395 76

Finance and insurance 699 134

Management of companies and enterprises 999 192

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

0

2

4

6

8

10

12

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) Chile Hong Kong

Peru amp Korea ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Chile Hong Kong Peru Korea

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0

40

80

120

160

200

240

280

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Foreign direct investment (stock) in Canada from top three

countries ndash

Source Foreign Affairs Trade and Development Canada (2013c)

US Netherlands UK

0

2

4

6

8

10

12

201220112010200920082007

2 0 0 2 C A $ b

i l l i o n s

Figure Foreign direct investment (stock) in Canada from China

ndash

Source Foreign Affairs Trade and Development Canada (2013c)

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fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

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Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

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References

Abacus Data (983090983088983089983090 November 983090983088) Beyond the Canadian-American Border

lthttpabacusdatacawp-contentuploads983090983088983089983090983089983089Can-AM_Report_CABC_

Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5662

The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

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983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5862

The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5962

983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6062

The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6162

983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6262

The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 8: Canadas Catch 22 State of Canada Us Relations in 2014

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983089

Bilateral trade relations

Merchandise trade

Tere is a significant decline in both exports and imports from 983090983088983088983096 to 983090983088983088983097

as a result of the US recession (table 983089) Te sharpest decline is in Canadian

merchandise exports to the US which decreased by 983090983095 percent in 983090983088983088983097 and

still have not recovered to the 983090983088983088983096 level in 983090983088983089983090 Canadian merchandise

imports from the US on the other hand did not fall as sharplymdash983089983094 percent in

983090983088983088983097mdashand in 983090983088983089983090 are only slightly below the 983090983088983088983096 number Tus on balance

Canadian exports to the US have suffered significantly more from the reces-

sion than American exports to Canada (figures 983089 983090) Given this re-balancing

Canadarsquos merchandise trade balance surplus with the USA has been virtu-

ally cut in half (983092983094 percent) from $983095983095 billion in 983090983088983088983096 to $983091983093 billion in 983090983088983089983090983089

Te traditionally large gap between merchandise exports and imports

between Canada and its largest trading partner have shrunk substantially As

a result Canadarsquos trade balance with the world has declined from $983092983089 billion

in 983090983088983088983096 to a deficit of $983089983088 billion in 983090983088983089983090 Te monthly import and export

numbers in 983090983088983089983091 show a continuation of this trend

A noticeable trend in Canada in the last 983095 years reveals that less GDP is

derived from trade (and thus more from Canadarsquos domestic market) while in

the United States the trade versus domestic market share of GDP is on a ris-

ing trend (table 983090) When we examine the US share of Canadarsquos total exports

and imports over a longer period (983089983097983097983091ndash983090983088983089983090) we notice the overall down-

ward trend (figures 983091 983092) Te main causal factors are the higher value of the

Canadian dollar the post-983090983088983088983096 slump in US demand and a certain amount

of diversification in Canadarsquos trade as well as stronger relative growth inCanadarsquos domestic market

1048625 All figures are in real Canadian dollars unless otherwise noted

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

A breakdown of the top export and import sectors in Canada-US trade

shows that the traditionally strong machinery and automotive sectors are

holding well in terms of US exports to Canada but the same sector is weaker

on the Canadian side Te gains on our side are in minerals and energy prod-

ucts (tables 983091 983092) Te slow decline in Canadian exports of manufactured prod-

ucts suggests a weakening on Canadarsquos side in the integrated supply-chain in

this sector Lower productivity and border costs may well play a role

Table 983089 Canadian merchandise trade 983090983088983088983095ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2007 2008 2009 2010 2011 2012

Total exports 41380 42705 32099 34675 38099 38006

Exports to US 31795 32331 23610 25332 27517 27809

Total imports 37291 38877 32691 35508 38036 38993

Imports from US 24215 24666 20641 22312 23475 24360

Total balance 4089 3827 -592 -833 063 -987

Balance with US 7579 7666 2969 3020 4042 3450

Note On a balance of payments basis

Source Statistics Canada (2013d)

15

20

25

30

35

2 0 1 3 - 0 5

2 0 1 3 - 0 1

2 0 1 2 - 0 9

2 0 1 2 - 0 5

2 0 1 2 - 0 1

2 0 1 1 - 0 9

2 0 1 1 - 0 5

2 0 1 1 - 0 1

2 0 1 0 - 0 9

2 0 1 0 - 0 5

2 0 1 0 - 0 1

2 0 0 9 - 0 9

2 0 0 9 - 0 5

2 0 0 9 - 0 1

2 0 0 8 - 0 9

2 0 0 8 - 0 5

2 0 0 8 - 0 1

2 0 0 7 - 0 9

2 0 0 7 - 0 5

2 0 0 7 - 0 1

Import Export

2 0 0 2 C A $ b i l l i o n s

Figure Canadarsquos merchandise trade (monthly) ndash

Source Statistics Canada (2013c) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091

fraserinstituteorg

Table 983090 Merchandise trade as a of GDP 983090983088983088983093ndash983090983088983089983090 (current US$)

2005 2006 2007 2008 2009 2010 2011 2012

Canada 602 584 569 583 483 501 515 510

Growth 02 -30 -26 25 -172 37 28 -10

US 210 221 227 243 191 225 250 248

Growth 61 52 27 70 -214 178 111 -08

Source The World Bank (2013a)

0

1

2

3

4

5

6

7

8

9

2 0 1 3

- 0 5

2 0 1 3

- 0 1

2 0 1 2

- 0 9

2 0 1 2

- 0 5

2 0 1 2

- 0 1

2 0 1 1

- 0 9

2 0 1 1

- 0 5

2 0 1 1

- 0 1

2 0 1 0

- 0 9

2 0 1 0

- 0 5

2 0 1 0

- 0 1

2 0 0 9

- 0 9

2 0 0 9

- 0 5

2 0 0 9

- 0 1

2 0 0 8

- 0 9

2 0 0 8

- 0 5

2 0 0 8

- 0 1

2 0 0 7

- 0 9

2 0 0 7

- 0 5

2 0 0 7

- 0 1

2 0 0 2 C A $ b i l l i o n s

Figure Canada-US net merchandise trade (monthly) ndash

Source Statistics Canada (2013c) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

-5

-4

-3

-2

-1

0

1

2

3

2012201120102009200820072006200520042003200220012000

G r o

w t h ( )

Figure GrowthUS share of Canadarsquos annual merchandise trade ()

ndash

Source Industry Canada (2013b) calculations by authors

Import Export

45

50

55

60

65

70

75

80

85

90

2011200920072005200320011999199719951993

Import Export

Figure US share of Canadarsquos annual merchandise trade () ndash

Source Industry Canada (2013b)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093

fraserinstituteorg

Table 983091 Top sectors for Canadian merchandise exports to the US 983090983088983089983090

Industry Exports

2002 CA$ bi llions Percentage

Mineral products 886 318

Products of chemical or allied industries 163 59

Plastics and related articles 118 43

Base metals and articles of base metals 200 72

Machinery mechanical appliances electrical equipment and related articles 276 99

Vehicles aircraft vessels and associated transport equipment 530 191

Note On a customs basis

Source Statistics Canada (2013a)

Table 983092 Top industries for Canadian merchandise imports from the US 983090983088983089983090

Industry Imports

2002 CA$ bi llions Percentage

Mineral products 163 85

Products of chemical or allied industries 171 89

Plastics and related articles 127 66

Base metals and articles of base metals 158 82

Machinery mechanical appliances electrical equipment and related articles 413 215

Vehicles aircraft vessels and associated transport equipment 413 215

Note On a customs basis

Source Statistics Canada (2013a)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Trade in services

As a share of overall bilateral trade trade in services is growing gradually otal

bilateral services trade in 983090983088983089983088 amounted to 983089983096 percent of bilateral merchan-

dise trade It was 983089983093 percent in 983090983088983088983095983090 Te United States is by far the largest

trading partner in Canadarsquos international trade in services rade with the

US is nearly ten times the amount with the next largest partner the United

Kingdom But unlike merchandise trade the value of non-US services trade

is nearly half (983092983092 percent in 983090983088983089983088) of that with the USA (table 983093) In other

words there is more diversification from the US market in services than in

merchandise983091

Te trend reveals rising competitiveness on the US side (and non-USA)

as Canadian imports are growing considerably while Canadian exports are

stagnant resulting in a growing services trade deficit (figure 983093)

Bilateral trade in services was not impacted by the US recession as

merchandise trade was otal volume of trade is slightly up in the three years

after 983090983088983088983095 (figure 983094) Most of this gain is from growth in Canadian imports

from the US (and from non-US) while Canadian exports to the USA are

slightly down

Given that there is no growth in Americans traveling to Canada during

this time period (as we will show later) the relative strength of US exports vis-

agrave-vis Canadian exports appears to lie in the commercial sector (tables 983094 983095)

In conclusion in both merchandise and services trade the post 983090983088983088983095

period shows that Canada is relatively losing in trade competitiveness in rela-

tion to the United States Te relative loss of trade competitiveness in our

relationship may be a surprise to many Canadians who believe Canada has

simply been doing better than the US since 983090983088983088983096 Te lsquodoing betterrsquo part may

apply to domestic economic activity but not to external trade

1048626 Data on trade in services is not as recent as merchandise trade

1048627 op export destinations in 983090983088983089983088 after the USA are the UK France and Germany op

importers to Canada in 983090983088983089983088 after the USA include UK Hong Kong (China) France

Germany and Mexico Te case with importers to Canada is similar to that with export-

ing countries Imports from the UK make up roughly 983089983088 percent that of imports from the

US Imports from Hong Kong are 983093983089 percent that from the UK with France at 983092983090 percent

and both Germany and Mexico rest at roughly 983091983096 percent each

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983095

fraserinstituteorg

Table 983093 Services trade between Canada and the US 983090983088983088983093ndash983090983088983089983088 (983090983088983088983090 CA$ billions)

2005 2006 2007 2008 2009 2010

Exports to USA 3988 3815 3834 3966 3718 3700

Imports from USA 4358 4395 4544 4833 4783 4960

Trade balance with USA -370 -580 -710 -866 -1065 -1260

Trade balance with USA -443 -707 -847 -985 -1240 -1455

Exports to non-USA 2832 3080 2985 3052 3142 3102

Imports from non-USA 3022 3187 3380 3518 3496 3722

Trade balance with non-USA -189 -108 -395 -466 -354 -620

Trade balance with non-USA -323 -172 -621 -710 -540 -909

Total services exports 6820 6894 6819 7018 6860 6802

Total services imports 7379 7582 7924 8350 8279 8682

Total trade balance -559 -688 -1105 -1333 -1419 -1880

Total trade balance -394 -475 -750 -867 -937 -1214

Bilateral (X+I) USA 8346 8210 8378 8799 8589 8660

Bilateral (X+I) non-USA 5854 6267 6365 6569 6551 6824

Bilateral (X+I) total 14200 14477 14742 15368 15140 15484

Source Foreign Affairs Trade and Development Canada (2013a)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

80

81

82

83

84

85

86

87

88

89

90

201020092008200720062005

2 0

0 2 C A $ b i l l i o n s

Figure Canada-US net services trade ndash

Source Foreign Affairs Trade and Development Canada (2013a)

-20

-16

-12

-8

-4

0

201020092008200720062005

Trade balance with USA Total trade balance

Figure Canadarsquos trade deficit with US and the world ndash

Source Foreign Affairs Trade and Development Canada (2013a)

2 0 0 2 C A $ b i l

l i o n s

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983097

fraserinstituteorg

Table 983094 Top categories for service trade exports Canada-World 983090983088983089983090

Category Subcategory Exports

2002 CA$ bi llions Percentage

Government services 13 19

Travel services 143 207

Personal travel 119 172

Transportation services 111 161

Air transport 52 76

Commercial services 424 614

Financial services 57 82

Computer and information services 64 93

Intellectual property use 31 44

Management services 90 130

Research and development 33 47

Architectural engineering 39 57

Source Foreign Affairs Trade and Development Canada (2013a)

Table 983095 Top categories for service trade imports Canada-World 983090983088983089983090

Category Subcategory Imports

2002 CA$ billions Percentage

Government services 11 12

Travel services 288 323

Personal travel 253 284

Transportation services 195 219

Water transport 82 92

Air transport 84 95

Commercial services 396 446

Insurance services 44 50

Financial services 44 50

Intellectual property use 89 100

Management services 75 84

Source Foreign Affairs Trade and Development Canada (2013a)

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983089983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

075

080

085

090

095

100

105

2 0 1 3

- 0 7

2 0 1 3

- 0 1

2 0 1 2

- 0 7

2 0 1 2

- 0 1

2 0 1 1

- 0 7

2 0 1 1

- 0 1

2 0 1 0

- 0 7

2 0 1 0

- 0 1

2 0 0 9

- 0 7

2 0 0 9

- 0 1

2 0 0 8

- 0 7

2 0 0 8

- 0 1

2 0 0 7

- 0 7

2 0 0 7

- 0 1

Figure CanadaUS dollar exchange rate ndash

Source Bank of Canada (2013b)

C A U S e x c h a n g e r a t e

Dollar value and productivity trends

Te first factor to consider regarding Canadarsquos trade competitiveness vis-agrave-vis

the United States is the value of the Canadian dollar Te substantial appre-

ciation of the Canadian dollar against the US dollar that began in the early

983090983088983088983088s has stabilized at a much higher average value of the loonie ( figure 983095)

As is well documented such exchange rate appreciation tends to have a strong

effect on current account balances as exports decline (Kappler et al 983090983088983089983089)

A growing account deficit will likely push the value of the Canadian dollar

downward in the longer term and thus offer some remedy

ProductivityOf more concern to Canadians should be the data indicating that Canadian

labour productivity rates are lagging those in the United States (figures 983096 983097)

One would expect that Canadarsquos higher dollar has provided industry in recent

years with an opportunity to improve productivity as imported machinery

and technology would be available at a lower price However Canadarsquos pro-

ductivity rate of growth is modest and in 983090983088983089983090 dips into negative territory

again

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983089983089

fraserinstituteorg

-1

0

1

2

3

20122011201020092008

Canada US

Figure Canada and US rates of output productivity growth ()

ndash

Source Statistics Canada (2013g)

R a t e o f p r o d u c t i v i t y g r o

w t h ( )

-10

-5

0

5

20122011201020092008

Labour productivity (Canada) Real GDP (Canada) Hours worked (Canada)

Labour productivity (US) Real GDP (US) Hours worked (US)

Figure Real US-Canadian output and hours worked () ndash

Source Statistics Canada (2013g)

A n n u a l c

h a n g e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983089983090 fraserinstituteorg

Trade and regulatory barriersdisputes

Table 983096 provides a synopsis of the major trade disputesbarriers that have

played a role in bilateral relations in the last five years and that are pertinent

for the 983090983088983089983092 period (pages 983089983094-983089983095) Te two large disputesmdashKeystone XL and

Mandatory Country-of-Origin Labeling (MCOOL) on red meatmdashare more

ominous than they may seem First both in crude oil products and in cattle

and hogs the United States is unilaterally disrupting or dismantling a well-

established integrated sector Canada has started attempts to diversify its oil

transportation structure including more rail and new pipeline routes But

as all proposed alternative pipelines have shown the alternatives are contro-

versial and at best years away from making a difference Meanwhile there is

considerable risk in putting too much crude oil on rail as its accident rates

are higher than pipe

Canadian threats to counter US MCOOL action with tariffs on food

products are not going to have much impact in the near future Moreover

an escalating tariff war on food products cannot be won by Canada and will

ultimately harm consumers on both sides of the border US defiance of two

WO rulings also means more uncertainty for Canadian traders

Keystone XL pipeline

Proposed in 983090983088983088983096 the Keystone XL (KXL) extension is part of a pipeline sys-

tem connecting Alberta oil sands and US mid-West and Gulf region refineries

KXL is a 983089983096983097983095 km crude oil pipeline with a capacity of 983092983094983093983088983088983088 barrels per

day (Hussain 983090983088983089983091) It is a substantial private infrastructure proposal that

will create employment and guarantee a secure energy source for the United

States (Millington and Murillo 983090983088983089983091) It is by no means a new feature in

Canada-US energy relations as a dense network of oil and electricity carri-ers cross the border at multiple points

What is unprecedented is that the permit process is now in its sixth

year and the final resolution remains uncertain (by US law a cross-border line

requires Department of State approval) If not resolved in 983090983088983089983092 the question

may well be handed over to the next president after 983090983088983089983094 Te policy uncertainty

associated with KXL approval has by far the largest impact on Canada-US trade

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The state of Canada-US relations in 983090983088983089983092 983089983091

fraserinstituteorg

relations Te dragged-out procedure has chilled relations Te southern leg of

KXL has been completed and the original route objection by Nebraska has been

resolved What remains ostensibly the problem is that the US administration

has identified this heavy oil as a component of its policy objective of curbing

the emission of greenhouses gasses to reduce global warming

Te impact of this pipeline delay in the 983090983095 million barrels per day (bpd)

export of Canadian oil products to the USA reverberates at various levels

Across Canada investment in mining oil and gas extraction for 983090983088983089983091 is pre-

dicted to decrease by 983090983095 percentmdashthe largest decline since the 983090983088983088983096 recession

(Statistics Canada 983090983088983089983091f) In Alberta investment is predicted to increase by

only 983088983089 percent (Statistics Canada 983090983088983089983091f) Capital investment in oil and gas

extraction has not recovered to pre-983090983088983088983096 levels (Industry Canada 983090983088983089983091a)

While the industry has become increasingly dependent on rail trans-

port to move product it is a costly alternative It can cost up to three times

as much as pipeline transport (Millington and Murillo 983090983088983089983091) and its limita-

tions are self-evident because rail movement of oil is constrained by the lim-

ited availability of rail cars In 983090983088983089983090 983089983091983088983088983088983088 bpd of heavy crude was being

transported by rail Tis is expected to rise to 983092983090983093983088983088983088 bpd by the end of

983090983088983089983092 falling short of the 983092983094983093983088983088983088 bpd which could have been moved through

KXL (Hussain 983090983088983089983091) Te forced increase in rail transport has resulted in

unintended costs for the industry a total of US$983089 billion must be invested for

new rail terminals and another US$983092ndash983093 billion for new rail cars (Lewis 983090983088983089983091)

Rail transport is both more costly and more dangerous A recent study

concluded that ldquopipeline transportation is safer than transportation by road

rail or barge as measured by incidents injuries and fatalitiesrdquo (Green amp

Furchtgott-Roth 983090983088983089983091) It is not inconceivable that another major oil acci-

dent either in Canada or the USAmdashsuch as took place in Quebec in July 983090983088983089983091

killing 983092983095 peoplemdashwould result in a moratorium on oil transport by rail with

grave consequences for Canadian producers

983090983088983088983090 Mandatory Country-of-Origin Labeling

Mandatory Country-of-Origin Labeling (MCOOL) is a provision mandated

by Congressional law and first implemented in 983090983088983088983096 Te measure imposes

strict segregation rules on American Canadian and Mexican cattle and hogs

and the subsequent slaughtering and processing of these animals to producebeef and pork products for retail sale Te stated purpose is to create labels

that indicate the origin in part or in whole of the product In effect it is a

veiled trade barrier because it gives US animals and products a competitive

advantage due to higher labeling inventory and processing costs for equiva-

lent Canadian products

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983089983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983096 Synopsis of trade disputes in Canadian-American relations in 983090983088983089983091

Dispute Impact and cost Prospect for resolution

Keystone XL Pipeline Very serious Poor

2008 proposal for a 1897

km 465000 bpd crude oilpipeline spanning fromAlberta down to Nebraska

Downward pressure on investment

Lost wages January 2012postponement is costing US $47million a day in lost wages (ConsumerEnergy Alliance 2013)

Continuation of crude oil pricediscounts due to lack of infrastructure

Costly alternative rail has emerged as atransportation alternative but can costup to three times as much as pipelinetravel (Millington and Murillo 2013)

Permit postponed twice

Resolution is not transparent

Rising risk of decision deferral past 2016

Mandatory Country-of-OriginLabelling (MCOOL)

Serious Poor

2008 CongressionalLaw mandating rulesfor segregated livestockprocessing and packagingand a labeling structure inorder to have food labelsindicate origin of product

Annual cost to Canadian beef and porksector of $1 billion

Deconstruction of a highly integratedtrilateral supply chain industry

MCOOL adds no animal health or foodsafety benefits

US has defied both WTO complaint andthe core part of the WTO Appeal ruling

2013 US reaction has been to strengthenthe discriminatory provision banning co-mingling of meats altogether

Canada plans to retaliate with tariffs butthis is a costly gambit with low chance ofsuccess

Softwood Lumber Agreement Moderate Good

In 2011 American softwoodcompanies took theirCanadian counterparts to theLondon Court of InternationalArbitration accusing themof circumventing the SLA(Foreign Affairs Trade andDevelopment Canada 2012a)

If in violation Canadian industry wouldface $380 million in penalties (TheCanadian Press 2012)

The London Court of InternationalArbitration in 2012 ruled in favor ofCanada (Foreign Affairs Trade andDevelopment Canada 2012a)

SLA was to expire in 2013 but Canadaand the USA extended it until 2015 (CBCNews 2012)

Long-term free trade in lumber needs toreplace SLA

Buy American Provision Serious Partial resolution but high risk ofrecurring Buy American legislation

2009 American Recovery andReinvestment Act

Exclusion of Canadian products andproduction sharing in US public worksprocurement

Canada-US Procurement Agreement in2010 which allowed for the purchaseof Canadian goods on seven US

infrastructure projects valued at morethan $7777000

Canada needs to seek a comprehensiveagreement in order to escape futureAmerican protectionism with allprovinces on board and compliant withthe WTO provision

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The state of Canada-US relations in 983090983088983089983092 983089983093

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Dispute Impact and cost Prospect for resolution

Canadian Wheat Board Long-term benefit Completed

Canadarsquos mandatory wheat

marketing board monopsonyended in 2011

Frequent US action against CWB in the

past will now end as wheat marketingin Canada turns fully market based

Intellectual Property Rights Moderate potential cost Partially resolved

Canada has been on theSpecial 301 Priority Watch Listby the United States TradeRepresentative since 1995

Ongoing threat of US Trade Action andlegal action

Canadian domestic complianceincluding

Strengthening data protection

Participation in Anti-counterfeiting TradeAgreement (ACTA in 2013)

Enacted the Combating CounterfeitProducts Act (2013)

Started the process of strengthening

the Copyright Act and implementingWorld Intellectual Property OrganizationInternet Treaties

In recognition of which Canada has beenremoved from the Special 301 PriorityWatch List

Prescription drugs Serious potential for trade action Indirect progress

The US complaint againstCanada

Imposing price ceilings thatshifts the cost burden of RampDto US firms

Weak protection ofintellectual property rights rethird party sales

Slow prescription drugapproval process causingreduced market access

US firms experience lost revenues andtrade action is a risk

In 2013 CETA agreement with theEuropean Union Canada agrees to givefull patent protection to new drugs fortwo years

Two-year rule may be transferable tofuture Canada-US resolution

Table 983096 continued

Canada and the United States have had a deeply integrated market in

this sector since the early 983089983097983097983088s Animal health and food safety standards have

been largely harmonized As a result highly efficient supply-chain production

methods have made this industry quite efficient However the imposition of

MCOOL has changed all that (Moens amp Leon 983090983088983089983090) Te cost differential haswidened and Canadian exports have dropped dramatically Since 983090983088983088983096 the

cattle sector has lost $983094983092983088 million per year and the hog sector has lost $983093983088983088

million a year (Te Canadian Press 983090983088983089983091a)

In 983090983088983089983090 the World rade Organization (WO) ruled in Canadarsquos favor by

concluding that MCOOL is discriminatory Te WO gave the US until May 983090983091

983090983088983089983091 to act but on that same day the USDA imposed regulatory changes that

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983089983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

actually strengthened the provisions of MCOOL In retaliation the Canadian

government released a list of US exports to Canada that would be subjected

to tariffs and it is preparing to seek a compliance panel at the WO Until this

situation is resolved the Canadian government predicts a continuing annual

loss of $983089 billion for the Canadian red meat sector (Te Canadian Press 983090983088983089983091a)

Softwood lumber

In 983090983088983089983089 several American softwood companies took their Canadian counter-

parts to the Court of International Arbitration in London accusing them of cir-

cumventing the Softwood Lumber Agreement of 983090983088983088983094 (Foreign Affairs rade

and Development Canada 983090983088983089983090a) Te dispute centered on the accelerating pace

of lumber harvests resulting from the pine beetle infestation Te stakes were

high $983091983096983088 million in penalties should Canada lose (Te Canadian Press 983090983088983089983090)

In 983090983088983089983090 the Court of International Arbitration ruled in Canadarsquos favor

(Foreign Affairs rade and Development Canada 983090983088983089983090a) In addition while

the Softwood Lumber Agreement was set to expire in 983090983088983089983091 the Canadian

and American governments successfully negotiated an extension of the

Agreement until 983090983088983089983093 (CBC News 983090983088983089983090) Te fact remains that as long as a

large part of Canadarsquos softwood lumber is managed in terms of quotas and

the stumpage fee system US trade action is very likely

lsquoBuy Americanrsquo provision

Te 983090983088983088983097 American Recovery and Reinvestment Act (ARRA which expired

on September 983091983088 983090983088983089983089) and the more recent 983090983088983089983089 American Jobs Act stipu-

lated that steel iron and other goods used in the repair and construction of

infrastructure projects in the US (highways bridges mass transit and fed-

eral buildings) must be manufactured in the United States (Matthiesen 983090983088983089983089)

In response to ARRA Canada and the US signed the Canada-US

Procurement Agreement in 983090983088983089983088 which allowed for the purchase of Canadian

goods on seven US infrastructure projects valued at more than $983095983095983095983095983088983088983088

or within the 983091983095 states subject to the WO GPA (Government of Canada

983090983088983089983091a) Te 983090983088983089983089 American Jobs Act did not pass in Senate and is thus moot

While the ARRA dispute was partially resolved lsquoBuy Americanrsquo anda counter position of lsquoBuy Canadianrsquo can flare up on either side of the bor-

der Canadian industry is most vulnerable in this uncertainty Te Canadian

government ought to seek a comprehensive Buy American exemption to

escape future American protectionism In so doing all provincial govern-

ments need to be on board in order to make the WO and NAFA rules

function optimally

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The state of Canada-US relations in 983090983088983089983092 983089983095

fraserinstituteorg

Canadian Wheat Board (CWB)

In 983090983088983089983089 the Canadian government removed the monopsony held by the

Canadian Wheat Board Tis unilateral action offers a successful reduction

in bilateral trade distortion oday the CWB continues to operate as a mar-

keting group

Intellectual Property Rights (IPR)

From 983089983097983097983093 through 983090983088983089983091 Canada was on the Special 983091983088983089 Priority Watch

List by the United States rade Representative Te US complaint was that

protection and enforcement of IPR in Canada were weak Te Special 983091983088983089

Priority Watch List is designed to identify US trading partners that are the

worst offenders in IPR protection (Embassy of the United States Ottawa

Canada 983090983088983089983091)

Although the issue is not completely resolved Canada has made sig-

nificant progress in recent years Te federal government has strengthened

data protection regulations criminalized the use of camcorders in theaters

and participates in the Anti-Counterfeiting rade Agreement (ACA) nego-

tiations (983090983088983089983091) Most recently Canada enacted the Combatting Counterfeit

Products Act (Embassy of the United States Ottawa Canada 983090983088983089983091) Te

Canadian Government is in the process of strengthening the Copyright Act

and implementing World Intellectual Property Organization Internet reaties

(Embassy of the United States Ottawa Canada 983090983088983089983091)

As a result of these steps Canada was removed from the Special 983091983088983089

Priority Watch List in 983090983088983089983091

Prescription drugs

Prescription drug prices in Canada are relatively low due to a price ceil-

ing mandated by Canadarsquos healthcare system In addition Health Canada

approval times for prescription drugs significantly lag behind their counter-

parts in the United States and the European Union (Barua and Esmail 983090983088983089983091)

US lawmakers have repeatedly expressed their concerns over cheap prescrip-

tion drugs re-entering the US from Canada (Moens and Gabler 983090983088983089983089) TeEU also asked Canada to strengthen IPR protections for prescription drugs

(Lexchin and Gagnon 983090983088983089983091) Since the signing of the CEA agreement in

principle on October 983089983096 983090983088983089983091 the issue between Canada and the EU is now

resolved (Waldie 983090983088983089983091) Canada has agreed to ldquoEU demands for patent pro-

tection for up to two years on brand-name drugsrdquo (Blanchfield 983090983088983089983091)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983089983096 fraserinstituteorg

State of the border andregulatory cooperation

Te decline in Americans traveling to Canada corresponds with the US

Greenback losing value against the Canadian dollar (figures 983089983088 983089983089) However

when we consider the extent of the decline in total numbers it appears dispro-

portionate Te change in American travel suggests instead a bigger problem

following the 983097-983089983089 shock Te imposition of new border transit requirements

such as passports as well as longer wait times and more security screening

has likely dampened US travel across this international boundary Given the

modest economic recovery in the USA from the beginning of 983090983088983089983088 onward

one would expect disposable income including for travel to trend back up

Instead the numbers remain stagnant at around 983090983088 million less than half the

number of 983090983088983088983090

While an overall national average for border wait times is not avail-

able data on major border crossings in both Central Canada and British

Columbia indicate that no reductions in wait times have been achieved

between 983090983088983088983094 and 983090983088983089983089 (figure 983089983090) Te problem of inefficiency as presented

by the Canada-US border goes well beyond wait times It includes inefficient

activity away from the border such as extra warehousing and costs of com-

plying with various facilitated traveler and goods programs such as FAS for

trucks loads and drivers

Tere are consistent cost differences between domestic and cross-bor-

der truck-borne trade which point to significant border costs ldquoFor exports

to the US these costs added 983088983097 percent to the delivered price of goods in

983090983088983088983092 Tis figure fell to 983088983092 percent in 983090983088983088983097 hellip Higher fixed costs per shipment

accounted for most of the additional cost of transporting goods to the USrdquo

(Brown and Anderson 983090983088983089983090) When we consider that in the manufacturingsector parts cross the border several times in various stages of assembly we

realize how this cost accumulates and defeats the efficiency gains otherwise

generated by integrated supply chain manufacturing Border costs are typ-

ically passed on to the consumer as fixed costs per shipment

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The state of Canada-US relations in 983090983088983089983092 983089983097

fraserinstituteorg

An unprecedented border problem has arisen in the current USAdministrationrsquos lengthy (six years) review of the permitting of a pipeline

border crossing as proposed in the Keystone XL project As a result oil-by-

rail transport has recently increased while the pipeline mode of Canada-US

trade has seen a drop in growth in the 983090983088983089983089983089983090 period ( figures 983089983091 983089983092)

0

10

20

30

40

50

201220112010200920082007200620052004200320022001200019991998

Figure Travellers entering Canada ndash

Source Statistics Canada (2013e)

US residents Non-US residents

0

3

6

9

12

15

18

0

03

06

09

12

15

18

20122011201020092008200720062005200420032002

Trips Spending US$CA$ (Secondary axis)

Figure US overnight travel to Canada ndash

Source Statistics Canada (2011) Bank of Canada (2013b)

M i l l i o n s o f t r i p

s N o m i n a l C A $ b i l l i o n s

U S $ C A $ ex c h a n

g er a t e

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983090983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

5

10

15

20

201120102009200820072006

Northbound average delay Southbound average delay

Figure Peace Arch average border wait time ndash

Source Cascade Gateway Data (2013)

M i n u t e s

0

25

50

75

100

125

150

175

200

225

250

275

300

201220112010200920082007200620052004

2 0 0 4

U S $ b

i l l i o n s

Figure All surface modes of freight flow data based on value of goods

ndash

Source Bureau of Transportation Statistics (2013)

Truck Rail Pipeline

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983089

fraserinstituteorg

lsquoBeyond the Borderrsquo and Regulatory Cooperation

In 983090983088983089983089 Canada and the United States announced an ambitious agreement

to reduce border costs by means of deeper bilateral regulatory and secur-

ity cooperation Te accord seeks to streamline various border proceduresmdash

some already in existence and some newmdashto improve intelligence-sharing

between law enforcement agencies mutual recognition of passenger baggage

screening improved frameworks for trusted trade programs harmoniza-

tion of NEXUS protocols streamlined supply chains enhanced trade com-

petitiveness collaboration in border infrastructure investment and deeper

cooperation in national security investigations Te agreement is known as

Beyond the Border A Shared Vision for Perimeter Security and Economic

Competitiveness (February 983092 983090983088983089983089)

Te Beyond the Border Vision accord also set up a Regulatory

Cooperation Council In it Canadian and American officials seek to reduce

red tape and harmonize regulations in certain key sectors o date the

Council has announced various plans affecting agriculture and food trans-

portation health personal care products workplace chemicals environmentnano materials and small business loans We summarize the key points of

progress made since 983090983088983089983089 in table 983097

-35

-25

-15

-5

5

15

25

35

20122011201020092008200720062005

Truck Rail Pipeline

Figure Growth rate of all surface modes of freight flows () ndash

Source Bureau of Transportation Statistics (2013) calculations by authors

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983090983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983097 Key elements of Beyond the Border and Regulatory Cooperation

Beyond the Border Program

Integrated Cargo Security Strategy (ICSS)December 2011

Reduces administrative duplication between Canada and the US byaddressing security risks in advance within the shipment supply chainand at the border (Canada Border Services Agency 2013)

Prince Rupert Pilot October 2012 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry via rail is examined by Canadian officials onbehalf of the US (Government of Canada 2013c)

Montreal Pilot January 2013 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry to the US via truck is examined by Canadianofficials on behalf of the US (Government of Canada 2013c)

Pre-load Air Cargo Targeting (PACT) Joint pilot by CBSA and Transport Canada to screen cargo pre-flight onCanada-bound airplanes at foreign airports (Canada Border ServicesAgency 2013)

Tamper Evident Technology PilotOctober 2012

Pilot collaboration between CBSA and US CBP to ensure containersremain sealed upon arrival at the US border (Canada Border Services

Agency 2013)

Truck Cargo Pre-Inspection PilotMarch 2013

Pilot program between the CBSA and the US CBP for pre-inspection ofsouthbound traffic into US (Canada Border Services Agency 2013)

Free and Secure Trade (FAST) PilotSarnia Ontario

Pilot program for usage of FAST lanes without Partners in Protection andCustoms Self Assessment programs (Government of Canada 2013c)

Canada-US Shiprider June 2013 Removal of jurisdictional barriers to improve law enforcement personnelin Windsor-Detroit and Vancouver-Blaine waterways (Government ofCanada 2013c)

EntryExit Initiative Phase II June 2013 Exchange entryexit data between the CBSA and US DHS on individualsat Canada-US land border crossings (Government of Canada 2013c)

Regulatory Cooperation ProgramMemorandum of Understanding between Transport Canada and the RailwayAssociation of Canada September 2013

Framework for Canadian rail emissions between 2011 to 2015(Government of Canada 2013d)

Canada-United States Perimeter Approachto Plant Protection September 2013

Draft framework for increased cooperation and reduction inadministrative duplication between the Canadian Food InspectionAgency (CFIA) and United States Animal and Plant Health InspectionService (APHIS) on trade in plants and plant products (Government ofCanada 2013d)

Common Electronic Submission GatewayPilot (CESG) August 2013

FDA and Health Canada will allow pharmaceutical firms to electronicallysubmit drug applications (Government of Canada 2013d)

Initiative to Align Veterinary DrugApprovals December 2012

Joint reviews between US FDA and Health Canada on veterinary drugproducts (Government of Canada 2013d)

Stricter Air Pollutant Emissions Environment Canada aligns car emissions beginning in 2017 with theUS Environmental Protection Agencyrsquos ldquoTier 3rdquo (Government of Canada2013d)

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The state of Canada-US relations in 983090983088983089983092 983090983091

fraserinstituteorg

On September 983092 983090983088983089983091 $983092983094983094 million in investment was allocated to the

Border Action plan by the Government of Canada in order expand two marine

container examination facilities (Government of Canada 983090983088983089983091c) $983091983091 million

was invested by the Government of Canada in the Asia Pacific Gateway and

rade Corridor Initiative (Government of Canada 983090983088983089983091c) Te Plan includes

an additional 983090983097 harmonization initiatives that will enhance trade activity

between Canada and the US

Neither Beyond the Border nor the Regulatory Cooperation Council

offer further investment or cost estimates on the initiatives described in table

983097 Moens and Gabler (983090983088983089983090) pointed to the need for both the Canadian and

American governments to provide data on border costs so that a cost-benefit

analysis can ensue Nonetheless the small steps of progress towards inte-

grating and harmonizing US and Canadian border practices remains a very

important (long-term) part of reducing the profile of the border

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983090983092 fraserinstituteorg

Canadian and American public perceptions

Tree observations are noteworthy in recent assessments of public percep-

tions between Americans and Canadians First Americans consistently have

a very high favourability rating of Canadians typically in the 983097983088 plus range

(table 983089983088 figure 983089983093) Both as a friend and a strategic ally Americans hold

Canadians in the most favourable light possible (table 983089983089) Disagreements over

policy between the two countries whether in defence and foreign affairs or

over border and trade issues do not move this fundamental asset Canadians

enjoy in dealing with their neighbour

Second Canadians do not have high expectations of either the

American or Canadian government regarding progress in bilateral relations

As table 983089983090 shows Canadians hold Obama in high regard (983094983091 percent) but

only 983093983092 percent expect progress from him in trade relations Prime Minister

Harper is rated slightly ahead of President Obama in terms of working hard

towards improving Canada-US relations (table 983089983091)

Tird and most significant in light of Canadarsquos Catch-983090983090 situation both

Canadians and Americans are more supportive of closer cooperation and inte-

gration policies than is the case for political representatives in either the United

States or Canada In two recent studies we showed how US Senators and House

Representatives are quite critical of Canada with regard to NAFA issues and bor-

der security (Moens and Gabler 983090983088983089983089) Similarly we found that among the three

major political parties in Canadarsquos parliament only one consistently expressed

itself in favour of closer ties with the United States (Moens and Gabler 983090983088983089983089)

A recent survey of American and Canadian (and Mexican) attitudes

towards free trade and NAFA show surprisingly strong data for more trade

integration In response to the statement ldquoTere should be more free trade

between the US Canada and Mexicordquo 983096983088 percent of Canadians approved

as did 983095983092 percent of Americans Even on border security Canadians andAmericans are more pro-cooperation and integration than their governmental

policies suggest In the US 983092983089 percent support a common perimeter while

983090983088 percent are opposed In Canada 983092983091 percent support it and 983091983088 percent are

opposed (Graves Pastor and Basaacutentildeez 983090983088983089983091) Terefore in terms of public

mandate both governments would have a case to work towards broader bilat-

eral (or trilateral) cooperation to lower trade barriers

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The state of Canada-US relations in 983090983088983089983092 983090983093

fraserinstituteorg

Table 983089983088 Canadian favourability rating among Americans (February 983090983088983089983090)

Veryfavourable

Mostlyfavourable

Mostlyunfavourable

Veryfavourable Not sure Total

favourableTotal

unfavourable

53 38 3 2 3 91 5

Note n=1015

Source Gallup Poll (2012)

Table 983089983089 Ally or enemy for Americans (June 983090983088983089983091)

Country Ally Friendly Unfriendly Enemy Total Ally andFriendly

Great Britain 66 25 2 1 91

Canada 61 33 2 1 94

China 11 44 26 14 55

Note n=1529Source Gallup Poll (2013)

88

90

92

94

96

98

201220112010200920082007

Figure Canadian favourability among Americans () ndash

Source Gallup Poll (2012)

f a

v o u r a

b l e

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983090983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983090 What effect will Obama have on Canada-US relations (November 983090983088983089983090)

Canadians Americans

Positive Negative None Positive Negative None

Relationship 62 5 34 48 12 40

Trade 54 10 35 48 12 39

Harmonizing 53 8 40 47 14 39

Note n=1066

Source Abacus Data (2012)

Table 983089983091 Has each leader worked hard to improve Canada-US relations

(July 983090983088983089983090)

Country Agree Disagree Not sure

Stephen Harper 58 32 10

Barack Obama 53 32 15

Note Sample of Canadians

Source HarrisDecima (2012)

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fraserinstituteorg 983090983095

US policy uncertainty

Canadian economic prospects face their most important challenge in the

United States Te US economic recovery has been modest and real GDP

growth so far has remained below the post-World War II average of post-

recession periods (figure 983089983094) As we noted above the less-than-stellar US

recovery is made even more challenging for Canadian traders in that pro-

ductivity gains in Canada are lagging while the Canadian dollar remains high

On top of that several American-imposed regulatory obstacles to free trade

are depressing trade prospects in crude oil red meat and public works pro-

curement Tese impediments reduce Canadian competitive access to the

US market

A high level of public spending until the January 983090983088983089983091 sequester and

ongoing monetary stimulation have not produced notable US GDP growth

Te seven post-recession periods below show the current average to be well

below the historical average (Young 983090983088983089983091)

983089983097983092983096-983089983097983093983095 983091983096983088

983089983097983093983096-983089983097983094983095 983092983090983096

983089983097983094983096-983089983097983095983095 983091983089983096

983089983097983095983096-983089983097983096983095 983091983089983093

983089983097983096983096-983089983097983097983095 983091983088983093

983089983097983097983096-983090983088983088983095 983090983097983097

983090983088983088983096-983090983088983089983091 983088983095983091

While economic growth has been modest growth in the public debt

has not (figure 983089983095) Publicly held debt in the US is now at 983095983091 percent of GDP

the highest since 983089983097983092983094 (Congressional Budget Office 983090983088983089983091)

Te widening gap between federal government outlays and revenueshas only recently been capped by the Sequester (figure 983089983096) However the

budget Sequester is temporary and final resolution of public spending and

taxation levels remains unclear given repeated gridlock in presidential-con-

gressional policy making High debt levels combined with stalemate over

taxes and budget cuts have produced a case of policy instability or uncer-

tainty in the last five years (Baker Bloom and Davis 983090983088983089983091)

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983090983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

US policy uncertainty is further aggravated by inaction on the large

lsquoentitlementrsquo programsmdashSocial Security Medicare and Medicaidmdashwhich are

the major drivers of the long-term gap in revenues and spending

-4

-2

0

2

4

6

8

201220062000199419881982197619701964

Figure US GDP growth rate ndash ( forecast)

Source The World Bank (2013b) OECD (2013)

-10

-8

-6

-4

-2

0

0

20

40

60

80

100

20122011201020092008200720062005200420032002

Government deficit as a percentage of GDP Government debt as a percentage of GDP

Figure US Government deficit and debt as a percentage of GDP ndash

Source Congressional Budget Office (2013)

D e fi c i t p e r c e n t a g e ( ) D

e b t p er c en t a g e ( )

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The state of Canada-US relations in 983090983088983089983092 983090983097

fraserinstituteorg

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

20122003199319831973

Revenue Outlays

Figure US Government revenue and outlays ndash ( US$ billions)

Source Congressional Budget Office (2013)

1 9 8 3 U S $ b i l l i o n s

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983091983088 fraserinstituteorg

Trade diversification

Given the weakness in near-term US opportunities Canadians are (again)

wondering how to pursue trade diversification away from the United States

Te objective is logical and if achieved will prove advantageous but various

trends in trade and investment show that diversification for Canada is a slow

and arduous journey (table 983089983092)

In terms of overall share exports to China in the last five years have

doubled but the numbersmdashfrom 983090983089983095 percent to 983092983090983094 percentmdashremain rela-

tively low In the same period the US-bound share declined by 983091 percent but

remains a towering 983095983092983093983092 percent Te pattern of small overall impact applies

to all the other top trading partners For example exports to the UK have

increased but exports to Japan and Mexico have essentially stalled When we

consider average export growth rates over the last five years (table 983089983093) we see

a very strong rate for China (983089983093983093 percent) and strong rates for the UK and

South Korea (983096983097 percent and 983094983097 percent) However a 983089983093 percent increase in a

983092 percent overall trade share produces little change Te point we are making

is that at this rate and pattern of trade lsquodiversificationrsquo it will actually take a

very long timemdashwhile relatively small upward trends in trade with the United

States could have a quick and very large impact in the opposite direction

On the import side we notice more trade diversification with the US

share at 983093983088 percent and the Chinese share at 983089983089 percent (table 983089983094) Te Chinese

growth rate on the import side is less than on the export side (table 983089983095) Te

most revealing number may be the high average over five years for Mexico

at 983097 percent Tis could be indicative of a growing supply chain with Mexico

While foreign direct investment (FDI) is not a direct indicator of future

trade trends in investment may harbinger change In terms of outbound

FDI we notice that only a small segment (less than 983089983088 percent) is targeted

for manufacturing (table 983089983096) It is investment in this category in which onewould expect growth in supply chains

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983089

fraserinstituteorg

Table 983089983092 Canadarsquos merchandise exports top ten destinations 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 3291 1 777 2361 1 751 2564 1 749

China 92 4 22 97 3 31 114 3 33

UK 114 2 27 105 2 33 141 2 41

Japan 97 3 23 73 4 23 79 4 23

Mexico 51 5 12 42 5 13 43 5 13

Netherlands 32 8 08 24 8 08 28 8 08

South Korea 34 7 08 31 7 10 32 7 09

Germany 39 6 09 33 6 10 34 6 10

France 28 9 07 23 9 07 20 10 06

Brazil 23 10 05 14 10 04 22 9 06

Total 4237 3145 3424

2011 2012Average

shareValue Rank Share Value Rank Share

US 2750 1 737 2783 1 745 752

China 140 3 38 159 2 43 33

UK 157 2 42 154 3 41 37

Japan 89 4 24 85 4 23 23

Mexico 46 5 12 44 5 12 12

Netherlands 40 7 11 37 6 10 09

South Korea 43 6 11 30 7 08 09

Germany 33 8 09 29 8 08 09

France 26 9 07 26 9 07 07

Brazil 24 10 06 21 10 06 06

Total 3732 3734

Source Industry Canada (2013b)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983091983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983093 Canadian export growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 56 7 -281 9 106 = 5

China 101 6 65 1 187 3

UK 16 9 -73 2 358 2

Japan 202 3 -250 7 106 = 5

Mexico 179 4 -178 6 43 9

Netherlands -85 10 -255 8 183 4

South Korea 276 2 -80 3 52 8

Germany 160 5 -167 4 54 7

France 36 8 -174 5 -122 10

Brazil 706 1 -380 10 603 1

2011 2012Average

Rank Rank

US 104 8 27 2 02

China 270 4 152 1 155

UK 148 6 -02 4 90

Japan 161 5 -29 6 38

Mexico 94 9 -16 5 24

Netherlands 475 1 -55 7 53

South Korea 374 2 -272 10 70

Germany 05 10 -95 9 -09

France 311 3 23 3 15

Brazil 109 7 -92 8 189

Source Industry Canada (2013b) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983091

fraserinstituteorg

Table 983089983094 Canadarsquos merchandise imports top ten sources 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 1992 1 524 1633 1 511 1745 1 504

China 374 2 98 347 2 109 382 2 110

Mexico 157 3 41 145 3 45 190 3 55

Japan 134 4 35 108 4 34 115 4 33

Germany 111 5 29 95 5 30 97 5 28

UK 110 6 29 82 6 26 92 6 27

South Korea 53 9 14 52 7 16 53 7 15

Algeria 67 7 18 33 10 10 31 10 09

Italy 45 10 12 39 9 12 40 9 12

France 53 8 14 49 8 15 47 8 13

Total 3804 3194 3465

2011 2012Average

shareValue Rank Share Value Rank Share

US 1846 1 496 1922 1 506 508

China 402 2 108 417 2 110 107

Mexico 205 3 55 210 3 55 50

Japan 109 4 29 123 4 33 33

Germany 107 5 29 118 5 31 29

UK 86 6 23 70 6 18 25

South Korea 55 7 15 52 7 14 15

Algeria 46 9 12 49 8 13 12

Italy 43 10 11 43 9 11 12

France 46 8 12 41 10 11 13

Total 3723 3796

Source Industry Canada (2013b)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983091983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983095 Old and new trade prospectsmdashimport growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 29 8 -178 7 89 5

China 112 4 -70 2 123 3

Mexico 43 7 -77 4 337 1

Japan -11 10 -192 8 89 4

Germany 105 5 -149 6 44 7

UK 95 6 -252 9 141 2

South Korea 120 3 -14 1 36 8

Algeria 518 1 -511 10 -50 10

Italy 11 9 -132 5 48 6

France 191 2 -70 3 -35 9

2011 2012Average

Rank Rank

US 88 5 57 4 17

China 82 6 53 5 60

Mexico 111 3 39 6 91

Japan -29 9 151 1 01

Germany 132 2 117 2 50

UK -36 10 -173 10 -45

South Korea 76 7 -37 8 37

Algeria 533 1 91 3 116

Italy 95 4 23 7 09

France 22 8 -97 9 02

Source Industry Canada (2013b) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983093

fraserinstituteorg

In terms of overall Canadian outbound FDI stocks in the US remain

very high despite the recent US recession while growth in stock in Asia is

modest (figure 983089983097) When we examine Canadian FDI in the so-called BRIC

states we notice that investment in both China and India is relatively small

Canadian mining investment in Brazil is much larger (figure 983090983088) In fact when

we examine amounts of FDI we find that Canada is not really a big BRIC

investor other than Brazil Chile Hong Kong and Peru are larger FDI recipi-

ents than China and India (figure 983090983089)

In terms of FDI flowing into Canada we notice the very large share

(983090983096983094983093 percent) in manufacturing which indicates both the predominant

share of US FDI and the extensive integrated supply chains in Canada-US

manufacturing (table 983089983097) Even more than for outbound FDI inflow stocks

show very large US preponderance (figure 983090983090) Such continued concentra-

tion of US FDI in Canada suggests that Canadian trade diversification is not

just a decision to be made by Canadian producers

Like trade growth Chinese FDI growth in Canada is positive but the

overall numbers are small and do not show rapid growth in the last 983091 years

(figure 983090983091)

Table 983089983096 Top industries for outward stocks of FDI 983090983088983089983090

Category Value Share

Mining oil and gas extraction 1099 188

Oil and gas subcategory 542 93

Manufacturing 569 97

Finance and insurance 2334 399

Management of companies and enterprises 757 129

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4362

983091983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

1

2

3

4

5

6

7

8

9

10

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n s

Figure Canadian foreign direct investment (stock) BRIC ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Brazil PRC India Russia

0

20

4060

80

100

120

140

160

180

200

220

240

260

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) various regions

ndash

Notes Excluding Mexico Canadian FDI to Mexico in 2012 was $557 billion

Foreign Direct Investment measures the purchase of various forms of capital stock abroad

However tax havens (Barbados Bermuda etc) are frequently found to be some of the highest

recipients of FDI In reality tax havens do not reflect economic growth as FDI figures invested

into tax havens are often reinvested back to the source country in a concept known as

round-tripping (Financial Post 2013) We have accounted for tax havens by removing them from

tables and figures in this section The numbers corresponding to Figure 19 would be Barbados

($593 billion) Bermuda ($118 billion) British Virgin Islands ($21 billion) Cayman Islands ($302

billion)

Source Foreign Affairs Trade and Development Canada (2013c)

US Europe Asia amp Oceania Central amp South America Africa

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4462

The state of Canada-US relations in 983090983088983089983092 983091983095

fraserinstituteorg

Table 983089983097 Top industries for inward stocks of FDI 983090983088983089983090

Category Value Share

Oil and gas extraction 766 147

Manufacturing 1492 287

Petroleum and coal products manufacturing 377 72

Wholesale trade 395 76

Finance and insurance 699 134

Management of companies and enterprises 999 192

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

0

2

4

6

8

10

12

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) Chile Hong Kong

Peru amp Korea ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Chile Hong Kong Peru Korea

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4562

983091983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

40

80

120

160

200

240

280

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Foreign direct investment (stock) in Canada from top three

countries ndash

Source Foreign Affairs Trade and Development Canada (2013c)

US Netherlands UK

0

2

4

6

8

10

12

201220112010200920082007

2 0 0 2 C A $ b

i l l i o n s

Figure Foreign direct investment (stock) in Canada from China

ndash

Source Foreign Affairs Trade and Development Canada (2013c)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4662

fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4762

983092983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4862

fraserinstituteorg 983092983089

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Abacus Data (983090983088983089983090 November 983090983088) Beyond the Canadian-American Border

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Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5862

The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5962

983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6062

The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 9: Canadas Catch 22 State of Canada Us Relations in 2014

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983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

A breakdown of the top export and import sectors in Canada-US trade

shows that the traditionally strong machinery and automotive sectors are

holding well in terms of US exports to Canada but the same sector is weaker

on the Canadian side Te gains on our side are in minerals and energy prod-

ucts (tables 983091 983092) Te slow decline in Canadian exports of manufactured prod-

ucts suggests a weakening on Canadarsquos side in the integrated supply-chain in

this sector Lower productivity and border costs may well play a role

Table 983089 Canadian merchandise trade 983090983088983088983095ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2007 2008 2009 2010 2011 2012

Total exports 41380 42705 32099 34675 38099 38006

Exports to US 31795 32331 23610 25332 27517 27809

Total imports 37291 38877 32691 35508 38036 38993

Imports from US 24215 24666 20641 22312 23475 24360

Total balance 4089 3827 -592 -833 063 -987

Balance with US 7579 7666 2969 3020 4042 3450

Note On a balance of payments basis

Source Statistics Canada (2013d)

15

20

25

30

35

2 0 1 3 - 0 5

2 0 1 3 - 0 1

2 0 1 2 - 0 9

2 0 1 2 - 0 5

2 0 1 2 - 0 1

2 0 1 1 - 0 9

2 0 1 1 - 0 5

2 0 1 1 - 0 1

2 0 1 0 - 0 9

2 0 1 0 - 0 5

2 0 1 0 - 0 1

2 0 0 9 - 0 9

2 0 0 9 - 0 5

2 0 0 9 - 0 1

2 0 0 8 - 0 9

2 0 0 8 - 0 5

2 0 0 8 - 0 1

2 0 0 7 - 0 9

2 0 0 7 - 0 5

2 0 0 7 - 0 1

Import Export

2 0 0 2 C A $ b i l l i o n s

Figure Canadarsquos merchandise trade (monthly) ndash

Source Statistics Canada (2013c) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091

fraserinstituteorg

Table 983090 Merchandise trade as a of GDP 983090983088983088983093ndash983090983088983089983090 (current US$)

2005 2006 2007 2008 2009 2010 2011 2012

Canada 602 584 569 583 483 501 515 510

Growth 02 -30 -26 25 -172 37 28 -10

US 210 221 227 243 191 225 250 248

Growth 61 52 27 70 -214 178 111 -08

Source The World Bank (2013a)

0

1

2

3

4

5

6

7

8

9

2 0 1 3

- 0 5

2 0 1 3

- 0 1

2 0 1 2

- 0 9

2 0 1 2

- 0 5

2 0 1 2

- 0 1

2 0 1 1

- 0 9

2 0 1 1

- 0 5

2 0 1 1

- 0 1

2 0 1 0

- 0 9

2 0 1 0

- 0 5

2 0 1 0

- 0 1

2 0 0 9

- 0 9

2 0 0 9

- 0 5

2 0 0 9

- 0 1

2 0 0 8

- 0 9

2 0 0 8

- 0 5

2 0 0 8

- 0 1

2 0 0 7

- 0 9

2 0 0 7

- 0 5

2 0 0 7

- 0 1

2 0 0 2 C A $ b i l l i o n s

Figure Canada-US net merchandise trade (monthly) ndash

Source Statistics Canada (2013c) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

-5

-4

-3

-2

-1

0

1

2

3

2012201120102009200820072006200520042003200220012000

G r o

w t h ( )

Figure GrowthUS share of Canadarsquos annual merchandise trade ()

ndash

Source Industry Canada (2013b) calculations by authors

Import Export

45

50

55

60

65

70

75

80

85

90

2011200920072005200320011999199719951993

Import Export

Figure US share of Canadarsquos annual merchandise trade () ndash

Source Industry Canada (2013b)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093

fraserinstituteorg

Table 983091 Top sectors for Canadian merchandise exports to the US 983090983088983089983090

Industry Exports

2002 CA$ bi llions Percentage

Mineral products 886 318

Products of chemical or allied industries 163 59

Plastics and related articles 118 43

Base metals and articles of base metals 200 72

Machinery mechanical appliances electrical equipment and related articles 276 99

Vehicles aircraft vessels and associated transport equipment 530 191

Note On a customs basis

Source Statistics Canada (2013a)

Table 983092 Top industries for Canadian merchandise imports from the US 983090983088983089983090

Industry Imports

2002 CA$ bi llions Percentage

Mineral products 163 85

Products of chemical or allied industries 171 89

Plastics and related articles 127 66

Base metals and articles of base metals 158 82

Machinery mechanical appliances electrical equipment and related articles 413 215

Vehicles aircraft vessels and associated transport equipment 413 215

Note On a customs basis

Source Statistics Canada (2013a)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Trade in services

As a share of overall bilateral trade trade in services is growing gradually otal

bilateral services trade in 983090983088983089983088 amounted to 983089983096 percent of bilateral merchan-

dise trade It was 983089983093 percent in 983090983088983088983095983090 Te United States is by far the largest

trading partner in Canadarsquos international trade in services rade with the

US is nearly ten times the amount with the next largest partner the United

Kingdom But unlike merchandise trade the value of non-US services trade

is nearly half (983092983092 percent in 983090983088983089983088) of that with the USA (table 983093) In other

words there is more diversification from the US market in services than in

merchandise983091

Te trend reveals rising competitiveness on the US side (and non-USA)

as Canadian imports are growing considerably while Canadian exports are

stagnant resulting in a growing services trade deficit (figure 983093)

Bilateral trade in services was not impacted by the US recession as

merchandise trade was otal volume of trade is slightly up in the three years

after 983090983088983088983095 (figure 983094) Most of this gain is from growth in Canadian imports

from the US (and from non-US) while Canadian exports to the USA are

slightly down

Given that there is no growth in Americans traveling to Canada during

this time period (as we will show later) the relative strength of US exports vis-

agrave-vis Canadian exports appears to lie in the commercial sector (tables 983094 983095)

In conclusion in both merchandise and services trade the post 983090983088983088983095

period shows that Canada is relatively losing in trade competitiveness in rela-

tion to the United States Te relative loss of trade competitiveness in our

relationship may be a surprise to many Canadians who believe Canada has

simply been doing better than the US since 983090983088983088983096 Te lsquodoing betterrsquo part may

apply to domestic economic activity but not to external trade

1048626 Data on trade in services is not as recent as merchandise trade

1048627 op export destinations in 983090983088983089983088 after the USA are the UK France and Germany op

importers to Canada in 983090983088983089983088 after the USA include UK Hong Kong (China) France

Germany and Mexico Te case with importers to Canada is similar to that with export-

ing countries Imports from the UK make up roughly 983089983088 percent that of imports from the

US Imports from Hong Kong are 983093983089 percent that from the UK with France at 983092983090 percent

and both Germany and Mexico rest at roughly 983091983096 percent each

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983095

fraserinstituteorg

Table 983093 Services trade between Canada and the US 983090983088983088983093ndash983090983088983089983088 (983090983088983088983090 CA$ billions)

2005 2006 2007 2008 2009 2010

Exports to USA 3988 3815 3834 3966 3718 3700

Imports from USA 4358 4395 4544 4833 4783 4960

Trade balance with USA -370 -580 -710 -866 -1065 -1260

Trade balance with USA -443 -707 -847 -985 -1240 -1455

Exports to non-USA 2832 3080 2985 3052 3142 3102

Imports from non-USA 3022 3187 3380 3518 3496 3722

Trade balance with non-USA -189 -108 -395 -466 -354 -620

Trade balance with non-USA -323 -172 -621 -710 -540 -909

Total services exports 6820 6894 6819 7018 6860 6802

Total services imports 7379 7582 7924 8350 8279 8682

Total trade balance -559 -688 -1105 -1333 -1419 -1880

Total trade balance -394 -475 -750 -867 -937 -1214

Bilateral (X+I) USA 8346 8210 8378 8799 8589 8660

Bilateral (X+I) non-USA 5854 6267 6365 6569 6551 6824

Bilateral (X+I) total 14200 14477 14742 15368 15140 15484

Source Foreign Affairs Trade and Development Canada (2013a)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

80

81

82

83

84

85

86

87

88

89

90

201020092008200720062005

2 0

0 2 C A $ b i l l i o n s

Figure Canada-US net services trade ndash

Source Foreign Affairs Trade and Development Canada (2013a)

-20

-16

-12

-8

-4

0

201020092008200720062005

Trade balance with USA Total trade balance

Figure Canadarsquos trade deficit with US and the world ndash

Source Foreign Affairs Trade and Development Canada (2013a)

2 0 0 2 C A $ b i l

l i o n s

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983097

fraserinstituteorg

Table 983094 Top categories for service trade exports Canada-World 983090983088983089983090

Category Subcategory Exports

2002 CA$ bi llions Percentage

Government services 13 19

Travel services 143 207

Personal travel 119 172

Transportation services 111 161

Air transport 52 76

Commercial services 424 614

Financial services 57 82

Computer and information services 64 93

Intellectual property use 31 44

Management services 90 130

Research and development 33 47

Architectural engineering 39 57

Source Foreign Affairs Trade and Development Canada (2013a)

Table 983095 Top categories for service trade imports Canada-World 983090983088983089983090

Category Subcategory Imports

2002 CA$ billions Percentage

Government services 11 12

Travel services 288 323

Personal travel 253 284

Transportation services 195 219

Water transport 82 92

Air transport 84 95

Commercial services 396 446

Insurance services 44 50

Financial services 44 50

Intellectual property use 89 100

Management services 75 84

Source Foreign Affairs Trade and Development Canada (2013a)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983089983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

075

080

085

090

095

100

105

2 0 1 3

- 0 7

2 0 1 3

- 0 1

2 0 1 2

- 0 7

2 0 1 2

- 0 1

2 0 1 1

- 0 7

2 0 1 1

- 0 1

2 0 1 0

- 0 7

2 0 1 0

- 0 1

2 0 0 9

- 0 7

2 0 0 9

- 0 1

2 0 0 8

- 0 7

2 0 0 8

- 0 1

2 0 0 7

- 0 7

2 0 0 7

- 0 1

Figure CanadaUS dollar exchange rate ndash

Source Bank of Canada (2013b)

C A U S e x c h a n g e r a t e

Dollar value and productivity trends

Te first factor to consider regarding Canadarsquos trade competitiveness vis-agrave-vis

the United States is the value of the Canadian dollar Te substantial appre-

ciation of the Canadian dollar against the US dollar that began in the early

983090983088983088983088s has stabilized at a much higher average value of the loonie ( figure 983095)

As is well documented such exchange rate appreciation tends to have a strong

effect on current account balances as exports decline (Kappler et al 983090983088983089983089)

A growing account deficit will likely push the value of the Canadian dollar

downward in the longer term and thus offer some remedy

ProductivityOf more concern to Canadians should be the data indicating that Canadian

labour productivity rates are lagging those in the United States (figures 983096 983097)

One would expect that Canadarsquos higher dollar has provided industry in recent

years with an opportunity to improve productivity as imported machinery

and technology would be available at a lower price However Canadarsquos pro-

ductivity rate of growth is modest and in 983090983088983089983090 dips into negative territory

again

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983089983089

fraserinstituteorg

-1

0

1

2

3

20122011201020092008

Canada US

Figure Canada and US rates of output productivity growth ()

ndash

Source Statistics Canada (2013g)

R a t e o f p r o d u c t i v i t y g r o

w t h ( )

-10

-5

0

5

20122011201020092008

Labour productivity (Canada) Real GDP (Canada) Hours worked (Canada)

Labour productivity (US) Real GDP (US) Hours worked (US)

Figure Real US-Canadian output and hours worked () ndash

Source Statistics Canada (2013g)

A n n u a l c

h a n g e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 1962

983089983090 fraserinstituteorg

Trade and regulatory barriersdisputes

Table 983096 provides a synopsis of the major trade disputesbarriers that have

played a role in bilateral relations in the last five years and that are pertinent

for the 983090983088983089983092 period (pages 983089983094-983089983095) Te two large disputesmdashKeystone XL and

Mandatory Country-of-Origin Labeling (MCOOL) on red meatmdashare more

ominous than they may seem First both in crude oil products and in cattle

and hogs the United States is unilaterally disrupting or dismantling a well-

established integrated sector Canada has started attempts to diversify its oil

transportation structure including more rail and new pipeline routes But

as all proposed alternative pipelines have shown the alternatives are contro-

versial and at best years away from making a difference Meanwhile there is

considerable risk in putting too much crude oil on rail as its accident rates

are higher than pipe

Canadian threats to counter US MCOOL action with tariffs on food

products are not going to have much impact in the near future Moreover

an escalating tariff war on food products cannot be won by Canada and will

ultimately harm consumers on both sides of the border US defiance of two

WO rulings also means more uncertainty for Canadian traders

Keystone XL pipeline

Proposed in 983090983088983088983096 the Keystone XL (KXL) extension is part of a pipeline sys-

tem connecting Alberta oil sands and US mid-West and Gulf region refineries

KXL is a 983089983096983097983095 km crude oil pipeline with a capacity of 983092983094983093983088983088983088 barrels per

day (Hussain 983090983088983089983091) It is a substantial private infrastructure proposal that

will create employment and guarantee a secure energy source for the United

States (Millington and Murillo 983090983088983089983091) It is by no means a new feature in

Canada-US energy relations as a dense network of oil and electricity carri-ers cross the border at multiple points

What is unprecedented is that the permit process is now in its sixth

year and the final resolution remains uncertain (by US law a cross-border line

requires Department of State approval) If not resolved in 983090983088983089983092 the question

may well be handed over to the next president after 983090983088983089983094 Te policy uncertainty

associated with KXL approval has by far the largest impact on Canada-US trade

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The state of Canada-US relations in 983090983088983089983092 983089983091

fraserinstituteorg

relations Te dragged-out procedure has chilled relations Te southern leg of

KXL has been completed and the original route objection by Nebraska has been

resolved What remains ostensibly the problem is that the US administration

has identified this heavy oil as a component of its policy objective of curbing

the emission of greenhouses gasses to reduce global warming

Te impact of this pipeline delay in the 983090983095 million barrels per day (bpd)

export of Canadian oil products to the USA reverberates at various levels

Across Canada investment in mining oil and gas extraction for 983090983088983089983091 is pre-

dicted to decrease by 983090983095 percentmdashthe largest decline since the 983090983088983088983096 recession

(Statistics Canada 983090983088983089983091f) In Alberta investment is predicted to increase by

only 983088983089 percent (Statistics Canada 983090983088983089983091f) Capital investment in oil and gas

extraction has not recovered to pre-983090983088983088983096 levels (Industry Canada 983090983088983089983091a)

While the industry has become increasingly dependent on rail trans-

port to move product it is a costly alternative It can cost up to three times

as much as pipeline transport (Millington and Murillo 983090983088983089983091) and its limita-

tions are self-evident because rail movement of oil is constrained by the lim-

ited availability of rail cars In 983090983088983089983090 983089983091983088983088983088983088 bpd of heavy crude was being

transported by rail Tis is expected to rise to 983092983090983093983088983088983088 bpd by the end of

983090983088983089983092 falling short of the 983092983094983093983088983088983088 bpd which could have been moved through

KXL (Hussain 983090983088983089983091) Te forced increase in rail transport has resulted in

unintended costs for the industry a total of US$983089 billion must be invested for

new rail terminals and another US$983092ndash983093 billion for new rail cars (Lewis 983090983088983089983091)

Rail transport is both more costly and more dangerous A recent study

concluded that ldquopipeline transportation is safer than transportation by road

rail or barge as measured by incidents injuries and fatalitiesrdquo (Green amp

Furchtgott-Roth 983090983088983089983091) It is not inconceivable that another major oil acci-

dent either in Canada or the USAmdashsuch as took place in Quebec in July 983090983088983089983091

killing 983092983095 peoplemdashwould result in a moratorium on oil transport by rail with

grave consequences for Canadian producers

983090983088983088983090 Mandatory Country-of-Origin Labeling

Mandatory Country-of-Origin Labeling (MCOOL) is a provision mandated

by Congressional law and first implemented in 983090983088983088983096 Te measure imposes

strict segregation rules on American Canadian and Mexican cattle and hogs

and the subsequent slaughtering and processing of these animals to producebeef and pork products for retail sale Te stated purpose is to create labels

that indicate the origin in part or in whole of the product In effect it is a

veiled trade barrier because it gives US animals and products a competitive

advantage due to higher labeling inventory and processing costs for equiva-

lent Canadian products

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983089983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983096 Synopsis of trade disputes in Canadian-American relations in 983090983088983089983091

Dispute Impact and cost Prospect for resolution

Keystone XL Pipeline Very serious Poor

2008 proposal for a 1897

km 465000 bpd crude oilpipeline spanning fromAlberta down to Nebraska

Downward pressure on investment

Lost wages January 2012postponement is costing US $47million a day in lost wages (ConsumerEnergy Alliance 2013)

Continuation of crude oil pricediscounts due to lack of infrastructure

Costly alternative rail has emerged as atransportation alternative but can costup to three times as much as pipelinetravel (Millington and Murillo 2013)

Permit postponed twice

Resolution is not transparent

Rising risk of decision deferral past 2016

Mandatory Country-of-OriginLabelling (MCOOL)

Serious Poor

2008 CongressionalLaw mandating rulesfor segregated livestockprocessing and packagingand a labeling structure inorder to have food labelsindicate origin of product

Annual cost to Canadian beef and porksector of $1 billion

Deconstruction of a highly integratedtrilateral supply chain industry

MCOOL adds no animal health or foodsafety benefits

US has defied both WTO complaint andthe core part of the WTO Appeal ruling

2013 US reaction has been to strengthenthe discriminatory provision banning co-mingling of meats altogether

Canada plans to retaliate with tariffs butthis is a costly gambit with low chance ofsuccess

Softwood Lumber Agreement Moderate Good

In 2011 American softwoodcompanies took theirCanadian counterparts to theLondon Court of InternationalArbitration accusing themof circumventing the SLA(Foreign Affairs Trade andDevelopment Canada 2012a)

If in violation Canadian industry wouldface $380 million in penalties (TheCanadian Press 2012)

The London Court of InternationalArbitration in 2012 ruled in favor ofCanada (Foreign Affairs Trade andDevelopment Canada 2012a)

SLA was to expire in 2013 but Canadaand the USA extended it until 2015 (CBCNews 2012)

Long-term free trade in lumber needs toreplace SLA

Buy American Provision Serious Partial resolution but high risk ofrecurring Buy American legislation

2009 American Recovery andReinvestment Act

Exclusion of Canadian products andproduction sharing in US public worksprocurement

Canada-US Procurement Agreement in2010 which allowed for the purchaseof Canadian goods on seven US

infrastructure projects valued at morethan $7777000

Canada needs to seek a comprehensiveagreement in order to escape futureAmerican protectionism with allprovinces on board and compliant withthe WTO provision

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The state of Canada-US relations in 983090983088983089983092 983089983093

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Dispute Impact and cost Prospect for resolution

Canadian Wheat Board Long-term benefit Completed

Canadarsquos mandatory wheat

marketing board monopsonyended in 2011

Frequent US action against CWB in the

past will now end as wheat marketingin Canada turns fully market based

Intellectual Property Rights Moderate potential cost Partially resolved

Canada has been on theSpecial 301 Priority Watch Listby the United States TradeRepresentative since 1995

Ongoing threat of US Trade Action andlegal action

Canadian domestic complianceincluding

Strengthening data protection

Participation in Anti-counterfeiting TradeAgreement (ACTA in 2013)

Enacted the Combating CounterfeitProducts Act (2013)

Started the process of strengthening

the Copyright Act and implementingWorld Intellectual Property OrganizationInternet Treaties

In recognition of which Canada has beenremoved from the Special 301 PriorityWatch List

Prescription drugs Serious potential for trade action Indirect progress

The US complaint againstCanada

Imposing price ceilings thatshifts the cost burden of RampDto US firms

Weak protection ofintellectual property rights rethird party sales

Slow prescription drugapproval process causingreduced market access

US firms experience lost revenues andtrade action is a risk

In 2013 CETA agreement with theEuropean Union Canada agrees to givefull patent protection to new drugs fortwo years

Two-year rule may be transferable tofuture Canada-US resolution

Table 983096 continued

Canada and the United States have had a deeply integrated market in

this sector since the early 983089983097983097983088s Animal health and food safety standards have

been largely harmonized As a result highly efficient supply-chain production

methods have made this industry quite efficient However the imposition of

MCOOL has changed all that (Moens amp Leon 983090983088983089983090) Te cost differential haswidened and Canadian exports have dropped dramatically Since 983090983088983088983096 the

cattle sector has lost $983094983092983088 million per year and the hog sector has lost $983093983088983088

million a year (Te Canadian Press 983090983088983089983091a)

In 983090983088983089983090 the World rade Organization (WO) ruled in Canadarsquos favor by

concluding that MCOOL is discriminatory Te WO gave the US until May 983090983091

983090983088983089983091 to act but on that same day the USDA imposed regulatory changes that

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983089983094 The state of Canada-US relations in 983090983088983089983092

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actually strengthened the provisions of MCOOL In retaliation the Canadian

government released a list of US exports to Canada that would be subjected

to tariffs and it is preparing to seek a compliance panel at the WO Until this

situation is resolved the Canadian government predicts a continuing annual

loss of $983089 billion for the Canadian red meat sector (Te Canadian Press 983090983088983089983091a)

Softwood lumber

In 983090983088983089983089 several American softwood companies took their Canadian counter-

parts to the Court of International Arbitration in London accusing them of cir-

cumventing the Softwood Lumber Agreement of 983090983088983088983094 (Foreign Affairs rade

and Development Canada 983090983088983089983090a) Te dispute centered on the accelerating pace

of lumber harvests resulting from the pine beetle infestation Te stakes were

high $983091983096983088 million in penalties should Canada lose (Te Canadian Press 983090983088983089983090)

In 983090983088983089983090 the Court of International Arbitration ruled in Canadarsquos favor

(Foreign Affairs rade and Development Canada 983090983088983089983090a) In addition while

the Softwood Lumber Agreement was set to expire in 983090983088983089983091 the Canadian

and American governments successfully negotiated an extension of the

Agreement until 983090983088983089983093 (CBC News 983090983088983089983090) Te fact remains that as long as a

large part of Canadarsquos softwood lumber is managed in terms of quotas and

the stumpage fee system US trade action is very likely

lsquoBuy Americanrsquo provision

Te 983090983088983088983097 American Recovery and Reinvestment Act (ARRA which expired

on September 983091983088 983090983088983089983089) and the more recent 983090983088983089983089 American Jobs Act stipu-

lated that steel iron and other goods used in the repair and construction of

infrastructure projects in the US (highways bridges mass transit and fed-

eral buildings) must be manufactured in the United States (Matthiesen 983090983088983089983089)

In response to ARRA Canada and the US signed the Canada-US

Procurement Agreement in 983090983088983089983088 which allowed for the purchase of Canadian

goods on seven US infrastructure projects valued at more than $983095983095983095983095983088983088983088

or within the 983091983095 states subject to the WO GPA (Government of Canada

983090983088983089983091a) Te 983090983088983089983089 American Jobs Act did not pass in Senate and is thus moot

While the ARRA dispute was partially resolved lsquoBuy Americanrsquo anda counter position of lsquoBuy Canadianrsquo can flare up on either side of the bor-

der Canadian industry is most vulnerable in this uncertainty Te Canadian

government ought to seek a comprehensive Buy American exemption to

escape future American protectionism In so doing all provincial govern-

ments need to be on board in order to make the WO and NAFA rules

function optimally

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The state of Canada-US relations in 983090983088983089983092 983089983095

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Canadian Wheat Board (CWB)

In 983090983088983089983089 the Canadian government removed the monopsony held by the

Canadian Wheat Board Tis unilateral action offers a successful reduction

in bilateral trade distortion oday the CWB continues to operate as a mar-

keting group

Intellectual Property Rights (IPR)

From 983089983097983097983093 through 983090983088983089983091 Canada was on the Special 983091983088983089 Priority Watch

List by the United States rade Representative Te US complaint was that

protection and enforcement of IPR in Canada were weak Te Special 983091983088983089

Priority Watch List is designed to identify US trading partners that are the

worst offenders in IPR protection (Embassy of the United States Ottawa

Canada 983090983088983089983091)

Although the issue is not completely resolved Canada has made sig-

nificant progress in recent years Te federal government has strengthened

data protection regulations criminalized the use of camcorders in theaters

and participates in the Anti-Counterfeiting rade Agreement (ACA) nego-

tiations (983090983088983089983091) Most recently Canada enacted the Combatting Counterfeit

Products Act (Embassy of the United States Ottawa Canada 983090983088983089983091) Te

Canadian Government is in the process of strengthening the Copyright Act

and implementing World Intellectual Property Organization Internet reaties

(Embassy of the United States Ottawa Canada 983090983088983089983091)

As a result of these steps Canada was removed from the Special 983091983088983089

Priority Watch List in 983090983088983089983091

Prescription drugs

Prescription drug prices in Canada are relatively low due to a price ceil-

ing mandated by Canadarsquos healthcare system In addition Health Canada

approval times for prescription drugs significantly lag behind their counter-

parts in the United States and the European Union (Barua and Esmail 983090983088983089983091)

US lawmakers have repeatedly expressed their concerns over cheap prescrip-

tion drugs re-entering the US from Canada (Moens and Gabler 983090983088983089983089) TeEU also asked Canada to strengthen IPR protections for prescription drugs

(Lexchin and Gagnon 983090983088983089983091) Since the signing of the CEA agreement in

principle on October 983089983096 983090983088983089983091 the issue between Canada and the EU is now

resolved (Waldie 983090983088983089983091) Canada has agreed to ldquoEU demands for patent pro-

tection for up to two years on brand-name drugsrdquo (Blanchfield 983090983088983089983091)

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983089983096 fraserinstituteorg

State of the border andregulatory cooperation

Te decline in Americans traveling to Canada corresponds with the US

Greenback losing value against the Canadian dollar (figures 983089983088 983089983089) However

when we consider the extent of the decline in total numbers it appears dispro-

portionate Te change in American travel suggests instead a bigger problem

following the 983097-983089983089 shock Te imposition of new border transit requirements

such as passports as well as longer wait times and more security screening

has likely dampened US travel across this international boundary Given the

modest economic recovery in the USA from the beginning of 983090983088983089983088 onward

one would expect disposable income including for travel to trend back up

Instead the numbers remain stagnant at around 983090983088 million less than half the

number of 983090983088983088983090

While an overall national average for border wait times is not avail-

able data on major border crossings in both Central Canada and British

Columbia indicate that no reductions in wait times have been achieved

between 983090983088983088983094 and 983090983088983089983089 (figure 983089983090) Te problem of inefficiency as presented

by the Canada-US border goes well beyond wait times It includes inefficient

activity away from the border such as extra warehousing and costs of com-

plying with various facilitated traveler and goods programs such as FAS for

trucks loads and drivers

Tere are consistent cost differences between domestic and cross-bor-

der truck-borne trade which point to significant border costs ldquoFor exports

to the US these costs added 983088983097 percent to the delivered price of goods in

983090983088983088983092 Tis figure fell to 983088983092 percent in 983090983088983088983097 hellip Higher fixed costs per shipment

accounted for most of the additional cost of transporting goods to the USrdquo

(Brown and Anderson 983090983088983089983090) When we consider that in the manufacturingsector parts cross the border several times in various stages of assembly we

realize how this cost accumulates and defeats the efficiency gains otherwise

generated by integrated supply chain manufacturing Border costs are typ-

ically passed on to the consumer as fixed costs per shipment

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The state of Canada-US relations in 983090983088983089983092 983089983097

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An unprecedented border problem has arisen in the current USAdministrationrsquos lengthy (six years) review of the permitting of a pipeline

border crossing as proposed in the Keystone XL project As a result oil-by-

rail transport has recently increased while the pipeline mode of Canada-US

trade has seen a drop in growth in the 983090983088983089983089983089983090 period ( figures 983089983091 983089983092)

0

10

20

30

40

50

201220112010200920082007200620052004200320022001200019991998

Figure Travellers entering Canada ndash

Source Statistics Canada (2013e)

US residents Non-US residents

0

3

6

9

12

15

18

0

03

06

09

12

15

18

20122011201020092008200720062005200420032002

Trips Spending US$CA$ (Secondary axis)

Figure US overnight travel to Canada ndash

Source Statistics Canada (2011) Bank of Canada (2013b)

M i l l i o n s o f t r i p

s N o m i n a l C A $ b i l l i o n s

U S $ C A $ ex c h a n

g er a t e

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983090983088 The state of Canada-US relations in 983090983088983089983092

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0

5

10

15

20

201120102009200820072006

Northbound average delay Southbound average delay

Figure Peace Arch average border wait time ndash

Source Cascade Gateway Data (2013)

M i n u t e s

0

25

50

75

100

125

150

175

200

225

250

275

300

201220112010200920082007200620052004

2 0 0 4

U S $ b

i l l i o n s

Figure All surface modes of freight flow data based on value of goods

ndash

Source Bureau of Transportation Statistics (2013)

Truck Rail Pipeline

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983089

fraserinstituteorg

lsquoBeyond the Borderrsquo and Regulatory Cooperation

In 983090983088983089983089 Canada and the United States announced an ambitious agreement

to reduce border costs by means of deeper bilateral regulatory and secur-

ity cooperation Te accord seeks to streamline various border proceduresmdash

some already in existence and some newmdashto improve intelligence-sharing

between law enforcement agencies mutual recognition of passenger baggage

screening improved frameworks for trusted trade programs harmoniza-

tion of NEXUS protocols streamlined supply chains enhanced trade com-

petitiveness collaboration in border infrastructure investment and deeper

cooperation in national security investigations Te agreement is known as

Beyond the Border A Shared Vision for Perimeter Security and Economic

Competitiveness (February 983092 983090983088983089983089)

Te Beyond the Border Vision accord also set up a Regulatory

Cooperation Council In it Canadian and American officials seek to reduce

red tape and harmonize regulations in certain key sectors o date the

Council has announced various plans affecting agriculture and food trans-

portation health personal care products workplace chemicals environmentnano materials and small business loans We summarize the key points of

progress made since 983090983088983089983089 in table 983097

-35

-25

-15

-5

5

15

25

35

20122011201020092008200720062005

Truck Rail Pipeline

Figure Growth rate of all surface modes of freight flows () ndash

Source Bureau of Transportation Statistics (2013) calculations by authors

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983090983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983097 Key elements of Beyond the Border and Regulatory Cooperation

Beyond the Border Program

Integrated Cargo Security Strategy (ICSS)December 2011

Reduces administrative duplication between Canada and the US byaddressing security risks in advance within the shipment supply chainand at the border (Canada Border Services Agency 2013)

Prince Rupert Pilot October 2012 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry via rail is examined by Canadian officials onbehalf of the US (Government of Canada 2013c)

Montreal Pilot January 2013 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry to the US via truck is examined by Canadianofficials on behalf of the US (Government of Canada 2013c)

Pre-load Air Cargo Targeting (PACT) Joint pilot by CBSA and Transport Canada to screen cargo pre-flight onCanada-bound airplanes at foreign airports (Canada Border ServicesAgency 2013)

Tamper Evident Technology PilotOctober 2012

Pilot collaboration between CBSA and US CBP to ensure containersremain sealed upon arrival at the US border (Canada Border Services

Agency 2013)

Truck Cargo Pre-Inspection PilotMarch 2013

Pilot program between the CBSA and the US CBP for pre-inspection ofsouthbound traffic into US (Canada Border Services Agency 2013)

Free and Secure Trade (FAST) PilotSarnia Ontario

Pilot program for usage of FAST lanes without Partners in Protection andCustoms Self Assessment programs (Government of Canada 2013c)

Canada-US Shiprider June 2013 Removal of jurisdictional barriers to improve law enforcement personnelin Windsor-Detroit and Vancouver-Blaine waterways (Government ofCanada 2013c)

EntryExit Initiative Phase II June 2013 Exchange entryexit data between the CBSA and US DHS on individualsat Canada-US land border crossings (Government of Canada 2013c)

Regulatory Cooperation ProgramMemorandum of Understanding between Transport Canada and the RailwayAssociation of Canada September 2013

Framework for Canadian rail emissions between 2011 to 2015(Government of Canada 2013d)

Canada-United States Perimeter Approachto Plant Protection September 2013

Draft framework for increased cooperation and reduction inadministrative duplication between the Canadian Food InspectionAgency (CFIA) and United States Animal and Plant Health InspectionService (APHIS) on trade in plants and plant products (Government ofCanada 2013d)

Common Electronic Submission GatewayPilot (CESG) August 2013

FDA and Health Canada will allow pharmaceutical firms to electronicallysubmit drug applications (Government of Canada 2013d)

Initiative to Align Veterinary DrugApprovals December 2012

Joint reviews between US FDA and Health Canada on veterinary drugproducts (Government of Canada 2013d)

Stricter Air Pollutant Emissions Environment Canada aligns car emissions beginning in 2017 with theUS Environmental Protection Agencyrsquos ldquoTier 3rdquo (Government of Canada2013d)

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The state of Canada-US relations in 983090983088983089983092 983090983091

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On September 983092 983090983088983089983091 $983092983094983094 million in investment was allocated to the

Border Action plan by the Government of Canada in order expand two marine

container examination facilities (Government of Canada 983090983088983089983091c) $983091983091 million

was invested by the Government of Canada in the Asia Pacific Gateway and

rade Corridor Initiative (Government of Canada 983090983088983089983091c) Te Plan includes

an additional 983090983097 harmonization initiatives that will enhance trade activity

between Canada and the US

Neither Beyond the Border nor the Regulatory Cooperation Council

offer further investment or cost estimates on the initiatives described in table

983097 Moens and Gabler (983090983088983089983090) pointed to the need for both the Canadian and

American governments to provide data on border costs so that a cost-benefit

analysis can ensue Nonetheless the small steps of progress towards inte-

grating and harmonizing US and Canadian border practices remains a very

important (long-term) part of reducing the profile of the border

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983090983092 fraserinstituteorg

Canadian and American public perceptions

Tree observations are noteworthy in recent assessments of public percep-

tions between Americans and Canadians First Americans consistently have

a very high favourability rating of Canadians typically in the 983097983088 plus range

(table 983089983088 figure 983089983093) Both as a friend and a strategic ally Americans hold

Canadians in the most favourable light possible (table 983089983089) Disagreements over

policy between the two countries whether in defence and foreign affairs or

over border and trade issues do not move this fundamental asset Canadians

enjoy in dealing with their neighbour

Second Canadians do not have high expectations of either the

American or Canadian government regarding progress in bilateral relations

As table 983089983090 shows Canadians hold Obama in high regard (983094983091 percent) but

only 983093983092 percent expect progress from him in trade relations Prime Minister

Harper is rated slightly ahead of President Obama in terms of working hard

towards improving Canada-US relations (table 983089983091)

Tird and most significant in light of Canadarsquos Catch-983090983090 situation both

Canadians and Americans are more supportive of closer cooperation and inte-

gration policies than is the case for political representatives in either the United

States or Canada In two recent studies we showed how US Senators and House

Representatives are quite critical of Canada with regard to NAFA issues and bor-

der security (Moens and Gabler 983090983088983089983089) Similarly we found that among the three

major political parties in Canadarsquos parliament only one consistently expressed

itself in favour of closer ties with the United States (Moens and Gabler 983090983088983089983089)

A recent survey of American and Canadian (and Mexican) attitudes

towards free trade and NAFA show surprisingly strong data for more trade

integration In response to the statement ldquoTere should be more free trade

between the US Canada and Mexicordquo 983096983088 percent of Canadians approved

as did 983095983092 percent of Americans Even on border security Canadians andAmericans are more pro-cooperation and integration than their governmental

policies suggest In the US 983092983089 percent support a common perimeter while

983090983088 percent are opposed In Canada 983092983091 percent support it and 983091983088 percent are

opposed (Graves Pastor and Basaacutentildeez 983090983088983089983091) Terefore in terms of public

mandate both governments would have a case to work towards broader bilat-

eral (or trilateral) cooperation to lower trade barriers

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The state of Canada-US relations in 983090983088983089983092 983090983093

fraserinstituteorg

Table 983089983088 Canadian favourability rating among Americans (February 983090983088983089983090)

Veryfavourable

Mostlyfavourable

Mostlyunfavourable

Veryfavourable Not sure Total

favourableTotal

unfavourable

53 38 3 2 3 91 5

Note n=1015

Source Gallup Poll (2012)

Table 983089983089 Ally or enemy for Americans (June 983090983088983089983091)

Country Ally Friendly Unfriendly Enemy Total Ally andFriendly

Great Britain 66 25 2 1 91

Canada 61 33 2 1 94

China 11 44 26 14 55

Note n=1529Source Gallup Poll (2013)

88

90

92

94

96

98

201220112010200920082007

Figure Canadian favourability among Americans () ndash

Source Gallup Poll (2012)

f a

v o u r a

b l e

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983090983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983090 What effect will Obama have on Canada-US relations (November 983090983088983089983090)

Canadians Americans

Positive Negative None Positive Negative None

Relationship 62 5 34 48 12 40

Trade 54 10 35 48 12 39

Harmonizing 53 8 40 47 14 39

Note n=1066

Source Abacus Data (2012)

Table 983089983091 Has each leader worked hard to improve Canada-US relations

(July 983090983088983089983090)

Country Agree Disagree Not sure

Stephen Harper 58 32 10

Barack Obama 53 32 15

Note Sample of Canadians

Source HarrisDecima (2012)

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fraserinstituteorg 983090983095

US policy uncertainty

Canadian economic prospects face their most important challenge in the

United States Te US economic recovery has been modest and real GDP

growth so far has remained below the post-World War II average of post-

recession periods (figure 983089983094) As we noted above the less-than-stellar US

recovery is made even more challenging for Canadian traders in that pro-

ductivity gains in Canada are lagging while the Canadian dollar remains high

On top of that several American-imposed regulatory obstacles to free trade

are depressing trade prospects in crude oil red meat and public works pro-

curement Tese impediments reduce Canadian competitive access to the

US market

A high level of public spending until the January 983090983088983089983091 sequester and

ongoing monetary stimulation have not produced notable US GDP growth

Te seven post-recession periods below show the current average to be well

below the historical average (Young 983090983088983089983091)

983089983097983092983096-983089983097983093983095 983091983096983088

983089983097983093983096-983089983097983094983095 983092983090983096

983089983097983094983096-983089983097983095983095 983091983089983096

983089983097983095983096-983089983097983096983095 983091983089983093

983089983097983096983096-983089983097983097983095 983091983088983093

983089983097983097983096-983090983088983088983095 983090983097983097

983090983088983088983096-983090983088983089983091 983088983095983091

While economic growth has been modest growth in the public debt

has not (figure 983089983095) Publicly held debt in the US is now at 983095983091 percent of GDP

the highest since 983089983097983092983094 (Congressional Budget Office 983090983088983089983091)

Te widening gap between federal government outlays and revenueshas only recently been capped by the Sequester (figure 983089983096) However the

budget Sequester is temporary and final resolution of public spending and

taxation levels remains unclear given repeated gridlock in presidential-con-

gressional policy making High debt levels combined with stalemate over

taxes and budget cuts have produced a case of policy instability or uncer-

tainty in the last five years (Baker Bloom and Davis 983090983088983089983091)

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US policy uncertainty is further aggravated by inaction on the large

lsquoentitlementrsquo programsmdashSocial Security Medicare and Medicaidmdashwhich are

the major drivers of the long-term gap in revenues and spending

-4

-2

0

2

4

6

8

201220062000199419881982197619701964

Figure US GDP growth rate ndash ( forecast)

Source The World Bank (2013b) OECD (2013)

-10

-8

-6

-4

-2

0

0

20

40

60

80

100

20122011201020092008200720062005200420032002

Government deficit as a percentage of GDP Government debt as a percentage of GDP

Figure US Government deficit and debt as a percentage of GDP ndash

Source Congressional Budget Office (2013)

D e fi c i t p e r c e n t a g e ( ) D

e b t p er c en t a g e ( )

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The state of Canada-US relations in 983090983088983089983092 983090983097

fraserinstituteorg

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

20122003199319831973

Revenue Outlays

Figure US Government revenue and outlays ndash ( US$ billions)

Source Congressional Budget Office (2013)

1 9 8 3 U S $ b i l l i o n s

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983091983088 fraserinstituteorg

Trade diversification

Given the weakness in near-term US opportunities Canadians are (again)

wondering how to pursue trade diversification away from the United States

Te objective is logical and if achieved will prove advantageous but various

trends in trade and investment show that diversification for Canada is a slow

and arduous journey (table 983089983092)

In terms of overall share exports to China in the last five years have

doubled but the numbersmdashfrom 983090983089983095 percent to 983092983090983094 percentmdashremain rela-

tively low In the same period the US-bound share declined by 983091 percent but

remains a towering 983095983092983093983092 percent Te pattern of small overall impact applies

to all the other top trading partners For example exports to the UK have

increased but exports to Japan and Mexico have essentially stalled When we

consider average export growth rates over the last five years (table 983089983093) we see

a very strong rate for China (983089983093983093 percent) and strong rates for the UK and

South Korea (983096983097 percent and 983094983097 percent) However a 983089983093 percent increase in a

983092 percent overall trade share produces little change Te point we are making

is that at this rate and pattern of trade lsquodiversificationrsquo it will actually take a

very long timemdashwhile relatively small upward trends in trade with the United

States could have a quick and very large impact in the opposite direction

On the import side we notice more trade diversification with the US

share at 983093983088 percent and the Chinese share at 983089983089 percent (table 983089983094) Te Chinese

growth rate on the import side is less than on the export side (table 983089983095) Te

most revealing number may be the high average over five years for Mexico

at 983097 percent Tis could be indicative of a growing supply chain with Mexico

While foreign direct investment (FDI) is not a direct indicator of future

trade trends in investment may harbinger change In terms of outbound

FDI we notice that only a small segment (less than 983089983088 percent) is targeted

for manufacturing (table 983089983096) It is investment in this category in which onewould expect growth in supply chains

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The state of Canada-US relations in 983090983088983089983092 983091983089

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Table 983089983092 Canadarsquos merchandise exports top ten destinations 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 3291 1 777 2361 1 751 2564 1 749

China 92 4 22 97 3 31 114 3 33

UK 114 2 27 105 2 33 141 2 41

Japan 97 3 23 73 4 23 79 4 23

Mexico 51 5 12 42 5 13 43 5 13

Netherlands 32 8 08 24 8 08 28 8 08

South Korea 34 7 08 31 7 10 32 7 09

Germany 39 6 09 33 6 10 34 6 10

France 28 9 07 23 9 07 20 10 06

Brazil 23 10 05 14 10 04 22 9 06

Total 4237 3145 3424

2011 2012Average

shareValue Rank Share Value Rank Share

US 2750 1 737 2783 1 745 752

China 140 3 38 159 2 43 33

UK 157 2 42 154 3 41 37

Japan 89 4 24 85 4 23 23

Mexico 46 5 12 44 5 12 12

Netherlands 40 7 11 37 6 10 09

South Korea 43 6 11 30 7 08 09

Germany 33 8 09 29 8 08 09

France 26 9 07 26 9 07 07

Brazil 24 10 06 21 10 06 06

Total 3732 3734

Source Industry Canada (2013b)

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Table 983089983093 Canadian export growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 56 7 -281 9 106 = 5

China 101 6 65 1 187 3

UK 16 9 -73 2 358 2

Japan 202 3 -250 7 106 = 5

Mexico 179 4 -178 6 43 9

Netherlands -85 10 -255 8 183 4

South Korea 276 2 -80 3 52 8

Germany 160 5 -167 4 54 7

France 36 8 -174 5 -122 10

Brazil 706 1 -380 10 603 1

2011 2012Average

Rank Rank

US 104 8 27 2 02

China 270 4 152 1 155

UK 148 6 -02 4 90

Japan 161 5 -29 6 38

Mexico 94 9 -16 5 24

Netherlands 475 1 -55 7 53

South Korea 374 2 -272 10 70

Germany 05 10 -95 9 -09

France 311 3 23 3 15

Brazil 109 7 -92 8 189

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983091

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Table 983089983094 Canadarsquos merchandise imports top ten sources 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 1992 1 524 1633 1 511 1745 1 504

China 374 2 98 347 2 109 382 2 110

Mexico 157 3 41 145 3 45 190 3 55

Japan 134 4 35 108 4 34 115 4 33

Germany 111 5 29 95 5 30 97 5 28

UK 110 6 29 82 6 26 92 6 27

South Korea 53 9 14 52 7 16 53 7 15

Algeria 67 7 18 33 10 10 31 10 09

Italy 45 10 12 39 9 12 40 9 12

France 53 8 14 49 8 15 47 8 13

Total 3804 3194 3465

2011 2012Average

shareValue Rank Share Value Rank Share

US 1846 1 496 1922 1 506 508

China 402 2 108 417 2 110 107

Mexico 205 3 55 210 3 55 50

Japan 109 4 29 123 4 33 33

Germany 107 5 29 118 5 31 29

UK 86 6 23 70 6 18 25

South Korea 55 7 15 52 7 14 15

Algeria 46 9 12 49 8 13 12

Italy 43 10 11 43 9 11 12

France 46 8 12 41 10 11 13

Total 3723 3796

Source Industry Canada (2013b)

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Table 983089983095 Old and new trade prospectsmdashimport growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 29 8 -178 7 89 5

China 112 4 -70 2 123 3

Mexico 43 7 -77 4 337 1

Japan -11 10 -192 8 89 4

Germany 105 5 -149 6 44 7

UK 95 6 -252 9 141 2

South Korea 120 3 -14 1 36 8

Algeria 518 1 -511 10 -50 10

Italy 11 9 -132 5 48 6

France 191 2 -70 3 -35 9

2011 2012Average

Rank Rank

US 88 5 57 4 17

China 82 6 53 5 60

Mexico 111 3 39 6 91

Japan -29 9 151 1 01

Germany 132 2 117 2 50

UK -36 10 -173 10 -45

South Korea 76 7 -37 8 37

Algeria 533 1 91 3 116

Italy 95 4 23 7 09

France 22 8 -97 9 02

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983093

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In terms of overall Canadian outbound FDI stocks in the US remain

very high despite the recent US recession while growth in stock in Asia is

modest (figure 983089983097) When we examine Canadian FDI in the so-called BRIC

states we notice that investment in both China and India is relatively small

Canadian mining investment in Brazil is much larger (figure 983090983088) In fact when

we examine amounts of FDI we find that Canada is not really a big BRIC

investor other than Brazil Chile Hong Kong and Peru are larger FDI recipi-

ents than China and India (figure 983090983089)

In terms of FDI flowing into Canada we notice the very large share

(983090983096983094983093 percent) in manufacturing which indicates both the predominant

share of US FDI and the extensive integrated supply chains in Canada-US

manufacturing (table 983089983097) Even more than for outbound FDI inflow stocks

show very large US preponderance (figure 983090983090) Such continued concentra-

tion of US FDI in Canada suggests that Canadian trade diversification is not

just a decision to be made by Canadian producers

Like trade growth Chinese FDI growth in Canada is positive but the

overall numbers are small and do not show rapid growth in the last 983091 years

(figure 983090983091)

Table 983089983096 Top industries for outward stocks of FDI 983090983088983089983090

Category Value Share

Mining oil and gas extraction 1099 188

Oil and gas subcategory 542 93

Manufacturing 569 97

Finance and insurance 2334 399

Management of companies and enterprises 757 129

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

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0

1

2

3

4

5

6

7

8

9

10

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n s

Figure Canadian foreign direct investment (stock) BRIC ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Brazil PRC India Russia

0

20

4060

80

100

120

140

160

180

200

220

240

260

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) various regions

ndash

Notes Excluding Mexico Canadian FDI to Mexico in 2012 was $557 billion

Foreign Direct Investment measures the purchase of various forms of capital stock abroad

However tax havens (Barbados Bermuda etc) are frequently found to be some of the highest

recipients of FDI In reality tax havens do not reflect economic growth as FDI figures invested

into tax havens are often reinvested back to the source country in a concept known as

round-tripping (Financial Post 2013) We have accounted for tax havens by removing them from

tables and figures in this section The numbers corresponding to Figure 19 would be Barbados

($593 billion) Bermuda ($118 billion) British Virgin Islands ($21 billion) Cayman Islands ($302

billion)

Source Foreign Affairs Trade and Development Canada (2013c)

US Europe Asia amp Oceania Central amp South America Africa

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The state of Canada-US relations in 983090983088983089983092 983091983095

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Table 983089983097 Top industries for inward stocks of FDI 983090983088983089983090

Category Value Share

Oil and gas extraction 766 147

Manufacturing 1492 287

Petroleum and coal products manufacturing 377 72

Wholesale trade 395 76

Finance and insurance 699 134

Management of companies and enterprises 999 192

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

0

2

4

6

8

10

12

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) Chile Hong Kong

Peru amp Korea ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Chile Hong Kong Peru Korea

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0

40

80

120

160

200

240

280

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Foreign direct investment (stock) in Canada from top three

countries ndash

Source Foreign Affairs Trade and Development Canada (2013c)

US Netherlands UK

0

2

4

6

8

10

12

201220112010200920082007

2 0 0 2 C A $ b

i l l i o n s

Figure Foreign direct investment (stock) in Canada from China

ndash

Source Foreign Affairs Trade and Development Canada (2013c)

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fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

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Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

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References

Abacus Data (983090983088983089983090 November 983090983088) Beyond the Canadian-American Border

lthttpabacusdatacawp-contentuploads983090983088983089983090983089983089Can-AM_Report_CABC_

Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5662

The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5862

The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5962

983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6062

The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6162

983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 10: Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091

fraserinstituteorg

Table 983090 Merchandise trade as a of GDP 983090983088983088983093ndash983090983088983089983090 (current US$)

2005 2006 2007 2008 2009 2010 2011 2012

Canada 602 584 569 583 483 501 515 510

Growth 02 -30 -26 25 -172 37 28 -10

US 210 221 227 243 191 225 250 248

Growth 61 52 27 70 -214 178 111 -08

Source The World Bank (2013a)

0

1

2

3

4

5

6

7

8

9

2 0 1 3

- 0 5

2 0 1 3

- 0 1

2 0 1 2

- 0 9

2 0 1 2

- 0 5

2 0 1 2

- 0 1

2 0 1 1

- 0 9

2 0 1 1

- 0 5

2 0 1 1

- 0 1

2 0 1 0

- 0 9

2 0 1 0

- 0 5

2 0 1 0

- 0 1

2 0 0 9

- 0 9

2 0 0 9

- 0 5

2 0 0 9

- 0 1

2 0 0 8

- 0 9

2 0 0 8

- 0 5

2 0 0 8

- 0 1

2 0 0 7

- 0 9

2 0 0 7

- 0 5

2 0 0 7

- 0 1

2 0 0 2 C A $ b i l l i o n s

Figure Canada-US net merchandise trade (monthly) ndash

Source Statistics Canada (2013c) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

-5

-4

-3

-2

-1

0

1

2

3

2012201120102009200820072006200520042003200220012000

G r o

w t h ( )

Figure GrowthUS share of Canadarsquos annual merchandise trade ()

ndash

Source Industry Canada (2013b) calculations by authors

Import Export

45

50

55

60

65

70

75

80

85

90

2011200920072005200320011999199719951993

Import Export

Figure US share of Canadarsquos annual merchandise trade () ndash

Source Industry Canada (2013b)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093

fraserinstituteorg

Table 983091 Top sectors for Canadian merchandise exports to the US 983090983088983089983090

Industry Exports

2002 CA$ bi llions Percentage

Mineral products 886 318

Products of chemical or allied industries 163 59

Plastics and related articles 118 43

Base metals and articles of base metals 200 72

Machinery mechanical appliances electrical equipment and related articles 276 99

Vehicles aircraft vessels and associated transport equipment 530 191

Note On a customs basis

Source Statistics Canada (2013a)

Table 983092 Top industries for Canadian merchandise imports from the US 983090983088983089983090

Industry Imports

2002 CA$ bi llions Percentage

Mineral products 163 85

Products of chemical or allied industries 171 89

Plastics and related articles 127 66

Base metals and articles of base metals 158 82

Machinery mechanical appliances electrical equipment and related articles 413 215

Vehicles aircraft vessels and associated transport equipment 413 215

Note On a customs basis

Source Statistics Canada (2013a)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Trade in services

As a share of overall bilateral trade trade in services is growing gradually otal

bilateral services trade in 983090983088983089983088 amounted to 983089983096 percent of bilateral merchan-

dise trade It was 983089983093 percent in 983090983088983088983095983090 Te United States is by far the largest

trading partner in Canadarsquos international trade in services rade with the

US is nearly ten times the amount with the next largest partner the United

Kingdom But unlike merchandise trade the value of non-US services trade

is nearly half (983092983092 percent in 983090983088983089983088) of that with the USA (table 983093) In other

words there is more diversification from the US market in services than in

merchandise983091

Te trend reveals rising competitiveness on the US side (and non-USA)

as Canadian imports are growing considerably while Canadian exports are

stagnant resulting in a growing services trade deficit (figure 983093)

Bilateral trade in services was not impacted by the US recession as

merchandise trade was otal volume of trade is slightly up in the three years

after 983090983088983088983095 (figure 983094) Most of this gain is from growth in Canadian imports

from the US (and from non-US) while Canadian exports to the USA are

slightly down

Given that there is no growth in Americans traveling to Canada during

this time period (as we will show later) the relative strength of US exports vis-

agrave-vis Canadian exports appears to lie in the commercial sector (tables 983094 983095)

In conclusion in both merchandise and services trade the post 983090983088983088983095

period shows that Canada is relatively losing in trade competitiveness in rela-

tion to the United States Te relative loss of trade competitiveness in our

relationship may be a surprise to many Canadians who believe Canada has

simply been doing better than the US since 983090983088983088983096 Te lsquodoing betterrsquo part may

apply to domestic economic activity but not to external trade

1048626 Data on trade in services is not as recent as merchandise trade

1048627 op export destinations in 983090983088983089983088 after the USA are the UK France and Germany op

importers to Canada in 983090983088983089983088 after the USA include UK Hong Kong (China) France

Germany and Mexico Te case with importers to Canada is similar to that with export-

ing countries Imports from the UK make up roughly 983089983088 percent that of imports from the

US Imports from Hong Kong are 983093983089 percent that from the UK with France at 983092983090 percent

and both Germany and Mexico rest at roughly 983091983096 percent each

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983095

fraserinstituteorg

Table 983093 Services trade between Canada and the US 983090983088983088983093ndash983090983088983089983088 (983090983088983088983090 CA$ billions)

2005 2006 2007 2008 2009 2010

Exports to USA 3988 3815 3834 3966 3718 3700

Imports from USA 4358 4395 4544 4833 4783 4960

Trade balance with USA -370 -580 -710 -866 -1065 -1260

Trade balance with USA -443 -707 -847 -985 -1240 -1455

Exports to non-USA 2832 3080 2985 3052 3142 3102

Imports from non-USA 3022 3187 3380 3518 3496 3722

Trade balance with non-USA -189 -108 -395 -466 -354 -620

Trade balance with non-USA -323 -172 -621 -710 -540 -909

Total services exports 6820 6894 6819 7018 6860 6802

Total services imports 7379 7582 7924 8350 8279 8682

Total trade balance -559 -688 -1105 -1333 -1419 -1880

Total trade balance -394 -475 -750 -867 -937 -1214

Bilateral (X+I) USA 8346 8210 8378 8799 8589 8660

Bilateral (X+I) non-USA 5854 6267 6365 6569 6551 6824

Bilateral (X+I) total 14200 14477 14742 15368 15140 15484

Source Foreign Affairs Trade and Development Canada (2013a)

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983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

80

81

82

83

84

85

86

87

88

89

90

201020092008200720062005

2 0

0 2 C A $ b i l l i o n s

Figure Canada-US net services trade ndash

Source Foreign Affairs Trade and Development Canada (2013a)

-20

-16

-12

-8

-4

0

201020092008200720062005

Trade balance with USA Total trade balance

Figure Canadarsquos trade deficit with US and the world ndash

Source Foreign Affairs Trade and Development Canada (2013a)

2 0 0 2 C A $ b i l

l i o n s

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983097

fraserinstituteorg

Table 983094 Top categories for service trade exports Canada-World 983090983088983089983090

Category Subcategory Exports

2002 CA$ bi llions Percentage

Government services 13 19

Travel services 143 207

Personal travel 119 172

Transportation services 111 161

Air transport 52 76

Commercial services 424 614

Financial services 57 82

Computer and information services 64 93

Intellectual property use 31 44

Management services 90 130

Research and development 33 47

Architectural engineering 39 57

Source Foreign Affairs Trade and Development Canada (2013a)

Table 983095 Top categories for service trade imports Canada-World 983090983088983089983090

Category Subcategory Imports

2002 CA$ billions Percentage

Government services 11 12

Travel services 288 323

Personal travel 253 284

Transportation services 195 219

Water transport 82 92

Air transport 84 95

Commercial services 396 446

Insurance services 44 50

Financial services 44 50

Intellectual property use 89 100

Management services 75 84

Source Foreign Affairs Trade and Development Canada (2013a)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983089983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

075

080

085

090

095

100

105

2 0 1 3

- 0 7

2 0 1 3

- 0 1

2 0 1 2

- 0 7

2 0 1 2

- 0 1

2 0 1 1

- 0 7

2 0 1 1

- 0 1

2 0 1 0

- 0 7

2 0 1 0

- 0 1

2 0 0 9

- 0 7

2 0 0 9

- 0 1

2 0 0 8

- 0 7

2 0 0 8

- 0 1

2 0 0 7

- 0 7

2 0 0 7

- 0 1

Figure CanadaUS dollar exchange rate ndash

Source Bank of Canada (2013b)

C A U S e x c h a n g e r a t e

Dollar value and productivity trends

Te first factor to consider regarding Canadarsquos trade competitiveness vis-agrave-vis

the United States is the value of the Canadian dollar Te substantial appre-

ciation of the Canadian dollar against the US dollar that began in the early

983090983088983088983088s has stabilized at a much higher average value of the loonie ( figure 983095)

As is well documented such exchange rate appreciation tends to have a strong

effect on current account balances as exports decline (Kappler et al 983090983088983089983089)

A growing account deficit will likely push the value of the Canadian dollar

downward in the longer term and thus offer some remedy

ProductivityOf more concern to Canadians should be the data indicating that Canadian

labour productivity rates are lagging those in the United States (figures 983096 983097)

One would expect that Canadarsquos higher dollar has provided industry in recent

years with an opportunity to improve productivity as imported machinery

and technology would be available at a lower price However Canadarsquos pro-

ductivity rate of growth is modest and in 983090983088983089983090 dips into negative territory

again

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983089983089

fraserinstituteorg

-1

0

1

2

3

20122011201020092008

Canada US

Figure Canada and US rates of output productivity growth ()

ndash

Source Statistics Canada (2013g)

R a t e o f p r o d u c t i v i t y g r o

w t h ( )

-10

-5

0

5

20122011201020092008

Labour productivity (Canada) Real GDP (Canada) Hours worked (Canada)

Labour productivity (US) Real GDP (US) Hours worked (US)

Figure Real US-Canadian output and hours worked () ndash

Source Statistics Canada (2013g)

A n n u a l c

h a n g e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983089983090 fraserinstituteorg

Trade and regulatory barriersdisputes

Table 983096 provides a synopsis of the major trade disputesbarriers that have

played a role in bilateral relations in the last five years and that are pertinent

for the 983090983088983089983092 period (pages 983089983094-983089983095) Te two large disputesmdashKeystone XL and

Mandatory Country-of-Origin Labeling (MCOOL) on red meatmdashare more

ominous than they may seem First both in crude oil products and in cattle

and hogs the United States is unilaterally disrupting or dismantling a well-

established integrated sector Canada has started attempts to diversify its oil

transportation structure including more rail and new pipeline routes But

as all proposed alternative pipelines have shown the alternatives are contro-

versial and at best years away from making a difference Meanwhile there is

considerable risk in putting too much crude oil on rail as its accident rates

are higher than pipe

Canadian threats to counter US MCOOL action with tariffs on food

products are not going to have much impact in the near future Moreover

an escalating tariff war on food products cannot be won by Canada and will

ultimately harm consumers on both sides of the border US defiance of two

WO rulings also means more uncertainty for Canadian traders

Keystone XL pipeline

Proposed in 983090983088983088983096 the Keystone XL (KXL) extension is part of a pipeline sys-

tem connecting Alberta oil sands and US mid-West and Gulf region refineries

KXL is a 983089983096983097983095 km crude oil pipeline with a capacity of 983092983094983093983088983088983088 barrels per

day (Hussain 983090983088983089983091) It is a substantial private infrastructure proposal that

will create employment and guarantee a secure energy source for the United

States (Millington and Murillo 983090983088983089983091) It is by no means a new feature in

Canada-US energy relations as a dense network of oil and electricity carri-ers cross the border at multiple points

What is unprecedented is that the permit process is now in its sixth

year and the final resolution remains uncertain (by US law a cross-border line

requires Department of State approval) If not resolved in 983090983088983089983092 the question

may well be handed over to the next president after 983090983088983089983094 Te policy uncertainty

associated with KXL approval has by far the largest impact on Canada-US trade

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The state of Canada-US relations in 983090983088983089983092 983089983091

fraserinstituteorg

relations Te dragged-out procedure has chilled relations Te southern leg of

KXL has been completed and the original route objection by Nebraska has been

resolved What remains ostensibly the problem is that the US administration

has identified this heavy oil as a component of its policy objective of curbing

the emission of greenhouses gasses to reduce global warming

Te impact of this pipeline delay in the 983090983095 million barrels per day (bpd)

export of Canadian oil products to the USA reverberates at various levels

Across Canada investment in mining oil and gas extraction for 983090983088983089983091 is pre-

dicted to decrease by 983090983095 percentmdashthe largest decline since the 983090983088983088983096 recession

(Statistics Canada 983090983088983089983091f) In Alberta investment is predicted to increase by

only 983088983089 percent (Statistics Canada 983090983088983089983091f) Capital investment in oil and gas

extraction has not recovered to pre-983090983088983088983096 levels (Industry Canada 983090983088983089983091a)

While the industry has become increasingly dependent on rail trans-

port to move product it is a costly alternative It can cost up to three times

as much as pipeline transport (Millington and Murillo 983090983088983089983091) and its limita-

tions are self-evident because rail movement of oil is constrained by the lim-

ited availability of rail cars In 983090983088983089983090 983089983091983088983088983088983088 bpd of heavy crude was being

transported by rail Tis is expected to rise to 983092983090983093983088983088983088 bpd by the end of

983090983088983089983092 falling short of the 983092983094983093983088983088983088 bpd which could have been moved through

KXL (Hussain 983090983088983089983091) Te forced increase in rail transport has resulted in

unintended costs for the industry a total of US$983089 billion must be invested for

new rail terminals and another US$983092ndash983093 billion for new rail cars (Lewis 983090983088983089983091)

Rail transport is both more costly and more dangerous A recent study

concluded that ldquopipeline transportation is safer than transportation by road

rail or barge as measured by incidents injuries and fatalitiesrdquo (Green amp

Furchtgott-Roth 983090983088983089983091) It is not inconceivable that another major oil acci-

dent either in Canada or the USAmdashsuch as took place in Quebec in July 983090983088983089983091

killing 983092983095 peoplemdashwould result in a moratorium on oil transport by rail with

grave consequences for Canadian producers

983090983088983088983090 Mandatory Country-of-Origin Labeling

Mandatory Country-of-Origin Labeling (MCOOL) is a provision mandated

by Congressional law and first implemented in 983090983088983088983096 Te measure imposes

strict segregation rules on American Canadian and Mexican cattle and hogs

and the subsequent slaughtering and processing of these animals to producebeef and pork products for retail sale Te stated purpose is to create labels

that indicate the origin in part or in whole of the product In effect it is a

veiled trade barrier because it gives US animals and products a competitive

advantage due to higher labeling inventory and processing costs for equiva-

lent Canadian products

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983089983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983096 Synopsis of trade disputes in Canadian-American relations in 983090983088983089983091

Dispute Impact and cost Prospect for resolution

Keystone XL Pipeline Very serious Poor

2008 proposal for a 1897

km 465000 bpd crude oilpipeline spanning fromAlberta down to Nebraska

Downward pressure on investment

Lost wages January 2012postponement is costing US $47million a day in lost wages (ConsumerEnergy Alliance 2013)

Continuation of crude oil pricediscounts due to lack of infrastructure

Costly alternative rail has emerged as atransportation alternative but can costup to three times as much as pipelinetravel (Millington and Murillo 2013)

Permit postponed twice

Resolution is not transparent

Rising risk of decision deferral past 2016

Mandatory Country-of-OriginLabelling (MCOOL)

Serious Poor

2008 CongressionalLaw mandating rulesfor segregated livestockprocessing and packagingand a labeling structure inorder to have food labelsindicate origin of product

Annual cost to Canadian beef and porksector of $1 billion

Deconstruction of a highly integratedtrilateral supply chain industry

MCOOL adds no animal health or foodsafety benefits

US has defied both WTO complaint andthe core part of the WTO Appeal ruling

2013 US reaction has been to strengthenthe discriminatory provision banning co-mingling of meats altogether

Canada plans to retaliate with tariffs butthis is a costly gambit with low chance ofsuccess

Softwood Lumber Agreement Moderate Good

In 2011 American softwoodcompanies took theirCanadian counterparts to theLondon Court of InternationalArbitration accusing themof circumventing the SLA(Foreign Affairs Trade andDevelopment Canada 2012a)

If in violation Canadian industry wouldface $380 million in penalties (TheCanadian Press 2012)

The London Court of InternationalArbitration in 2012 ruled in favor ofCanada (Foreign Affairs Trade andDevelopment Canada 2012a)

SLA was to expire in 2013 but Canadaand the USA extended it until 2015 (CBCNews 2012)

Long-term free trade in lumber needs toreplace SLA

Buy American Provision Serious Partial resolution but high risk ofrecurring Buy American legislation

2009 American Recovery andReinvestment Act

Exclusion of Canadian products andproduction sharing in US public worksprocurement

Canada-US Procurement Agreement in2010 which allowed for the purchaseof Canadian goods on seven US

infrastructure projects valued at morethan $7777000

Canada needs to seek a comprehensiveagreement in order to escape futureAmerican protectionism with allprovinces on board and compliant withthe WTO provision

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The state of Canada-US relations in 983090983088983089983092 983089983093

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Dispute Impact and cost Prospect for resolution

Canadian Wheat Board Long-term benefit Completed

Canadarsquos mandatory wheat

marketing board monopsonyended in 2011

Frequent US action against CWB in the

past will now end as wheat marketingin Canada turns fully market based

Intellectual Property Rights Moderate potential cost Partially resolved

Canada has been on theSpecial 301 Priority Watch Listby the United States TradeRepresentative since 1995

Ongoing threat of US Trade Action andlegal action

Canadian domestic complianceincluding

Strengthening data protection

Participation in Anti-counterfeiting TradeAgreement (ACTA in 2013)

Enacted the Combating CounterfeitProducts Act (2013)

Started the process of strengthening

the Copyright Act and implementingWorld Intellectual Property OrganizationInternet Treaties

In recognition of which Canada has beenremoved from the Special 301 PriorityWatch List

Prescription drugs Serious potential for trade action Indirect progress

The US complaint againstCanada

Imposing price ceilings thatshifts the cost burden of RampDto US firms

Weak protection ofintellectual property rights rethird party sales

Slow prescription drugapproval process causingreduced market access

US firms experience lost revenues andtrade action is a risk

In 2013 CETA agreement with theEuropean Union Canada agrees to givefull patent protection to new drugs fortwo years

Two-year rule may be transferable tofuture Canada-US resolution

Table 983096 continued

Canada and the United States have had a deeply integrated market in

this sector since the early 983089983097983097983088s Animal health and food safety standards have

been largely harmonized As a result highly efficient supply-chain production

methods have made this industry quite efficient However the imposition of

MCOOL has changed all that (Moens amp Leon 983090983088983089983090) Te cost differential haswidened and Canadian exports have dropped dramatically Since 983090983088983088983096 the

cattle sector has lost $983094983092983088 million per year and the hog sector has lost $983093983088983088

million a year (Te Canadian Press 983090983088983089983091a)

In 983090983088983089983090 the World rade Organization (WO) ruled in Canadarsquos favor by

concluding that MCOOL is discriminatory Te WO gave the US until May 983090983091

983090983088983089983091 to act but on that same day the USDA imposed regulatory changes that

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983089983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

actually strengthened the provisions of MCOOL In retaliation the Canadian

government released a list of US exports to Canada that would be subjected

to tariffs and it is preparing to seek a compliance panel at the WO Until this

situation is resolved the Canadian government predicts a continuing annual

loss of $983089 billion for the Canadian red meat sector (Te Canadian Press 983090983088983089983091a)

Softwood lumber

In 983090983088983089983089 several American softwood companies took their Canadian counter-

parts to the Court of International Arbitration in London accusing them of cir-

cumventing the Softwood Lumber Agreement of 983090983088983088983094 (Foreign Affairs rade

and Development Canada 983090983088983089983090a) Te dispute centered on the accelerating pace

of lumber harvests resulting from the pine beetle infestation Te stakes were

high $983091983096983088 million in penalties should Canada lose (Te Canadian Press 983090983088983089983090)

In 983090983088983089983090 the Court of International Arbitration ruled in Canadarsquos favor

(Foreign Affairs rade and Development Canada 983090983088983089983090a) In addition while

the Softwood Lumber Agreement was set to expire in 983090983088983089983091 the Canadian

and American governments successfully negotiated an extension of the

Agreement until 983090983088983089983093 (CBC News 983090983088983089983090) Te fact remains that as long as a

large part of Canadarsquos softwood lumber is managed in terms of quotas and

the stumpage fee system US trade action is very likely

lsquoBuy Americanrsquo provision

Te 983090983088983088983097 American Recovery and Reinvestment Act (ARRA which expired

on September 983091983088 983090983088983089983089) and the more recent 983090983088983089983089 American Jobs Act stipu-

lated that steel iron and other goods used in the repair and construction of

infrastructure projects in the US (highways bridges mass transit and fed-

eral buildings) must be manufactured in the United States (Matthiesen 983090983088983089983089)

In response to ARRA Canada and the US signed the Canada-US

Procurement Agreement in 983090983088983089983088 which allowed for the purchase of Canadian

goods on seven US infrastructure projects valued at more than $983095983095983095983095983088983088983088

or within the 983091983095 states subject to the WO GPA (Government of Canada

983090983088983089983091a) Te 983090983088983089983089 American Jobs Act did not pass in Senate and is thus moot

While the ARRA dispute was partially resolved lsquoBuy Americanrsquo anda counter position of lsquoBuy Canadianrsquo can flare up on either side of the bor-

der Canadian industry is most vulnerable in this uncertainty Te Canadian

government ought to seek a comprehensive Buy American exemption to

escape future American protectionism In so doing all provincial govern-

ments need to be on board in order to make the WO and NAFA rules

function optimally

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The state of Canada-US relations in 983090983088983089983092 983089983095

fraserinstituteorg

Canadian Wheat Board (CWB)

In 983090983088983089983089 the Canadian government removed the monopsony held by the

Canadian Wheat Board Tis unilateral action offers a successful reduction

in bilateral trade distortion oday the CWB continues to operate as a mar-

keting group

Intellectual Property Rights (IPR)

From 983089983097983097983093 through 983090983088983089983091 Canada was on the Special 983091983088983089 Priority Watch

List by the United States rade Representative Te US complaint was that

protection and enforcement of IPR in Canada were weak Te Special 983091983088983089

Priority Watch List is designed to identify US trading partners that are the

worst offenders in IPR protection (Embassy of the United States Ottawa

Canada 983090983088983089983091)

Although the issue is not completely resolved Canada has made sig-

nificant progress in recent years Te federal government has strengthened

data protection regulations criminalized the use of camcorders in theaters

and participates in the Anti-Counterfeiting rade Agreement (ACA) nego-

tiations (983090983088983089983091) Most recently Canada enacted the Combatting Counterfeit

Products Act (Embassy of the United States Ottawa Canada 983090983088983089983091) Te

Canadian Government is in the process of strengthening the Copyright Act

and implementing World Intellectual Property Organization Internet reaties

(Embassy of the United States Ottawa Canada 983090983088983089983091)

As a result of these steps Canada was removed from the Special 983091983088983089

Priority Watch List in 983090983088983089983091

Prescription drugs

Prescription drug prices in Canada are relatively low due to a price ceil-

ing mandated by Canadarsquos healthcare system In addition Health Canada

approval times for prescription drugs significantly lag behind their counter-

parts in the United States and the European Union (Barua and Esmail 983090983088983089983091)

US lawmakers have repeatedly expressed their concerns over cheap prescrip-

tion drugs re-entering the US from Canada (Moens and Gabler 983090983088983089983089) TeEU also asked Canada to strengthen IPR protections for prescription drugs

(Lexchin and Gagnon 983090983088983089983091) Since the signing of the CEA agreement in

principle on October 983089983096 983090983088983089983091 the issue between Canada and the EU is now

resolved (Waldie 983090983088983089983091) Canada has agreed to ldquoEU demands for patent pro-

tection for up to two years on brand-name drugsrdquo (Blanchfield 983090983088983089983091)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983089983096 fraserinstituteorg

State of the border andregulatory cooperation

Te decline in Americans traveling to Canada corresponds with the US

Greenback losing value against the Canadian dollar (figures 983089983088 983089983089) However

when we consider the extent of the decline in total numbers it appears dispro-

portionate Te change in American travel suggests instead a bigger problem

following the 983097-983089983089 shock Te imposition of new border transit requirements

such as passports as well as longer wait times and more security screening

has likely dampened US travel across this international boundary Given the

modest economic recovery in the USA from the beginning of 983090983088983089983088 onward

one would expect disposable income including for travel to trend back up

Instead the numbers remain stagnant at around 983090983088 million less than half the

number of 983090983088983088983090

While an overall national average for border wait times is not avail-

able data on major border crossings in both Central Canada and British

Columbia indicate that no reductions in wait times have been achieved

between 983090983088983088983094 and 983090983088983089983089 (figure 983089983090) Te problem of inefficiency as presented

by the Canada-US border goes well beyond wait times It includes inefficient

activity away from the border such as extra warehousing and costs of com-

plying with various facilitated traveler and goods programs such as FAS for

trucks loads and drivers

Tere are consistent cost differences between domestic and cross-bor-

der truck-borne trade which point to significant border costs ldquoFor exports

to the US these costs added 983088983097 percent to the delivered price of goods in

983090983088983088983092 Tis figure fell to 983088983092 percent in 983090983088983088983097 hellip Higher fixed costs per shipment

accounted for most of the additional cost of transporting goods to the USrdquo

(Brown and Anderson 983090983088983089983090) When we consider that in the manufacturingsector parts cross the border several times in various stages of assembly we

realize how this cost accumulates and defeats the efficiency gains otherwise

generated by integrated supply chain manufacturing Border costs are typ-

ically passed on to the consumer as fixed costs per shipment

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983089983097

fraserinstituteorg

An unprecedented border problem has arisen in the current USAdministrationrsquos lengthy (six years) review of the permitting of a pipeline

border crossing as proposed in the Keystone XL project As a result oil-by-

rail transport has recently increased while the pipeline mode of Canada-US

trade has seen a drop in growth in the 983090983088983089983089983089983090 period ( figures 983089983091 983089983092)

0

10

20

30

40

50

201220112010200920082007200620052004200320022001200019991998

Figure Travellers entering Canada ndash

Source Statistics Canada (2013e)

US residents Non-US residents

0

3

6

9

12

15

18

0

03

06

09

12

15

18

20122011201020092008200720062005200420032002

Trips Spending US$CA$ (Secondary axis)

Figure US overnight travel to Canada ndash

Source Statistics Canada (2011) Bank of Canada (2013b)

M i l l i o n s o f t r i p

s N o m i n a l C A $ b i l l i o n s

U S $ C A $ ex c h a n

g er a t e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

5

10

15

20

201120102009200820072006

Northbound average delay Southbound average delay

Figure Peace Arch average border wait time ndash

Source Cascade Gateway Data (2013)

M i n u t e s

0

25

50

75

100

125

150

175

200

225

250

275

300

201220112010200920082007200620052004

2 0 0 4

U S $ b

i l l i o n s

Figure All surface modes of freight flow data based on value of goods

ndash

Source Bureau of Transportation Statistics (2013)

Truck Rail Pipeline

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983089

fraserinstituteorg

lsquoBeyond the Borderrsquo and Regulatory Cooperation

In 983090983088983089983089 Canada and the United States announced an ambitious agreement

to reduce border costs by means of deeper bilateral regulatory and secur-

ity cooperation Te accord seeks to streamline various border proceduresmdash

some already in existence and some newmdashto improve intelligence-sharing

between law enforcement agencies mutual recognition of passenger baggage

screening improved frameworks for trusted trade programs harmoniza-

tion of NEXUS protocols streamlined supply chains enhanced trade com-

petitiveness collaboration in border infrastructure investment and deeper

cooperation in national security investigations Te agreement is known as

Beyond the Border A Shared Vision for Perimeter Security and Economic

Competitiveness (February 983092 983090983088983089983089)

Te Beyond the Border Vision accord also set up a Regulatory

Cooperation Council In it Canadian and American officials seek to reduce

red tape and harmonize regulations in certain key sectors o date the

Council has announced various plans affecting agriculture and food trans-

portation health personal care products workplace chemicals environmentnano materials and small business loans We summarize the key points of

progress made since 983090983088983089983089 in table 983097

-35

-25

-15

-5

5

15

25

35

20122011201020092008200720062005

Truck Rail Pipeline

Figure Growth rate of all surface modes of freight flows () ndash

Source Bureau of Transportation Statistics (2013) calculations by authors

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983090983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983097 Key elements of Beyond the Border and Regulatory Cooperation

Beyond the Border Program

Integrated Cargo Security Strategy (ICSS)December 2011

Reduces administrative duplication between Canada and the US byaddressing security risks in advance within the shipment supply chainand at the border (Canada Border Services Agency 2013)

Prince Rupert Pilot October 2012 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry via rail is examined by Canadian officials onbehalf of the US (Government of Canada 2013c)

Montreal Pilot January 2013 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry to the US via truck is examined by Canadianofficials on behalf of the US (Government of Canada 2013c)

Pre-load Air Cargo Targeting (PACT) Joint pilot by CBSA and Transport Canada to screen cargo pre-flight onCanada-bound airplanes at foreign airports (Canada Border ServicesAgency 2013)

Tamper Evident Technology PilotOctober 2012

Pilot collaboration between CBSA and US CBP to ensure containersremain sealed upon arrival at the US border (Canada Border Services

Agency 2013)

Truck Cargo Pre-Inspection PilotMarch 2013

Pilot program between the CBSA and the US CBP for pre-inspection ofsouthbound traffic into US (Canada Border Services Agency 2013)

Free and Secure Trade (FAST) PilotSarnia Ontario

Pilot program for usage of FAST lanes without Partners in Protection andCustoms Self Assessment programs (Government of Canada 2013c)

Canada-US Shiprider June 2013 Removal of jurisdictional barriers to improve law enforcement personnelin Windsor-Detroit and Vancouver-Blaine waterways (Government ofCanada 2013c)

EntryExit Initiative Phase II June 2013 Exchange entryexit data between the CBSA and US DHS on individualsat Canada-US land border crossings (Government of Canada 2013c)

Regulatory Cooperation ProgramMemorandum of Understanding between Transport Canada and the RailwayAssociation of Canada September 2013

Framework for Canadian rail emissions between 2011 to 2015(Government of Canada 2013d)

Canada-United States Perimeter Approachto Plant Protection September 2013

Draft framework for increased cooperation and reduction inadministrative duplication between the Canadian Food InspectionAgency (CFIA) and United States Animal and Plant Health InspectionService (APHIS) on trade in plants and plant products (Government ofCanada 2013d)

Common Electronic Submission GatewayPilot (CESG) August 2013

FDA and Health Canada will allow pharmaceutical firms to electronicallysubmit drug applications (Government of Canada 2013d)

Initiative to Align Veterinary DrugApprovals December 2012

Joint reviews between US FDA and Health Canada on veterinary drugproducts (Government of Canada 2013d)

Stricter Air Pollutant Emissions Environment Canada aligns car emissions beginning in 2017 with theUS Environmental Protection Agencyrsquos ldquoTier 3rdquo (Government of Canada2013d)

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The state of Canada-US relations in 983090983088983089983092 983090983091

fraserinstituteorg

On September 983092 983090983088983089983091 $983092983094983094 million in investment was allocated to the

Border Action plan by the Government of Canada in order expand two marine

container examination facilities (Government of Canada 983090983088983089983091c) $983091983091 million

was invested by the Government of Canada in the Asia Pacific Gateway and

rade Corridor Initiative (Government of Canada 983090983088983089983091c) Te Plan includes

an additional 983090983097 harmonization initiatives that will enhance trade activity

between Canada and the US

Neither Beyond the Border nor the Regulatory Cooperation Council

offer further investment or cost estimates on the initiatives described in table

983097 Moens and Gabler (983090983088983089983090) pointed to the need for both the Canadian and

American governments to provide data on border costs so that a cost-benefit

analysis can ensue Nonetheless the small steps of progress towards inte-

grating and harmonizing US and Canadian border practices remains a very

important (long-term) part of reducing the profile of the border

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983090983092 fraserinstituteorg

Canadian and American public perceptions

Tree observations are noteworthy in recent assessments of public percep-

tions between Americans and Canadians First Americans consistently have

a very high favourability rating of Canadians typically in the 983097983088 plus range

(table 983089983088 figure 983089983093) Both as a friend and a strategic ally Americans hold

Canadians in the most favourable light possible (table 983089983089) Disagreements over

policy between the two countries whether in defence and foreign affairs or

over border and trade issues do not move this fundamental asset Canadians

enjoy in dealing with their neighbour

Second Canadians do not have high expectations of either the

American or Canadian government regarding progress in bilateral relations

As table 983089983090 shows Canadians hold Obama in high regard (983094983091 percent) but

only 983093983092 percent expect progress from him in trade relations Prime Minister

Harper is rated slightly ahead of President Obama in terms of working hard

towards improving Canada-US relations (table 983089983091)

Tird and most significant in light of Canadarsquos Catch-983090983090 situation both

Canadians and Americans are more supportive of closer cooperation and inte-

gration policies than is the case for political representatives in either the United

States or Canada In two recent studies we showed how US Senators and House

Representatives are quite critical of Canada with regard to NAFA issues and bor-

der security (Moens and Gabler 983090983088983089983089) Similarly we found that among the three

major political parties in Canadarsquos parliament only one consistently expressed

itself in favour of closer ties with the United States (Moens and Gabler 983090983088983089983089)

A recent survey of American and Canadian (and Mexican) attitudes

towards free trade and NAFA show surprisingly strong data for more trade

integration In response to the statement ldquoTere should be more free trade

between the US Canada and Mexicordquo 983096983088 percent of Canadians approved

as did 983095983092 percent of Americans Even on border security Canadians andAmericans are more pro-cooperation and integration than their governmental

policies suggest In the US 983092983089 percent support a common perimeter while

983090983088 percent are opposed In Canada 983092983091 percent support it and 983091983088 percent are

opposed (Graves Pastor and Basaacutentildeez 983090983088983089983091) Terefore in terms of public

mandate both governments would have a case to work towards broader bilat-

eral (or trilateral) cooperation to lower trade barriers

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The state of Canada-US relations in 983090983088983089983092 983090983093

fraserinstituteorg

Table 983089983088 Canadian favourability rating among Americans (February 983090983088983089983090)

Veryfavourable

Mostlyfavourable

Mostlyunfavourable

Veryfavourable Not sure Total

favourableTotal

unfavourable

53 38 3 2 3 91 5

Note n=1015

Source Gallup Poll (2012)

Table 983089983089 Ally or enemy for Americans (June 983090983088983089983091)

Country Ally Friendly Unfriendly Enemy Total Ally andFriendly

Great Britain 66 25 2 1 91

Canada 61 33 2 1 94

China 11 44 26 14 55

Note n=1529Source Gallup Poll (2013)

88

90

92

94

96

98

201220112010200920082007

Figure Canadian favourability among Americans () ndash

Source Gallup Poll (2012)

f a

v o u r a

b l e

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983090983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983090 What effect will Obama have on Canada-US relations (November 983090983088983089983090)

Canadians Americans

Positive Negative None Positive Negative None

Relationship 62 5 34 48 12 40

Trade 54 10 35 48 12 39

Harmonizing 53 8 40 47 14 39

Note n=1066

Source Abacus Data (2012)

Table 983089983091 Has each leader worked hard to improve Canada-US relations

(July 983090983088983089983090)

Country Agree Disagree Not sure

Stephen Harper 58 32 10

Barack Obama 53 32 15

Note Sample of Canadians

Source HarrisDecima (2012)

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fraserinstituteorg 983090983095

US policy uncertainty

Canadian economic prospects face their most important challenge in the

United States Te US economic recovery has been modest and real GDP

growth so far has remained below the post-World War II average of post-

recession periods (figure 983089983094) As we noted above the less-than-stellar US

recovery is made even more challenging for Canadian traders in that pro-

ductivity gains in Canada are lagging while the Canadian dollar remains high

On top of that several American-imposed regulatory obstacles to free trade

are depressing trade prospects in crude oil red meat and public works pro-

curement Tese impediments reduce Canadian competitive access to the

US market

A high level of public spending until the January 983090983088983089983091 sequester and

ongoing monetary stimulation have not produced notable US GDP growth

Te seven post-recession periods below show the current average to be well

below the historical average (Young 983090983088983089983091)

983089983097983092983096-983089983097983093983095 983091983096983088

983089983097983093983096-983089983097983094983095 983092983090983096

983089983097983094983096-983089983097983095983095 983091983089983096

983089983097983095983096-983089983097983096983095 983091983089983093

983089983097983096983096-983089983097983097983095 983091983088983093

983089983097983097983096-983090983088983088983095 983090983097983097

983090983088983088983096-983090983088983089983091 983088983095983091

While economic growth has been modest growth in the public debt

has not (figure 983089983095) Publicly held debt in the US is now at 983095983091 percent of GDP

the highest since 983089983097983092983094 (Congressional Budget Office 983090983088983089983091)

Te widening gap between federal government outlays and revenueshas only recently been capped by the Sequester (figure 983089983096) However the

budget Sequester is temporary and final resolution of public spending and

taxation levels remains unclear given repeated gridlock in presidential-con-

gressional policy making High debt levels combined with stalemate over

taxes and budget cuts have produced a case of policy instability or uncer-

tainty in the last five years (Baker Bloom and Davis 983090983088983089983091)

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983090983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

US policy uncertainty is further aggravated by inaction on the large

lsquoentitlementrsquo programsmdashSocial Security Medicare and Medicaidmdashwhich are

the major drivers of the long-term gap in revenues and spending

-4

-2

0

2

4

6

8

201220062000199419881982197619701964

Figure US GDP growth rate ndash ( forecast)

Source The World Bank (2013b) OECD (2013)

-10

-8

-6

-4

-2

0

0

20

40

60

80

100

20122011201020092008200720062005200420032002

Government deficit as a percentage of GDP Government debt as a percentage of GDP

Figure US Government deficit and debt as a percentage of GDP ndash

Source Congressional Budget Office (2013)

D e fi c i t p e r c e n t a g e ( ) D

e b t p er c en t a g e ( )

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The state of Canada-US relations in 983090983088983089983092 983090983097

fraserinstituteorg

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

20122003199319831973

Revenue Outlays

Figure US Government revenue and outlays ndash ( US$ billions)

Source Congressional Budget Office (2013)

1 9 8 3 U S $ b i l l i o n s

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983091983088 fraserinstituteorg

Trade diversification

Given the weakness in near-term US opportunities Canadians are (again)

wondering how to pursue trade diversification away from the United States

Te objective is logical and if achieved will prove advantageous but various

trends in trade and investment show that diversification for Canada is a slow

and arduous journey (table 983089983092)

In terms of overall share exports to China in the last five years have

doubled but the numbersmdashfrom 983090983089983095 percent to 983092983090983094 percentmdashremain rela-

tively low In the same period the US-bound share declined by 983091 percent but

remains a towering 983095983092983093983092 percent Te pattern of small overall impact applies

to all the other top trading partners For example exports to the UK have

increased but exports to Japan and Mexico have essentially stalled When we

consider average export growth rates over the last five years (table 983089983093) we see

a very strong rate for China (983089983093983093 percent) and strong rates for the UK and

South Korea (983096983097 percent and 983094983097 percent) However a 983089983093 percent increase in a

983092 percent overall trade share produces little change Te point we are making

is that at this rate and pattern of trade lsquodiversificationrsquo it will actually take a

very long timemdashwhile relatively small upward trends in trade with the United

States could have a quick and very large impact in the opposite direction

On the import side we notice more trade diversification with the US

share at 983093983088 percent and the Chinese share at 983089983089 percent (table 983089983094) Te Chinese

growth rate on the import side is less than on the export side (table 983089983095) Te

most revealing number may be the high average over five years for Mexico

at 983097 percent Tis could be indicative of a growing supply chain with Mexico

While foreign direct investment (FDI) is not a direct indicator of future

trade trends in investment may harbinger change In terms of outbound

FDI we notice that only a small segment (less than 983089983088 percent) is targeted

for manufacturing (table 983089983096) It is investment in this category in which onewould expect growth in supply chains

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983089

fraserinstituteorg

Table 983089983092 Canadarsquos merchandise exports top ten destinations 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 3291 1 777 2361 1 751 2564 1 749

China 92 4 22 97 3 31 114 3 33

UK 114 2 27 105 2 33 141 2 41

Japan 97 3 23 73 4 23 79 4 23

Mexico 51 5 12 42 5 13 43 5 13

Netherlands 32 8 08 24 8 08 28 8 08

South Korea 34 7 08 31 7 10 32 7 09

Germany 39 6 09 33 6 10 34 6 10

France 28 9 07 23 9 07 20 10 06

Brazil 23 10 05 14 10 04 22 9 06

Total 4237 3145 3424

2011 2012Average

shareValue Rank Share Value Rank Share

US 2750 1 737 2783 1 745 752

China 140 3 38 159 2 43 33

UK 157 2 42 154 3 41 37

Japan 89 4 24 85 4 23 23

Mexico 46 5 12 44 5 12 12

Netherlands 40 7 11 37 6 10 09

South Korea 43 6 11 30 7 08 09

Germany 33 8 09 29 8 08 09

France 26 9 07 26 9 07 07

Brazil 24 10 06 21 10 06 06

Total 3732 3734

Source Industry Canada (2013b)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983091983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983093 Canadian export growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 56 7 -281 9 106 = 5

China 101 6 65 1 187 3

UK 16 9 -73 2 358 2

Japan 202 3 -250 7 106 = 5

Mexico 179 4 -178 6 43 9

Netherlands -85 10 -255 8 183 4

South Korea 276 2 -80 3 52 8

Germany 160 5 -167 4 54 7

France 36 8 -174 5 -122 10

Brazil 706 1 -380 10 603 1

2011 2012Average

Rank Rank

US 104 8 27 2 02

China 270 4 152 1 155

UK 148 6 -02 4 90

Japan 161 5 -29 6 38

Mexico 94 9 -16 5 24

Netherlands 475 1 -55 7 53

South Korea 374 2 -272 10 70

Germany 05 10 -95 9 -09

France 311 3 23 3 15

Brazil 109 7 -92 8 189

Source Industry Canada (2013b) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983091

fraserinstituteorg

Table 983089983094 Canadarsquos merchandise imports top ten sources 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 1992 1 524 1633 1 511 1745 1 504

China 374 2 98 347 2 109 382 2 110

Mexico 157 3 41 145 3 45 190 3 55

Japan 134 4 35 108 4 34 115 4 33

Germany 111 5 29 95 5 30 97 5 28

UK 110 6 29 82 6 26 92 6 27

South Korea 53 9 14 52 7 16 53 7 15

Algeria 67 7 18 33 10 10 31 10 09

Italy 45 10 12 39 9 12 40 9 12

France 53 8 14 49 8 15 47 8 13

Total 3804 3194 3465

2011 2012Average

shareValue Rank Share Value Rank Share

US 1846 1 496 1922 1 506 508

China 402 2 108 417 2 110 107

Mexico 205 3 55 210 3 55 50

Japan 109 4 29 123 4 33 33

Germany 107 5 29 118 5 31 29

UK 86 6 23 70 6 18 25

South Korea 55 7 15 52 7 14 15

Algeria 46 9 12 49 8 13 12

Italy 43 10 11 43 9 11 12

France 46 8 12 41 10 11 13

Total 3723 3796

Source Industry Canada (2013b)

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983091983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983095 Old and new trade prospectsmdashimport growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 29 8 -178 7 89 5

China 112 4 -70 2 123 3

Mexico 43 7 -77 4 337 1

Japan -11 10 -192 8 89 4

Germany 105 5 -149 6 44 7

UK 95 6 -252 9 141 2

South Korea 120 3 -14 1 36 8

Algeria 518 1 -511 10 -50 10

Italy 11 9 -132 5 48 6

France 191 2 -70 3 -35 9

2011 2012Average

Rank Rank

US 88 5 57 4 17

China 82 6 53 5 60

Mexico 111 3 39 6 91

Japan -29 9 151 1 01

Germany 132 2 117 2 50

UK -36 10 -173 10 -45

South Korea 76 7 -37 8 37

Algeria 533 1 91 3 116

Italy 95 4 23 7 09

France 22 8 -97 9 02

Source Industry Canada (2013b) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983093

fraserinstituteorg

In terms of overall Canadian outbound FDI stocks in the US remain

very high despite the recent US recession while growth in stock in Asia is

modest (figure 983089983097) When we examine Canadian FDI in the so-called BRIC

states we notice that investment in both China and India is relatively small

Canadian mining investment in Brazil is much larger (figure 983090983088) In fact when

we examine amounts of FDI we find that Canada is not really a big BRIC

investor other than Brazil Chile Hong Kong and Peru are larger FDI recipi-

ents than China and India (figure 983090983089)

In terms of FDI flowing into Canada we notice the very large share

(983090983096983094983093 percent) in manufacturing which indicates both the predominant

share of US FDI and the extensive integrated supply chains in Canada-US

manufacturing (table 983089983097) Even more than for outbound FDI inflow stocks

show very large US preponderance (figure 983090983090) Such continued concentra-

tion of US FDI in Canada suggests that Canadian trade diversification is not

just a decision to be made by Canadian producers

Like trade growth Chinese FDI growth in Canada is positive but the

overall numbers are small and do not show rapid growth in the last 983091 years

(figure 983090983091)

Table 983089983096 Top industries for outward stocks of FDI 983090983088983089983090

Category Value Share

Mining oil and gas extraction 1099 188

Oil and gas subcategory 542 93

Manufacturing 569 97

Finance and insurance 2334 399

Management of companies and enterprises 757 129

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

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983091983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

1

2

3

4

5

6

7

8

9

10

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n s

Figure Canadian foreign direct investment (stock) BRIC ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Brazil PRC India Russia

0

20

4060

80

100

120

140

160

180

200

220

240

260

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) various regions

ndash

Notes Excluding Mexico Canadian FDI to Mexico in 2012 was $557 billion

Foreign Direct Investment measures the purchase of various forms of capital stock abroad

However tax havens (Barbados Bermuda etc) are frequently found to be some of the highest

recipients of FDI In reality tax havens do not reflect economic growth as FDI figures invested

into tax havens are often reinvested back to the source country in a concept known as

round-tripping (Financial Post 2013) We have accounted for tax havens by removing them from

tables and figures in this section The numbers corresponding to Figure 19 would be Barbados

($593 billion) Bermuda ($118 billion) British Virgin Islands ($21 billion) Cayman Islands ($302

billion)

Source Foreign Affairs Trade and Development Canada (2013c)

US Europe Asia amp Oceania Central amp South America Africa

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983095

fraserinstituteorg

Table 983089983097 Top industries for inward stocks of FDI 983090983088983089983090

Category Value Share

Oil and gas extraction 766 147

Manufacturing 1492 287

Petroleum and coal products manufacturing 377 72

Wholesale trade 395 76

Finance and insurance 699 134

Management of companies and enterprises 999 192

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

0

2

4

6

8

10

12

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) Chile Hong Kong

Peru amp Korea ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Chile Hong Kong Peru Korea

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4562

983091983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

40

80

120

160

200

240

280

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Foreign direct investment (stock) in Canada from top three

countries ndash

Source Foreign Affairs Trade and Development Canada (2013c)

US Netherlands UK

0

2

4

6

8

10

12

201220112010200920082007

2 0 0 2 C A $ b

i l l i o n s

Figure Foreign direct investment (stock) in Canada from China

ndash

Source Foreign Affairs Trade and Development Canada (2013c)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4662

fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4762

983092983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4862

fraserinstituteorg 983092983089

References

Abacus Data (983090983088983089983090 November 983090983088) Beyond the Canadian-American Border

lthttpabacusdatacawp-contentuploads983090983088983089983090983089983089Can-AM_Report_CABC_

Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

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The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6062

The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 11: Canadas Catch 22 State of Canada Us Relations in 2014

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983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

-5

-4

-3

-2

-1

0

1

2

3

2012201120102009200820072006200520042003200220012000

G r o

w t h ( )

Figure GrowthUS share of Canadarsquos annual merchandise trade ()

ndash

Source Industry Canada (2013b) calculations by authors

Import Export

45

50

55

60

65

70

75

80

85

90

2011200920072005200320011999199719951993

Import Export

Figure US share of Canadarsquos annual merchandise trade () ndash

Source Industry Canada (2013b)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093

fraserinstituteorg

Table 983091 Top sectors for Canadian merchandise exports to the US 983090983088983089983090

Industry Exports

2002 CA$ bi llions Percentage

Mineral products 886 318

Products of chemical or allied industries 163 59

Plastics and related articles 118 43

Base metals and articles of base metals 200 72

Machinery mechanical appliances electrical equipment and related articles 276 99

Vehicles aircraft vessels and associated transport equipment 530 191

Note On a customs basis

Source Statistics Canada (2013a)

Table 983092 Top industries for Canadian merchandise imports from the US 983090983088983089983090

Industry Imports

2002 CA$ bi llions Percentage

Mineral products 163 85

Products of chemical or allied industries 171 89

Plastics and related articles 127 66

Base metals and articles of base metals 158 82

Machinery mechanical appliances electrical equipment and related articles 413 215

Vehicles aircraft vessels and associated transport equipment 413 215

Note On a customs basis

Source Statistics Canada (2013a)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Trade in services

As a share of overall bilateral trade trade in services is growing gradually otal

bilateral services trade in 983090983088983089983088 amounted to 983089983096 percent of bilateral merchan-

dise trade It was 983089983093 percent in 983090983088983088983095983090 Te United States is by far the largest

trading partner in Canadarsquos international trade in services rade with the

US is nearly ten times the amount with the next largest partner the United

Kingdom But unlike merchandise trade the value of non-US services trade

is nearly half (983092983092 percent in 983090983088983089983088) of that with the USA (table 983093) In other

words there is more diversification from the US market in services than in

merchandise983091

Te trend reveals rising competitiveness on the US side (and non-USA)

as Canadian imports are growing considerably while Canadian exports are

stagnant resulting in a growing services trade deficit (figure 983093)

Bilateral trade in services was not impacted by the US recession as

merchandise trade was otal volume of trade is slightly up in the three years

after 983090983088983088983095 (figure 983094) Most of this gain is from growth in Canadian imports

from the US (and from non-US) while Canadian exports to the USA are

slightly down

Given that there is no growth in Americans traveling to Canada during

this time period (as we will show later) the relative strength of US exports vis-

agrave-vis Canadian exports appears to lie in the commercial sector (tables 983094 983095)

In conclusion in both merchandise and services trade the post 983090983088983088983095

period shows that Canada is relatively losing in trade competitiveness in rela-

tion to the United States Te relative loss of trade competitiveness in our

relationship may be a surprise to many Canadians who believe Canada has

simply been doing better than the US since 983090983088983088983096 Te lsquodoing betterrsquo part may

apply to domestic economic activity but not to external trade

1048626 Data on trade in services is not as recent as merchandise trade

1048627 op export destinations in 983090983088983089983088 after the USA are the UK France and Germany op

importers to Canada in 983090983088983089983088 after the USA include UK Hong Kong (China) France

Germany and Mexico Te case with importers to Canada is similar to that with export-

ing countries Imports from the UK make up roughly 983089983088 percent that of imports from the

US Imports from Hong Kong are 983093983089 percent that from the UK with France at 983092983090 percent

and both Germany and Mexico rest at roughly 983091983096 percent each

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The state of Canada-US relations in 983090983088983089983092 983095

fraserinstituteorg

Table 983093 Services trade between Canada and the US 983090983088983088983093ndash983090983088983089983088 (983090983088983088983090 CA$ billions)

2005 2006 2007 2008 2009 2010

Exports to USA 3988 3815 3834 3966 3718 3700

Imports from USA 4358 4395 4544 4833 4783 4960

Trade balance with USA -370 -580 -710 -866 -1065 -1260

Trade balance with USA -443 -707 -847 -985 -1240 -1455

Exports to non-USA 2832 3080 2985 3052 3142 3102

Imports from non-USA 3022 3187 3380 3518 3496 3722

Trade balance with non-USA -189 -108 -395 -466 -354 -620

Trade balance with non-USA -323 -172 -621 -710 -540 -909

Total services exports 6820 6894 6819 7018 6860 6802

Total services imports 7379 7582 7924 8350 8279 8682

Total trade balance -559 -688 -1105 -1333 -1419 -1880

Total trade balance -394 -475 -750 -867 -937 -1214

Bilateral (X+I) USA 8346 8210 8378 8799 8589 8660

Bilateral (X+I) non-USA 5854 6267 6365 6569 6551 6824

Bilateral (X+I) total 14200 14477 14742 15368 15140 15484

Source Foreign Affairs Trade and Development Canada (2013a)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

80

81

82

83

84

85

86

87

88

89

90

201020092008200720062005

2 0

0 2 C A $ b i l l i o n s

Figure Canada-US net services trade ndash

Source Foreign Affairs Trade and Development Canada (2013a)

-20

-16

-12

-8

-4

0

201020092008200720062005

Trade balance with USA Total trade balance

Figure Canadarsquos trade deficit with US and the world ndash

Source Foreign Affairs Trade and Development Canada (2013a)

2 0 0 2 C A $ b i l

l i o n s

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983097

fraserinstituteorg

Table 983094 Top categories for service trade exports Canada-World 983090983088983089983090

Category Subcategory Exports

2002 CA$ bi llions Percentage

Government services 13 19

Travel services 143 207

Personal travel 119 172

Transportation services 111 161

Air transport 52 76

Commercial services 424 614

Financial services 57 82

Computer and information services 64 93

Intellectual property use 31 44

Management services 90 130

Research and development 33 47

Architectural engineering 39 57

Source Foreign Affairs Trade and Development Canada (2013a)

Table 983095 Top categories for service trade imports Canada-World 983090983088983089983090

Category Subcategory Imports

2002 CA$ billions Percentage

Government services 11 12

Travel services 288 323

Personal travel 253 284

Transportation services 195 219

Water transport 82 92

Air transport 84 95

Commercial services 396 446

Insurance services 44 50

Financial services 44 50

Intellectual property use 89 100

Management services 75 84

Source Foreign Affairs Trade and Development Canada (2013a)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983089983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

075

080

085

090

095

100

105

2 0 1 3

- 0 7

2 0 1 3

- 0 1

2 0 1 2

- 0 7

2 0 1 2

- 0 1

2 0 1 1

- 0 7

2 0 1 1

- 0 1

2 0 1 0

- 0 7

2 0 1 0

- 0 1

2 0 0 9

- 0 7

2 0 0 9

- 0 1

2 0 0 8

- 0 7

2 0 0 8

- 0 1

2 0 0 7

- 0 7

2 0 0 7

- 0 1

Figure CanadaUS dollar exchange rate ndash

Source Bank of Canada (2013b)

C A U S e x c h a n g e r a t e

Dollar value and productivity trends

Te first factor to consider regarding Canadarsquos trade competitiveness vis-agrave-vis

the United States is the value of the Canadian dollar Te substantial appre-

ciation of the Canadian dollar against the US dollar that began in the early

983090983088983088983088s has stabilized at a much higher average value of the loonie ( figure 983095)

As is well documented such exchange rate appreciation tends to have a strong

effect on current account balances as exports decline (Kappler et al 983090983088983089983089)

A growing account deficit will likely push the value of the Canadian dollar

downward in the longer term and thus offer some remedy

ProductivityOf more concern to Canadians should be the data indicating that Canadian

labour productivity rates are lagging those in the United States (figures 983096 983097)

One would expect that Canadarsquos higher dollar has provided industry in recent

years with an opportunity to improve productivity as imported machinery

and technology would be available at a lower price However Canadarsquos pro-

ductivity rate of growth is modest and in 983090983088983089983090 dips into negative territory

again

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983089983089

fraserinstituteorg

-1

0

1

2

3

20122011201020092008

Canada US

Figure Canada and US rates of output productivity growth ()

ndash

Source Statistics Canada (2013g)

R a t e o f p r o d u c t i v i t y g r o

w t h ( )

-10

-5

0

5

20122011201020092008

Labour productivity (Canada) Real GDP (Canada) Hours worked (Canada)

Labour productivity (US) Real GDP (US) Hours worked (US)

Figure Real US-Canadian output and hours worked () ndash

Source Statistics Canada (2013g)

A n n u a l c

h a n g e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983089983090 fraserinstituteorg

Trade and regulatory barriersdisputes

Table 983096 provides a synopsis of the major trade disputesbarriers that have

played a role in bilateral relations in the last five years and that are pertinent

for the 983090983088983089983092 period (pages 983089983094-983089983095) Te two large disputesmdashKeystone XL and

Mandatory Country-of-Origin Labeling (MCOOL) on red meatmdashare more

ominous than they may seem First both in crude oil products and in cattle

and hogs the United States is unilaterally disrupting or dismantling a well-

established integrated sector Canada has started attempts to diversify its oil

transportation structure including more rail and new pipeline routes But

as all proposed alternative pipelines have shown the alternatives are contro-

versial and at best years away from making a difference Meanwhile there is

considerable risk in putting too much crude oil on rail as its accident rates

are higher than pipe

Canadian threats to counter US MCOOL action with tariffs on food

products are not going to have much impact in the near future Moreover

an escalating tariff war on food products cannot be won by Canada and will

ultimately harm consumers on both sides of the border US defiance of two

WO rulings also means more uncertainty for Canadian traders

Keystone XL pipeline

Proposed in 983090983088983088983096 the Keystone XL (KXL) extension is part of a pipeline sys-

tem connecting Alberta oil sands and US mid-West and Gulf region refineries

KXL is a 983089983096983097983095 km crude oil pipeline with a capacity of 983092983094983093983088983088983088 barrels per

day (Hussain 983090983088983089983091) It is a substantial private infrastructure proposal that

will create employment and guarantee a secure energy source for the United

States (Millington and Murillo 983090983088983089983091) It is by no means a new feature in

Canada-US energy relations as a dense network of oil and electricity carri-ers cross the border at multiple points

What is unprecedented is that the permit process is now in its sixth

year and the final resolution remains uncertain (by US law a cross-border line

requires Department of State approval) If not resolved in 983090983088983089983092 the question

may well be handed over to the next president after 983090983088983089983094 Te policy uncertainty

associated with KXL approval has by far the largest impact on Canada-US trade

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The state of Canada-US relations in 983090983088983089983092 983089983091

fraserinstituteorg

relations Te dragged-out procedure has chilled relations Te southern leg of

KXL has been completed and the original route objection by Nebraska has been

resolved What remains ostensibly the problem is that the US administration

has identified this heavy oil as a component of its policy objective of curbing

the emission of greenhouses gasses to reduce global warming

Te impact of this pipeline delay in the 983090983095 million barrels per day (bpd)

export of Canadian oil products to the USA reverberates at various levels

Across Canada investment in mining oil and gas extraction for 983090983088983089983091 is pre-

dicted to decrease by 983090983095 percentmdashthe largest decline since the 983090983088983088983096 recession

(Statistics Canada 983090983088983089983091f) In Alberta investment is predicted to increase by

only 983088983089 percent (Statistics Canada 983090983088983089983091f) Capital investment in oil and gas

extraction has not recovered to pre-983090983088983088983096 levels (Industry Canada 983090983088983089983091a)

While the industry has become increasingly dependent on rail trans-

port to move product it is a costly alternative It can cost up to three times

as much as pipeline transport (Millington and Murillo 983090983088983089983091) and its limita-

tions are self-evident because rail movement of oil is constrained by the lim-

ited availability of rail cars In 983090983088983089983090 983089983091983088983088983088983088 bpd of heavy crude was being

transported by rail Tis is expected to rise to 983092983090983093983088983088983088 bpd by the end of

983090983088983089983092 falling short of the 983092983094983093983088983088983088 bpd which could have been moved through

KXL (Hussain 983090983088983089983091) Te forced increase in rail transport has resulted in

unintended costs for the industry a total of US$983089 billion must be invested for

new rail terminals and another US$983092ndash983093 billion for new rail cars (Lewis 983090983088983089983091)

Rail transport is both more costly and more dangerous A recent study

concluded that ldquopipeline transportation is safer than transportation by road

rail or barge as measured by incidents injuries and fatalitiesrdquo (Green amp

Furchtgott-Roth 983090983088983089983091) It is not inconceivable that another major oil acci-

dent either in Canada or the USAmdashsuch as took place in Quebec in July 983090983088983089983091

killing 983092983095 peoplemdashwould result in a moratorium on oil transport by rail with

grave consequences for Canadian producers

983090983088983088983090 Mandatory Country-of-Origin Labeling

Mandatory Country-of-Origin Labeling (MCOOL) is a provision mandated

by Congressional law and first implemented in 983090983088983088983096 Te measure imposes

strict segregation rules on American Canadian and Mexican cattle and hogs

and the subsequent slaughtering and processing of these animals to producebeef and pork products for retail sale Te stated purpose is to create labels

that indicate the origin in part or in whole of the product In effect it is a

veiled trade barrier because it gives US animals and products a competitive

advantage due to higher labeling inventory and processing costs for equiva-

lent Canadian products

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983089983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983096 Synopsis of trade disputes in Canadian-American relations in 983090983088983089983091

Dispute Impact and cost Prospect for resolution

Keystone XL Pipeline Very serious Poor

2008 proposal for a 1897

km 465000 bpd crude oilpipeline spanning fromAlberta down to Nebraska

Downward pressure on investment

Lost wages January 2012postponement is costing US $47million a day in lost wages (ConsumerEnergy Alliance 2013)

Continuation of crude oil pricediscounts due to lack of infrastructure

Costly alternative rail has emerged as atransportation alternative but can costup to three times as much as pipelinetravel (Millington and Murillo 2013)

Permit postponed twice

Resolution is not transparent

Rising risk of decision deferral past 2016

Mandatory Country-of-OriginLabelling (MCOOL)

Serious Poor

2008 CongressionalLaw mandating rulesfor segregated livestockprocessing and packagingand a labeling structure inorder to have food labelsindicate origin of product

Annual cost to Canadian beef and porksector of $1 billion

Deconstruction of a highly integratedtrilateral supply chain industry

MCOOL adds no animal health or foodsafety benefits

US has defied both WTO complaint andthe core part of the WTO Appeal ruling

2013 US reaction has been to strengthenthe discriminatory provision banning co-mingling of meats altogether

Canada plans to retaliate with tariffs butthis is a costly gambit with low chance ofsuccess

Softwood Lumber Agreement Moderate Good

In 2011 American softwoodcompanies took theirCanadian counterparts to theLondon Court of InternationalArbitration accusing themof circumventing the SLA(Foreign Affairs Trade andDevelopment Canada 2012a)

If in violation Canadian industry wouldface $380 million in penalties (TheCanadian Press 2012)

The London Court of InternationalArbitration in 2012 ruled in favor ofCanada (Foreign Affairs Trade andDevelopment Canada 2012a)

SLA was to expire in 2013 but Canadaand the USA extended it until 2015 (CBCNews 2012)

Long-term free trade in lumber needs toreplace SLA

Buy American Provision Serious Partial resolution but high risk ofrecurring Buy American legislation

2009 American Recovery andReinvestment Act

Exclusion of Canadian products andproduction sharing in US public worksprocurement

Canada-US Procurement Agreement in2010 which allowed for the purchaseof Canadian goods on seven US

infrastructure projects valued at morethan $7777000

Canada needs to seek a comprehensiveagreement in order to escape futureAmerican protectionism with allprovinces on board and compliant withthe WTO provision

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The state of Canada-US relations in 983090983088983089983092 983089983093

fraserinstituteorg

Dispute Impact and cost Prospect for resolution

Canadian Wheat Board Long-term benefit Completed

Canadarsquos mandatory wheat

marketing board monopsonyended in 2011

Frequent US action against CWB in the

past will now end as wheat marketingin Canada turns fully market based

Intellectual Property Rights Moderate potential cost Partially resolved

Canada has been on theSpecial 301 Priority Watch Listby the United States TradeRepresentative since 1995

Ongoing threat of US Trade Action andlegal action

Canadian domestic complianceincluding

Strengthening data protection

Participation in Anti-counterfeiting TradeAgreement (ACTA in 2013)

Enacted the Combating CounterfeitProducts Act (2013)

Started the process of strengthening

the Copyright Act and implementingWorld Intellectual Property OrganizationInternet Treaties

In recognition of which Canada has beenremoved from the Special 301 PriorityWatch List

Prescription drugs Serious potential for trade action Indirect progress

The US complaint againstCanada

Imposing price ceilings thatshifts the cost burden of RampDto US firms

Weak protection ofintellectual property rights rethird party sales

Slow prescription drugapproval process causingreduced market access

US firms experience lost revenues andtrade action is a risk

In 2013 CETA agreement with theEuropean Union Canada agrees to givefull patent protection to new drugs fortwo years

Two-year rule may be transferable tofuture Canada-US resolution

Table 983096 continued

Canada and the United States have had a deeply integrated market in

this sector since the early 983089983097983097983088s Animal health and food safety standards have

been largely harmonized As a result highly efficient supply-chain production

methods have made this industry quite efficient However the imposition of

MCOOL has changed all that (Moens amp Leon 983090983088983089983090) Te cost differential haswidened and Canadian exports have dropped dramatically Since 983090983088983088983096 the

cattle sector has lost $983094983092983088 million per year and the hog sector has lost $983093983088983088

million a year (Te Canadian Press 983090983088983089983091a)

In 983090983088983089983090 the World rade Organization (WO) ruled in Canadarsquos favor by

concluding that MCOOL is discriminatory Te WO gave the US until May 983090983091

983090983088983089983091 to act but on that same day the USDA imposed regulatory changes that

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983089983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

actually strengthened the provisions of MCOOL In retaliation the Canadian

government released a list of US exports to Canada that would be subjected

to tariffs and it is preparing to seek a compliance panel at the WO Until this

situation is resolved the Canadian government predicts a continuing annual

loss of $983089 billion for the Canadian red meat sector (Te Canadian Press 983090983088983089983091a)

Softwood lumber

In 983090983088983089983089 several American softwood companies took their Canadian counter-

parts to the Court of International Arbitration in London accusing them of cir-

cumventing the Softwood Lumber Agreement of 983090983088983088983094 (Foreign Affairs rade

and Development Canada 983090983088983089983090a) Te dispute centered on the accelerating pace

of lumber harvests resulting from the pine beetle infestation Te stakes were

high $983091983096983088 million in penalties should Canada lose (Te Canadian Press 983090983088983089983090)

In 983090983088983089983090 the Court of International Arbitration ruled in Canadarsquos favor

(Foreign Affairs rade and Development Canada 983090983088983089983090a) In addition while

the Softwood Lumber Agreement was set to expire in 983090983088983089983091 the Canadian

and American governments successfully negotiated an extension of the

Agreement until 983090983088983089983093 (CBC News 983090983088983089983090) Te fact remains that as long as a

large part of Canadarsquos softwood lumber is managed in terms of quotas and

the stumpage fee system US trade action is very likely

lsquoBuy Americanrsquo provision

Te 983090983088983088983097 American Recovery and Reinvestment Act (ARRA which expired

on September 983091983088 983090983088983089983089) and the more recent 983090983088983089983089 American Jobs Act stipu-

lated that steel iron and other goods used in the repair and construction of

infrastructure projects in the US (highways bridges mass transit and fed-

eral buildings) must be manufactured in the United States (Matthiesen 983090983088983089983089)

In response to ARRA Canada and the US signed the Canada-US

Procurement Agreement in 983090983088983089983088 which allowed for the purchase of Canadian

goods on seven US infrastructure projects valued at more than $983095983095983095983095983088983088983088

or within the 983091983095 states subject to the WO GPA (Government of Canada

983090983088983089983091a) Te 983090983088983089983089 American Jobs Act did not pass in Senate and is thus moot

While the ARRA dispute was partially resolved lsquoBuy Americanrsquo anda counter position of lsquoBuy Canadianrsquo can flare up on either side of the bor-

der Canadian industry is most vulnerable in this uncertainty Te Canadian

government ought to seek a comprehensive Buy American exemption to

escape future American protectionism In so doing all provincial govern-

ments need to be on board in order to make the WO and NAFA rules

function optimally

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983089983095

fraserinstituteorg

Canadian Wheat Board (CWB)

In 983090983088983089983089 the Canadian government removed the monopsony held by the

Canadian Wheat Board Tis unilateral action offers a successful reduction

in bilateral trade distortion oday the CWB continues to operate as a mar-

keting group

Intellectual Property Rights (IPR)

From 983089983097983097983093 through 983090983088983089983091 Canada was on the Special 983091983088983089 Priority Watch

List by the United States rade Representative Te US complaint was that

protection and enforcement of IPR in Canada were weak Te Special 983091983088983089

Priority Watch List is designed to identify US trading partners that are the

worst offenders in IPR protection (Embassy of the United States Ottawa

Canada 983090983088983089983091)

Although the issue is not completely resolved Canada has made sig-

nificant progress in recent years Te federal government has strengthened

data protection regulations criminalized the use of camcorders in theaters

and participates in the Anti-Counterfeiting rade Agreement (ACA) nego-

tiations (983090983088983089983091) Most recently Canada enacted the Combatting Counterfeit

Products Act (Embassy of the United States Ottawa Canada 983090983088983089983091) Te

Canadian Government is in the process of strengthening the Copyright Act

and implementing World Intellectual Property Organization Internet reaties

(Embassy of the United States Ottawa Canada 983090983088983089983091)

As a result of these steps Canada was removed from the Special 983091983088983089

Priority Watch List in 983090983088983089983091

Prescription drugs

Prescription drug prices in Canada are relatively low due to a price ceil-

ing mandated by Canadarsquos healthcare system In addition Health Canada

approval times for prescription drugs significantly lag behind their counter-

parts in the United States and the European Union (Barua and Esmail 983090983088983089983091)

US lawmakers have repeatedly expressed their concerns over cheap prescrip-

tion drugs re-entering the US from Canada (Moens and Gabler 983090983088983089983089) TeEU also asked Canada to strengthen IPR protections for prescription drugs

(Lexchin and Gagnon 983090983088983089983091) Since the signing of the CEA agreement in

principle on October 983089983096 983090983088983089983091 the issue between Canada and the EU is now

resolved (Waldie 983090983088983089983091) Canada has agreed to ldquoEU demands for patent pro-

tection for up to two years on brand-name drugsrdquo (Blanchfield 983090983088983089983091)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983089983096 fraserinstituteorg

State of the border andregulatory cooperation

Te decline in Americans traveling to Canada corresponds with the US

Greenback losing value against the Canadian dollar (figures 983089983088 983089983089) However

when we consider the extent of the decline in total numbers it appears dispro-

portionate Te change in American travel suggests instead a bigger problem

following the 983097-983089983089 shock Te imposition of new border transit requirements

such as passports as well as longer wait times and more security screening

has likely dampened US travel across this international boundary Given the

modest economic recovery in the USA from the beginning of 983090983088983089983088 onward

one would expect disposable income including for travel to trend back up

Instead the numbers remain stagnant at around 983090983088 million less than half the

number of 983090983088983088983090

While an overall national average for border wait times is not avail-

able data on major border crossings in both Central Canada and British

Columbia indicate that no reductions in wait times have been achieved

between 983090983088983088983094 and 983090983088983089983089 (figure 983089983090) Te problem of inefficiency as presented

by the Canada-US border goes well beyond wait times It includes inefficient

activity away from the border such as extra warehousing and costs of com-

plying with various facilitated traveler and goods programs such as FAS for

trucks loads and drivers

Tere are consistent cost differences between domestic and cross-bor-

der truck-borne trade which point to significant border costs ldquoFor exports

to the US these costs added 983088983097 percent to the delivered price of goods in

983090983088983088983092 Tis figure fell to 983088983092 percent in 983090983088983088983097 hellip Higher fixed costs per shipment

accounted for most of the additional cost of transporting goods to the USrdquo

(Brown and Anderson 983090983088983089983090) When we consider that in the manufacturingsector parts cross the border several times in various stages of assembly we

realize how this cost accumulates and defeats the efficiency gains otherwise

generated by integrated supply chain manufacturing Border costs are typ-

ically passed on to the consumer as fixed costs per shipment

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The state of Canada-US relations in 983090983088983089983092 983089983097

fraserinstituteorg

An unprecedented border problem has arisen in the current USAdministrationrsquos lengthy (six years) review of the permitting of a pipeline

border crossing as proposed in the Keystone XL project As a result oil-by-

rail transport has recently increased while the pipeline mode of Canada-US

trade has seen a drop in growth in the 983090983088983089983089983089983090 period ( figures 983089983091 983089983092)

0

10

20

30

40

50

201220112010200920082007200620052004200320022001200019991998

Figure Travellers entering Canada ndash

Source Statistics Canada (2013e)

US residents Non-US residents

0

3

6

9

12

15

18

0

03

06

09

12

15

18

20122011201020092008200720062005200420032002

Trips Spending US$CA$ (Secondary axis)

Figure US overnight travel to Canada ndash

Source Statistics Canada (2011) Bank of Canada (2013b)

M i l l i o n s o f t r i p

s N o m i n a l C A $ b i l l i o n s

U S $ C A $ ex c h a n

g er a t e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

5

10

15

20

201120102009200820072006

Northbound average delay Southbound average delay

Figure Peace Arch average border wait time ndash

Source Cascade Gateway Data (2013)

M i n u t e s

0

25

50

75

100

125

150

175

200

225

250

275

300

201220112010200920082007200620052004

2 0 0 4

U S $ b

i l l i o n s

Figure All surface modes of freight flow data based on value of goods

ndash

Source Bureau of Transportation Statistics (2013)

Truck Rail Pipeline

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983089

fraserinstituteorg

lsquoBeyond the Borderrsquo and Regulatory Cooperation

In 983090983088983089983089 Canada and the United States announced an ambitious agreement

to reduce border costs by means of deeper bilateral regulatory and secur-

ity cooperation Te accord seeks to streamline various border proceduresmdash

some already in existence and some newmdashto improve intelligence-sharing

between law enforcement agencies mutual recognition of passenger baggage

screening improved frameworks for trusted trade programs harmoniza-

tion of NEXUS protocols streamlined supply chains enhanced trade com-

petitiveness collaboration in border infrastructure investment and deeper

cooperation in national security investigations Te agreement is known as

Beyond the Border A Shared Vision for Perimeter Security and Economic

Competitiveness (February 983092 983090983088983089983089)

Te Beyond the Border Vision accord also set up a Regulatory

Cooperation Council In it Canadian and American officials seek to reduce

red tape and harmonize regulations in certain key sectors o date the

Council has announced various plans affecting agriculture and food trans-

portation health personal care products workplace chemicals environmentnano materials and small business loans We summarize the key points of

progress made since 983090983088983089983089 in table 983097

-35

-25

-15

-5

5

15

25

35

20122011201020092008200720062005

Truck Rail Pipeline

Figure Growth rate of all surface modes of freight flows () ndash

Source Bureau of Transportation Statistics (2013) calculations by authors

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983090983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983097 Key elements of Beyond the Border and Regulatory Cooperation

Beyond the Border Program

Integrated Cargo Security Strategy (ICSS)December 2011

Reduces administrative duplication between Canada and the US byaddressing security risks in advance within the shipment supply chainand at the border (Canada Border Services Agency 2013)

Prince Rupert Pilot October 2012 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry via rail is examined by Canadian officials onbehalf of the US (Government of Canada 2013c)

Montreal Pilot January 2013 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry to the US via truck is examined by Canadianofficials on behalf of the US (Government of Canada 2013c)

Pre-load Air Cargo Targeting (PACT) Joint pilot by CBSA and Transport Canada to screen cargo pre-flight onCanada-bound airplanes at foreign airports (Canada Border ServicesAgency 2013)

Tamper Evident Technology PilotOctober 2012

Pilot collaboration between CBSA and US CBP to ensure containersremain sealed upon arrival at the US border (Canada Border Services

Agency 2013)

Truck Cargo Pre-Inspection PilotMarch 2013

Pilot program between the CBSA and the US CBP for pre-inspection ofsouthbound traffic into US (Canada Border Services Agency 2013)

Free and Secure Trade (FAST) PilotSarnia Ontario

Pilot program for usage of FAST lanes without Partners in Protection andCustoms Self Assessment programs (Government of Canada 2013c)

Canada-US Shiprider June 2013 Removal of jurisdictional barriers to improve law enforcement personnelin Windsor-Detroit and Vancouver-Blaine waterways (Government ofCanada 2013c)

EntryExit Initiative Phase II June 2013 Exchange entryexit data between the CBSA and US DHS on individualsat Canada-US land border crossings (Government of Canada 2013c)

Regulatory Cooperation ProgramMemorandum of Understanding between Transport Canada and the RailwayAssociation of Canada September 2013

Framework for Canadian rail emissions between 2011 to 2015(Government of Canada 2013d)

Canada-United States Perimeter Approachto Plant Protection September 2013

Draft framework for increased cooperation and reduction inadministrative duplication between the Canadian Food InspectionAgency (CFIA) and United States Animal and Plant Health InspectionService (APHIS) on trade in plants and plant products (Government ofCanada 2013d)

Common Electronic Submission GatewayPilot (CESG) August 2013

FDA and Health Canada will allow pharmaceutical firms to electronicallysubmit drug applications (Government of Canada 2013d)

Initiative to Align Veterinary DrugApprovals December 2012

Joint reviews between US FDA and Health Canada on veterinary drugproducts (Government of Canada 2013d)

Stricter Air Pollutant Emissions Environment Canada aligns car emissions beginning in 2017 with theUS Environmental Protection Agencyrsquos ldquoTier 3rdquo (Government of Canada2013d)

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The state of Canada-US relations in 983090983088983089983092 983090983091

fraserinstituteorg

On September 983092 983090983088983089983091 $983092983094983094 million in investment was allocated to the

Border Action plan by the Government of Canada in order expand two marine

container examination facilities (Government of Canada 983090983088983089983091c) $983091983091 million

was invested by the Government of Canada in the Asia Pacific Gateway and

rade Corridor Initiative (Government of Canada 983090983088983089983091c) Te Plan includes

an additional 983090983097 harmonization initiatives that will enhance trade activity

between Canada and the US

Neither Beyond the Border nor the Regulatory Cooperation Council

offer further investment or cost estimates on the initiatives described in table

983097 Moens and Gabler (983090983088983089983090) pointed to the need for both the Canadian and

American governments to provide data on border costs so that a cost-benefit

analysis can ensue Nonetheless the small steps of progress towards inte-

grating and harmonizing US and Canadian border practices remains a very

important (long-term) part of reducing the profile of the border

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983090983092 fraserinstituteorg

Canadian and American public perceptions

Tree observations are noteworthy in recent assessments of public percep-

tions between Americans and Canadians First Americans consistently have

a very high favourability rating of Canadians typically in the 983097983088 plus range

(table 983089983088 figure 983089983093) Both as a friend and a strategic ally Americans hold

Canadians in the most favourable light possible (table 983089983089) Disagreements over

policy between the two countries whether in defence and foreign affairs or

over border and trade issues do not move this fundamental asset Canadians

enjoy in dealing with their neighbour

Second Canadians do not have high expectations of either the

American or Canadian government regarding progress in bilateral relations

As table 983089983090 shows Canadians hold Obama in high regard (983094983091 percent) but

only 983093983092 percent expect progress from him in trade relations Prime Minister

Harper is rated slightly ahead of President Obama in terms of working hard

towards improving Canada-US relations (table 983089983091)

Tird and most significant in light of Canadarsquos Catch-983090983090 situation both

Canadians and Americans are more supportive of closer cooperation and inte-

gration policies than is the case for political representatives in either the United

States or Canada In two recent studies we showed how US Senators and House

Representatives are quite critical of Canada with regard to NAFA issues and bor-

der security (Moens and Gabler 983090983088983089983089) Similarly we found that among the three

major political parties in Canadarsquos parliament only one consistently expressed

itself in favour of closer ties with the United States (Moens and Gabler 983090983088983089983089)

A recent survey of American and Canadian (and Mexican) attitudes

towards free trade and NAFA show surprisingly strong data for more trade

integration In response to the statement ldquoTere should be more free trade

between the US Canada and Mexicordquo 983096983088 percent of Canadians approved

as did 983095983092 percent of Americans Even on border security Canadians andAmericans are more pro-cooperation and integration than their governmental

policies suggest In the US 983092983089 percent support a common perimeter while

983090983088 percent are opposed In Canada 983092983091 percent support it and 983091983088 percent are

opposed (Graves Pastor and Basaacutentildeez 983090983088983089983091) Terefore in terms of public

mandate both governments would have a case to work towards broader bilat-

eral (or trilateral) cooperation to lower trade barriers

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The state of Canada-US relations in 983090983088983089983092 983090983093

fraserinstituteorg

Table 983089983088 Canadian favourability rating among Americans (February 983090983088983089983090)

Veryfavourable

Mostlyfavourable

Mostlyunfavourable

Veryfavourable Not sure Total

favourableTotal

unfavourable

53 38 3 2 3 91 5

Note n=1015

Source Gallup Poll (2012)

Table 983089983089 Ally or enemy for Americans (June 983090983088983089983091)

Country Ally Friendly Unfriendly Enemy Total Ally andFriendly

Great Britain 66 25 2 1 91

Canada 61 33 2 1 94

China 11 44 26 14 55

Note n=1529Source Gallup Poll (2013)

88

90

92

94

96

98

201220112010200920082007

Figure Canadian favourability among Americans () ndash

Source Gallup Poll (2012)

f a

v o u r a

b l e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983090 What effect will Obama have on Canada-US relations (November 983090983088983089983090)

Canadians Americans

Positive Negative None Positive Negative None

Relationship 62 5 34 48 12 40

Trade 54 10 35 48 12 39

Harmonizing 53 8 40 47 14 39

Note n=1066

Source Abacus Data (2012)

Table 983089983091 Has each leader worked hard to improve Canada-US relations

(July 983090983088983089983090)

Country Agree Disagree Not sure

Stephen Harper 58 32 10

Barack Obama 53 32 15

Note Sample of Canadians

Source HarrisDecima (2012)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983090983095

US policy uncertainty

Canadian economic prospects face their most important challenge in the

United States Te US economic recovery has been modest and real GDP

growth so far has remained below the post-World War II average of post-

recession periods (figure 983089983094) As we noted above the less-than-stellar US

recovery is made even more challenging for Canadian traders in that pro-

ductivity gains in Canada are lagging while the Canadian dollar remains high

On top of that several American-imposed regulatory obstacles to free trade

are depressing trade prospects in crude oil red meat and public works pro-

curement Tese impediments reduce Canadian competitive access to the

US market

A high level of public spending until the January 983090983088983089983091 sequester and

ongoing monetary stimulation have not produced notable US GDP growth

Te seven post-recession periods below show the current average to be well

below the historical average (Young 983090983088983089983091)

983089983097983092983096-983089983097983093983095 983091983096983088

983089983097983093983096-983089983097983094983095 983092983090983096

983089983097983094983096-983089983097983095983095 983091983089983096

983089983097983095983096-983089983097983096983095 983091983089983093

983089983097983096983096-983089983097983097983095 983091983088983093

983089983097983097983096-983090983088983088983095 983090983097983097

983090983088983088983096-983090983088983089983091 983088983095983091

While economic growth has been modest growth in the public debt

has not (figure 983089983095) Publicly held debt in the US is now at 983095983091 percent of GDP

the highest since 983089983097983092983094 (Congressional Budget Office 983090983088983089983091)

Te widening gap between federal government outlays and revenueshas only recently been capped by the Sequester (figure 983089983096) However the

budget Sequester is temporary and final resolution of public spending and

taxation levels remains unclear given repeated gridlock in presidential-con-

gressional policy making High debt levels combined with stalemate over

taxes and budget cuts have produced a case of policy instability or uncer-

tainty in the last five years (Baker Bloom and Davis 983090983088983089983091)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

US policy uncertainty is further aggravated by inaction on the large

lsquoentitlementrsquo programsmdashSocial Security Medicare and Medicaidmdashwhich are

the major drivers of the long-term gap in revenues and spending

-4

-2

0

2

4

6

8

201220062000199419881982197619701964

Figure US GDP growth rate ndash ( forecast)

Source The World Bank (2013b) OECD (2013)

-10

-8

-6

-4

-2

0

0

20

40

60

80

100

20122011201020092008200720062005200420032002

Government deficit as a percentage of GDP Government debt as a percentage of GDP

Figure US Government deficit and debt as a percentage of GDP ndash

Source Congressional Budget Office (2013)

D e fi c i t p e r c e n t a g e ( ) D

e b t p er c en t a g e ( )

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983097

fraserinstituteorg

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

20122003199319831973

Revenue Outlays

Figure US Government revenue and outlays ndash ( US$ billions)

Source Congressional Budget Office (2013)

1 9 8 3 U S $ b i l l i o n s

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 3762

983091983088 fraserinstituteorg

Trade diversification

Given the weakness in near-term US opportunities Canadians are (again)

wondering how to pursue trade diversification away from the United States

Te objective is logical and if achieved will prove advantageous but various

trends in trade and investment show that diversification for Canada is a slow

and arduous journey (table 983089983092)

In terms of overall share exports to China in the last five years have

doubled but the numbersmdashfrom 983090983089983095 percent to 983092983090983094 percentmdashremain rela-

tively low In the same period the US-bound share declined by 983091 percent but

remains a towering 983095983092983093983092 percent Te pattern of small overall impact applies

to all the other top trading partners For example exports to the UK have

increased but exports to Japan and Mexico have essentially stalled When we

consider average export growth rates over the last five years (table 983089983093) we see

a very strong rate for China (983089983093983093 percent) and strong rates for the UK and

South Korea (983096983097 percent and 983094983097 percent) However a 983089983093 percent increase in a

983092 percent overall trade share produces little change Te point we are making

is that at this rate and pattern of trade lsquodiversificationrsquo it will actually take a

very long timemdashwhile relatively small upward trends in trade with the United

States could have a quick and very large impact in the opposite direction

On the import side we notice more trade diversification with the US

share at 983093983088 percent and the Chinese share at 983089983089 percent (table 983089983094) Te Chinese

growth rate on the import side is less than on the export side (table 983089983095) Te

most revealing number may be the high average over five years for Mexico

at 983097 percent Tis could be indicative of a growing supply chain with Mexico

While foreign direct investment (FDI) is not a direct indicator of future

trade trends in investment may harbinger change In terms of outbound

FDI we notice that only a small segment (less than 983089983088 percent) is targeted

for manufacturing (table 983089983096) It is investment in this category in which onewould expect growth in supply chains

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983089

fraserinstituteorg

Table 983089983092 Canadarsquos merchandise exports top ten destinations 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 3291 1 777 2361 1 751 2564 1 749

China 92 4 22 97 3 31 114 3 33

UK 114 2 27 105 2 33 141 2 41

Japan 97 3 23 73 4 23 79 4 23

Mexico 51 5 12 42 5 13 43 5 13

Netherlands 32 8 08 24 8 08 28 8 08

South Korea 34 7 08 31 7 10 32 7 09

Germany 39 6 09 33 6 10 34 6 10

France 28 9 07 23 9 07 20 10 06

Brazil 23 10 05 14 10 04 22 9 06

Total 4237 3145 3424

2011 2012Average

shareValue Rank Share Value Rank Share

US 2750 1 737 2783 1 745 752

China 140 3 38 159 2 43 33

UK 157 2 42 154 3 41 37

Japan 89 4 24 85 4 23 23

Mexico 46 5 12 44 5 12 12

Netherlands 40 7 11 37 6 10 09

South Korea 43 6 11 30 7 08 09

Germany 33 8 09 29 8 08 09

France 26 9 07 26 9 07 07

Brazil 24 10 06 21 10 06 06

Total 3732 3734

Source Industry Canada (2013b)

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983091983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983093 Canadian export growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 56 7 -281 9 106 = 5

China 101 6 65 1 187 3

UK 16 9 -73 2 358 2

Japan 202 3 -250 7 106 = 5

Mexico 179 4 -178 6 43 9

Netherlands -85 10 -255 8 183 4

South Korea 276 2 -80 3 52 8

Germany 160 5 -167 4 54 7

France 36 8 -174 5 -122 10

Brazil 706 1 -380 10 603 1

2011 2012Average

Rank Rank

US 104 8 27 2 02

China 270 4 152 1 155

UK 148 6 -02 4 90

Japan 161 5 -29 6 38

Mexico 94 9 -16 5 24

Netherlands 475 1 -55 7 53

South Korea 374 2 -272 10 70

Germany 05 10 -95 9 -09

France 311 3 23 3 15

Brazil 109 7 -92 8 189

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983091

fraserinstituteorg

Table 983089983094 Canadarsquos merchandise imports top ten sources 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 1992 1 524 1633 1 511 1745 1 504

China 374 2 98 347 2 109 382 2 110

Mexico 157 3 41 145 3 45 190 3 55

Japan 134 4 35 108 4 34 115 4 33

Germany 111 5 29 95 5 30 97 5 28

UK 110 6 29 82 6 26 92 6 27

South Korea 53 9 14 52 7 16 53 7 15

Algeria 67 7 18 33 10 10 31 10 09

Italy 45 10 12 39 9 12 40 9 12

France 53 8 14 49 8 15 47 8 13

Total 3804 3194 3465

2011 2012Average

shareValue Rank Share Value Rank Share

US 1846 1 496 1922 1 506 508

China 402 2 108 417 2 110 107

Mexico 205 3 55 210 3 55 50

Japan 109 4 29 123 4 33 33

Germany 107 5 29 118 5 31 29

UK 86 6 23 70 6 18 25

South Korea 55 7 15 52 7 14 15

Algeria 46 9 12 49 8 13 12

Italy 43 10 11 43 9 11 12

France 46 8 12 41 10 11 13

Total 3723 3796

Source Industry Canada (2013b)

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983091983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983095 Old and new trade prospectsmdashimport growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 29 8 -178 7 89 5

China 112 4 -70 2 123 3

Mexico 43 7 -77 4 337 1

Japan -11 10 -192 8 89 4

Germany 105 5 -149 6 44 7

UK 95 6 -252 9 141 2

South Korea 120 3 -14 1 36 8

Algeria 518 1 -511 10 -50 10

Italy 11 9 -132 5 48 6

France 191 2 -70 3 -35 9

2011 2012Average

Rank Rank

US 88 5 57 4 17

China 82 6 53 5 60

Mexico 111 3 39 6 91

Japan -29 9 151 1 01

Germany 132 2 117 2 50

UK -36 10 -173 10 -45

South Korea 76 7 -37 8 37

Algeria 533 1 91 3 116

Italy 95 4 23 7 09

France 22 8 -97 9 02

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983093

fraserinstituteorg

In terms of overall Canadian outbound FDI stocks in the US remain

very high despite the recent US recession while growth in stock in Asia is

modest (figure 983089983097) When we examine Canadian FDI in the so-called BRIC

states we notice that investment in both China and India is relatively small

Canadian mining investment in Brazil is much larger (figure 983090983088) In fact when

we examine amounts of FDI we find that Canada is not really a big BRIC

investor other than Brazil Chile Hong Kong and Peru are larger FDI recipi-

ents than China and India (figure 983090983089)

In terms of FDI flowing into Canada we notice the very large share

(983090983096983094983093 percent) in manufacturing which indicates both the predominant

share of US FDI and the extensive integrated supply chains in Canada-US

manufacturing (table 983089983097) Even more than for outbound FDI inflow stocks

show very large US preponderance (figure 983090983090) Such continued concentra-

tion of US FDI in Canada suggests that Canadian trade diversification is not

just a decision to be made by Canadian producers

Like trade growth Chinese FDI growth in Canada is positive but the

overall numbers are small and do not show rapid growth in the last 983091 years

(figure 983090983091)

Table 983089983096 Top industries for outward stocks of FDI 983090983088983089983090

Category Value Share

Mining oil and gas extraction 1099 188

Oil and gas subcategory 542 93

Manufacturing 569 97

Finance and insurance 2334 399

Management of companies and enterprises 757 129

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

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983091983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

1

2

3

4

5

6

7

8

9

10

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n s

Figure Canadian foreign direct investment (stock) BRIC ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Brazil PRC India Russia

0

20

4060

80

100

120

140

160

180

200

220

240

260

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) various regions

ndash

Notes Excluding Mexico Canadian FDI to Mexico in 2012 was $557 billion

Foreign Direct Investment measures the purchase of various forms of capital stock abroad

However tax havens (Barbados Bermuda etc) are frequently found to be some of the highest

recipients of FDI In reality tax havens do not reflect economic growth as FDI figures invested

into tax havens are often reinvested back to the source country in a concept known as

round-tripping (Financial Post 2013) We have accounted for tax havens by removing them from

tables and figures in this section The numbers corresponding to Figure 19 would be Barbados

($593 billion) Bermuda ($118 billion) British Virgin Islands ($21 billion) Cayman Islands ($302

billion)

Source Foreign Affairs Trade and Development Canada (2013c)

US Europe Asia amp Oceania Central amp South America Africa

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The state of Canada-US relations in 983090983088983089983092 983091983095

fraserinstituteorg

Table 983089983097 Top industries for inward stocks of FDI 983090983088983089983090

Category Value Share

Oil and gas extraction 766 147

Manufacturing 1492 287

Petroleum and coal products manufacturing 377 72

Wholesale trade 395 76

Finance and insurance 699 134

Management of companies and enterprises 999 192

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

0

2

4

6

8

10

12

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) Chile Hong Kong

Peru amp Korea ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Chile Hong Kong Peru Korea

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fraserinstituteorg

0

40

80

120

160

200

240

280

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Foreign direct investment (stock) in Canada from top three

countries ndash

Source Foreign Affairs Trade and Development Canada (2013c)

US Netherlands UK

0

2

4

6

8

10

12

201220112010200920082007

2 0 0 2 C A $ b

i l l i o n s

Figure Foreign direct investment (stock) in Canada from China

ndash

Source Foreign Affairs Trade and Development Canada (2013c)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

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fraserinstituteorg

Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

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References

Abacus Data (983090983088983089983090 November 983090983088) Beyond the Canadian-American Border

lthttpabacusdatacawp-contentuploads983090983088983089983090983089983089Can-AM_Report_CABC_

Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5662

The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

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983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5862

The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5962

983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6062

The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 12: Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093

fraserinstituteorg

Table 983091 Top sectors for Canadian merchandise exports to the US 983090983088983089983090

Industry Exports

2002 CA$ bi llions Percentage

Mineral products 886 318

Products of chemical or allied industries 163 59

Plastics and related articles 118 43

Base metals and articles of base metals 200 72

Machinery mechanical appliances electrical equipment and related articles 276 99

Vehicles aircraft vessels and associated transport equipment 530 191

Note On a customs basis

Source Statistics Canada (2013a)

Table 983092 Top industries for Canadian merchandise imports from the US 983090983088983089983090

Industry Imports

2002 CA$ bi llions Percentage

Mineral products 163 85

Products of chemical or allied industries 171 89

Plastics and related articles 127 66

Base metals and articles of base metals 158 82

Machinery mechanical appliances electrical equipment and related articles 413 215

Vehicles aircraft vessels and associated transport equipment 413 215

Note On a customs basis

Source Statistics Canada (2013a)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Trade in services

As a share of overall bilateral trade trade in services is growing gradually otal

bilateral services trade in 983090983088983089983088 amounted to 983089983096 percent of bilateral merchan-

dise trade It was 983089983093 percent in 983090983088983088983095983090 Te United States is by far the largest

trading partner in Canadarsquos international trade in services rade with the

US is nearly ten times the amount with the next largest partner the United

Kingdom But unlike merchandise trade the value of non-US services trade

is nearly half (983092983092 percent in 983090983088983089983088) of that with the USA (table 983093) In other

words there is more diversification from the US market in services than in

merchandise983091

Te trend reveals rising competitiveness on the US side (and non-USA)

as Canadian imports are growing considerably while Canadian exports are

stagnant resulting in a growing services trade deficit (figure 983093)

Bilateral trade in services was not impacted by the US recession as

merchandise trade was otal volume of trade is slightly up in the three years

after 983090983088983088983095 (figure 983094) Most of this gain is from growth in Canadian imports

from the US (and from non-US) while Canadian exports to the USA are

slightly down

Given that there is no growth in Americans traveling to Canada during

this time period (as we will show later) the relative strength of US exports vis-

agrave-vis Canadian exports appears to lie in the commercial sector (tables 983094 983095)

In conclusion in both merchandise and services trade the post 983090983088983088983095

period shows that Canada is relatively losing in trade competitiveness in rela-

tion to the United States Te relative loss of trade competitiveness in our

relationship may be a surprise to many Canadians who believe Canada has

simply been doing better than the US since 983090983088983088983096 Te lsquodoing betterrsquo part may

apply to domestic economic activity but not to external trade

1048626 Data on trade in services is not as recent as merchandise trade

1048627 op export destinations in 983090983088983089983088 after the USA are the UK France and Germany op

importers to Canada in 983090983088983089983088 after the USA include UK Hong Kong (China) France

Germany and Mexico Te case with importers to Canada is similar to that with export-

ing countries Imports from the UK make up roughly 983089983088 percent that of imports from the

US Imports from Hong Kong are 983093983089 percent that from the UK with France at 983092983090 percent

and both Germany and Mexico rest at roughly 983091983096 percent each

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983095

fraserinstituteorg

Table 983093 Services trade between Canada and the US 983090983088983088983093ndash983090983088983089983088 (983090983088983088983090 CA$ billions)

2005 2006 2007 2008 2009 2010

Exports to USA 3988 3815 3834 3966 3718 3700

Imports from USA 4358 4395 4544 4833 4783 4960

Trade balance with USA -370 -580 -710 -866 -1065 -1260

Trade balance with USA -443 -707 -847 -985 -1240 -1455

Exports to non-USA 2832 3080 2985 3052 3142 3102

Imports from non-USA 3022 3187 3380 3518 3496 3722

Trade balance with non-USA -189 -108 -395 -466 -354 -620

Trade balance with non-USA -323 -172 -621 -710 -540 -909

Total services exports 6820 6894 6819 7018 6860 6802

Total services imports 7379 7582 7924 8350 8279 8682

Total trade balance -559 -688 -1105 -1333 -1419 -1880

Total trade balance -394 -475 -750 -867 -937 -1214

Bilateral (X+I) USA 8346 8210 8378 8799 8589 8660

Bilateral (X+I) non-USA 5854 6267 6365 6569 6551 6824

Bilateral (X+I) total 14200 14477 14742 15368 15140 15484

Source Foreign Affairs Trade and Development Canada (2013a)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

80

81

82

83

84

85

86

87

88

89

90

201020092008200720062005

2 0

0 2 C A $ b i l l i o n s

Figure Canada-US net services trade ndash

Source Foreign Affairs Trade and Development Canada (2013a)

-20

-16

-12

-8

-4

0

201020092008200720062005

Trade balance with USA Total trade balance

Figure Canadarsquos trade deficit with US and the world ndash

Source Foreign Affairs Trade and Development Canada (2013a)

2 0 0 2 C A $ b i l

l i o n s

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983097

fraserinstituteorg

Table 983094 Top categories for service trade exports Canada-World 983090983088983089983090

Category Subcategory Exports

2002 CA$ bi llions Percentage

Government services 13 19

Travel services 143 207

Personal travel 119 172

Transportation services 111 161

Air transport 52 76

Commercial services 424 614

Financial services 57 82

Computer and information services 64 93

Intellectual property use 31 44

Management services 90 130

Research and development 33 47

Architectural engineering 39 57

Source Foreign Affairs Trade and Development Canada (2013a)

Table 983095 Top categories for service trade imports Canada-World 983090983088983089983090

Category Subcategory Imports

2002 CA$ billions Percentage

Government services 11 12

Travel services 288 323

Personal travel 253 284

Transportation services 195 219

Water transport 82 92

Air transport 84 95

Commercial services 396 446

Insurance services 44 50

Financial services 44 50

Intellectual property use 89 100

Management services 75 84

Source Foreign Affairs Trade and Development Canada (2013a)

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983089983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

075

080

085

090

095

100

105

2 0 1 3

- 0 7

2 0 1 3

- 0 1

2 0 1 2

- 0 7

2 0 1 2

- 0 1

2 0 1 1

- 0 7

2 0 1 1

- 0 1

2 0 1 0

- 0 7

2 0 1 0

- 0 1

2 0 0 9

- 0 7

2 0 0 9

- 0 1

2 0 0 8

- 0 7

2 0 0 8

- 0 1

2 0 0 7

- 0 7

2 0 0 7

- 0 1

Figure CanadaUS dollar exchange rate ndash

Source Bank of Canada (2013b)

C A U S e x c h a n g e r a t e

Dollar value and productivity trends

Te first factor to consider regarding Canadarsquos trade competitiveness vis-agrave-vis

the United States is the value of the Canadian dollar Te substantial appre-

ciation of the Canadian dollar against the US dollar that began in the early

983090983088983088983088s has stabilized at a much higher average value of the loonie ( figure 983095)

As is well documented such exchange rate appreciation tends to have a strong

effect on current account balances as exports decline (Kappler et al 983090983088983089983089)

A growing account deficit will likely push the value of the Canadian dollar

downward in the longer term and thus offer some remedy

ProductivityOf more concern to Canadians should be the data indicating that Canadian

labour productivity rates are lagging those in the United States (figures 983096 983097)

One would expect that Canadarsquos higher dollar has provided industry in recent

years with an opportunity to improve productivity as imported machinery

and technology would be available at a lower price However Canadarsquos pro-

ductivity rate of growth is modest and in 983090983088983089983090 dips into negative territory

again

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The state of Canada-US relations in 983090983088983089983092 983089983089

fraserinstituteorg

-1

0

1

2

3

20122011201020092008

Canada US

Figure Canada and US rates of output productivity growth ()

ndash

Source Statistics Canada (2013g)

R a t e o f p r o d u c t i v i t y g r o

w t h ( )

-10

-5

0

5

20122011201020092008

Labour productivity (Canada) Real GDP (Canada) Hours worked (Canada)

Labour productivity (US) Real GDP (US) Hours worked (US)

Figure Real US-Canadian output and hours worked () ndash

Source Statistics Canada (2013g)

A n n u a l c

h a n g e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983089983090 fraserinstituteorg

Trade and regulatory barriersdisputes

Table 983096 provides a synopsis of the major trade disputesbarriers that have

played a role in bilateral relations in the last five years and that are pertinent

for the 983090983088983089983092 period (pages 983089983094-983089983095) Te two large disputesmdashKeystone XL and

Mandatory Country-of-Origin Labeling (MCOOL) on red meatmdashare more

ominous than they may seem First both in crude oil products and in cattle

and hogs the United States is unilaterally disrupting or dismantling a well-

established integrated sector Canada has started attempts to diversify its oil

transportation structure including more rail and new pipeline routes But

as all proposed alternative pipelines have shown the alternatives are contro-

versial and at best years away from making a difference Meanwhile there is

considerable risk in putting too much crude oil on rail as its accident rates

are higher than pipe

Canadian threats to counter US MCOOL action with tariffs on food

products are not going to have much impact in the near future Moreover

an escalating tariff war on food products cannot be won by Canada and will

ultimately harm consumers on both sides of the border US defiance of two

WO rulings also means more uncertainty for Canadian traders

Keystone XL pipeline

Proposed in 983090983088983088983096 the Keystone XL (KXL) extension is part of a pipeline sys-

tem connecting Alberta oil sands and US mid-West and Gulf region refineries

KXL is a 983089983096983097983095 km crude oil pipeline with a capacity of 983092983094983093983088983088983088 barrels per

day (Hussain 983090983088983089983091) It is a substantial private infrastructure proposal that

will create employment and guarantee a secure energy source for the United

States (Millington and Murillo 983090983088983089983091) It is by no means a new feature in

Canada-US energy relations as a dense network of oil and electricity carri-ers cross the border at multiple points

What is unprecedented is that the permit process is now in its sixth

year and the final resolution remains uncertain (by US law a cross-border line

requires Department of State approval) If not resolved in 983090983088983089983092 the question

may well be handed over to the next president after 983090983088983089983094 Te policy uncertainty

associated with KXL approval has by far the largest impact on Canada-US trade

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The state of Canada-US relations in 983090983088983089983092 983089983091

fraserinstituteorg

relations Te dragged-out procedure has chilled relations Te southern leg of

KXL has been completed and the original route objection by Nebraska has been

resolved What remains ostensibly the problem is that the US administration

has identified this heavy oil as a component of its policy objective of curbing

the emission of greenhouses gasses to reduce global warming

Te impact of this pipeline delay in the 983090983095 million barrels per day (bpd)

export of Canadian oil products to the USA reverberates at various levels

Across Canada investment in mining oil and gas extraction for 983090983088983089983091 is pre-

dicted to decrease by 983090983095 percentmdashthe largest decline since the 983090983088983088983096 recession

(Statistics Canada 983090983088983089983091f) In Alberta investment is predicted to increase by

only 983088983089 percent (Statistics Canada 983090983088983089983091f) Capital investment in oil and gas

extraction has not recovered to pre-983090983088983088983096 levels (Industry Canada 983090983088983089983091a)

While the industry has become increasingly dependent on rail trans-

port to move product it is a costly alternative It can cost up to three times

as much as pipeline transport (Millington and Murillo 983090983088983089983091) and its limita-

tions are self-evident because rail movement of oil is constrained by the lim-

ited availability of rail cars In 983090983088983089983090 983089983091983088983088983088983088 bpd of heavy crude was being

transported by rail Tis is expected to rise to 983092983090983093983088983088983088 bpd by the end of

983090983088983089983092 falling short of the 983092983094983093983088983088983088 bpd which could have been moved through

KXL (Hussain 983090983088983089983091) Te forced increase in rail transport has resulted in

unintended costs for the industry a total of US$983089 billion must be invested for

new rail terminals and another US$983092ndash983093 billion for new rail cars (Lewis 983090983088983089983091)

Rail transport is both more costly and more dangerous A recent study

concluded that ldquopipeline transportation is safer than transportation by road

rail or barge as measured by incidents injuries and fatalitiesrdquo (Green amp

Furchtgott-Roth 983090983088983089983091) It is not inconceivable that another major oil acci-

dent either in Canada or the USAmdashsuch as took place in Quebec in July 983090983088983089983091

killing 983092983095 peoplemdashwould result in a moratorium on oil transport by rail with

grave consequences for Canadian producers

983090983088983088983090 Mandatory Country-of-Origin Labeling

Mandatory Country-of-Origin Labeling (MCOOL) is a provision mandated

by Congressional law and first implemented in 983090983088983088983096 Te measure imposes

strict segregation rules on American Canadian and Mexican cattle and hogs

and the subsequent slaughtering and processing of these animals to producebeef and pork products for retail sale Te stated purpose is to create labels

that indicate the origin in part or in whole of the product In effect it is a

veiled trade barrier because it gives US animals and products a competitive

advantage due to higher labeling inventory and processing costs for equiva-

lent Canadian products

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983089983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983096 Synopsis of trade disputes in Canadian-American relations in 983090983088983089983091

Dispute Impact and cost Prospect for resolution

Keystone XL Pipeline Very serious Poor

2008 proposal for a 1897

km 465000 bpd crude oilpipeline spanning fromAlberta down to Nebraska

Downward pressure on investment

Lost wages January 2012postponement is costing US $47million a day in lost wages (ConsumerEnergy Alliance 2013)

Continuation of crude oil pricediscounts due to lack of infrastructure

Costly alternative rail has emerged as atransportation alternative but can costup to three times as much as pipelinetravel (Millington and Murillo 2013)

Permit postponed twice

Resolution is not transparent

Rising risk of decision deferral past 2016

Mandatory Country-of-OriginLabelling (MCOOL)

Serious Poor

2008 CongressionalLaw mandating rulesfor segregated livestockprocessing and packagingand a labeling structure inorder to have food labelsindicate origin of product

Annual cost to Canadian beef and porksector of $1 billion

Deconstruction of a highly integratedtrilateral supply chain industry

MCOOL adds no animal health or foodsafety benefits

US has defied both WTO complaint andthe core part of the WTO Appeal ruling

2013 US reaction has been to strengthenthe discriminatory provision banning co-mingling of meats altogether

Canada plans to retaliate with tariffs butthis is a costly gambit with low chance ofsuccess

Softwood Lumber Agreement Moderate Good

In 2011 American softwoodcompanies took theirCanadian counterparts to theLondon Court of InternationalArbitration accusing themof circumventing the SLA(Foreign Affairs Trade andDevelopment Canada 2012a)

If in violation Canadian industry wouldface $380 million in penalties (TheCanadian Press 2012)

The London Court of InternationalArbitration in 2012 ruled in favor ofCanada (Foreign Affairs Trade andDevelopment Canada 2012a)

SLA was to expire in 2013 but Canadaand the USA extended it until 2015 (CBCNews 2012)

Long-term free trade in lumber needs toreplace SLA

Buy American Provision Serious Partial resolution but high risk ofrecurring Buy American legislation

2009 American Recovery andReinvestment Act

Exclusion of Canadian products andproduction sharing in US public worksprocurement

Canada-US Procurement Agreement in2010 which allowed for the purchaseof Canadian goods on seven US

infrastructure projects valued at morethan $7777000

Canada needs to seek a comprehensiveagreement in order to escape futureAmerican protectionism with allprovinces on board and compliant withthe WTO provision

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The state of Canada-US relations in 983090983088983089983092 983089983093

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Dispute Impact and cost Prospect for resolution

Canadian Wheat Board Long-term benefit Completed

Canadarsquos mandatory wheat

marketing board monopsonyended in 2011

Frequent US action against CWB in the

past will now end as wheat marketingin Canada turns fully market based

Intellectual Property Rights Moderate potential cost Partially resolved

Canada has been on theSpecial 301 Priority Watch Listby the United States TradeRepresentative since 1995

Ongoing threat of US Trade Action andlegal action

Canadian domestic complianceincluding

Strengthening data protection

Participation in Anti-counterfeiting TradeAgreement (ACTA in 2013)

Enacted the Combating CounterfeitProducts Act (2013)

Started the process of strengthening

the Copyright Act and implementingWorld Intellectual Property OrganizationInternet Treaties

In recognition of which Canada has beenremoved from the Special 301 PriorityWatch List

Prescription drugs Serious potential for trade action Indirect progress

The US complaint againstCanada

Imposing price ceilings thatshifts the cost burden of RampDto US firms

Weak protection ofintellectual property rights rethird party sales

Slow prescription drugapproval process causingreduced market access

US firms experience lost revenues andtrade action is a risk

In 2013 CETA agreement with theEuropean Union Canada agrees to givefull patent protection to new drugs fortwo years

Two-year rule may be transferable tofuture Canada-US resolution

Table 983096 continued

Canada and the United States have had a deeply integrated market in

this sector since the early 983089983097983097983088s Animal health and food safety standards have

been largely harmonized As a result highly efficient supply-chain production

methods have made this industry quite efficient However the imposition of

MCOOL has changed all that (Moens amp Leon 983090983088983089983090) Te cost differential haswidened and Canadian exports have dropped dramatically Since 983090983088983088983096 the

cattle sector has lost $983094983092983088 million per year and the hog sector has lost $983093983088983088

million a year (Te Canadian Press 983090983088983089983091a)

In 983090983088983089983090 the World rade Organization (WO) ruled in Canadarsquos favor by

concluding that MCOOL is discriminatory Te WO gave the US until May 983090983091

983090983088983089983091 to act but on that same day the USDA imposed regulatory changes that

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983089983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

actually strengthened the provisions of MCOOL In retaliation the Canadian

government released a list of US exports to Canada that would be subjected

to tariffs and it is preparing to seek a compliance panel at the WO Until this

situation is resolved the Canadian government predicts a continuing annual

loss of $983089 billion for the Canadian red meat sector (Te Canadian Press 983090983088983089983091a)

Softwood lumber

In 983090983088983089983089 several American softwood companies took their Canadian counter-

parts to the Court of International Arbitration in London accusing them of cir-

cumventing the Softwood Lumber Agreement of 983090983088983088983094 (Foreign Affairs rade

and Development Canada 983090983088983089983090a) Te dispute centered on the accelerating pace

of lumber harvests resulting from the pine beetle infestation Te stakes were

high $983091983096983088 million in penalties should Canada lose (Te Canadian Press 983090983088983089983090)

In 983090983088983089983090 the Court of International Arbitration ruled in Canadarsquos favor

(Foreign Affairs rade and Development Canada 983090983088983089983090a) In addition while

the Softwood Lumber Agreement was set to expire in 983090983088983089983091 the Canadian

and American governments successfully negotiated an extension of the

Agreement until 983090983088983089983093 (CBC News 983090983088983089983090) Te fact remains that as long as a

large part of Canadarsquos softwood lumber is managed in terms of quotas and

the stumpage fee system US trade action is very likely

lsquoBuy Americanrsquo provision

Te 983090983088983088983097 American Recovery and Reinvestment Act (ARRA which expired

on September 983091983088 983090983088983089983089) and the more recent 983090983088983089983089 American Jobs Act stipu-

lated that steel iron and other goods used in the repair and construction of

infrastructure projects in the US (highways bridges mass transit and fed-

eral buildings) must be manufactured in the United States (Matthiesen 983090983088983089983089)

In response to ARRA Canada and the US signed the Canada-US

Procurement Agreement in 983090983088983089983088 which allowed for the purchase of Canadian

goods on seven US infrastructure projects valued at more than $983095983095983095983095983088983088983088

or within the 983091983095 states subject to the WO GPA (Government of Canada

983090983088983089983091a) Te 983090983088983089983089 American Jobs Act did not pass in Senate and is thus moot

While the ARRA dispute was partially resolved lsquoBuy Americanrsquo anda counter position of lsquoBuy Canadianrsquo can flare up on either side of the bor-

der Canadian industry is most vulnerable in this uncertainty Te Canadian

government ought to seek a comprehensive Buy American exemption to

escape future American protectionism In so doing all provincial govern-

ments need to be on board in order to make the WO and NAFA rules

function optimally

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The state of Canada-US relations in 983090983088983089983092 983089983095

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Canadian Wheat Board (CWB)

In 983090983088983089983089 the Canadian government removed the monopsony held by the

Canadian Wheat Board Tis unilateral action offers a successful reduction

in bilateral trade distortion oday the CWB continues to operate as a mar-

keting group

Intellectual Property Rights (IPR)

From 983089983097983097983093 through 983090983088983089983091 Canada was on the Special 983091983088983089 Priority Watch

List by the United States rade Representative Te US complaint was that

protection and enforcement of IPR in Canada were weak Te Special 983091983088983089

Priority Watch List is designed to identify US trading partners that are the

worst offenders in IPR protection (Embassy of the United States Ottawa

Canada 983090983088983089983091)

Although the issue is not completely resolved Canada has made sig-

nificant progress in recent years Te federal government has strengthened

data protection regulations criminalized the use of camcorders in theaters

and participates in the Anti-Counterfeiting rade Agreement (ACA) nego-

tiations (983090983088983089983091) Most recently Canada enacted the Combatting Counterfeit

Products Act (Embassy of the United States Ottawa Canada 983090983088983089983091) Te

Canadian Government is in the process of strengthening the Copyright Act

and implementing World Intellectual Property Organization Internet reaties

(Embassy of the United States Ottawa Canada 983090983088983089983091)

As a result of these steps Canada was removed from the Special 983091983088983089

Priority Watch List in 983090983088983089983091

Prescription drugs

Prescription drug prices in Canada are relatively low due to a price ceil-

ing mandated by Canadarsquos healthcare system In addition Health Canada

approval times for prescription drugs significantly lag behind their counter-

parts in the United States and the European Union (Barua and Esmail 983090983088983089983091)

US lawmakers have repeatedly expressed their concerns over cheap prescrip-

tion drugs re-entering the US from Canada (Moens and Gabler 983090983088983089983089) TeEU also asked Canada to strengthen IPR protections for prescription drugs

(Lexchin and Gagnon 983090983088983089983091) Since the signing of the CEA agreement in

principle on October 983089983096 983090983088983089983091 the issue between Canada and the EU is now

resolved (Waldie 983090983088983089983091) Canada has agreed to ldquoEU demands for patent pro-

tection for up to two years on brand-name drugsrdquo (Blanchfield 983090983088983089983091)

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983089983096 fraserinstituteorg

State of the border andregulatory cooperation

Te decline in Americans traveling to Canada corresponds with the US

Greenback losing value against the Canadian dollar (figures 983089983088 983089983089) However

when we consider the extent of the decline in total numbers it appears dispro-

portionate Te change in American travel suggests instead a bigger problem

following the 983097-983089983089 shock Te imposition of new border transit requirements

such as passports as well as longer wait times and more security screening

has likely dampened US travel across this international boundary Given the

modest economic recovery in the USA from the beginning of 983090983088983089983088 onward

one would expect disposable income including for travel to trend back up

Instead the numbers remain stagnant at around 983090983088 million less than half the

number of 983090983088983088983090

While an overall national average for border wait times is not avail-

able data on major border crossings in both Central Canada and British

Columbia indicate that no reductions in wait times have been achieved

between 983090983088983088983094 and 983090983088983089983089 (figure 983089983090) Te problem of inefficiency as presented

by the Canada-US border goes well beyond wait times It includes inefficient

activity away from the border such as extra warehousing and costs of com-

plying with various facilitated traveler and goods programs such as FAS for

trucks loads and drivers

Tere are consistent cost differences between domestic and cross-bor-

der truck-borne trade which point to significant border costs ldquoFor exports

to the US these costs added 983088983097 percent to the delivered price of goods in

983090983088983088983092 Tis figure fell to 983088983092 percent in 983090983088983088983097 hellip Higher fixed costs per shipment

accounted for most of the additional cost of transporting goods to the USrdquo

(Brown and Anderson 983090983088983089983090) When we consider that in the manufacturingsector parts cross the border several times in various stages of assembly we

realize how this cost accumulates and defeats the efficiency gains otherwise

generated by integrated supply chain manufacturing Border costs are typ-

ically passed on to the consumer as fixed costs per shipment

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The state of Canada-US relations in 983090983088983089983092 983089983097

fraserinstituteorg

An unprecedented border problem has arisen in the current USAdministrationrsquos lengthy (six years) review of the permitting of a pipeline

border crossing as proposed in the Keystone XL project As a result oil-by-

rail transport has recently increased while the pipeline mode of Canada-US

trade has seen a drop in growth in the 983090983088983089983089983089983090 period ( figures 983089983091 983089983092)

0

10

20

30

40

50

201220112010200920082007200620052004200320022001200019991998

Figure Travellers entering Canada ndash

Source Statistics Canada (2013e)

US residents Non-US residents

0

3

6

9

12

15

18

0

03

06

09

12

15

18

20122011201020092008200720062005200420032002

Trips Spending US$CA$ (Secondary axis)

Figure US overnight travel to Canada ndash

Source Statistics Canada (2011) Bank of Canada (2013b)

M i l l i o n s o f t r i p

s N o m i n a l C A $ b i l l i o n s

U S $ C A $ ex c h a n

g er a t e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983088 The state of Canada-US relations in 983090983088983089983092

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0

5

10

15

20

201120102009200820072006

Northbound average delay Southbound average delay

Figure Peace Arch average border wait time ndash

Source Cascade Gateway Data (2013)

M i n u t e s

0

25

50

75

100

125

150

175

200

225

250

275

300

201220112010200920082007200620052004

2 0 0 4

U S $ b

i l l i o n s

Figure All surface modes of freight flow data based on value of goods

ndash

Source Bureau of Transportation Statistics (2013)

Truck Rail Pipeline

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983089

fraserinstituteorg

lsquoBeyond the Borderrsquo and Regulatory Cooperation

In 983090983088983089983089 Canada and the United States announced an ambitious agreement

to reduce border costs by means of deeper bilateral regulatory and secur-

ity cooperation Te accord seeks to streamline various border proceduresmdash

some already in existence and some newmdashto improve intelligence-sharing

between law enforcement agencies mutual recognition of passenger baggage

screening improved frameworks for trusted trade programs harmoniza-

tion of NEXUS protocols streamlined supply chains enhanced trade com-

petitiveness collaboration in border infrastructure investment and deeper

cooperation in national security investigations Te agreement is known as

Beyond the Border A Shared Vision for Perimeter Security and Economic

Competitiveness (February 983092 983090983088983089983089)

Te Beyond the Border Vision accord also set up a Regulatory

Cooperation Council In it Canadian and American officials seek to reduce

red tape and harmonize regulations in certain key sectors o date the

Council has announced various plans affecting agriculture and food trans-

portation health personal care products workplace chemicals environmentnano materials and small business loans We summarize the key points of

progress made since 983090983088983089983089 in table 983097

-35

-25

-15

-5

5

15

25

35

20122011201020092008200720062005

Truck Rail Pipeline

Figure Growth rate of all surface modes of freight flows () ndash

Source Bureau of Transportation Statistics (2013) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983097 Key elements of Beyond the Border and Regulatory Cooperation

Beyond the Border Program

Integrated Cargo Security Strategy (ICSS)December 2011

Reduces administrative duplication between Canada and the US byaddressing security risks in advance within the shipment supply chainand at the border (Canada Border Services Agency 2013)

Prince Rupert Pilot October 2012 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry via rail is examined by Canadian officials onbehalf of the US (Government of Canada 2013c)

Montreal Pilot January 2013 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry to the US via truck is examined by Canadianofficials on behalf of the US (Government of Canada 2013c)

Pre-load Air Cargo Targeting (PACT) Joint pilot by CBSA and Transport Canada to screen cargo pre-flight onCanada-bound airplanes at foreign airports (Canada Border ServicesAgency 2013)

Tamper Evident Technology PilotOctober 2012

Pilot collaboration between CBSA and US CBP to ensure containersremain sealed upon arrival at the US border (Canada Border Services

Agency 2013)

Truck Cargo Pre-Inspection PilotMarch 2013

Pilot program between the CBSA and the US CBP for pre-inspection ofsouthbound traffic into US (Canada Border Services Agency 2013)

Free and Secure Trade (FAST) PilotSarnia Ontario

Pilot program for usage of FAST lanes without Partners in Protection andCustoms Self Assessment programs (Government of Canada 2013c)

Canada-US Shiprider June 2013 Removal of jurisdictional barriers to improve law enforcement personnelin Windsor-Detroit and Vancouver-Blaine waterways (Government ofCanada 2013c)

EntryExit Initiative Phase II June 2013 Exchange entryexit data between the CBSA and US DHS on individualsat Canada-US land border crossings (Government of Canada 2013c)

Regulatory Cooperation ProgramMemorandum of Understanding between Transport Canada and the RailwayAssociation of Canada September 2013

Framework for Canadian rail emissions between 2011 to 2015(Government of Canada 2013d)

Canada-United States Perimeter Approachto Plant Protection September 2013

Draft framework for increased cooperation and reduction inadministrative duplication between the Canadian Food InspectionAgency (CFIA) and United States Animal and Plant Health InspectionService (APHIS) on trade in plants and plant products (Government ofCanada 2013d)

Common Electronic Submission GatewayPilot (CESG) August 2013

FDA and Health Canada will allow pharmaceutical firms to electronicallysubmit drug applications (Government of Canada 2013d)

Initiative to Align Veterinary DrugApprovals December 2012

Joint reviews between US FDA and Health Canada on veterinary drugproducts (Government of Canada 2013d)

Stricter Air Pollutant Emissions Environment Canada aligns car emissions beginning in 2017 with theUS Environmental Protection Agencyrsquos ldquoTier 3rdquo (Government of Canada2013d)

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The state of Canada-US relations in 983090983088983089983092 983090983091

fraserinstituteorg

On September 983092 983090983088983089983091 $983092983094983094 million in investment was allocated to the

Border Action plan by the Government of Canada in order expand two marine

container examination facilities (Government of Canada 983090983088983089983091c) $983091983091 million

was invested by the Government of Canada in the Asia Pacific Gateway and

rade Corridor Initiative (Government of Canada 983090983088983089983091c) Te Plan includes

an additional 983090983097 harmonization initiatives that will enhance trade activity

between Canada and the US

Neither Beyond the Border nor the Regulatory Cooperation Council

offer further investment or cost estimates on the initiatives described in table

983097 Moens and Gabler (983090983088983089983090) pointed to the need for both the Canadian and

American governments to provide data on border costs so that a cost-benefit

analysis can ensue Nonetheless the small steps of progress towards inte-

grating and harmonizing US and Canadian border practices remains a very

important (long-term) part of reducing the profile of the border

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Canadian and American public perceptions

Tree observations are noteworthy in recent assessments of public percep-

tions between Americans and Canadians First Americans consistently have

a very high favourability rating of Canadians typically in the 983097983088 plus range

(table 983089983088 figure 983089983093) Both as a friend and a strategic ally Americans hold

Canadians in the most favourable light possible (table 983089983089) Disagreements over

policy between the two countries whether in defence and foreign affairs or

over border and trade issues do not move this fundamental asset Canadians

enjoy in dealing with their neighbour

Second Canadians do not have high expectations of either the

American or Canadian government regarding progress in bilateral relations

As table 983089983090 shows Canadians hold Obama in high regard (983094983091 percent) but

only 983093983092 percent expect progress from him in trade relations Prime Minister

Harper is rated slightly ahead of President Obama in terms of working hard

towards improving Canada-US relations (table 983089983091)

Tird and most significant in light of Canadarsquos Catch-983090983090 situation both

Canadians and Americans are more supportive of closer cooperation and inte-

gration policies than is the case for political representatives in either the United

States or Canada In two recent studies we showed how US Senators and House

Representatives are quite critical of Canada with regard to NAFA issues and bor-

der security (Moens and Gabler 983090983088983089983089) Similarly we found that among the three

major political parties in Canadarsquos parliament only one consistently expressed

itself in favour of closer ties with the United States (Moens and Gabler 983090983088983089983089)

A recent survey of American and Canadian (and Mexican) attitudes

towards free trade and NAFA show surprisingly strong data for more trade

integration In response to the statement ldquoTere should be more free trade

between the US Canada and Mexicordquo 983096983088 percent of Canadians approved

as did 983095983092 percent of Americans Even on border security Canadians andAmericans are more pro-cooperation and integration than their governmental

policies suggest In the US 983092983089 percent support a common perimeter while

983090983088 percent are opposed In Canada 983092983091 percent support it and 983091983088 percent are

opposed (Graves Pastor and Basaacutentildeez 983090983088983089983091) Terefore in terms of public

mandate both governments would have a case to work towards broader bilat-

eral (or trilateral) cooperation to lower trade barriers

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The state of Canada-US relations in 983090983088983089983092 983090983093

fraserinstituteorg

Table 983089983088 Canadian favourability rating among Americans (February 983090983088983089983090)

Veryfavourable

Mostlyfavourable

Mostlyunfavourable

Veryfavourable Not sure Total

favourableTotal

unfavourable

53 38 3 2 3 91 5

Note n=1015

Source Gallup Poll (2012)

Table 983089983089 Ally or enemy for Americans (June 983090983088983089983091)

Country Ally Friendly Unfriendly Enemy Total Ally andFriendly

Great Britain 66 25 2 1 91

Canada 61 33 2 1 94

China 11 44 26 14 55

Note n=1529Source Gallup Poll (2013)

88

90

92

94

96

98

201220112010200920082007

Figure Canadian favourability among Americans () ndash

Source Gallup Poll (2012)

f a

v o u r a

b l e

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983090983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983090 What effect will Obama have on Canada-US relations (November 983090983088983089983090)

Canadians Americans

Positive Negative None Positive Negative None

Relationship 62 5 34 48 12 40

Trade 54 10 35 48 12 39

Harmonizing 53 8 40 47 14 39

Note n=1066

Source Abacus Data (2012)

Table 983089983091 Has each leader worked hard to improve Canada-US relations

(July 983090983088983089983090)

Country Agree Disagree Not sure

Stephen Harper 58 32 10

Barack Obama 53 32 15

Note Sample of Canadians

Source HarrisDecima (2012)

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fraserinstituteorg 983090983095

US policy uncertainty

Canadian economic prospects face their most important challenge in the

United States Te US economic recovery has been modest and real GDP

growth so far has remained below the post-World War II average of post-

recession periods (figure 983089983094) As we noted above the less-than-stellar US

recovery is made even more challenging for Canadian traders in that pro-

ductivity gains in Canada are lagging while the Canadian dollar remains high

On top of that several American-imposed regulatory obstacles to free trade

are depressing trade prospects in crude oil red meat and public works pro-

curement Tese impediments reduce Canadian competitive access to the

US market

A high level of public spending until the January 983090983088983089983091 sequester and

ongoing monetary stimulation have not produced notable US GDP growth

Te seven post-recession periods below show the current average to be well

below the historical average (Young 983090983088983089983091)

983089983097983092983096-983089983097983093983095 983091983096983088

983089983097983093983096-983089983097983094983095 983092983090983096

983089983097983094983096-983089983097983095983095 983091983089983096

983089983097983095983096-983089983097983096983095 983091983089983093

983089983097983096983096-983089983097983097983095 983091983088983093

983089983097983097983096-983090983088983088983095 983090983097983097

983090983088983088983096-983090983088983089983091 983088983095983091

While economic growth has been modest growth in the public debt

has not (figure 983089983095) Publicly held debt in the US is now at 983095983091 percent of GDP

the highest since 983089983097983092983094 (Congressional Budget Office 983090983088983089983091)

Te widening gap between federal government outlays and revenueshas only recently been capped by the Sequester (figure 983089983096) However the

budget Sequester is temporary and final resolution of public spending and

taxation levels remains unclear given repeated gridlock in presidential-con-

gressional policy making High debt levels combined with stalemate over

taxes and budget cuts have produced a case of policy instability or uncer-

tainty in the last five years (Baker Bloom and Davis 983090983088983089983091)

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US policy uncertainty is further aggravated by inaction on the large

lsquoentitlementrsquo programsmdashSocial Security Medicare and Medicaidmdashwhich are

the major drivers of the long-term gap in revenues and spending

-4

-2

0

2

4

6

8

201220062000199419881982197619701964

Figure US GDP growth rate ndash ( forecast)

Source The World Bank (2013b) OECD (2013)

-10

-8

-6

-4

-2

0

0

20

40

60

80

100

20122011201020092008200720062005200420032002

Government deficit as a percentage of GDP Government debt as a percentage of GDP

Figure US Government deficit and debt as a percentage of GDP ndash

Source Congressional Budget Office (2013)

D e fi c i t p e r c e n t a g e ( ) D

e b t p er c en t a g e ( )

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The state of Canada-US relations in 983090983088983089983092 983090983097

fraserinstituteorg

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

20122003199319831973

Revenue Outlays

Figure US Government revenue and outlays ndash ( US$ billions)

Source Congressional Budget Office (2013)

1 9 8 3 U S $ b i l l i o n s

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983091983088 fraserinstituteorg

Trade diversification

Given the weakness in near-term US opportunities Canadians are (again)

wondering how to pursue trade diversification away from the United States

Te objective is logical and if achieved will prove advantageous but various

trends in trade and investment show that diversification for Canada is a slow

and arduous journey (table 983089983092)

In terms of overall share exports to China in the last five years have

doubled but the numbersmdashfrom 983090983089983095 percent to 983092983090983094 percentmdashremain rela-

tively low In the same period the US-bound share declined by 983091 percent but

remains a towering 983095983092983093983092 percent Te pattern of small overall impact applies

to all the other top trading partners For example exports to the UK have

increased but exports to Japan and Mexico have essentially stalled When we

consider average export growth rates over the last five years (table 983089983093) we see

a very strong rate for China (983089983093983093 percent) and strong rates for the UK and

South Korea (983096983097 percent and 983094983097 percent) However a 983089983093 percent increase in a

983092 percent overall trade share produces little change Te point we are making

is that at this rate and pattern of trade lsquodiversificationrsquo it will actually take a

very long timemdashwhile relatively small upward trends in trade with the United

States could have a quick and very large impact in the opposite direction

On the import side we notice more trade diversification with the US

share at 983093983088 percent and the Chinese share at 983089983089 percent (table 983089983094) Te Chinese

growth rate on the import side is less than on the export side (table 983089983095) Te

most revealing number may be the high average over five years for Mexico

at 983097 percent Tis could be indicative of a growing supply chain with Mexico

While foreign direct investment (FDI) is not a direct indicator of future

trade trends in investment may harbinger change In terms of outbound

FDI we notice that only a small segment (less than 983089983088 percent) is targeted

for manufacturing (table 983089983096) It is investment in this category in which onewould expect growth in supply chains

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The state of Canada-US relations in 983090983088983089983092 983091983089

fraserinstituteorg

Table 983089983092 Canadarsquos merchandise exports top ten destinations 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 3291 1 777 2361 1 751 2564 1 749

China 92 4 22 97 3 31 114 3 33

UK 114 2 27 105 2 33 141 2 41

Japan 97 3 23 73 4 23 79 4 23

Mexico 51 5 12 42 5 13 43 5 13

Netherlands 32 8 08 24 8 08 28 8 08

South Korea 34 7 08 31 7 10 32 7 09

Germany 39 6 09 33 6 10 34 6 10

France 28 9 07 23 9 07 20 10 06

Brazil 23 10 05 14 10 04 22 9 06

Total 4237 3145 3424

2011 2012Average

shareValue Rank Share Value Rank Share

US 2750 1 737 2783 1 745 752

China 140 3 38 159 2 43 33

UK 157 2 42 154 3 41 37

Japan 89 4 24 85 4 23 23

Mexico 46 5 12 44 5 12 12

Netherlands 40 7 11 37 6 10 09

South Korea 43 6 11 30 7 08 09

Germany 33 8 09 29 8 08 09

France 26 9 07 26 9 07 07

Brazil 24 10 06 21 10 06 06

Total 3732 3734

Source Industry Canada (2013b)

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Table 983089983093 Canadian export growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 56 7 -281 9 106 = 5

China 101 6 65 1 187 3

UK 16 9 -73 2 358 2

Japan 202 3 -250 7 106 = 5

Mexico 179 4 -178 6 43 9

Netherlands -85 10 -255 8 183 4

South Korea 276 2 -80 3 52 8

Germany 160 5 -167 4 54 7

France 36 8 -174 5 -122 10

Brazil 706 1 -380 10 603 1

2011 2012Average

Rank Rank

US 104 8 27 2 02

China 270 4 152 1 155

UK 148 6 -02 4 90

Japan 161 5 -29 6 38

Mexico 94 9 -16 5 24

Netherlands 475 1 -55 7 53

South Korea 374 2 -272 10 70

Germany 05 10 -95 9 -09

France 311 3 23 3 15

Brazil 109 7 -92 8 189

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983091

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Table 983089983094 Canadarsquos merchandise imports top ten sources 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 1992 1 524 1633 1 511 1745 1 504

China 374 2 98 347 2 109 382 2 110

Mexico 157 3 41 145 3 45 190 3 55

Japan 134 4 35 108 4 34 115 4 33

Germany 111 5 29 95 5 30 97 5 28

UK 110 6 29 82 6 26 92 6 27

South Korea 53 9 14 52 7 16 53 7 15

Algeria 67 7 18 33 10 10 31 10 09

Italy 45 10 12 39 9 12 40 9 12

France 53 8 14 49 8 15 47 8 13

Total 3804 3194 3465

2011 2012Average

shareValue Rank Share Value Rank Share

US 1846 1 496 1922 1 506 508

China 402 2 108 417 2 110 107

Mexico 205 3 55 210 3 55 50

Japan 109 4 29 123 4 33 33

Germany 107 5 29 118 5 31 29

UK 86 6 23 70 6 18 25

South Korea 55 7 15 52 7 14 15

Algeria 46 9 12 49 8 13 12

Italy 43 10 11 43 9 11 12

France 46 8 12 41 10 11 13

Total 3723 3796

Source Industry Canada (2013b)

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983091983092 The state of Canada-US relations in 983090983088983089983092

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Table 983089983095 Old and new trade prospectsmdashimport growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 29 8 -178 7 89 5

China 112 4 -70 2 123 3

Mexico 43 7 -77 4 337 1

Japan -11 10 -192 8 89 4

Germany 105 5 -149 6 44 7

UK 95 6 -252 9 141 2

South Korea 120 3 -14 1 36 8

Algeria 518 1 -511 10 -50 10

Italy 11 9 -132 5 48 6

France 191 2 -70 3 -35 9

2011 2012Average

Rank Rank

US 88 5 57 4 17

China 82 6 53 5 60

Mexico 111 3 39 6 91

Japan -29 9 151 1 01

Germany 132 2 117 2 50

UK -36 10 -173 10 -45

South Korea 76 7 -37 8 37

Algeria 533 1 91 3 116

Italy 95 4 23 7 09

France 22 8 -97 9 02

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983093

fraserinstituteorg

In terms of overall Canadian outbound FDI stocks in the US remain

very high despite the recent US recession while growth in stock in Asia is

modest (figure 983089983097) When we examine Canadian FDI in the so-called BRIC

states we notice that investment in both China and India is relatively small

Canadian mining investment in Brazil is much larger (figure 983090983088) In fact when

we examine amounts of FDI we find that Canada is not really a big BRIC

investor other than Brazil Chile Hong Kong and Peru are larger FDI recipi-

ents than China and India (figure 983090983089)

In terms of FDI flowing into Canada we notice the very large share

(983090983096983094983093 percent) in manufacturing which indicates both the predominant

share of US FDI and the extensive integrated supply chains in Canada-US

manufacturing (table 983089983097) Even more than for outbound FDI inflow stocks

show very large US preponderance (figure 983090983090) Such continued concentra-

tion of US FDI in Canada suggests that Canadian trade diversification is not

just a decision to be made by Canadian producers

Like trade growth Chinese FDI growth in Canada is positive but the

overall numbers are small and do not show rapid growth in the last 983091 years

(figure 983090983091)

Table 983089983096 Top industries for outward stocks of FDI 983090983088983089983090

Category Value Share

Mining oil and gas extraction 1099 188

Oil and gas subcategory 542 93

Manufacturing 569 97

Finance and insurance 2334 399

Management of companies and enterprises 757 129

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

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983091983094 The state of Canada-US relations in 983090983088983089983092

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0

1

2

3

4

5

6

7

8

9

10

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n s

Figure Canadian foreign direct investment (stock) BRIC ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Brazil PRC India Russia

0

20

4060

80

100

120

140

160

180

200

220

240

260

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) various regions

ndash

Notes Excluding Mexico Canadian FDI to Mexico in 2012 was $557 billion

Foreign Direct Investment measures the purchase of various forms of capital stock abroad

However tax havens (Barbados Bermuda etc) are frequently found to be some of the highest

recipients of FDI In reality tax havens do not reflect economic growth as FDI figures invested

into tax havens are often reinvested back to the source country in a concept known as

round-tripping (Financial Post 2013) We have accounted for tax havens by removing them from

tables and figures in this section The numbers corresponding to Figure 19 would be Barbados

($593 billion) Bermuda ($118 billion) British Virgin Islands ($21 billion) Cayman Islands ($302

billion)

Source Foreign Affairs Trade and Development Canada (2013c)

US Europe Asia amp Oceania Central amp South America Africa

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The state of Canada-US relations in 983090983088983089983092 983091983095

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Table 983089983097 Top industries for inward stocks of FDI 983090983088983089983090

Category Value Share

Oil and gas extraction 766 147

Manufacturing 1492 287

Petroleum and coal products manufacturing 377 72

Wholesale trade 395 76

Finance and insurance 699 134

Management of companies and enterprises 999 192

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

0

2

4

6

8

10

12

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) Chile Hong Kong

Peru amp Korea ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Chile Hong Kong Peru Korea

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fraserinstituteorg

0

40

80

120

160

200

240

280

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Foreign direct investment (stock) in Canada from top three

countries ndash

Source Foreign Affairs Trade and Development Canada (2013c)

US Netherlands UK

0

2

4

6

8

10

12

201220112010200920082007

2 0 0 2 C A $ b

i l l i o n s

Figure Foreign direct investment (stock) in Canada from China

ndash

Source Foreign Affairs Trade and Development Canada (2013c)

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fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

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Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

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References

Abacus Data (983090983088983089983090 November 983090983088) Beyond the Canadian-American Border

lthttpabacusdatacawp-contentuploads983090983088983089983090983089983089Can-AM_Report_CABC_

Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5862

The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5962

983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6062

The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6162

983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 13: Canadas Catch 22 State of Canada Us Relations in 2014

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983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Trade in services

As a share of overall bilateral trade trade in services is growing gradually otal

bilateral services trade in 983090983088983089983088 amounted to 983089983096 percent of bilateral merchan-

dise trade It was 983089983093 percent in 983090983088983088983095983090 Te United States is by far the largest

trading partner in Canadarsquos international trade in services rade with the

US is nearly ten times the amount with the next largest partner the United

Kingdom But unlike merchandise trade the value of non-US services trade

is nearly half (983092983092 percent in 983090983088983089983088) of that with the USA (table 983093) In other

words there is more diversification from the US market in services than in

merchandise983091

Te trend reveals rising competitiveness on the US side (and non-USA)

as Canadian imports are growing considerably while Canadian exports are

stagnant resulting in a growing services trade deficit (figure 983093)

Bilateral trade in services was not impacted by the US recession as

merchandise trade was otal volume of trade is slightly up in the three years

after 983090983088983088983095 (figure 983094) Most of this gain is from growth in Canadian imports

from the US (and from non-US) while Canadian exports to the USA are

slightly down

Given that there is no growth in Americans traveling to Canada during

this time period (as we will show later) the relative strength of US exports vis-

agrave-vis Canadian exports appears to lie in the commercial sector (tables 983094 983095)

In conclusion in both merchandise and services trade the post 983090983088983088983095

period shows that Canada is relatively losing in trade competitiveness in rela-

tion to the United States Te relative loss of trade competitiveness in our

relationship may be a surprise to many Canadians who believe Canada has

simply been doing better than the US since 983090983088983088983096 Te lsquodoing betterrsquo part may

apply to domestic economic activity but not to external trade

1048626 Data on trade in services is not as recent as merchandise trade

1048627 op export destinations in 983090983088983089983088 after the USA are the UK France and Germany op

importers to Canada in 983090983088983089983088 after the USA include UK Hong Kong (China) France

Germany and Mexico Te case with importers to Canada is similar to that with export-

ing countries Imports from the UK make up roughly 983089983088 percent that of imports from the

US Imports from Hong Kong are 983093983089 percent that from the UK with France at 983092983090 percent

and both Germany and Mexico rest at roughly 983091983096 percent each

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983095

fraserinstituteorg

Table 983093 Services trade between Canada and the US 983090983088983088983093ndash983090983088983089983088 (983090983088983088983090 CA$ billions)

2005 2006 2007 2008 2009 2010

Exports to USA 3988 3815 3834 3966 3718 3700

Imports from USA 4358 4395 4544 4833 4783 4960

Trade balance with USA -370 -580 -710 -866 -1065 -1260

Trade balance with USA -443 -707 -847 -985 -1240 -1455

Exports to non-USA 2832 3080 2985 3052 3142 3102

Imports from non-USA 3022 3187 3380 3518 3496 3722

Trade balance with non-USA -189 -108 -395 -466 -354 -620

Trade balance with non-USA -323 -172 -621 -710 -540 -909

Total services exports 6820 6894 6819 7018 6860 6802

Total services imports 7379 7582 7924 8350 8279 8682

Total trade balance -559 -688 -1105 -1333 -1419 -1880

Total trade balance -394 -475 -750 -867 -937 -1214

Bilateral (X+I) USA 8346 8210 8378 8799 8589 8660

Bilateral (X+I) non-USA 5854 6267 6365 6569 6551 6824

Bilateral (X+I) total 14200 14477 14742 15368 15140 15484

Source Foreign Affairs Trade and Development Canada (2013a)

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983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

80

81

82

83

84

85

86

87

88

89

90

201020092008200720062005

2 0

0 2 C A $ b i l l i o n s

Figure Canada-US net services trade ndash

Source Foreign Affairs Trade and Development Canada (2013a)

-20

-16

-12

-8

-4

0

201020092008200720062005

Trade balance with USA Total trade balance

Figure Canadarsquos trade deficit with US and the world ndash

Source Foreign Affairs Trade and Development Canada (2013a)

2 0 0 2 C A $ b i l

l i o n s

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983097

fraserinstituteorg

Table 983094 Top categories for service trade exports Canada-World 983090983088983089983090

Category Subcategory Exports

2002 CA$ bi llions Percentage

Government services 13 19

Travel services 143 207

Personal travel 119 172

Transportation services 111 161

Air transport 52 76

Commercial services 424 614

Financial services 57 82

Computer and information services 64 93

Intellectual property use 31 44

Management services 90 130

Research and development 33 47

Architectural engineering 39 57

Source Foreign Affairs Trade and Development Canada (2013a)

Table 983095 Top categories for service trade imports Canada-World 983090983088983089983090

Category Subcategory Imports

2002 CA$ billions Percentage

Government services 11 12

Travel services 288 323

Personal travel 253 284

Transportation services 195 219

Water transport 82 92

Air transport 84 95

Commercial services 396 446

Insurance services 44 50

Financial services 44 50

Intellectual property use 89 100

Management services 75 84

Source Foreign Affairs Trade and Development Canada (2013a)

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983089983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

075

080

085

090

095

100

105

2 0 1 3

- 0 7

2 0 1 3

- 0 1

2 0 1 2

- 0 7

2 0 1 2

- 0 1

2 0 1 1

- 0 7

2 0 1 1

- 0 1

2 0 1 0

- 0 7

2 0 1 0

- 0 1

2 0 0 9

- 0 7

2 0 0 9

- 0 1

2 0 0 8

- 0 7

2 0 0 8

- 0 1

2 0 0 7

- 0 7

2 0 0 7

- 0 1

Figure CanadaUS dollar exchange rate ndash

Source Bank of Canada (2013b)

C A U S e x c h a n g e r a t e

Dollar value and productivity trends

Te first factor to consider regarding Canadarsquos trade competitiveness vis-agrave-vis

the United States is the value of the Canadian dollar Te substantial appre-

ciation of the Canadian dollar against the US dollar that began in the early

983090983088983088983088s has stabilized at a much higher average value of the loonie ( figure 983095)

As is well documented such exchange rate appreciation tends to have a strong

effect on current account balances as exports decline (Kappler et al 983090983088983089983089)

A growing account deficit will likely push the value of the Canadian dollar

downward in the longer term and thus offer some remedy

ProductivityOf more concern to Canadians should be the data indicating that Canadian

labour productivity rates are lagging those in the United States (figures 983096 983097)

One would expect that Canadarsquos higher dollar has provided industry in recent

years with an opportunity to improve productivity as imported machinery

and technology would be available at a lower price However Canadarsquos pro-

ductivity rate of growth is modest and in 983090983088983089983090 dips into negative territory

again

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The state of Canada-US relations in 983090983088983089983092 983089983089

fraserinstituteorg

-1

0

1

2

3

20122011201020092008

Canada US

Figure Canada and US rates of output productivity growth ()

ndash

Source Statistics Canada (2013g)

R a t e o f p r o d u c t i v i t y g r o

w t h ( )

-10

-5

0

5

20122011201020092008

Labour productivity (Canada) Real GDP (Canada) Hours worked (Canada)

Labour productivity (US) Real GDP (US) Hours worked (US)

Figure Real US-Canadian output and hours worked () ndash

Source Statistics Canada (2013g)

A n n u a l c

h a n g e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983089983090 fraserinstituteorg

Trade and regulatory barriersdisputes

Table 983096 provides a synopsis of the major trade disputesbarriers that have

played a role in bilateral relations in the last five years and that are pertinent

for the 983090983088983089983092 period (pages 983089983094-983089983095) Te two large disputesmdashKeystone XL and

Mandatory Country-of-Origin Labeling (MCOOL) on red meatmdashare more

ominous than they may seem First both in crude oil products and in cattle

and hogs the United States is unilaterally disrupting or dismantling a well-

established integrated sector Canada has started attempts to diversify its oil

transportation structure including more rail and new pipeline routes But

as all proposed alternative pipelines have shown the alternatives are contro-

versial and at best years away from making a difference Meanwhile there is

considerable risk in putting too much crude oil on rail as its accident rates

are higher than pipe

Canadian threats to counter US MCOOL action with tariffs on food

products are not going to have much impact in the near future Moreover

an escalating tariff war on food products cannot be won by Canada and will

ultimately harm consumers on both sides of the border US defiance of two

WO rulings also means more uncertainty for Canadian traders

Keystone XL pipeline

Proposed in 983090983088983088983096 the Keystone XL (KXL) extension is part of a pipeline sys-

tem connecting Alberta oil sands and US mid-West and Gulf region refineries

KXL is a 983089983096983097983095 km crude oil pipeline with a capacity of 983092983094983093983088983088983088 barrels per

day (Hussain 983090983088983089983091) It is a substantial private infrastructure proposal that

will create employment and guarantee a secure energy source for the United

States (Millington and Murillo 983090983088983089983091) It is by no means a new feature in

Canada-US energy relations as a dense network of oil and electricity carri-ers cross the border at multiple points

What is unprecedented is that the permit process is now in its sixth

year and the final resolution remains uncertain (by US law a cross-border line

requires Department of State approval) If not resolved in 983090983088983089983092 the question

may well be handed over to the next president after 983090983088983089983094 Te policy uncertainty

associated with KXL approval has by far the largest impact on Canada-US trade

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The state of Canada-US relations in 983090983088983089983092 983089983091

fraserinstituteorg

relations Te dragged-out procedure has chilled relations Te southern leg of

KXL has been completed and the original route objection by Nebraska has been

resolved What remains ostensibly the problem is that the US administration

has identified this heavy oil as a component of its policy objective of curbing

the emission of greenhouses gasses to reduce global warming

Te impact of this pipeline delay in the 983090983095 million barrels per day (bpd)

export of Canadian oil products to the USA reverberates at various levels

Across Canada investment in mining oil and gas extraction for 983090983088983089983091 is pre-

dicted to decrease by 983090983095 percentmdashthe largest decline since the 983090983088983088983096 recession

(Statistics Canada 983090983088983089983091f) In Alberta investment is predicted to increase by

only 983088983089 percent (Statistics Canada 983090983088983089983091f) Capital investment in oil and gas

extraction has not recovered to pre-983090983088983088983096 levels (Industry Canada 983090983088983089983091a)

While the industry has become increasingly dependent on rail trans-

port to move product it is a costly alternative It can cost up to three times

as much as pipeline transport (Millington and Murillo 983090983088983089983091) and its limita-

tions are self-evident because rail movement of oil is constrained by the lim-

ited availability of rail cars In 983090983088983089983090 983089983091983088983088983088983088 bpd of heavy crude was being

transported by rail Tis is expected to rise to 983092983090983093983088983088983088 bpd by the end of

983090983088983089983092 falling short of the 983092983094983093983088983088983088 bpd which could have been moved through

KXL (Hussain 983090983088983089983091) Te forced increase in rail transport has resulted in

unintended costs for the industry a total of US$983089 billion must be invested for

new rail terminals and another US$983092ndash983093 billion for new rail cars (Lewis 983090983088983089983091)

Rail transport is both more costly and more dangerous A recent study

concluded that ldquopipeline transportation is safer than transportation by road

rail or barge as measured by incidents injuries and fatalitiesrdquo (Green amp

Furchtgott-Roth 983090983088983089983091) It is not inconceivable that another major oil acci-

dent either in Canada or the USAmdashsuch as took place in Quebec in July 983090983088983089983091

killing 983092983095 peoplemdashwould result in a moratorium on oil transport by rail with

grave consequences for Canadian producers

983090983088983088983090 Mandatory Country-of-Origin Labeling

Mandatory Country-of-Origin Labeling (MCOOL) is a provision mandated

by Congressional law and first implemented in 983090983088983088983096 Te measure imposes

strict segregation rules on American Canadian and Mexican cattle and hogs

and the subsequent slaughtering and processing of these animals to producebeef and pork products for retail sale Te stated purpose is to create labels

that indicate the origin in part or in whole of the product In effect it is a

veiled trade barrier because it gives US animals and products a competitive

advantage due to higher labeling inventory and processing costs for equiva-

lent Canadian products

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983089983092 The state of Canada-US relations in 983090983088983089983092

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Table 983096 Synopsis of trade disputes in Canadian-American relations in 983090983088983089983091

Dispute Impact and cost Prospect for resolution

Keystone XL Pipeline Very serious Poor

2008 proposal for a 1897

km 465000 bpd crude oilpipeline spanning fromAlberta down to Nebraska

Downward pressure on investment

Lost wages January 2012postponement is costing US $47million a day in lost wages (ConsumerEnergy Alliance 2013)

Continuation of crude oil pricediscounts due to lack of infrastructure

Costly alternative rail has emerged as atransportation alternative but can costup to three times as much as pipelinetravel (Millington and Murillo 2013)

Permit postponed twice

Resolution is not transparent

Rising risk of decision deferral past 2016

Mandatory Country-of-OriginLabelling (MCOOL)

Serious Poor

2008 CongressionalLaw mandating rulesfor segregated livestockprocessing and packagingand a labeling structure inorder to have food labelsindicate origin of product

Annual cost to Canadian beef and porksector of $1 billion

Deconstruction of a highly integratedtrilateral supply chain industry

MCOOL adds no animal health or foodsafety benefits

US has defied both WTO complaint andthe core part of the WTO Appeal ruling

2013 US reaction has been to strengthenthe discriminatory provision banning co-mingling of meats altogether

Canada plans to retaliate with tariffs butthis is a costly gambit with low chance ofsuccess

Softwood Lumber Agreement Moderate Good

In 2011 American softwoodcompanies took theirCanadian counterparts to theLondon Court of InternationalArbitration accusing themof circumventing the SLA(Foreign Affairs Trade andDevelopment Canada 2012a)

If in violation Canadian industry wouldface $380 million in penalties (TheCanadian Press 2012)

The London Court of InternationalArbitration in 2012 ruled in favor ofCanada (Foreign Affairs Trade andDevelopment Canada 2012a)

SLA was to expire in 2013 but Canadaand the USA extended it until 2015 (CBCNews 2012)

Long-term free trade in lumber needs toreplace SLA

Buy American Provision Serious Partial resolution but high risk ofrecurring Buy American legislation

2009 American Recovery andReinvestment Act

Exclusion of Canadian products andproduction sharing in US public worksprocurement

Canada-US Procurement Agreement in2010 which allowed for the purchaseof Canadian goods on seven US

infrastructure projects valued at morethan $7777000

Canada needs to seek a comprehensiveagreement in order to escape futureAmerican protectionism with allprovinces on board and compliant withthe WTO provision

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The state of Canada-US relations in 983090983088983089983092 983089983093

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Dispute Impact and cost Prospect for resolution

Canadian Wheat Board Long-term benefit Completed

Canadarsquos mandatory wheat

marketing board monopsonyended in 2011

Frequent US action against CWB in the

past will now end as wheat marketingin Canada turns fully market based

Intellectual Property Rights Moderate potential cost Partially resolved

Canada has been on theSpecial 301 Priority Watch Listby the United States TradeRepresentative since 1995

Ongoing threat of US Trade Action andlegal action

Canadian domestic complianceincluding

Strengthening data protection

Participation in Anti-counterfeiting TradeAgreement (ACTA in 2013)

Enacted the Combating CounterfeitProducts Act (2013)

Started the process of strengthening

the Copyright Act and implementingWorld Intellectual Property OrganizationInternet Treaties

In recognition of which Canada has beenremoved from the Special 301 PriorityWatch List

Prescription drugs Serious potential for trade action Indirect progress

The US complaint againstCanada

Imposing price ceilings thatshifts the cost burden of RampDto US firms

Weak protection ofintellectual property rights rethird party sales

Slow prescription drugapproval process causingreduced market access

US firms experience lost revenues andtrade action is a risk

In 2013 CETA agreement with theEuropean Union Canada agrees to givefull patent protection to new drugs fortwo years

Two-year rule may be transferable tofuture Canada-US resolution

Table 983096 continued

Canada and the United States have had a deeply integrated market in

this sector since the early 983089983097983097983088s Animal health and food safety standards have

been largely harmonized As a result highly efficient supply-chain production

methods have made this industry quite efficient However the imposition of

MCOOL has changed all that (Moens amp Leon 983090983088983089983090) Te cost differential haswidened and Canadian exports have dropped dramatically Since 983090983088983088983096 the

cattle sector has lost $983094983092983088 million per year and the hog sector has lost $983093983088983088

million a year (Te Canadian Press 983090983088983089983091a)

In 983090983088983089983090 the World rade Organization (WO) ruled in Canadarsquos favor by

concluding that MCOOL is discriminatory Te WO gave the US until May 983090983091

983090983088983089983091 to act but on that same day the USDA imposed regulatory changes that

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983089983094 The state of Canada-US relations in 983090983088983089983092

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actually strengthened the provisions of MCOOL In retaliation the Canadian

government released a list of US exports to Canada that would be subjected

to tariffs and it is preparing to seek a compliance panel at the WO Until this

situation is resolved the Canadian government predicts a continuing annual

loss of $983089 billion for the Canadian red meat sector (Te Canadian Press 983090983088983089983091a)

Softwood lumber

In 983090983088983089983089 several American softwood companies took their Canadian counter-

parts to the Court of International Arbitration in London accusing them of cir-

cumventing the Softwood Lumber Agreement of 983090983088983088983094 (Foreign Affairs rade

and Development Canada 983090983088983089983090a) Te dispute centered on the accelerating pace

of lumber harvests resulting from the pine beetle infestation Te stakes were

high $983091983096983088 million in penalties should Canada lose (Te Canadian Press 983090983088983089983090)

In 983090983088983089983090 the Court of International Arbitration ruled in Canadarsquos favor

(Foreign Affairs rade and Development Canada 983090983088983089983090a) In addition while

the Softwood Lumber Agreement was set to expire in 983090983088983089983091 the Canadian

and American governments successfully negotiated an extension of the

Agreement until 983090983088983089983093 (CBC News 983090983088983089983090) Te fact remains that as long as a

large part of Canadarsquos softwood lumber is managed in terms of quotas and

the stumpage fee system US trade action is very likely

lsquoBuy Americanrsquo provision

Te 983090983088983088983097 American Recovery and Reinvestment Act (ARRA which expired

on September 983091983088 983090983088983089983089) and the more recent 983090983088983089983089 American Jobs Act stipu-

lated that steel iron and other goods used in the repair and construction of

infrastructure projects in the US (highways bridges mass transit and fed-

eral buildings) must be manufactured in the United States (Matthiesen 983090983088983089983089)

In response to ARRA Canada and the US signed the Canada-US

Procurement Agreement in 983090983088983089983088 which allowed for the purchase of Canadian

goods on seven US infrastructure projects valued at more than $983095983095983095983095983088983088983088

or within the 983091983095 states subject to the WO GPA (Government of Canada

983090983088983089983091a) Te 983090983088983089983089 American Jobs Act did not pass in Senate and is thus moot

While the ARRA dispute was partially resolved lsquoBuy Americanrsquo anda counter position of lsquoBuy Canadianrsquo can flare up on either side of the bor-

der Canadian industry is most vulnerable in this uncertainty Te Canadian

government ought to seek a comprehensive Buy American exemption to

escape future American protectionism In so doing all provincial govern-

ments need to be on board in order to make the WO and NAFA rules

function optimally

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The state of Canada-US relations in 983090983088983089983092 983089983095

fraserinstituteorg

Canadian Wheat Board (CWB)

In 983090983088983089983089 the Canadian government removed the monopsony held by the

Canadian Wheat Board Tis unilateral action offers a successful reduction

in bilateral trade distortion oday the CWB continues to operate as a mar-

keting group

Intellectual Property Rights (IPR)

From 983089983097983097983093 through 983090983088983089983091 Canada was on the Special 983091983088983089 Priority Watch

List by the United States rade Representative Te US complaint was that

protection and enforcement of IPR in Canada were weak Te Special 983091983088983089

Priority Watch List is designed to identify US trading partners that are the

worst offenders in IPR protection (Embassy of the United States Ottawa

Canada 983090983088983089983091)

Although the issue is not completely resolved Canada has made sig-

nificant progress in recent years Te federal government has strengthened

data protection regulations criminalized the use of camcorders in theaters

and participates in the Anti-Counterfeiting rade Agreement (ACA) nego-

tiations (983090983088983089983091) Most recently Canada enacted the Combatting Counterfeit

Products Act (Embassy of the United States Ottawa Canada 983090983088983089983091) Te

Canadian Government is in the process of strengthening the Copyright Act

and implementing World Intellectual Property Organization Internet reaties

(Embassy of the United States Ottawa Canada 983090983088983089983091)

As a result of these steps Canada was removed from the Special 983091983088983089

Priority Watch List in 983090983088983089983091

Prescription drugs

Prescription drug prices in Canada are relatively low due to a price ceil-

ing mandated by Canadarsquos healthcare system In addition Health Canada

approval times for prescription drugs significantly lag behind their counter-

parts in the United States and the European Union (Barua and Esmail 983090983088983089983091)

US lawmakers have repeatedly expressed their concerns over cheap prescrip-

tion drugs re-entering the US from Canada (Moens and Gabler 983090983088983089983089) TeEU also asked Canada to strengthen IPR protections for prescription drugs

(Lexchin and Gagnon 983090983088983089983091) Since the signing of the CEA agreement in

principle on October 983089983096 983090983088983089983091 the issue between Canada and the EU is now

resolved (Waldie 983090983088983089983091) Canada has agreed to ldquoEU demands for patent pro-

tection for up to two years on brand-name drugsrdquo (Blanchfield 983090983088983089983091)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983089983096 fraserinstituteorg

State of the border andregulatory cooperation

Te decline in Americans traveling to Canada corresponds with the US

Greenback losing value against the Canadian dollar (figures 983089983088 983089983089) However

when we consider the extent of the decline in total numbers it appears dispro-

portionate Te change in American travel suggests instead a bigger problem

following the 983097-983089983089 shock Te imposition of new border transit requirements

such as passports as well as longer wait times and more security screening

has likely dampened US travel across this international boundary Given the

modest economic recovery in the USA from the beginning of 983090983088983089983088 onward

one would expect disposable income including for travel to trend back up

Instead the numbers remain stagnant at around 983090983088 million less than half the

number of 983090983088983088983090

While an overall national average for border wait times is not avail-

able data on major border crossings in both Central Canada and British

Columbia indicate that no reductions in wait times have been achieved

between 983090983088983088983094 and 983090983088983089983089 (figure 983089983090) Te problem of inefficiency as presented

by the Canada-US border goes well beyond wait times It includes inefficient

activity away from the border such as extra warehousing and costs of com-

plying with various facilitated traveler and goods programs such as FAS for

trucks loads and drivers

Tere are consistent cost differences between domestic and cross-bor-

der truck-borne trade which point to significant border costs ldquoFor exports

to the US these costs added 983088983097 percent to the delivered price of goods in

983090983088983088983092 Tis figure fell to 983088983092 percent in 983090983088983088983097 hellip Higher fixed costs per shipment

accounted for most of the additional cost of transporting goods to the USrdquo

(Brown and Anderson 983090983088983089983090) When we consider that in the manufacturingsector parts cross the border several times in various stages of assembly we

realize how this cost accumulates and defeats the efficiency gains otherwise

generated by integrated supply chain manufacturing Border costs are typ-

ically passed on to the consumer as fixed costs per shipment

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983089983097

fraserinstituteorg

An unprecedented border problem has arisen in the current USAdministrationrsquos lengthy (six years) review of the permitting of a pipeline

border crossing as proposed in the Keystone XL project As a result oil-by-

rail transport has recently increased while the pipeline mode of Canada-US

trade has seen a drop in growth in the 983090983088983089983089983089983090 period ( figures 983089983091 983089983092)

0

10

20

30

40

50

201220112010200920082007200620052004200320022001200019991998

Figure Travellers entering Canada ndash

Source Statistics Canada (2013e)

US residents Non-US residents

0

3

6

9

12

15

18

0

03

06

09

12

15

18

20122011201020092008200720062005200420032002

Trips Spending US$CA$ (Secondary axis)

Figure US overnight travel to Canada ndash

Source Statistics Canada (2011) Bank of Canada (2013b)

M i l l i o n s o f t r i p

s N o m i n a l C A $ b i l l i o n s

U S $ C A $ ex c h a n

g er a t e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

5

10

15

20

201120102009200820072006

Northbound average delay Southbound average delay

Figure Peace Arch average border wait time ndash

Source Cascade Gateway Data (2013)

M i n u t e s

0

25

50

75

100

125

150

175

200

225

250

275

300

201220112010200920082007200620052004

2 0 0 4

U S $ b

i l l i o n s

Figure All surface modes of freight flow data based on value of goods

ndash

Source Bureau of Transportation Statistics (2013)

Truck Rail Pipeline

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983089

fraserinstituteorg

lsquoBeyond the Borderrsquo and Regulatory Cooperation

In 983090983088983089983089 Canada and the United States announced an ambitious agreement

to reduce border costs by means of deeper bilateral regulatory and secur-

ity cooperation Te accord seeks to streamline various border proceduresmdash

some already in existence and some newmdashto improve intelligence-sharing

between law enforcement agencies mutual recognition of passenger baggage

screening improved frameworks for trusted trade programs harmoniza-

tion of NEXUS protocols streamlined supply chains enhanced trade com-

petitiveness collaboration in border infrastructure investment and deeper

cooperation in national security investigations Te agreement is known as

Beyond the Border A Shared Vision for Perimeter Security and Economic

Competitiveness (February 983092 983090983088983089983089)

Te Beyond the Border Vision accord also set up a Regulatory

Cooperation Council In it Canadian and American officials seek to reduce

red tape and harmonize regulations in certain key sectors o date the

Council has announced various plans affecting agriculture and food trans-

portation health personal care products workplace chemicals environmentnano materials and small business loans We summarize the key points of

progress made since 983090983088983089983089 in table 983097

-35

-25

-15

-5

5

15

25

35

20122011201020092008200720062005

Truck Rail Pipeline

Figure Growth rate of all surface modes of freight flows () ndash

Source Bureau of Transportation Statistics (2013) calculations by authors

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983090983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983097 Key elements of Beyond the Border and Regulatory Cooperation

Beyond the Border Program

Integrated Cargo Security Strategy (ICSS)December 2011

Reduces administrative duplication between Canada and the US byaddressing security risks in advance within the shipment supply chainand at the border (Canada Border Services Agency 2013)

Prince Rupert Pilot October 2012 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry via rail is examined by Canadian officials onbehalf of the US (Government of Canada 2013c)

Montreal Pilot January 2013 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry to the US via truck is examined by Canadianofficials on behalf of the US (Government of Canada 2013c)

Pre-load Air Cargo Targeting (PACT) Joint pilot by CBSA and Transport Canada to screen cargo pre-flight onCanada-bound airplanes at foreign airports (Canada Border ServicesAgency 2013)

Tamper Evident Technology PilotOctober 2012

Pilot collaboration between CBSA and US CBP to ensure containersremain sealed upon arrival at the US border (Canada Border Services

Agency 2013)

Truck Cargo Pre-Inspection PilotMarch 2013

Pilot program between the CBSA and the US CBP for pre-inspection ofsouthbound traffic into US (Canada Border Services Agency 2013)

Free and Secure Trade (FAST) PilotSarnia Ontario

Pilot program for usage of FAST lanes without Partners in Protection andCustoms Self Assessment programs (Government of Canada 2013c)

Canada-US Shiprider June 2013 Removal of jurisdictional barriers to improve law enforcement personnelin Windsor-Detroit and Vancouver-Blaine waterways (Government ofCanada 2013c)

EntryExit Initiative Phase II June 2013 Exchange entryexit data between the CBSA and US DHS on individualsat Canada-US land border crossings (Government of Canada 2013c)

Regulatory Cooperation ProgramMemorandum of Understanding between Transport Canada and the RailwayAssociation of Canada September 2013

Framework for Canadian rail emissions between 2011 to 2015(Government of Canada 2013d)

Canada-United States Perimeter Approachto Plant Protection September 2013

Draft framework for increased cooperation and reduction inadministrative duplication between the Canadian Food InspectionAgency (CFIA) and United States Animal and Plant Health InspectionService (APHIS) on trade in plants and plant products (Government ofCanada 2013d)

Common Electronic Submission GatewayPilot (CESG) August 2013

FDA and Health Canada will allow pharmaceutical firms to electronicallysubmit drug applications (Government of Canada 2013d)

Initiative to Align Veterinary DrugApprovals December 2012

Joint reviews between US FDA and Health Canada on veterinary drugproducts (Government of Canada 2013d)

Stricter Air Pollutant Emissions Environment Canada aligns car emissions beginning in 2017 with theUS Environmental Protection Agencyrsquos ldquoTier 3rdquo (Government of Canada2013d)

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The state of Canada-US relations in 983090983088983089983092 983090983091

fraserinstituteorg

On September 983092 983090983088983089983091 $983092983094983094 million in investment was allocated to the

Border Action plan by the Government of Canada in order expand two marine

container examination facilities (Government of Canada 983090983088983089983091c) $983091983091 million

was invested by the Government of Canada in the Asia Pacific Gateway and

rade Corridor Initiative (Government of Canada 983090983088983089983091c) Te Plan includes

an additional 983090983097 harmonization initiatives that will enhance trade activity

between Canada and the US

Neither Beyond the Border nor the Regulatory Cooperation Council

offer further investment or cost estimates on the initiatives described in table

983097 Moens and Gabler (983090983088983089983090) pointed to the need for both the Canadian and

American governments to provide data on border costs so that a cost-benefit

analysis can ensue Nonetheless the small steps of progress towards inte-

grating and harmonizing US and Canadian border practices remains a very

important (long-term) part of reducing the profile of the border

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983090983092 fraserinstituteorg

Canadian and American public perceptions

Tree observations are noteworthy in recent assessments of public percep-

tions between Americans and Canadians First Americans consistently have

a very high favourability rating of Canadians typically in the 983097983088 plus range

(table 983089983088 figure 983089983093) Both as a friend and a strategic ally Americans hold

Canadians in the most favourable light possible (table 983089983089) Disagreements over

policy between the two countries whether in defence and foreign affairs or

over border and trade issues do not move this fundamental asset Canadians

enjoy in dealing with their neighbour

Second Canadians do not have high expectations of either the

American or Canadian government regarding progress in bilateral relations

As table 983089983090 shows Canadians hold Obama in high regard (983094983091 percent) but

only 983093983092 percent expect progress from him in trade relations Prime Minister

Harper is rated slightly ahead of President Obama in terms of working hard

towards improving Canada-US relations (table 983089983091)

Tird and most significant in light of Canadarsquos Catch-983090983090 situation both

Canadians and Americans are more supportive of closer cooperation and inte-

gration policies than is the case for political representatives in either the United

States or Canada In two recent studies we showed how US Senators and House

Representatives are quite critical of Canada with regard to NAFA issues and bor-

der security (Moens and Gabler 983090983088983089983089) Similarly we found that among the three

major political parties in Canadarsquos parliament only one consistently expressed

itself in favour of closer ties with the United States (Moens and Gabler 983090983088983089983089)

A recent survey of American and Canadian (and Mexican) attitudes

towards free trade and NAFA show surprisingly strong data for more trade

integration In response to the statement ldquoTere should be more free trade

between the US Canada and Mexicordquo 983096983088 percent of Canadians approved

as did 983095983092 percent of Americans Even on border security Canadians andAmericans are more pro-cooperation and integration than their governmental

policies suggest In the US 983092983089 percent support a common perimeter while

983090983088 percent are opposed In Canada 983092983091 percent support it and 983091983088 percent are

opposed (Graves Pastor and Basaacutentildeez 983090983088983089983091) Terefore in terms of public

mandate both governments would have a case to work towards broader bilat-

eral (or trilateral) cooperation to lower trade barriers

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The state of Canada-US relations in 983090983088983089983092 983090983093

fraserinstituteorg

Table 983089983088 Canadian favourability rating among Americans (February 983090983088983089983090)

Veryfavourable

Mostlyfavourable

Mostlyunfavourable

Veryfavourable Not sure Total

favourableTotal

unfavourable

53 38 3 2 3 91 5

Note n=1015

Source Gallup Poll (2012)

Table 983089983089 Ally or enemy for Americans (June 983090983088983089983091)

Country Ally Friendly Unfriendly Enemy Total Ally andFriendly

Great Britain 66 25 2 1 91

Canada 61 33 2 1 94

China 11 44 26 14 55

Note n=1529Source Gallup Poll (2013)

88

90

92

94

96

98

201220112010200920082007

Figure Canadian favourability among Americans () ndash

Source Gallup Poll (2012)

f a

v o u r a

b l e

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983090983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983090 What effect will Obama have on Canada-US relations (November 983090983088983089983090)

Canadians Americans

Positive Negative None Positive Negative None

Relationship 62 5 34 48 12 40

Trade 54 10 35 48 12 39

Harmonizing 53 8 40 47 14 39

Note n=1066

Source Abacus Data (2012)

Table 983089983091 Has each leader worked hard to improve Canada-US relations

(July 983090983088983089983090)

Country Agree Disagree Not sure

Stephen Harper 58 32 10

Barack Obama 53 32 15

Note Sample of Canadians

Source HarrisDecima (2012)

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fraserinstituteorg 983090983095

US policy uncertainty

Canadian economic prospects face their most important challenge in the

United States Te US economic recovery has been modest and real GDP

growth so far has remained below the post-World War II average of post-

recession periods (figure 983089983094) As we noted above the less-than-stellar US

recovery is made even more challenging for Canadian traders in that pro-

ductivity gains in Canada are lagging while the Canadian dollar remains high

On top of that several American-imposed regulatory obstacles to free trade

are depressing trade prospects in crude oil red meat and public works pro-

curement Tese impediments reduce Canadian competitive access to the

US market

A high level of public spending until the January 983090983088983089983091 sequester and

ongoing monetary stimulation have not produced notable US GDP growth

Te seven post-recession periods below show the current average to be well

below the historical average (Young 983090983088983089983091)

983089983097983092983096-983089983097983093983095 983091983096983088

983089983097983093983096-983089983097983094983095 983092983090983096

983089983097983094983096-983089983097983095983095 983091983089983096

983089983097983095983096-983089983097983096983095 983091983089983093

983089983097983096983096-983089983097983097983095 983091983088983093

983089983097983097983096-983090983088983088983095 983090983097983097

983090983088983088983096-983090983088983089983091 983088983095983091

While economic growth has been modest growth in the public debt

has not (figure 983089983095) Publicly held debt in the US is now at 983095983091 percent of GDP

the highest since 983089983097983092983094 (Congressional Budget Office 983090983088983089983091)

Te widening gap between federal government outlays and revenueshas only recently been capped by the Sequester (figure 983089983096) However the

budget Sequester is temporary and final resolution of public spending and

taxation levels remains unclear given repeated gridlock in presidential-con-

gressional policy making High debt levels combined with stalemate over

taxes and budget cuts have produced a case of policy instability or uncer-

tainty in the last five years (Baker Bloom and Davis 983090983088983089983091)

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983090983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

US policy uncertainty is further aggravated by inaction on the large

lsquoentitlementrsquo programsmdashSocial Security Medicare and Medicaidmdashwhich are

the major drivers of the long-term gap in revenues and spending

-4

-2

0

2

4

6

8

201220062000199419881982197619701964

Figure US GDP growth rate ndash ( forecast)

Source The World Bank (2013b) OECD (2013)

-10

-8

-6

-4

-2

0

0

20

40

60

80

100

20122011201020092008200720062005200420032002

Government deficit as a percentage of GDP Government debt as a percentage of GDP

Figure US Government deficit and debt as a percentage of GDP ndash

Source Congressional Budget Office (2013)

D e fi c i t p e r c e n t a g e ( ) D

e b t p er c en t a g e ( )

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The state of Canada-US relations in 983090983088983089983092 983090983097

fraserinstituteorg

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

20122003199319831973

Revenue Outlays

Figure US Government revenue and outlays ndash ( US$ billions)

Source Congressional Budget Office (2013)

1 9 8 3 U S $ b i l l i o n s

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983091983088 fraserinstituteorg

Trade diversification

Given the weakness in near-term US opportunities Canadians are (again)

wondering how to pursue trade diversification away from the United States

Te objective is logical and if achieved will prove advantageous but various

trends in trade and investment show that diversification for Canada is a slow

and arduous journey (table 983089983092)

In terms of overall share exports to China in the last five years have

doubled but the numbersmdashfrom 983090983089983095 percent to 983092983090983094 percentmdashremain rela-

tively low In the same period the US-bound share declined by 983091 percent but

remains a towering 983095983092983093983092 percent Te pattern of small overall impact applies

to all the other top trading partners For example exports to the UK have

increased but exports to Japan and Mexico have essentially stalled When we

consider average export growth rates over the last five years (table 983089983093) we see

a very strong rate for China (983089983093983093 percent) and strong rates for the UK and

South Korea (983096983097 percent and 983094983097 percent) However a 983089983093 percent increase in a

983092 percent overall trade share produces little change Te point we are making

is that at this rate and pattern of trade lsquodiversificationrsquo it will actually take a

very long timemdashwhile relatively small upward trends in trade with the United

States could have a quick and very large impact in the opposite direction

On the import side we notice more trade diversification with the US

share at 983093983088 percent and the Chinese share at 983089983089 percent (table 983089983094) Te Chinese

growth rate on the import side is less than on the export side (table 983089983095) Te

most revealing number may be the high average over five years for Mexico

at 983097 percent Tis could be indicative of a growing supply chain with Mexico

While foreign direct investment (FDI) is not a direct indicator of future

trade trends in investment may harbinger change In terms of outbound

FDI we notice that only a small segment (less than 983089983088 percent) is targeted

for manufacturing (table 983089983096) It is investment in this category in which onewould expect growth in supply chains

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983089

fraserinstituteorg

Table 983089983092 Canadarsquos merchandise exports top ten destinations 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 3291 1 777 2361 1 751 2564 1 749

China 92 4 22 97 3 31 114 3 33

UK 114 2 27 105 2 33 141 2 41

Japan 97 3 23 73 4 23 79 4 23

Mexico 51 5 12 42 5 13 43 5 13

Netherlands 32 8 08 24 8 08 28 8 08

South Korea 34 7 08 31 7 10 32 7 09

Germany 39 6 09 33 6 10 34 6 10

France 28 9 07 23 9 07 20 10 06

Brazil 23 10 05 14 10 04 22 9 06

Total 4237 3145 3424

2011 2012Average

shareValue Rank Share Value Rank Share

US 2750 1 737 2783 1 745 752

China 140 3 38 159 2 43 33

UK 157 2 42 154 3 41 37

Japan 89 4 24 85 4 23 23

Mexico 46 5 12 44 5 12 12

Netherlands 40 7 11 37 6 10 09

South Korea 43 6 11 30 7 08 09

Germany 33 8 09 29 8 08 09

France 26 9 07 26 9 07 07

Brazil 24 10 06 21 10 06 06

Total 3732 3734

Source Industry Canada (2013b)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983091983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983093 Canadian export growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 56 7 -281 9 106 = 5

China 101 6 65 1 187 3

UK 16 9 -73 2 358 2

Japan 202 3 -250 7 106 = 5

Mexico 179 4 -178 6 43 9

Netherlands -85 10 -255 8 183 4

South Korea 276 2 -80 3 52 8

Germany 160 5 -167 4 54 7

France 36 8 -174 5 -122 10

Brazil 706 1 -380 10 603 1

2011 2012Average

Rank Rank

US 104 8 27 2 02

China 270 4 152 1 155

UK 148 6 -02 4 90

Japan 161 5 -29 6 38

Mexico 94 9 -16 5 24

Netherlands 475 1 -55 7 53

South Korea 374 2 -272 10 70

Germany 05 10 -95 9 -09

France 311 3 23 3 15

Brazil 109 7 -92 8 189

Source Industry Canada (2013b) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983091

fraserinstituteorg

Table 983089983094 Canadarsquos merchandise imports top ten sources 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 1992 1 524 1633 1 511 1745 1 504

China 374 2 98 347 2 109 382 2 110

Mexico 157 3 41 145 3 45 190 3 55

Japan 134 4 35 108 4 34 115 4 33

Germany 111 5 29 95 5 30 97 5 28

UK 110 6 29 82 6 26 92 6 27

South Korea 53 9 14 52 7 16 53 7 15

Algeria 67 7 18 33 10 10 31 10 09

Italy 45 10 12 39 9 12 40 9 12

France 53 8 14 49 8 15 47 8 13

Total 3804 3194 3465

2011 2012Average

shareValue Rank Share Value Rank Share

US 1846 1 496 1922 1 506 508

China 402 2 108 417 2 110 107

Mexico 205 3 55 210 3 55 50

Japan 109 4 29 123 4 33 33

Germany 107 5 29 118 5 31 29

UK 86 6 23 70 6 18 25

South Korea 55 7 15 52 7 14 15

Algeria 46 9 12 49 8 13 12

Italy 43 10 11 43 9 11 12

France 46 8 12 41 10 11 13

Total 3723 3796

Source Industry Canada (2013b)

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983091983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983095 Old and new trade prospectsmdashimport growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 29 8 -178 7 89 5

China 112 4 -70 2 123 3

Mexico 43 7 -77 4 337 1

Japan -11 10 -192 8 89 4

Germany 105 5 -149 6 44 7

UK 95 6 -252 9 141 2

South Korea 120 3 -14 1 36 8

Algeria 518 1 -511 10 -50 10

Italy 11 9 -132 5 48 6

France 191 2 -70 3 -35 9

2011 2012Average

Rank Rank

US 88 5 57 4 17

China 82 6 53 5 60

Mexico 111 3 39 6 91

Japan -29 9 151 1 01

Germany 132 2 117 2 50

UK -36 10 -173 10 -45

South Korea 76 7 -37 8 37

Algeria 533 1 91 3 116

Italy 95 4 23 7 09

France 22 8 -97 9 02

Source Industry Canada (2013b) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983093

fraserinstituteorg

In terms of overall Canadian outbound FDI stocks in the US remain

very high despite the recent US recession while growth in stock in Asia is

modest (figure 983089983097) When we examine Canadian FDI in the so-called BRIC

states we notice that investment in both China and India is relatively small

Canadian mining investment in Brazil is much larger (figure 983090983088) In fact when

we examine amounts of FDI we find that Canada is not really a big BRIC

investor other than Brazil Chile Hong Kong and Peru are larger FDI recipi-

ents than China and India (figure 983090983089)

In terms of FDI flowing into Canada we notice the very large share

(983090983096983094983093 percent) in manufacturing which indicates both the predominant

share of US FDI and the extensive integrated supply chains in Canada-US

manufacturing (table 983089983097) Even more than for outbound FDI inflow stocks

show very large US preponderance (figure 983090983090) Such continued concentra-

tion of US FDI in Canada suggests that Canadian trade diversification is not

just a decision to be made by Canadian producers

Like trade growth Chinese FDI growth in Canada is positive but the

overall numbers are small and do not show rapid growth in the last 983091 years

(figure 983090983091)

Table 983089983096 Top industries for outward stocks of FDI 983090983088983089983090

Category Value Share

Mining oil and gas extraction 1099 188

Oil and gas subcategory 542 93

Manufacturing 569 97

Finance and insurance 2334 399

Management of companies and enterprises 757 129

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

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983091983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

1

2

3

4

5

6

7

8

9

10

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n s

Figure Canadian foreign direct investment (stock) BRIC ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Brazil PRC India Russia

0

20

4060

80

100

120

140

160

180

200

220

240

260

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) various regions

ndash

Notes Excluding Mexico Canadian FDI to Mexico in 2012 was $557 billion

Foreign Direct Investment measures the purchase of various forms of capital stock abroad

However tax havens (Barbados Bermuda etc) are frequently found to be some of the highest

recipients of FDI In reality tax havens do not reflect economic growth as FDI figures invested

into tax havens are often reinvested back to the source country in a concept known as

round-tripping (Financial Post 2013) We have accounted for tax havens by removing them from

tables and figures in this section The numbers corresponding to Figure 19 would be Barbados

($593 billion) Bermuda ($118 billion) British Virgin Islands ($21 billion) Cayman Islands ($302

billion)

Source Foreign Affairs Trade and Development Canada (2013c)

US Europe Asia amp Oceania Central amp South America Africa

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4462

The state of Canada-US relations in 983090983088983089983092 983091983095

fraserinstituteorg

Table 983089983097 Top industries for inward stocks of FDI 983090983088983089983090

Category Value Share

Oil and gas extraction 766 147

Manufacturing 1492 287

Petroleum and coal products manufacturing 377 72

Wholesale trade 395 76

Finance and insurance 699 134

Management of companies and enterprises 999 192

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

0

2

4

6

8

10

12

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) Chile Hong Kong

Peru amp Korea ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Chile Hong Kong Peru Korea

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4562

983091983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

40

80

120

160

200

240

280

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Foreign direct investment (stock) in Canada from top three

countries ndash

Source Foreign Affairs Trade and Development Canada (2013c)

US Netherlands UK

0

2

4

6

8

10

12

201220112010200920082007

2 0 0 2 C A $ b

i l l i o n s

Figure Foreign direct investment (stock) in Canada from China

ndash

Source Foreign Affairs Trade and Development Canada (2013c)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4662

fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4762

983092983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4862

fraserinstituteorg 983092983089

References

Abacus Data (983090983088983089983090 November 983090983088) Beyond the Canadian-American Border

lthttpabacusdatacawp-contentuploads983090983088983089983090983089983089Can-AM_Report_CABC_

Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

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The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

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983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 14: Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983095

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Table 983093 Services trade between Canada and the US 983090983088983088983093ndash983090983088983089983088 (983090983088983088983090 CA$ billions)

2005 2006 2007 2008 2009 2010

Exports to USA 3988 3815 3834 3966 3718 3700

Imports from USA 4358 4395 4544 4833 4783 4960

Trade balance with USA -370 -580 -710 -866 -1065 -1260

Trade balance with USA -443 -707 -847 -985 -1240 -1455

Exports to non-USA 2832 3080 2985 3052 3142 3102

Imports from non-USA 3022 3187 3380 3518 3496 3722

Trade balance with non-USA -189 -108 -395 -466 -354 -620

Trade balance with non-USA -323 -172 -621 -710 -540 -909

Total services exports 6820 6894 6819 7018 6860 6802

Total services imports 7379 7582 7924 8350 8279 8682

Total trade balance -559 -688 -1105 -1333 -1419 -1880

Total trade balance -394 -475 -750 -867 -937 -1214

Bilateral (X+I) USA 8346 8210 8378 8799 8589 8660

Bilateral (X+I) non-USA 5854 6267 6365 6569 6551 6824

Bilateral (X+I) total 14200 14477 14742 15368 15140 15484

Source Foreign Affairs Trade and Development Canada (2013a)

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983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

80

81

82

83

84

85

86

87

88

89

90

201020092008200720062005

2 0

0 2 C A $ b i l l i o n s

Figure Canada-US net services trade ndash

Source Foreign Affairs Trade and Development Canada (2013a)

-20

-16

-12

-8

-4

0

201020092008200720062005

Trade balance with USA Total trade balance

Figure Canadarsquos trade deficit with US and the world ndash

Source Foreign Affairs Trade and Development Canada (2013a)

2 0 0 2 C A $ b i l

l i o n s

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The state of Canada-US relations in 983090983088983089983092 983097

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Table 983094 Top categories for service trade exports Canada-World 983090983088983089983090

Category Subcategory Exports

2002 CA$ bi llions Percentage

Government services 13 19

Travel services 143 207

Personal travel 119 172

Transportation services 111 161

Air transport 52 76

Commercial services 424 614

Financial services 57 82

Computer and information services 64 93

Intellectual property use 31 44

Management services 90 130

Research and development 33 47

Architectural engineering 39 57

Source Foreign Affairs Trade and Development Canada (2013a)

Table 983095 Top categories for service trade imports Canada-World 983090983088983089983090

Category Subcategory Imports

2002 CA$ billions Percentage

Government services 11 12

Travel services 288 323

Personal travel 253 284

Transportation services 195 219

Water transport 82 92

Air transport 84 95

Commercial services 396 446

Insurance services 44 50

Financial services 44 50

Intellectual property use 89 100

Management services 75 84

Source Foreign Affairs Trade and Development Canada (2013a)

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983089983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

075

080

085

090

095

100

105

2 0 1 3

- 0 7

2 0 1 3

- 0 1

2 0 1 2

- 0 7

2 0 1 2

- 0 1

2 0 1 1

- 0 7

2 0 1 1

- 0 1

2 0 1 0

- 0 7

2 0 1 0

- 0 1

2 0 0 9

- 0 7

2 0 0 9

- 0 1

2 0 0 8

- 0 7

2 0 0 8

- 0 1

2 0 0 7

- 0 7

2 0 0 7

- 0 1

Figure CanadaUS dollar exchange rate ndash

Source Bank of Canada (2013b)

C A U S e x c h a n g e r a t e

Dollar value and productivity trends

Te first factor to consider regarding Canadarsquos trade competitiveness vis-agrave-vis

the United States is the value of the Canadian dollar Te substantial appre-

ciation of the Canadian dollar against the US dollar that began in the early

983090983088983088983088s has stabilized at a much higher average value of the loonie ( figure 983095)

As is well documented such exchange rate appreciation tends to have a strong

effect on current account balances as exports decline (Kappler et al 983090983088983089983089)

A growing account deficit will likely push the value of the Canadian dollar

downward in the longer term and thus offer some remedy

ProductivityOf more concern to Canadians should be the data indicating that Canadian

labour productivity rates are lagging those in the United States (figures 983096 983097)

One would expect that Canadarsquos higher dollar has provided industry in recent

years with an opportunity to improve productivity as imported machinery

and technology would be available at a lower price However Canadarsquos pro-

ductivity rate of growth is modest and in 983090983088983089983090 dips into negative territory

again

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983089983089

fraserinstituteorg

-1

0

1

2

3

20122011201020092008

Canada US

Figure Canada and US rates of output productivity growth ()

ndash

Source Statistics Canada (2013g)

R a t e o f p r o d u c t i v i t y g r o

w t h ( )

-10

-5

0

5

20122011201020092008

Labour productivity (Canada) Real GDP (Canada) Hours worked (Canada)

Labour productivity (US) Real GDP (US) Hours worked (US)

Figure Real US-Canadian output and hours worked () ndash

Source Statistics Canada (2013g)

A n n u a l c

h a n g e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983089983090 fraserinstituteorg

Trade and regulatory barriersdisputes

Table 983096 provides a synopsis of the major trade disputesbarriers that have

played a role in bilateral relations in the last five years and that are pertinent

for the 983090983088983089983092 period (pages 983089983094-983089983095) Te two large disputesmdashKeystone XL and

Mandatory Country-of-Origin Labeling (MCOOL) on red meatmdashare more

ominous than they may seem First both in crude oil products and in cattle

and hogs the United States is unilaterally disrupting or dismantling a well-

established integrated sector Canada has started attempts to diversify its oil

transportation structure including more rail and new pipeline routes But

as all proposed alternative pipelines have shown the alternatives are contro-

versial and at best years away from making a difference Meanwhile there is

considerable risk in putting too much crude oil on rail as its accident rates

are higher than pipe

Canadian threats to counter US MCOOL action with tariffs on food

products are not going to have much impact in the near future Moreover

an escalating tariff war on food products cannot be won by Canada and will

ultimately harm consumers on both sides of the border US defiance of two

WO rulings also means more uncertainty for Canadian traders

Keystone XL pipeline

Proposed in 983090983088983088983096 the Keystone XL (KXL) extension is part of a pipeline sys-

tem connecting Alberta oil sands and US mid-West and Gulf region refineries

KXL is a 983089983096983097983095 km crude oil pipeline with a capacity of 983092983094983093983088983088983088 barrels per

day (Hussain 983090983088983089983091) It is a substantial private infrastructure proposal that

will create employment and guarantee a secure energy source for the United

States (Millington and Murillo 983090983088983089983091) It is by no means a new feature in

Canada-US energy relations as a dense network of oil and electricity carri-ers cross the border at multiple points

What is unprecedented is that the permit process is now in its sixth

year and the final resolution remains uncertain (by US law a cross-border line

requires Department of State approval) If not resolved in 983090983088983089983092 the question

may well be handed over to the next president after 983090983088983089983094 Te policy uncertainty

associated with KXL approval has by far the largest impact on Canada-US trade

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The state of Canada-US relations in 983090983088983089983092 983089983091

fraserinstituteorg

relations Te dragged-out procedure has chilled relations Te southern leg of

KXL has been completed and the original route objection by Nebraska has been

resolved What remains ostensibly the problem is that the US administration

has identified this heavy oil as a component of its policy objective of curbing

the emission of greenhouses gasses to reduce global warming

Te impact of this pipeline delay in the 983090983095 million barrels per day (bpd)

export of Canadian oil products to the USA reverberates at various levels

Across Canada investment in mining oil and gas extraction for 983090983088983089983091 is pre-

dicted to decrease by 983090983095 percentmdashthe largest decline since the 983090983088983088983096 recession

(Statistics Canada 983090983088983089983091f) In Alberta investment is predicted to increase by

only 983088983089 percent (Statistics Canada 983090983088983089983091f) Capital investment in oil and gas

extraction has not recovered to pre-983090983088983088983096 levels (Industry Canada 983090983088983089983091a)

While the industry has become increasingly dependent on rail trans-

port to move product it is a costly alternative It can cost up to three times

as much as pipeline transport (Millington and Murillo 983090983088983089983091) and its limita-

tions are self-evident because rail movement of oil is constrained by the lim-

ited availability of rail cars In 983090983088983089983090 983089983091983088983088983088983088 bpd of heavy crude was being

transported by rail Tis is expected to rise to 983092983090983093983088983088983088 bpd by the end of

983090983088983089983092 falling short of the 983092983094983093983088983088983088 bpd which could have been moved through

KXL (Hussain 983090983088983089983091) Te forced increase in rail transport has resulted in

unintended costs for the industry a total of US$983089 billion must be invested for

new rail terminals and another US$983092ndash983093 billion for new rail cars (Lewis 983090983088983089983091)

Rail transport is both more costly and more dangerous A recent study

concluded that ldquopipeline transportation is safer than transportation by road

rail or barge as measured by incidents injuries and fatalitiesrdquo (Green amp

Furchtgott-Roth 983090983088983089983091) It is not inconceivable that another major oil acci-

dent either in Canada or the USAmdashsuch as took place in Quebec in July 983090983088983089983091

killing 983092983095 peoplemdashwould result in a moratorium on oil transport by rail with

grave consequences for Canadian producers

983090983088983088983090 Mandatory Country-of-Origin Labeling

Mandatory Country-of-Origin Labeling (MCOOL) is a provision mandated

by Congressional law and first implemented in 983090983088983088983096 Te measure imposes

strict segregation rules on American Canadian and Mexican cattle and hogs

and the subsequent slaughtering and processing of these animals to producebeef and pork products for retail sale Te stated purpose is to create labels

that indicate the origin in part or in whole of the product In effect it is a

veiled trade barrier because it gives US animals and products a competitive

advantage due to higher labeling inventory and processing costs for equiva-

lent Canadian products

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983089983092 The state of Canada-US relations in 983090983088983089983092

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Table 983096 Synopsis of trade disputes in Canadian-American relations in 983090983088983089983091

Dispute Impact and cost Prospect for resolution

Keystone XL Pipeline Very serious Poor

2008 proposal for a 1897

km 465000 bpd crude oilpipeline spanning fromAlberta down to Nebraska

Downward pressure on investment

Lost wages January 2012postponement is costing US $47million a day in lost wages (ConsumerEnergy Alliance 2013)

Continuation of crude oil pricediscounts due to lack of infrastructure

Costly alternative rail has emerged as atransportation alternative but can costup to three times as much as pipelinetravel (Millington and Murillo 2013)

Permit postponed twice

Resolution is not transparent

Rising risk of decision deferral past 2016

Mandatory Country-of-OriginLabelling (MCOOL)

Serious Poor

2008 CongressionalLaw mandating rulesfor segregated livestockprocessing and packagingand a labeling structure inorder to have food labelsindicate origin of product

Annual cost to Canadian beef and porksector of $1 billion

Deconstruction of a highly integratedtrilateral supply chain industry

MCOOL adds no animal health or foodsafety benefits

US has defied both WTO complaint andthe core part of the WTO Appeal ruling

2013 US reaction has been to strengthenthe discriminatory provision banning co-mingling of meats altogether

Canada plans to retaliate with tariffs butthis is a costly gambit with low chance ofsuccess

Softwood Lumber Agreement Moderate Good

In 2011 American softwoodcompanies took theirCanadian counterparts to theLondon Court of InternationalArbitration accusing themof circumventing the SLA(Foreign Affairs Trade andDevelopment Canada 2012a)

If in violation Canadian industry wouldface $380 million in penalties (TheCanadian Press 2012)

The London Court of InternationalArbitration in 2012 ruled in favor ofCanada (Foreign Affairs Trade andDevelopment Canada 2012a)

SLA was to expire in 2013 but Canadaand the USA extended it until 2015 (CBCNews 2012)

Long-term free trade in lumber needs toreplace SLA

Buy American Provision Serious Partial resolution but high risk ofrecurring Buy American legislation

2009 American Recovery andReinvestment Act

Exclusion of Canadian products andproduction sharing in US public worksprocurement

Canada-US Procurement Agreement in2010 which allowed for the purchaseof Canadian goods on seven US

infrastructure projects valued at morethan $7777000

Canada needs to seek a comprehensiveagreement in order to escape futureAmerican protectionism with allprovinces on board and compliant withthe WTO provision

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The state of Canada-US relations in 983090983088983089983092 983089983093

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Dispute Impact and cost Prospect for resolution

Canadian Wheat Board Long-term benefit Completed

Canadarsquos mandatory wheat

marketing board monopsonyended in 2011

Frequent US action against CWB in the

past will now end as wheat marketingin Canada turns fully market based

Intellectual Property Rights Moderate potential cost Partially resolved

Canada has been on theSpecial 301 Priority Watch Listby the United States TradeRepresentative since 1995

Ongoing threat of US Trade Action andlegal action

Canadian domestic complianceincluding

Strengthening data protection

Participation in Anti-counterfeiting TradeAgreement (ACTA in 2013)

Enacted the Combating CounterfeitProducts Act (2013)

Started the process of strengthening

the Copyright Act and implementingWorld Intellectual Property OrganizationInternet Treaties

In recognition of which Canada has beenremoved from the Special 301 PriorityWatch List

Prescription drugs Serious potential for trade action Indirect progress

The US complaint againstCanada

Imposing price ceilings thatshifts the cost burden of RampDto US firms

Weak protection ofintellectual property rights rethird party sales

Slow prescription drugapproval process causingreduced market access

US firms experience lost revenues andtrade action is a risk

In 2013 CETA agreement with theEuropean Union Canada agrees to givefull patent protection to new drugs fortwo years

Two-year rule may be transferable tofuture Canada-US resolution

Table 983096 continued

Canada and the United States have had a deeply integrated market in

this sector since the early 983089983097983097983088s Animal health and food safety standards have

been largely harmonized As a result highly efficient supply-chain production

methods have made this industry quite efficient However the imposition of

MCOOL has changed all that (Moens amp Leon 983090983088983089983090) Te cost differential haswidened and Canadian exports have dropped dramatically Since 983090983088983088983096 the

cattle sector has lost $983094983092983088 million per year and the hog sector has lost $983093983088983088

million a year (Te Canadian Press 983090983088983089983091a)

In 983090983088983089983090 the World rade Organization (WO) ruled in Canadarsquos favor by

concluding that MCOOL is discriminatory Te WO gave the US until May 983090983091

983090983088983089983091 to act but on that same day the USDA imposed regulatory changes that

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983089983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

actually strengthened the provisions of MCOOL In retaliation the Canadian

government released a list of US exports to Canada that would be subjected

to tariffs and it is preparing to seek a compliance panel at the WO Until this

situation is resolved the Canadian government predicts a continuing annual

loss of $983089 billion for the Canadian red meat sector (Te Canadian Press 983090983088983089983091a)

Softwood lumber

In 983090983088983089983089 several American softwood companies took their Canadian counter-

parts to the Court of International Arbitration in London accusing them of cir-

cumventing the Softwood Lumber Agreement of 983090983088983088983094 (Foreign Affairs rade

and Development Canada 983090983088983089983090a) Te dispute centered on the accelerating pace

of lumber harvests resulting from the pine beetle infestation Te stakes were

high $983091983096983088 million in penalties should Canada lose (Te Canadian Press 983090983088983089983090)

In 983090983088983089983090 the Court of International Arbitration ruled in Canadarsquos favor

(Foreign Affairs rade and Development Canada 983090983088983089983090a) In addition while

the Softwood Lumber Agreement was set to expire in 983090983088983089983091 the Canadian

and American governments successfully negotiated an extension of the

Agreement until 983090983088983089983093 (CBC News 983090983088983089983090) Te fact remains that as long as a

large part of Canadarsquos softwood lumber is managed in terms of quotas and

the stumpage fee system US trade action is very likely

lsquoBuy Americanrsquo provision

Te 983090983088983088983097 American Recovery and Reinvestment Act (ARRA which expired

on September 983091983088 983090983088983089983089) and the more recent 983090983088983089983089 American Jobs Act stipu-

lated that steel iron and other goods used in the repair and construction of

infrastructure projects in the US (highways bridges mass transit and fed-

eral buildings) must be manufactured in the United States (Matthiesen 983090983088983089983089)

In response to ARRA Canada and the US signed the Canada-US

Procurement Agreement in 983090983088983089983088 which allowed for the purchase of Canadian

goods on seven US infrastructure projects valued at more than $983095983095983095983095983088983088983088

or within the 983091983095 states subject to the WO GPA (Government of Canada

983090983088983089983091a) Te 983090983088983089983089 American Jobs Act did not pass in Senate and is thus moot

While the ARRA dispute was partially resolved lsquoBuy Americanrsquo anda counter position of lsquoBuy Canadianrsquo can flare up on either side of the bor-

der Canadian industry is most vulnerable in this uncertainty Te Canadian

government ought to seek a comprehensive Buy American exemption to

escape future American protectionism In so doing all provincial govern-

ments need to be on board in order to make the WO and NAFA rules

function optimally

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983089983095

fraserinstituteorg

Canadian Wheat Board (CWB)

In 983090983088983089983089 the Canadian government removed the monopsony held by the

Canadian Wheat Board Tis unilateral action offers a successful reduction

in bilateral trade distortion oday the CWB continues to operate as a mar-

keting group

Intellectual Property Rights (IPR)

From 983089983097983097983093 through 983090983088983089983091 Canada was on the Special 983091983088983089 Priority Watch

List by the United States rade Representative Te US complaint was that

protection and enforcement of IPR in Canada were weak Te Special 983091983088983089

Priority Watch List is designed to identify US trading partners that are the

worst offenders in IPR protection (Embassy of the United States Ottawa

Canada 983090983088983089983091)

Although the issue is not completely resolved Canada has made sig-

nificant progress in recent years Te federal government has strengthened

data protection regulations criminalized the use of camcorders in theaters

and participates in the Anti-Counterfeiting rade Agreement (ACA) nego-

tiations (983090983088983089983091) Most recently Canada enacted the Combatting Counterfeit

Products Act (Embassy of the United States Ottawa Canada 983090983088983089983091) Te

Canadian Government is in the process of strengthening the Copyright Act

and implementing World Intellectual Property Organization Internet reaties

(Embassy of the United States Ottawa Canada 983090983088983089983091)

As a result of these steps Canada was removed from the Special 983091983088983089

Priority Watch List in 983090983088983089983091

Prescription drugs

Prescription drug prices in Canada are relatively low due to a price ceil-

ing mandated by Canadarsquos healthcare system In addition Health Canada

approval times for prescription drugs significantly lag behind their counter-

parts in the United States and the European Union (Barua and Esmail 983090983088983089983091)

US lawmakers have repeatedly expressed their concerns over cheap prescrip-

tion drugs re-entering the US from Canada (Moens and Gabler 983090983088983089983089) TeEU also asked Canada to strengthen IPR protections for prescription drugs

(Lexchin and Gagnon 983090983088983089983091) Since the signing of the CEA agreement in

principle on October 983089983096 983090983088983089983091 the issue between Canada and the EU is now

resolved (Waldie 983090983088983089983091) Canada has agreed to ldquoEU demands for patent pro-

tection for up to two years on brand-name drugsrdquo (Blanchfield 983090983088983089983091)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983089983096 fraserinstituteorg

State of the border andregulatory cooperation

Te decline in Americans traveling to Canada corresponds with the US

Greenback losing value against the Canadian dollar (figures 983089983088 983089983089) However

when we consider the extent of the decline in total numbers it appears dispro-

portionate Te change in American travel suggests instead a bigger problem

following the 983097-983089983089 shock Te imposition of new border transit requirements

such as passports as well as longer wait times and more security screening

has likely dampened US travel across this international boundary Given the

modest economic recovery in the USA from the beginning of 983090983088983089983088 onward

one would expect disposable income including for travel to trend back up

Instead the numbers remain stagnant at around 983090983088 million less than half the

number of 983090983088983088983090

While an overall national average for border wait times is not avail-

able data on major border crossings in both Central Canada and British

Columbia indicate that no reductions in wait times have been achieved

between 983090983088983088983094 and 983090983088983089983089 (figure 983089983090) Te problem of inefficiency as presented

by the Canada-US border goes well beyond wait times It includes inefficient

activity away from the border such as extra warehousing and costs of com-

plying with various facilitated traveler and goods programs such as FAS for

trucks loads and drivers

Tere are consistent cost differences between domestic and cross-bor-

der truck-borne trade which point to significant border costs ldquoFor exports

to the US these costs added 983088983097 percent to the delivered price of goods in

983090983088983088983092 Tis figure fell to 983088983092 percent in 983090983088983088983097 hellip Higher fixed costs per shipment

accounted for most of the additional cost of transporting goods to the USrdquo

(Brown and Anderson 983090983088983089983090) When we consider that in the manufacturingsector parts cross the border several times in various stages of assembly we

realize how this cost accumulates and defeats the efficiency gains otherwise

generated by integrated supply chain manufacturing Border costs are typ-

ically passed on to the consumer as fixed costs per shipment

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983089983097

fraserinstituteorg

An unprecedented border problem has arisen in the current USAdministrationrsquos lengthy (six years) review of the permitting of a pipeline

border crossing as proposed in the Keystone XL project As a result oil-by-

rail transport has recently increased while the pipeline mode of Canada-US

trade has seen a drop in growth in the 983090983088983089983089983089983090 period ( figures 983089983091 983089983092)

0

10

20

30

40

50

201220112010200920082007200620052004200320022001200019991998

Figure Travellers entering Canada ndash

Source Statistics Canada (2013e)

US residents Non-US residents

0

3

6

9

12

15

18

0

03

06

09

12

15

18

20122011201020092008200720062005200420032002

Trips Spending US$CA$ (Secondary axis)

Figure US overnight travel to Canada ndash

Source Statistics Canada (2011) Bank of Canada (2013b)

M i l l i o n s o f t r i p

s N o m i n a l C A $ b i l l i o n s

U S $ C A $ ex c h a n

g er a t e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

5

10

15

20

201120102009200820072006

Northbound average delay Southbound average delay

Figure Peace Arch average border wait time ndash

Source Cascade Gateway Data (2013)

M i n u t e s

0

25

50

75

100

125

150

175

200

225

250

275

300

201220112010200920082007200620052004

2 0 0 4

U S $ b

i l l i o n s

Figure All surface modes of freight flow data based on value of goods

ndash

Source Bureau of Transportation Statistics (2013)

Truck Rail Pipeline

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983089

fraserinstituteorg

lsquoBeyond the Borderrsquo and Regulatory Cooperation

In 983090983088983089983089 Canada and the United States announced an ambitious agreement

to reduce border costs by means of deeper bilateral regulatory and secur-

ity cooperation Te accord seeks to streamline various border proceduresmdash

some already in existence and some newmdashto improve intelligence-sharing

between law enforcement agencies mutual recognition of passenger baggage

screening improved frameworks for trusted trade programs harmoniza-

tion of NEXUS protocols streamlined supply chains enhanced trade com-

petitiveness collaboration in border infrastructure investment and deeper

cooperation in national security investigations Te agreement is known as

Beyond the Border A Shared Vision for Perimeter Security and Economic

Competitiveness (February 983092 983090983088983089983089)

Te Beyond the Border Vision accord also set up a Regulatory

Cooperation Council In it Canadian and American officials seek to reduce

red tape and harmonize regulations in certain key sectors o date the

Council has announced various plans affecting agriculture and food trans-

portation health personal care products workplace chemicals environmentnano materials and small business loans We summarize the key points of

progress made since 983090983088983089983089 in table 983097

-35

-25

-15

-5

5

15

25

35

20122011201020092008200720062005

Truck Rail Pipeline

Figure Growth rate of all surface modes of freight flows () ndash

Source Bureau of Transportation Statistics (2013) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983097 Key elements of Beyond the Border and Regulatory Cooperation

Beyond the Border Program

Integrated Cargo Security Strategy (ICSS)December 2011

Reduces administrative duplication between Canada and the US byaddressing security risks in advance within the shipment supply chainand at the border (Canada Border Services Agency 2013)

Prince Rupert Pilot October 2012 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry via rail is examined by Canadian officials onbehalf of the US (Government of Canada 2013c)

Montreal Pilot January 2013 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry to the US via truck is examined by Canadianofficials on behalf of the US (Government of Canada 2013c)

Pre-load Air Cargo Targeting (PACT) Joint pilot by CBSA and Transport Canada to screen cargo pre-flight onCanada-bound airplanes at foreign airports (Canada Border ServicesAgency 2013)

Tamper Evident Technology PilotOctober 2012

Pilot collaboration between CBSA and US CBP to ensure containersremain sealed upon arrival at the US border (Canada Border Services

Agency 2013)

Truck Cargo Pre-Inspection PilotMarch 2013

Pilot program between the CBSA and the US CBP for pre-inspection ofsouthbound traffic into US (Canada Border Services Agency 2013)

Free and Secure Trade (FAST) PilotSarnia Ontario

Pilot program for usage of FAST lanes without Partners in Protection andCustoms Self Assessment programs (Government of Canada 2013c)

Canada-US Shiprider June 2013 Removal of jurisdictional barriers to improve law enforcement personnelin Windsor-Detroit and Vancouver-Blaine waterways (Government ofCanada 2013c)

EntryExit Initiative Phase II June 2013 Exchange entryexit data between the CBSA and US DHS on individualsat Canada-US land border crossings (Government of Canada 2013c)

Regulatory Cooperation ProgramMemorandum of Understanding between Transport Canada and the RailwayAssociation of Canada September 2013

Framework for Canadian rail emissions between 2011 to 2015(Government of Canada 2013d)

Canada-United States Perimeter Approachto Plant Protection September 2013

Draft framework for increased cooperation and reduction inadministrative duplication between the Canadian Food InspectionAgency (CFIA) and United States Animal and Plant Health InspectionService (APHIS) on trade in plants and plant products (Government ofCanada 2013d)

Common Electronic Submission GatewayPilot (CESG) August 2013

FDA and Health Canada will allow pharmaceutical firms to electronicallysubmit drug applications (Government of Canada 2013d)

Initiative to Align Veterinary DrugApprovals December 2012

Joint reviews between US FDA and Health Canada on veterinary drugproducts (Government of Canada 2013d)

Stricter Air Pollutant Emissions Environment Canada aligns car emissions beginning in 2017 with theUS Environmental Protection Agencyrsquos ldquoTier 3rdquo (Government of Canada2013d)

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The state of Canada-US relations in 983090983088983089983092 983090983091

fraserinstituteorg

On September 983092 983090983088983089983091 $983092983094983094 million in investment was allocated to the

Border Action plan by the Government of Canada in order expand two marine

container examination facilities (Government of Canada 983090983088983089983091c) $983091983091 million

was invested by the Government of Canada in the Asia Pacific Gateway and

rade Corridor Initiative (Government of Canada 983090983088983089983091c) Te Plan includes

an additional 983090983097 harmonization initiatives that will enhance trade activity

between Canada and the US

Neither Beyond the Border nor the Regulatory Cooperation Council

offer further investment or cost estimates on the initiatives described in table

983097 Moens and Gabler (983090983088983089983090) pointed to the need for both the Canadian and

American governments to provide data on border costs so that a cost-benefit

analysis can ensue Nonetheless the small steps of progress towards inte-

grating and harmonizing US and Canadian border practices remains a very

important (long-term) part of reducing the profile of the border

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983090983092 fraserinstituteorg

Canadian and American public perceptions

Tree observations are noteworthy in recent assessments of public percep-

tions between Americans and Canadians First Americans consistently have

a very high favourability rating of Canadians typically in the 983097983088 plus range

(table 983089983088 figure 983089983093) Both as a friend and a strategic ally Americans hold

Canadians in the most favourable light possible (table 983089983089) Disagreements over

policy between the two countries whether in defence and foreign affairs or

over border and trade issues do not move this fundamental asset Canadians

enjoy in dealing with their neighbour

Second Canadians do not have high expectations of either the

American or Canadian government regarding progress in bilateral relations

As table 983089983090 shows Canadians hold Obama in high regard (983094983091 percent) but

only 983093983092 percent expect progress from him in trade relations Prime Minister

Harper is rated slightly ahead of President Obama in terms of working hard

towards improving Canada-US relations (table 983089983091)

Tird and most significant in light of Canadarsquos Catch-983090983090 situation both

Canadians and Americans are more supportive of closer cooperation and inte-

gration policies than is the case for political representatives in either the United

States or Canada In two recent studies we showed how US Senators and House

Representatives are quite critical of Canada with regard to NAFA issues and bor-

der security (Moens and Gabler 983090983088983089983089) Similarly we found that among the three

major political parties in Canadarsquos parliament only one consistently expressed

itself in favour of closer ties with the United States (Moens and Gabler 983090983088983089983089)

A recent survey of American and Canadian (and Mexican) attitudes

towards free trade and NAFA show surprisingly strong data for more trade

integration In response to the statement ldquoTere should be more free trade

between the US Canada and Mexicordquo 983096983088 percent of Canadians approved

as did 983095983092 percent of Americans Even on border security Canadians andAmericans are more pro-cooperation and integration than their governmental

policies suggest In the US 983092983089 percent support a common perimeter while

983090983088 percent are opposed In Canada 983092983091 percent support it and 983091983088 percent are

opposed (Graves Pastor and Basaacutentildeez 983090983088983089983091) Terefore in terms of public

mandate both governments would have a case to work towards broader bilat-

eral (or trilateral) cooperation to lower trade barriers

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The state of Canada-US relations in 983090983088983089983092 983090983093

fraserinstituteorg

Table 983089983088 Canadian favourability rating among Americans (February 983090983088983089983090)

Veryfavourable

Mostlyfavourable

Mostlyunfavourable

Veryfavourable Not sure Total

favourableTotal

unfavourable

53 38 3 2 3 91 5

Note n=1015

Source Gallup Poll (2012)

Table 983089983089 Ally or enemy for Americans (June 983090983088983089983091)

Country Ally Friendly Unfriendly Enemy Total Ally andFriendly

Great Britain 66 25 2 1 91

Canada 61 33 2 1 94

China 11 44 26 14 55

Note n=1529Source Gallup Poll (2013)

88

90

92

94

96

98

201220112010200920082007

Figure Canadian favourability among Americans () ndash

Source Gallup Poll (2012)

f a

v o u r a

b l e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983090 What effect will Obama have on Canada-US relations (November 983090983088983089983090)

Canadians Americans

Positive Negative None Positive Negative None

Relationship 62 5 34 48 12 40

Trade 54 10 35 48 12 39

Harmonizing 53 8 40 47 14 39

Note n=1066

Source Abacus Data (2012)

Table 983089983091 Has each leader worked hard to improve Canada-US relations

(July 983090983088983089983090)

Country Agree Disagree Not sure

Stephen Harper 58 32 10

Barack Obama 53 32 15

Note Sample of Canadians

Source HarrisDecima (2012)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983090983095

US policy uncertainty

Canadian economic prospects face their most important challenge in the

United States Te US economic recovery has been modest and real GDP

growth so far has remained below the post-World War II average of post-

recession periods (figure 983089983094) As we noted above the less-than-stellar US

recovery is made even more challenging for Canadian traders in that pro-

ductivity gains in Canada are lagging while the Canadian dollar remains high

On top of that several American-imposed regulatory obstacles to free trade

are depressing trade prospects in crude oil red meat and public works pro-

curement Tese impediments reduce Canadian competitive access to the

US market

A high level of public spending until the January 983090983088983089983091 sequester and

ongoing monetary stimulation have not produced notable US GDP growth

Te seven post-recession periods below show the current average to be well

below the historical average (Young 983090983088983089983091)

983089983097983092983096-983089983097983093983095 983091983096983088

983089983097983093983096-983089983097983094983095 983092983090983096

983089983097983094983096-983089983097983095983095 983091983089983096

983089983097983095983096-983089983097983096983095 983091983089983093

983089983097983096983096-983089983097983097983095 983091983088983093

983089983097983097983096-983090983088983088983095 983090983097983097

983090983088983088983096-983090983088983089983091 983088983095983091

While economic growth has been modest growth in the public debt

has not (figure 983089983095) Publicly held debt in the US is now at 983095983091 percent of GDP

the highest since 983089983097983092983094 (Congressional Budget Office 983090983088983089983091)

Te widening gap between federal government outlays and revenueshas only recently been capped by the Sequester (figure 983089983096) However the

budget Sequester is temporary and final resolution of public spending and

taxation levels remains unclear given repeated gridlock in presidential-con-

gressional policy making High debt levels combined with stalemate over

taxes and budget cuts have produced a case of policy instability or uncer-

tainty in the last five years (Baker Bloom and Davis 983090983088983089983091)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

US policy uncertainty is further aggravated by inaction on the large

lsquoentitlementrsquo programsmdashSocial Security Medicare and Medicaidmdashwhich are

the major drivers of the long-term gap in revenues and spending

-4

-2

0

2

4

6

8

201220062000199419881982197619701964

Figure US GDP growth rate ndash ( forecast)

Source The World Bank (2013b) OECD (2013)

-10

-8

-6

-4

-2

0

0

20

40

60

80

100

20122011201020092008200720062005200420032002

Government deficit as a percentage of GDP Government debt as a percentage of GDP

Figure US Government deficit and debt as a percentage of GDP ndash

Source Congressional Budget Office (2013)

D e fi c i t p e r c e n t a g e ( ) D

e b t p er c en t a g e ( )

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983097

fraserinstituteorg

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

20122003199319831973

Revenue Outlays

Figure US Government revenue and outlays ndash ( US$ billions)

Source Congressional Budget Office (2013)

1 9 8 3 U S $ b i l l i o n s

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 3762

983091983088 fraserinstituteorg

Trade diversification

Given the weakness in near-term US opportunities Canadians are (again)

wondering how to pursue trade diversification away from the United States

Te objective is logical and if achieved will prove advantageous but various

trends in trade and investment show that diversification for Canada is a slow

and arduous journey (table 983089983092)

In terms of overall share exports to China in the last five years have

doubled but the numbersmdashfrom 983090983089983095 percent to 983092983090983094 percentmdashremain rela-

tively low In the same period the US-bound share declined by 983091 percent but

remains a towering 983095983092983093983092 percent Te pattern of small overall impact applies

to all the other top trading partners For example exports to the UK have

increased but exports to Japan and Mexico have essentially stalled When we

consider average export growth rates over the last five years (table 983089983093) we see

a very strong rate for China (983089983093983093 percent) and strong rates for the UK and

South Korea (983096983097 percent and 983094983097 percent) However a 983089983093 percent increase in a

983092 percent overall trade share produces little change Te point we are making

is that at this rate and pattern of trade lsquodiversificationrsquo it will actually take a

very long timemdashwhile relatively small upward trends in trade with the United

States could have a quick and very large impact in the opposite direction

On the import side we notice more trade diversification with the US

share at 983093983088 percent and the Chinese share at 983089983089 percent (table 983089983094) Te Chinese

growth rate on the import side is less than on the export side (table 983089983095) Te

most revealing number may be the high average over five years for Mexico

at 983097 percent Tis could be indicative of a growing supply chain with Mexico

While foreign direct investment (FDI) is not a direct indicator of future

trade trends in investment may harbinger change In terms of outbound

FDI we notice that only a small segment (less than 983089983088 percent) is targeted

for manufacturing (table 983089983096) It is investment in this category in which onewould expect growth in supply chains

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983089

fraserinstituteorg

Table 983089983092 Canadarsquos merchandise exports top ten destinations 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 3291 1 777 2361 1 751 2564 1 749

China 92 4 22 97 3 31 114 3 33

UK 114 2 27 105 2 33 141 2 41

Japan 97 3 23 73 4 23 79 4 23

Mexico 51 5 12 42 5 13 43 5 13

Netherlands 32 8 08 24 8 08 28 8 08

South Korea 34 7 08 31 7 10 32 7 09

Germany 39 6 09 33 6 10 34 6 10

France 28 9 07 23 9 07 20 10 06

Brazil 23 10 05 14 10 04 22 9 06

Total 4237 3145 3424

2011 2012Average

shareValue Rank Share Value Rank Share

US 2750 1 737 2783 1 745 752

China 140 3 38 159 2 43 33

UK 157 2 42 154 3 41 37

Japan 89 4 24 85 4 23 23

Mexico 46 5 12 44 5 12 12

Netherlands 40 7 11 37 6 10 09

South Korea 43 6 11 30 7 08 09

Germany 33 8 09 29 8 08 09

France 26 9 07 26 9 07 07

Brazil 24 10 06 21 10 06 06

Total 3732 3734

Source Industry Canada (2013b)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 3962

983091983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983093 Canadian export growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 56 7 -281 9 106 = 5

China 101 6 65 1 187 3

UK 16 9 -73 2 358 2

Japan 202 3 -250 7 106 = 5

Mexico 179 4 -178 6 43 9

Netherlands -85 10 -255 8 183 4

South Korea 276 2 -80 3 52 8

Germany 160 5 -167 4 54 7

France 36 8 -174 5 -122 10

Brazil 706 1 -380 10 603 1

2011 2012Average

Rank Rank

US 104 8 27 2 02

China 270 4 152 1 155

UK 148 6 -02 4 90

Japan 161 5 -29 6 38

Mexico 94 9 -16 5 24

Netherlands 475 1 -55 7 53

South Korea 374 2 -272 10 70

Germany 05 10 -95 9 -09

France 311 3 23 3 15

Brazil 109 7 -92 8 189

Source Industry Canada (2013b) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983091

fraserinstituteorg

Table 983089983094 Canadarsquos merchandise imports top ten sources 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 1992 1 524 1633 1 511 1745 1 504

China 374 2 98 347 2 109 382 2 110

Mexico 157 3 41 145 3 45 190 3 55

Japan 134 4 35 108 4 34 115 4 33

Germany 111 5 29 95 5 30 97 5 28

UK 110 6 29 82 6 26 92 6 27

South Korea 53 9 14 52 7 16 53 7 15

Algeria 67 7 18 33 10 10 31 10 09

Italy 45 10 12 39 9 12 40 9 12

France 53 8 14 49 8 15 47 8 13

Total 3804 3194 3465

2011 2012Average

shareValue Rank Share Value Rank Share

US 1846 1 496 1922 1 506 508

China 402 2 108 417 2 110 107

Mexico 205 3 55 210 3 55 50

Japan 109 4 29 123 4 33 33

Germany 107 5 29 118 5 31 29

UK 86 6 23 70 6 18 25

South Korea 55 7 15 52 7 14 15

Algeria 46 9 12 49 8 13 12

Italy 43 10 11 43 9 11 12

France 46 8 12 41 10 11 13

Total 3723 3796

Source Industry Canada (2013b)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983091983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983095 Old and new trade prospectsmdashimport growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 29 8 -178 7 89 5

China 112 4 -70 2 123 3

Mexico 43 7 -77 4 337 1

Japan -11 10 -192 8 89 4

Germany 105 5 -149 6 44 7

UK 95 6 -252 9 141 2

South Korea 120 3 -14 1 36 8

Algeria 518 1 -511 10 -50 10

Italy 11 9 -132 5 48 6

France 191 2 -70 3 -35 9

2011 2012Average

Rank Rank

US 88 5 57 4 17

China 82 6 53 5 60

Mexico 111 3 39 6 91

Japan -29 9 151 1 01

Germany 132 2 117 2 50

UK -36 10 -173 10 -45

South Korea 76 7 -37 8 37

Algeria 533 1 91 3 116

Italy 95 4 23 7 09

France 22 8 -97 9 02

Source Industry Canada (2013b) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4262

The state of Canada-US relations in 983090983088983089983092 983091983093

fraserinstituteorg

In terms of overall Canadian outbound FDI stocks in the US remain

very high despite the recent US recession while growth in stock in Asia is

modest (figure 983089983097) When we examine Canadian FDI in the so-called BRIC

states we notice that investment in both China and India is relatively small

Canadian mining investment in Brazil is much larger (figure 983090983088) In fact when

we examine amounts of FDI we find that Canada is not really a big BRIC

investor other than Brazil Chile Hong Kong and Peru are larger FDI recipi-

ents than China and India (figure 983090983089)

In terms of FDI flowing into Canada we notice the very large share

(983090983096983094983093 percent) in manufacturing which indicates both the predominant

share of US FDI and the extensive integrated supply chains in Canada-US

manufacturing (table 983089983097) Even more than for outbound FDI inflow stocks

show very large US preponderance (figure 983090983090) Such continued concentra-

tion of US FDI in Canada suggests that Canadian trade diversification is not

just a decision to be made by Canadian producers

Like trade growth Chinese FDI growth in Canada is positive but the

overall numbers are small and do not show rapid growth in the last 983091 years

(figure 983090983091)

Table 983089983096 Top industries for outward stocks of FDI 983090983088983089983090

Category Value Share

Mining oil and gas extraction 1099 188

Oil and gas subcategory 542 93

Manufacturing 569 97

Finance and insurance 2334 399

Management of companies and enterprises 757 129

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983091983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

1

2

3

4

5

6

7

8

9

10

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n s

Figure Canadian foreign direct investment (stock) BRIC ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Brazil PRC India Russia

0

20

4060

80

100

120

140

160

180

200

220

240

260

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) various regions

ndash

Notes Excluding Mexico Canadian FDI to Mexico in 2012 was $557 billion

Foreign Direct Investment measures the purchase of various forms of capital stock abroad

However tax havens (Barbados Bermuda etc) are frequently found to be some of the highest

recipients of FDI In reality tax havens do not reflect economic growth as FDI figures invested

into tax havens are often reinvested back to the source country in a concept known as

round-tripping (Financial Post 2013) We have accounted for tax havens by removing them from

tables and figures in this section The numbers corresponding to Figure 19 would be Barbados

($593 billion) Bermuda ($118 billion) British Virgin Islands ($21 billion) Cayman Islands ($302

billion)

Source Foreign Affairs Trade and Development Canada (2013c)

US Europe Asia amp Oceania Central amp South America Africa

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4462

The state of Canada-US relations in 983090983088983089983092 983091983095

fraserinstituteorg

Table 983089983097 Top industries for inward stocks of FDI 983090983088983089983090

Category Value Share

Oil and gas extraction 766 147

Manufacturing 1492 287

Petroleum and coal products manufacturing 377 72

Wholesale trade 395 76

Finance and insurance 699 134

Management of companies and enterprises 999 192

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

0

2

4

6

8

10

12

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) Chile Hong Kong

Peru amp Korea ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Chile Hong Kong Peru Korea

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4562

983091983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

40

80

120

160

200

240

280

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Foreign direct investment (stock) in Canada from top three

countries ndash

Source Foreign Affairs Trade and Development Canada (2013c)

US Netherlands UK

0

2

4

6

8

10

12

201220112010200920082007

2 0 0 2 C A $ b

i l l i o n s

Figure Foreign direct investment (stock) in Canada from China

ndash

Source Foreign Affairs Trade and Development Canada (2013c)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4662

fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983092983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4862

fraserinstituteorg 983092983089

References

Abacus Data (983090983088983089983090 November 983090983088) Beyond the Canadian-American Border

lthttpabacusdatacawp-contentuploads983090983088983089983090983089983089Can-AM_Report_CABC_

Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

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983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5862

The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5962

983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 15: Canadas Catch 22 State of Canada Us Relations in 2014

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983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

80

81

82

83

84

85

86

87

88

89

90

201020092008200720062005

2 0

0 2 C A $ b i l l i o n s

Figure Canada-US net services trade ndash

Source Foreign Affairs Trade and Development Canada (2013a)

-20

-16

-12

-8

-4

0

201020092008200720062005

Trade balance with USA Total trade balance

Figure Canadarsquos trade deficit with US and the world ndash

Source Foreign Affairs Trade and Development Canada (2013a)

2 0 0 2 C A $ b i l

l i o n s

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983097

fraserinstituteorg

Table 983094 Top categories for service trade exports Canada-World 983090983088983089983090

Category Subcategory Exports

2002 CA$ bi llions Percentage

Government services 13 19

Travel services 143 207

Personal travel 119 172

Transportation services 111 161

Air transport 52 76

Commercial services 424 614

Financial services 57 82

Computer and information services 64 93

Intellectual property use 31 44

Management services 90 130

Research and development 33 47

Architectural engineering 39 57

Source Foreign Affairs Trade and Development Canada (2013a)

Table 983095 Top categories for service trade imports Canada-World 983090983088983089983090

Category Subcategory Imports

2002 CA$ billions Percentage

Government services 11 12

Travel services 288 323

Personal travel 253 284

Transportation services 195 219

Water transport 82 92

Air transport 84 95

Commercial services 396 446

Insurance services 44 50

Financial services 44 50

Intellectual property use 89 100

Management services 75 84

Source Foreign Affairs Trade and Development Canada (2013a)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983089983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

075

080

085

090

095

100

105

2 0 1 3

- 0 7

2 0 1 3

- 0 1

2 0 1 2

- 0 7

2 0 1 2

- 0 1

2 0 1 1

- 0 7

2 0 1 1

- 0 1

2 0 1 0

- 0 7

2 0 1 0

- 0 1

2 0 0 9

- 0 7

2 0 0 9

- 0 1

2 0 0 8

- 0 7

2 0 0 8

- 0 1

2 0 0 7

- 0 7

2 0 0 7

- 0 1

Figure CanadaUS dollar exchange rate ndash

Source Bank of Canada (2013b)

C A U S e x c h a n g e r a t e

Dollar value and productivity trends

Te first factor to consider regarding Canadarsquos trade competitiveness vis-agrave-vis

the United States is the value of the Canadian dollar Te substantial appre-

ciation of the Canadian dollar against the US dollar that began in the early

983090983088983088983088s has stabilized at a much higher average value of the loonie ( figure 983095)

As is well documented such exchange rate appreciation tends to have a strong

effect on current account balances as exports decline (Kappler et al 983090983088983089983089)

A growing account deficit will likely push the value of the Canadian dollar

downward in the longer term and thus offer some remedy

ProductivityOf more concern to Canadians should be the data indicating that Canadian

labour productivity rates are lagging those in the United States (figures 983096 983097)

One would expect that Canadarsquos higher dollar has provided industry in recent

years with an opportunity to improve productivity as imported machinery

and technology would be available at a lower price However Canadarsquos pro-

ductivity rate of growth is modest and in 983090983088983089983090 dips into negative territory

again

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983089983089

fraserinstituteorg

-1

0

1

2

3

20122011201020092008

Canada US

Figure Canada and US rates of output productivity growth ()

ndash

Source Statistics Canada (2013g)

R a t e o f p r o d u c t i v i t y g r o

w t h ( )

-10

-5

0

5

20122011201020092008

Labour productivity (Canada) Real GDP (Canada) Hours worked (Canada)

Labour productivity (US) Real GDP (US) Hours worked (US)

Figure Real US-Canadian output and hours worked () ndash

Source Statistics Canada (2013g)

A n n u a l c

h a n g e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 1962

983089983090 fraserinstituteorg

Trade and regulatory barriersdisputes

Table 983096 provides a synopsis of the major trade disputesbarriers that have

played a role in bilateral relations in the last five years and that are pertinent

for the 983090983088983089983092 period (pages 983089983094-983089983095) Te two large disputesmdashKeystone XL and

Mandatory Country-of-Origin Labeling (MCOOL) on red meatmdashare more

ominous than they may seem First both in crude oil products and in cattle

and hogs the United States is unilaterally disrupting or dismantling a well-

established integrated sector Canada has started attempts to diversify its oil

transportation structure including more rail and new pipeline routes But

as all proposed alternative pipelines have shown the alternatives are contro-

versial and at best years away from making a difference Meanwhile there is

considerable risk in putting too much crude oil on rail as its accident rates

are higher than pipe

Canadian threats to counter US MCOOL action with tariffs on food

products are not going to have much impact in the near future Moreover

an escalating tariff war on food products cannot be won by Canada and will

ultimately harm consumers on both sides of the border US defiance of two

WO rulings also means more uncertainty for Canadian traders

Keystone XL pipeline

Proposed in 983090983088983088983096 the Keystone XL (KXL) extension is part of a pipeline sys-

tem connecting Alberta oil sands and US mid-West and Gulf region refineries

KXL is a 983089983096983097983095 km crude oil pipeline with a capacity of 983092983094983093983088983088983088 barrels per

day (Hussain 983090983088983089983091) It is a substantial private infrastructure proposal that

will create employment and guarantee a secure energy source for the United

States (Millington and Murillo 983090983088983089983091) It is by no means a new feature in

Canada-US energy relations as a dense network of oil and electricity carri-ers cross the border at multiple points

What is unprecedented is that the permit process is now in its sixth

year and the final resolution remains uncertain (by US law a cross-border line

requires Department of State approval) If not resolved in 983090983088983089983092 the question

may well be handed over to the next president after 983090983088983089983094 Te policy uncertainty

associated with KXL approval has by far the largest impact on Canada-US trade

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983089983091

fraserinstituteorg

relations Te dragged-out procedure has chilled relations Te southern leg of

KXL has been completed and the original route objection by Nebraska has been

resolved What remains ostensibly the problem is that the US administration

has identified this heavy oil as a component of its policy objective of curbing

the emission of greenhouses gasses to reduce global warming

Te impact of this pipeline delay in the 983090983095 million barrels per day (bpd)

export of Canadian oil products to the USA reverberates at various levels

Across Canada investment in mining oil and gas extraction for 983090983088983089983091 is pre-

dicted to decrease by 983090983095 percentmdashthe largest decline since the 983090983088983088983096 recession

(Statistics Canada 983090983088983089983091f) In Alberta investment is predicted to increase by

only 983088983089 percent (Statistics Canada 983090983088983089983091f) Capital investment in oil and gas

extraction has not recovered to pre-983090983088983088983096 levels (Industry Canada 983090983088983089983091a)

While the industry has become increasingly dependent on rail trans-

port to move product it is a costly alternative It can cost up to three times

as much as pipeline transport (Millington and Murillo 983090983088983089983091) and its limita-

tions are self-evident because rail movement of oil is constrained by the lim-

ited availability of rail cars In 983090983088983089983090 983089983091983088983088983088983088 bpd of heavy crude was being

transported by rail Tis is expected to rise to 983092983090983093983088983088983088 bpd by the end of

983090983088983089983092 falling short of the 983092983094983093983088983088983088 bpd which could have been moved through

KXL (Hussain 983090983088983089983091) Te forced increase in rail transport has resulted in

unintended costs for the industry a total of US$983089 billion must be invested for

new rail terminals and another US$983092ndash983093 billion for new rail cars (Lewis 983090983088983089983091)

Rail transport is both more costly and more dangerous A recent study

concluded that ldquopipeline transportation is safer than transportation by road

rail or barge as measured by incidents injuries and fatalitiesrdquo (Green amp

Furchtgott-Roth 983090983088983089983091) It is not inconceivable that another major oil acci-

dent either in Canada or the USAmdashsuch as took place in Quebec in July 983090983088983089983091

killing 983092983095 peoplemdashwould result in a moratorium on oil transport by rail with

grave consequences for Canadian producers

983090983088983088983090 Mandatory Country-of-Origin Labeling

Mandatory Country-of-Origin Labeling (MCOOL) is a provision mandated

by Congressional law and first implemented in 983090983088983088983096 Te measure imposes

strict segregation rules on American Canadian and Mexican cattle and hogs

and the subsequent slaughtering and processing of these animals to producebeef and pork products for retail sale Te stated purpose is to create labels

that indicate the origin in part or in whole of the product In effect it is a

veiled trade barrier because it gives US animals and products a competitive

advantage due to higher labeling inventory and processing costs for equiva-

lent Canadian products

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983089983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983096 Synopsis of trade disputes in Canadian-American relations in 983090983088983089983091

Dispute Impact and cost Prospect for resolution

Keystone XL Pipeline Very serious Poor

2008 proposal for a 1897

km 465000 bpd crude oilpipeline spanning fromAlberta down to Nebraska

Downward pressure on investment

Lost wages January 2012postponement is costing US $47million a day in lost wages (ConsumerEnergy Alliance 2013)

Continuation of crude oil pricediscounts due to lack of infrastructure

Costly alternative rail has emerged as atransportation alternative but can costup to three times as much as pipelinetravel (Millington and Murillo 2013)

Permit postponed twice

Resolution is not transparent

Rising risk of decision deferral past 2016

Mandatory Country-of-OriginLabelling (MCOOL)

Serious Poor

2008 CongressionalLaw mandating rulesfor segregated livestockprocessing and packagingand a labeling structure inorder to have food labelsindicate origin of product

Annual cost to Canadian beef and porksector of $1 billion

Deconstruction of a highly integratedtrilateral supply chain industry

MCOOL adds no animal health or foodsafety benefits

US has defied both WTO complaint andthe core part of the WTO Appeal ruling

2013 US reaction has been to strengthenthe discriminatory provision banning co-mingling of meats altogether

Canada plans to retaliate with tariffs butthis is a costly gambit with low chance ofsuccess

Softwood Lumber Agreement Moderate Good

In 2011 American softwoodcompanies took theirCanadian counterparts to theLondon Court of InternationalArbitration accusing themof circumventing the SLA(Foreign Affairs Trade andDevelopment Canada 2012a)

If in violation Canadian industry wouldface $380 million in penalties (TheCanadian Press 2012)

The London Court of InternationalArbitration in 2012 ruled in favor ofCanada (Foreign Affairs Trade andDevelopment Canada 2012a)

SLA was to expire in 2013 but Canadaand the USA extended it until 2015 (CBCNews 2012)

Long-term free trade in lumber needs toreplace SLA

Buy American Provision Serious Partial resolution but high risk ofrecurring Buy American legislation

2009 American Recovery andReinvestment Act

Exclusion of Canadian products andproduction sharing in US public worksprocurement

Canada-US Procurement Agreement in2010 which allowed for the purchaseof Canadian goods on seven US

infrastructure projects valued at morethan $7777000

Canada needs to seek a comprehensiveagreement in order to escape futureAmerican protectionism with allprovinces on board and compliant withthe WTO provision

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The state of Canada-US relations in 983090983088983089983092 983089983093

fraserinstituteorg

Dispute Impact and cost Prospect for resolution

Canadian Wheat Board Long-term benefit Completed

Canadarsquos mandatory wheat

marketing board monopsonyended in 2011

Frequent US action against CWB in the

past will now end as wheat marketingin Canada turns fully market based

Intellectual Property Rights Moderate potential cost Partially resolved

Canada has been on theSpecial 301 Priority Watch Listby the United States TradeRepresentative since 1995

Ongoing threat of US Trade Action andlegal action

Canadian domestic complianceincluding

Strengthening data protection

Participation in Anti-counterfeiting TradeAgreement (ACTA in 2013)

Enacted the Combating CounterfeitProducts Act (2013)

Started the process of strengthening

the Copyright Act and implementingWorld Intellectual Property OrganizationInternet Treaties

In recognition of which Canada has beenremoved from the Special 301 PriorityWatch List

Prescription drugs Serious potential for trade action Indirect progress

The US complaint againstCanada

Imposing price ceilings thatshifts the cost burden of RampDto US firms

Weak protection ofintellectual property rights rethird party sales

Slow prescription drugapproval process causingreduced market access

US firms experience lost revenues andtrade action is a risk

In 2013 CETA agreement with theEuropean Union Canada agrees to givefull patent protection to new drugs fortwo years

Two-year rule may be transferable tofuture Canada-US resolution

Table 983096 continued

Canada and the United States have had a deeply integrated market in

this sector since the early 983089983097983097983088s Animal health and food safety standards have

been largely harmonized As a result highly efficient supply-chain production

methods have made this industry quite efficient However the imposition of

MCOOL has changed all that (Moens amp Leon 983090983088983089983090) Te cost differential haswidened and Canadian exports have dropped dramatically Since 983090983088983088983096 the

cattle sector has lost $983094983092983088 million per year and the hog sector has lost $983093983088983088

million a year (Te Canadian Press 983090983088983089983091a)

In 983090983088983089983090 the World rade Organization (WO) ruled in Canadarsquos favor by

concluding that MCOOL is discriminatory Te WO gave the US until May 983090983091

983090983088983089983091 to act but on that same day the USDA imposed regulatory changes that

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983089983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

actually strengthened the provisions of MCOOL In retaliation the Canadian

government released a list of US exports to Canada that would be subjected

to tariffs and it is preparing to seek a compliance panel at the WO Until this

situation is resolved the Canadian government predicts a continuing annual

loss of $983089 billion for the Canadian red meat sector (Te Canadian Press 983090983088983089983091a)

Softwood lumber

In 983090983088983089983089 several American softwood companies took their Canadian counter-

parts to the Court of International Arbitration in London accusing them of cir-

cumventing the Softwood Lumber Agreement of 983090983088983088983094 (Foreign Affairs rade

and Development Canada 983090983088983089983090a) Te dispute centered on the accelerating pace

of lumber harvests resulting from the pine beetle infestation Te stakes were

high $983091983096983088 million in penalties should Canada lose (Te Canadian Press 983090983088983089983090)

In 983090983088983089983090 the Court of International Arbitration ruled in Canadarsquos favor

(Foreign Affairs rade and Development Canada 983090983088983089983090a) In addition while

the Softwood Lumber Agreement was set to expire in 983090983088983089983091 the Canadian

and American governments successfully negotiated an extension of the

Agreement until 983090983088983089983093 (CBC News 983090983088983089983090) Te fact remains that as long as a

large part of Canadarsquos softwood lumber is managed in terms of quotas and

the stumpage fee system US trade action is very likely

lsquoBuy Americanrsquo provision

Te 983090983088983088983097 American Recovery and Reinvestment Act (ARRA which expired

on September 983091983088 983090983088983089983089) and the more recent 983090983088983089983089 American Jobs Act stipu-

lated that steel iron and other goods used in the repair and construction of

infrastructure projects in the US (highways bridges mass transit and fed-

eral buildings) must be manufactured in the United States (Matthiesen 983090983088983089983089)

In response to ARRA Canada and the US signed the Canada-US

Procurement Agreement in 983090983088983089983088 which allowed for the purchase of Canadian

goods on seven US infrastructure projects valued at more than $983095983095983095983095983088983088983088

or within the 983091983095 states subject to the WO GPA (Government of Canada

983090983088983089983091a) Te 983090983088983089983089 American Jobs Act did not pass in Senate and is thus moot

While the ARRA dispute was partially resolved lsquoBuy Americanrsquo anda counter position of lsquoBuy Canadianrsquo can flare up on either side of the bor-

der Canadian industry is most vulnerable in this uncertainty Te Canadian

government ought to seek a comprehensive Buy American exemption to

escape future American protectionism In so doing all provincial govern-

ments need to be on board in order to make the WO and NAFA rules

function optimally

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983089983095

fraserinstituteorg

Canadian Wheat Board (CWB)

In 983090983088983089983089 the Canadian government removed the monopsony held by the

Canadian Wheat Board Tis unilateral action offers a successful reduction

in bilateral trade distortion oday the CWB continues to operate as a mar-

keting group

Intellectual Property Rights (IPR)

From 983089983097983097983093 through 983090983088983089983091 Canada was on the Special 983091983088983089 Priority Watch

List by the United States rade Representative Te US complaint was that

protection and enforcement of IPR in Canada were weak Te Special 983091983088983089

Priority Watch List is designed to identify US trading partners that are the

worst offenders in IPR protection (Embassy of the United States Ottawa

Canada 983090983088983089983091)

Although the issue is not completely resolved Canada has made sig-

nificant progress in recent years Te federal government has strengthened

data protection regulations criminalized the use of camcorders in theaters

and participates in the Anti-Counterfeiting rade Agreement (ACA) nego-

tiations (983090983088983089983091) Most recently Canada enacted the Combatting Counterfeit

Products Act (Embassy of the United States Ottawa Canada 983090983088983089983091) Te

Canadian Government is in the process of strengthening the Copyright Act

and implementing World Intellectual Property Organization Internet reaties

(Embassy of the United States Ottawa Canada 983090983088983089983091)

As a result of these steps Canada was removed from the Special 983091983088983089

Priority Watch List in 983090983088983089983091

Prescription drugs

Prescription drug prices in Canada are relatively low due to a price ceil-

ing mandated by Canadarsquos healthcare system In addition Health Canada

approval times for prescription drugs significantly lag behind their counter-

parts in the United States and the European Union (Barua and Esmail 983090983088983089983091)

US lawmakers have repeatedly expressed their concerns over cheap prescrip-

tion drugs re-entering the US from Canada (Moens and Gabler 983090983088983089983089) TeEU also asked Canada to strengthen IPR protections for prescription drugs

(Lexchin and Gagnon 983090983088983089983091) Since the signing of the CEA agreement in

principle on October 983089983096 983090983088983089983091 the issue between Canada and the EU is now

resolved (Waldie 983090983088983089983091) Canada has agreed to ldquoEU demands for patent pro-

tection for up to two years on brand-name drugsrdquo (Blanchfield 983090983088983089983091)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983089983096 fraserinstituteorg

State of the border andregulatory cooperation

Te decline in Americans traveling to Canada corresponds with the US

Greenback losing value against the Canadian dollar (figures 983089983088 983089983089) However

when we consider the extent of the decline in total numbers it appears dispro-

portionate Te change in American travel suggests instead a bigger problem

following the 983097-983089983089 shock Te imposition of new border transit requirements

such as passports as well as longer wait times and more security screening

has likely dampened US travel across this international boundary Given the

modest economic recovery in the USA from the beginning of 983090983088983089983088 onward

one would expect disposable income including for travel to trend back up

Instead the numbers remain stagnant at around 983090983088 million less than half the

number of 983090983088983088983090

While an overall national average for border wait times is not avail-

able data on major border crossings in both Central Canada and British

Columbia indicate that no reductions in wait times have been achieved

between 983090983088983088983094 and 983090983088983089983089 (figure 983089983090) Te problem of inefficiency as presented

by the Canada-US border goes well beyond wait times It includes inefficient

activity away from the border such as extra warehousing and costs of com-

plying with various facilitated traveler and goods programs such as FAS for

trucks loads and drivers

Tere are consistent cost differences between domestic and cross-bor-

der truck-borne trade which point to significant border costs ldquoFor exports

to the US these costs added 983088983097 percent to the delivered price of goods in

983090983088983088983092 Tis figure fell to 983088983092 percent in 983090983088983088983097 hellip Higher fixed costs per shipment

accounted for most of the additional cost of transporting goods to the USrdquo

(Brown and Anderson 983090983088983089983090) When we consider that in the manufacturingsector parts cross the border several times in various stages of assembly we

realize how this cost accumulates and defeats the efficiency gains otherwise

generated by integrated supply chain manufacturing Border costs are typ-

ically passed on to the consumer as fixed costs per shipment

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The state of Canada-US relations in 983090983088983089983092 983089983097

fraserinstituteorg

An unprecedented border problem has arisen in the current USAdministrationrsquos lengthy (six years) review of the permitting of a pipeline

border crossing as proposed in the Keystone XL project As a result oil-by-

rail transport has recently increased while the pipeline mode of Canada-US

trade has seen a drop in growth in the 983090983088983089983089983089983090 period ( figures 983089983091 983089983092)

0

10

20

30

40

50

201220112010200920082007200620052004200320022001200019991998

Figure Travellers entering Canada ndash

Source Statistics Canada (2013e)

US residents Non-US residents

0

3

6

9

12

15

18

0

03

06

09

12

15

18

20122011201020092008200720062005200420032002

Trips Spending US$CA$ (Secondary axis)

Figure US overnight travel to Canada ndash

Source Statistics Canada (2011) Bank of Canada (2013b)

M i l l i o n s o f t r i p

s N o m i n a l C A $ b i l l i o n s

U S $ C A $ ex c h a n

g er a t e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

5

10

15

20

201120102009200820072006

Northbound average delay Southbound average delay

Figure Peace Arch average border wait time ndash

Source Cascade Gateway Data (2013)

M i n u t e s

0

25

50

75

100

125

150

175

200

225

250

275

300

201220112010200920082007200620052004

2 0 0 4

U S $ b

i l l i o n s

Figure All surface modes of freight flow data based on value of goods

ndash

Source Bureau of Transportation Statistics (2013)

Truck Rail Pipeline

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983089

fraserinstituteorg

lsquoBeyond the Borderrsquo and Regulatory Cooperation

In 983090983088983089983089 Canada and the United States announced an ambitious agreement

to reduce border costs by means of deeper bilateral regulatory and secur-

ity cooperation Te accord seeks to streamline various border proceduresmdash

some already in existence and some newmdashto improve intelligence-sharing

between law enforcement agencies mutual recognition of passenger baggage

screening improved frameworks for trusted trade programs harmoniza-

tion of NEXUS protocols streamlined supply chains enhanced trade com-

petitiveness collaboration in border infrastructure investment and deeper

cooperation in national security investigations Te agreement is known as

Beyond the Border A Shared Vision for Perimeter Security and Economic

Competitiveness (February 983092 983090983088983089983089)

Te Beyond the Border Vision accord also set up a Regulatory

Cooperation Council In it Canadian and American officials seek to reduce

red tape and harmonize regulations in certain key sectors o date the

Council has announced various plans affecting agriculture and food trans-

portation health personal care products workplace chemicals environmentnano materials and small business loans We summarize the key points of

progress made since 983090983088983089983089 in table 983097

-35

-25

-15

-5

5

15

25

35

20122011201020092008200720062005

Truck Rail Pipeline

Figure Growth rate of all surface modes of freight flows () ndash

Source Bureau of Transportation Statistics (2013) calculations by authors

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983090983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983097 Key elements of Beyond the Border and Regulatory Cooperation

Beyond the Border Program

Integrated Cargo Security Strategy (ICSS)December 2011

Reduces administrative duplication between Canada and the US byaddressing security risks in advance within the shipment supply chainand at the border (Canada Border Services Agency 2013)

Prince Rupert Pilot October 2012 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry via rail is examined by Canadian officials onbehalf of the US (Government of Canada 2013c)

Montreal Pilot January 2013 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry to the US via truck is examined by Canadianofficials on behalf of the US (Government of Canada 2013c)

Pre-load Air Cargo Targeting (PACT) Joint pilot by CBSA and Transport Canada to screen cargo pre-flight onCanada-bound airplanes at foreign airports (Canada Border ServicesAgency 2013)

Tamper Evident Technology PilotOctober 2012

Pilot collaboration between CBSA and US CBP to ensure containersremain sealed upon arrival at the US border (Canada Border Services

Agency 2013)

Truck Cargo Pre-Inspection PilotMarch 2013

Pilot program between the CBSA and the US CBP for pre-inspection ofsouthbound traffic into US (Canada Border Services Agency 2013)

Free and Secure Trade (FAST) PilotSarnia Ontario

Pilot program for usage of FAST lanes without Partners in Protection andCustoms Self Assessment programs (Government of Canada 2013c)

Canada-US Shiprider June 2013 Removal of jurisdictional barriers to improve law enforcement personnelin Windsor-Detroit and Vancouver-Blaine waterways (Government ofCanada 2013c)

EntryExit Initiative Phase II June 2013 Exchange entryexit data between the CBSA and US DHS on individualsat Canada-US land border crossings (Government of Canada 2013c)

Regulatory Cooperation ProgramMemorandum of Understanding between Transport Canada and the RailwayAssociation of Canada September 2013

Framework for Canadian rail emissions between 2011 to 2015(Government of Canada 2013d)

Canada-United States Perimeter Approachto Plant Protection September 2013

Draft framework for increased cooperation and reduction inadministrative duplication between the Canadian Food InspectionAgency (CFIA) and United States Animal and Plant Health InspectionService (APHIS) on trade in plants and plant products (Government ofCanada 2013d)

Common Electronic Submission GatewayPilot (CESG) August 2013

FDA and Health Canada will allow pharmaceutical firms to electronicallysubmit drug applications (Government of Canada 2013d)

Initiative to Align Veterinary DrugApprovals December 2012

Joint reviews between US FDA and Health Canada on veterinary drugproducts (Government of Canada 2013d)

Stricter Air Pollutant Emissions Environment Canada aligns car emissions beginning in 2017 with theUS Environmental Protection Agencyrsquos ldquoTier 3rdquo (Government of Canada2013d)

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The state of Canada-US relations in 983090983088983089983092 983090983091

fraserinstituteorg

On September 983092 983090983088983089983091 $983092983094983094 million in investment was allocated to the

Border Action plan by the Government of Canada in order expand two marine

container examination facilities (Government of Canada 983090983088983089983091c) $983091983091 million

was invested by the Government of Canada in the Asia Pacific Gateway and

rade Corridor Initiative (Government of Canada 983090983088983089983091c) Te Plan includes

an additional 983090983097 harmonization initiatives that will enhance trade activity

between Canada and the US

Neither Beyond the Border nor the Regulatory Cooperation Council

offer further investment or cost estimates on the initiatives described in table

983097 Moens and Gabler (983090983088983089983090) pointed to the need for both the Canadian and

American governments to provide data on border costs so that a cost-benefit

analysis can ensue Nonetheless the small steps of progress towards inte-

grating and harmonizing US and Canadian border practices remains a very

important (long-term) part of reducing the profile of the border

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983090983092 fraserinstituteorg

Canadian and American public perceptions

Tree observations are noteworthy in recent assessments of public percep-

tions between Americans and Canadians First Americans consistently have

a very high favourability rating of Canadians typically in the 983097983088 plus range

(table 983089983088 figure 983089983093) Both as a friend and a strategic ally Americans hold

Canadians in the most favourable light possible (table 983089983089) Disagreements over

policy between the two countries whether in defence and foreign affairs or

over border and trade issues do not move this fundamental asset Canadians

enjoy in dealing with their neighbour

Second Canadians do not have high expectations of either the

American or Canadian government regarding progress in bilateral relations

As table 983089983090 shows Canadians hold Obama in high regard (983094983091 percent) but

only 983093983092 percent expect progress from him in trade relations Prime Minister

Harper is rated slightly ahead of President Obama in terms of working hard

towards improving Canada-US relations (table 983089983091)

Tird and most significant in light of Canadarsquos Catch-983090983090 situation both

Canadians and Americans are more supportive of closer cooperation and inte-

gration policies than is the case for political representatives in either the United

States or Canada In two recent studies we showed how US Senators and House

Representatives are quite critical of Canada with regard to NAFA issues and bor-

der security (Moens and Gabler 983090983088983089983089) Similarly we found that among the three

major political parties in Canadarsquos parliament only one consistently expressed

itself in favour of closer ties with the United States (Moens and Gabler 983090983088983089983089)

A recent survey of American and Canadian (and Mexican) attitudes

towards free trade and NAFA show surprisingly strong data for more trade

integration In response to the statement ldquoTere should be more free trade

between the US Canada and Mexicordquo 983096983088 percent of Canadians approved

as did 983095983092 percent of Americans Even on border security Canadians andAmericans are more pro-cooperation and integration than their governmental

policies suggest In the US 983092983089 percent support a common perimeter while

983090983088 percent are opposed In Canada 983092983091 percent support it and 983091983088 percent are

opposed (Graves Pastor and Basaacutentildeez 983090983088983089983091) Terefore in terms of public

mandate both governments would have a case to work towards broader bilat-

eral (or trilateral) cooperation to lower trade barriers

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The state of Canada-US relations in 983090983088983089983092 983090983093

fraserinstituteorg

Table 983089983088 Canadian favourability rating among Americans (February 983090983088983089983090)

Veryfavourable

Mostlyfavourable

Mostlyunfavourable

Veryfavourable Not sure Total

favourableTotal

unfavourable

53 38 3 2 3 91 5

Note n=1015

Source Gallup Poll (2012)

Table 983089983089 Ally or enemy for Americans (June 983090983088983089983091)

Country Ally Friendly Unfriendly Enemy Total Ally andFriendly

Great Britain 66 25 2 1 91

Canada 61 33 2 1 94

China 11 44 26 14 55

Note n=1529Source Gallup Poll (2013)

88

90

92

94

96

98

201220112010200920082007

Figure Canadian favourability among Americans () ndash

Source Gallup Poll (2012)

f a

v o u r a

b l e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983090 What effect will Obama have on Canada-US relations (November 983090983088983089983090)

Canadians Americans

Positive Negative None Positive Negative None

Relationship 62 5 34 48 12 40

Trade 54 10 35 48 12 39

Harmonizing 53 8 40 47 14 39

Note n=1066

Source Abacus Data (2012)

Table 983089983091 Has each leader worked hard to improve Canada-US relations

(July 983090983088983089983090)

Country Agree Disagree Not sure

Stephen Harper 58 32 10

Barack Obama 53 32 15

Note Sample of Canadians

Source HarrisDecima (2012)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983090983095

US policy uncertainty

Canadian economic prospects face their most important challenge in the

United States Te US economic recovery has been modest and real GDP

growth so far has remained below the post-World War II average of post-

recession periods (figure 983089983094) As we noted above the less-than-stellar US

recovery is made even more challenging for Canadian traders in that pro-

ductivity gains in Canada are lagging while the Canadian dollar remains high

On top of that several American-imposed regulatory obstacles to free trade

are depressing trade prospects in crude oil red meat and public works pro-

curement Tese impediments reduce Canadian competitive access to the

US market

A high level of public spending until the January 983090983088983089983091 sequester and

ongoing monetary stimulation have not produced notable US GDP growth

Te seven post-recession periods below show the current average to be well

below the historical average (Young 983090983088983089983091)

983089983097983092983096-983089983097983093983095 983091983096983088

983089983097983093983096-983089983097983094983095 983092983090983096

983089983097983094983096-983089983097983095983095 983091983089983096

983089983097983095983096-983089983097983096983095 983091983089983093

983089983097983096983096-983089983097983097983095 983091983088983093

983089983097983097983096-983090983088983088983095 983090983097983097

983090983088983088983096-983090983088983089983091 983088983095983091

While economic growth has been modest growth in the public debt

has not (figure 983089983095) Publicly held debt in the US is now at 983095983091 percent of GDP

the highest since 983089983097983092983094 (Congressional Budget Office 983090983088983089983091)

Te widening gap between federal government outlays and revenueshas only recently been capped by the Sequester (figure 983089983096) However the

budget Sequester is temporary and final resolution of public spending and

taxation levels remains unclear given repeated gridlock in presidential-con-

gressional policy making High debt levels combined with stalemate over

taxes and budget cuts have produced a case of policy instability or uncer-

tainty in the last five years (Baker Bloom and Davis 983090983088983089983091)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

US policy uncertainty is further aggravated by inaction on the large

lsquoentitlementrsquo programsmdashSocial Security Medicare and Medicaidmdashwhich are

the major drivers of the long-term gap in revenues and spending

-4

-2

0

2

4

6

8

201220062000199419881982197619701964

Figure US GDP growth rate ndash ( forecast)

Source The World Bank (2013b) OECD (2013)

-10

-8

-6

-4

-2

0

0

20

40

60

80

100

20122011201020092008200720062005200420032002

Government deficit as a percentage of GDP Government debt as a percentage of GDP

Figure US Government deficit and debt as a percentage of GDP ndash

Source Congressional Budget Office (2013)

D e fi c i t p e r c e n t a g e ( ) D

e b t p er c en t a g e ( )

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983097

fraserinstituteorg

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

20122003199319831973

Revenue Outlays

Figure US Government revenue and outlays ndash ( US$ billions)

Source Congressional Budget Office (2013)

1 9 8 3 U S $ b i l l i o n s

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 3762

983091983088 fraserinstituteorg

Trade diversification

Given the weakness in near-term US opportunities Canadians are (again)

wondering how to pursue trade diversification away from the United States

Te objective is logical and if achieved will prove advantageous but various

trends in trade and investment show that diversification for Canada is a slow

and arduous journey (table 983089983092)

In terms of overall share exports to China in the last five years have

doubled but the numbersmdashfrom 983090983089983095 percent to 983092983090983094 percentmdashremain rela-

tively low In the same period the US-bound share declined by 983091 percent but

remains a towering 983095983092983093983092 percent Te pattern of small overall impact applies

to all the other top trading partners For example exports to the UK have

increased but exports to Japan and Mexico have essentially stalled When we

consider average export growth rates over the last five years (table 983089983093) we see

a very strong rate for China (983089983093983093 percent) and strong rates for the UK and

South Korea (983096983097 percent and 983094983097 percent) However a 983089983093 percent increase in a

983092 percent overall trade share produces little change Te point we are making

is that at this rate and pattern of trade lsquodiversificationrsquo it will actually take a

very long timemdashwhile relatively small upward trends in trade with the United

States could have a quick and very large impact in the opposite direction

On the import side we notice more trade diversification with the US

share at 983093983088 percent and the Chinese share at 983089983089 percent (table 983089983094) Te Chinese

growth rate on the import side is less than on the export side (table 983089983095) Te

most revealing number may be the high average over five years for Mexico

at 983097 percent Tis could be indicative of a growing supply chain with Mexico

While foreign direct investment (FDI) is not a direct indicator of future

trade trends in investment may harbinger change In terms of outbound

FDI we notice that only a small segment (less than 983089983088 percent) is targeted

for manufacturing (table 983089983096) It is investment in this category in which onewould expect growth in supply chains

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983089

fraserinstituteorg

Table 983089983092 Canadarsquos merchandise exports top ten destinations 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 3291 1 777 2361 1 751 2564 1 749

China 92 4 22 97 3 31 114 3 33

UK 114 2 27 105 2 33 141 2 41

Japan 97 3 23 73 4 23 79 4 23

Mexico 51 5 12 42 5 13 43 5 13

Netherlands 32 8 08 24 8 08 28 8 08

South Korea 34 7 08 31 7 10 32 7 09

Germany 39 6 09 33 6 10 34 6 10

France 28 9 07 23 9 07 20 10 06

Brazil 23 10 05 14 10 04 22 9 06

Total 4237 3145 3424

2011 2012Average

shareValue Rank Share Value Rank Share

US 2750 1 737 2783 1 745 752

China 140 3 38 159 2 43 33

UK 157 2 42 154 3 41 37

Japan 89 4 24 85 4 23 23

Mexico 46 5 12 44 5 12 12

Netherlands 40 7 11 37 6 10 09

South Korea 43 6 11 30 7 08 09

Germany 33 8 09 29 8 08 09

France 26 9 07 26 9 07 07

Brazil 24 10 06 21 10 06 06

Total 3732 3734

Source Industry Canada (2013b)

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983091983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983093 Canadian export growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 56 7 -281 9 106 = 5

China 101 6 65 1 187 3

UK 16 9 -73 2 358 2

Japan 202 3 -250 7 106 = 5

Mexico 179 4 -178 6 43 9

Netherlands -85 10 -255 8 183 4

South Korea 276 2 -80 3 52 8

Germany 160 5 -167 4 54 7

France 36 8 -174 5 -122 10

Brazil 706 1 -380 10 603 1

2011 2012Average

Rank Rank

US 104 8 27 2 02

China 270 4 152 1 155

UK 148 6 -02 4 90

Japan 161 5 -29 6 38

Mexico 94 9 -16 5 24

Netherlands 475 1 -55 7 53

South Korea 374 2 -272 10 70

Germany 05 10 -95 9 -09

France 311 3 23 3 15

Brazil 109 7 -92 8 189

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983091

fraserinstituteorg

Table 983089983094 Canadarsquos merchandise imports top ten sources 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 1992 1 524 1633 1 511 1745 1 504

China 374 2 98 347 2 109 382 2 110

Mexico 157 3 41 145 3 45 190 3 55

Japan 134 4 35 108 4 34 115 4 33

Germany 111 5 29 95 5 30 97 5 28

UK 110 6 29 82 6 26 92 6 27

South Korea 53 9 14 52 7 16 53 7 15

Algeria 67 7 18 33 10 10 31 10 09

Italy 45 10 12 39 9 12 40 9 12

France 53 8 14 49 8 15 47 8 13

Total 3804 3194 3465

2011 2012Average

shareValue Rank Share Value Rank Share

US 1846 1 496 1922 1 506 508

China 402 2 108 417 2 110 107

Mexico 205 3 55 210 3 55 50

Japan 109 4 29 123 4 33 33

Germany 107 5 29 118 5 31 29

UK 86 6 23 70 6 18 25

South Korea 55 7 15 52 7 14 15

Algeria 46 9 12 49 8 13 12

Italy 43 10 11 43 9 11 12

France 46 8 12 41 10 11 13

Total 3723 3796

Source Industry Canada (2013b)

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983091983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983095 Old and new trade prospectsmdashimport growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 29 8 -178 7 89 5

China 112 4 -70 2 123 3

Mexico 43 7 -77 4 337 1

Japan -11 10 -192 8 89 4

Germany 105 5 -149 6 44 7

UK 95 6 -252 9 141 2

South Korea 120 3 -14 1 36 8

Algeria 518 1 -511 10 -50 10

Italy 11 9 -132 5 48 6

France 191 2 -70 3 -35 9

2011 2012Average

Rank Rank

US 88 5 57 4 17

China 82 6 53 5 60

Mexico 111 3 39 6 91

Japan -29 9 151 1 01

Germany 132 2 117 2 50

UK -36 10 -173 10 -45

South Korea 76 7 -37 8 37

Algeria 533 1 91 3 116

Italy 95 4 23 7 09

France 22 8 -97 9 02

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983093

fraserinstituteorg

In terms of overall Canadian outbound FDI stocks in the US remain

very high despite the recent US recession while growth in stock in Asia is

modest (figure 983089983097) When we examine Canadian FDI in the so-called BRIC

states we notice that investment in both China and India is relatively small

Canadian mining investment in Brazil is much larger (figure 983090983088) In fact when

we examine amounts of FDI we find that Canada is not really a big BRIC

investor other than Brazil Chile Hong Kong and Peru are larger FDI recipi-

ents than China and India (figure 983090983089)

In terms of FDI flowing into Canada we notice the very large share

(983090983096983094983093 percent) in manufacturing which indicates both the predominant

share of US FDI and the extensive integrated supply chains in Canada-US

manufacturing (table 983089983097) Even more than for outbound FDI inflow stocks

show very large US preponderance (figure 983090983090) Such continued concentra-

tion of US FDI in Canada suggests that Canadian trade diversification is not

just a decision to be made by Canadian producers

Like trade growth Chinese FDI growth in Canada is positive but the

overall numbers are small and do not show rapid growth in the last 983091 years

(figure 983090983091)

Table 983089983096 Top industries for outward stocks of FDI 983090983088983089983090

Category Value Share

Mining oil and gas extraction 1099 188

Oil and gas subcategory 542 93

Manufacturing 569 97

Finance and insurance 2334 399

Management of companies and enterprises 757 129

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

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983091983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

1

2

3

4

5

6

7

8

9

10

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n s

Figure Canadian foreign direct investment (stock) BRIC ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Brazil PRC India Russia

0

20

4060

80

100

120

140

160

180

200

220

240

260

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) various regions

ndash

Notes Excluding Mexico Canadian FDI to Mexico in 2012 was $557 billion

Foreign Direct Investment measures the purchase of various forms of capital stock abroad

However tax havens (Barbados Bermuda etc) are frequently found to be some of the highest

recipients of FDI In reality tax havens do not reflect economic growth as FDI figures invested

into tax havens are often reinvested back to the source country in a concept known as

round-tripping (Financial Post 2013) We have accounted for tax havens by removing them from

tables and figures in this section The numbers corresponding to Figure 19 would be Barbados

($593 billion) Bermuda ($118 billion) British Virgin Islands ($21 billion) Cayman Islands ($302

billion)

Source Foreign Affairs Trade and Development Canada (2013c)

US Europe Asia amp Oceania Central amp South America Africa

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The state of Canada-US relations in 983090983088983089983092 983091983095

fraserinstituteorg

Table 983089983097 Top industries for inward stocks of FDI 983090983088983089983090

Category Value Share

Oil and gas extraction 766 147

Manufacturing 1492 287

Petroleum and coal products manufacturing 377 72

Wholesale trade 395 76

Finance and insurance 699 134

Management of companies and enterprises 999 192

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

0

2

4

6

8

10

12

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) Chile Hong Kong

Peru amp Korea ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Chile Hong Kong Peru Korea

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fraserinstituteorg

0

40

80

120

160

200

240

280

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Foreign direct investment (stock) in Canada from top three

countries ndash

Source Foreign Affairs Trade and Development Canada (2013c)

US Netherlands UK

0

2

4

6

8

10

12

201220112010200920082007

2 0 0 2 C A $ b

i l l i o n s

Figure Foreign direct investment (stock) in Canada from China

ndash

Source Foreign Affairs Trade and Development Canada (2013c)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

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fraserinstituteorg

Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

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References

Abacus Data (983090983088983089983090 November 983090983088) Beyond the Canadian-American Border

lthttpabacusdatacawp-contentuploads983090983088983089983090983089983089Can-AM_Report_CABC_

Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5662

The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

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fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5862

The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5962

983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6062

The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 16: Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983097

fraserinstituteorg

Table 983094 Top categories for service trade exports Canada-World 983090983088983089983090

Category Subcategory Exports

2002 CA$ bi llions Percentage

Government services 13 19

Travel services 143 207

Personal travel 119 172

Transportation services 111 161

Air transport 52 76

Commercial services 424 614

Financial services 57 82

Computer and information services 64 93

Intellectual property use 31 44

Management services 90 130

Research and development 33 47

Architectural engineering 39 57

Source Foreign Affairs Trade and Development Canada (2013a)

Table 983095 Top categories for service trade imports Canada-World 983090983088983089983090

Category Subcategory Imports

2002 CA$ billions Percentage

Government services 11 12

Travel services 288 323

Personal travel 253 284

Transportation services 195 219

Water transport 82 92

Air transport 84 95

Commercial services 396 446

Insurance services 44 50

Financial services 44 50

Intellectual property use 89 100

Management services 75 84

Source Foreign Affairs Trade and Development Canada (2013a)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983089983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

075

080

085

090

095

100

105

2 0 1 3

- 0 7

2 0 1 3

- 0 1

2 0 1 2

- 0 7

2 0 1 2

- 0 1

2 0 1 1

- 0 7

2 0 1 1

- 0 1

2 0 1 0

- 0 7

2 0 1 0

- 0 1

2 0 0 9

- 0 7

2 0 0 9

- 0 1

2 0 0 8

- 0 7

2 0 0 8

- 0 1

2 0 0 7

- 0 7

2 0 0 7

- 0 1

Figure CanadaUS dollar exchange rate ndash

Source Bank of Canada (2013b)

C A U S e x c h a n g e r a t e

Dollar value and productivity trends

Te first factor to consider regarding Canadarsquos trade competitiveness vis-agrave-vis

the United States is the value of the Canadian dollar Te substantial appre-

ciation of the Canadian dollar against the US dollar that began in the early

983090983088983088983088s has stabilized at a much higher average value of the loonie ( figure 983095)

As is well documented such exchange rate appreciation tends to have a strong

effect on current account balances as exports decline (Kappler et al 983090983088983089983089)

A growing account deficit will likely push the value of the Canadian dollar

downward in the longer term and thus offer some remedy

ProductivityOf more concern to Canadians should be the data indicating that Canadian

labour productivity rates are lagging those in the United States (figures 983096 983097)

One would expect that Canadarsquos higher dollar has provided industry in recent

years with an opportunity to improve productivity as imported machinery

and technology would be available at a lower price However Canadarsquos pro-

ductivity rate of growth is modest and in 983090983088983089983090 dips into negative territory

again

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983089983089

fraserinstituteorg

-1

0

1

2

3

20122011201020092008

Canada US

Figure Canada and US rates of output productivity growth ()

ndash

Source Statistics Canada (2013g)

R a t e o f p r o d u c t i v i t y g r o

w t h ( )

-10

-5

0

5

20122011201020092008

Labour productivity (Canada) Real GDP (Canada) Hours worked (Canada)

Labour productivity (US) Real GDP (US) Hours worked (US)

Figure Real US-Canadian output and hours worked () ndash

Source Statistics Canada (2013g)

A n n u a l c

h a n g e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 1962

983089983090 fraserinstituteorg

Trade and regulatory barriersdisputes

Table 983096 provides a synopsis of the major trade disputesbarriers that have

played a role in bilateral relations in the last five years and that are pertinent

for the 983090983088983089983092 period (pages 983089983094-983089983095) Te two large disputesmdashKeystone XL and

Mandatory Country-of-Origin Labeling (MCOOL) on red meatmdashare more

ominous than they may seem First both in crude oil products and in cattle

and hogs the United States is unilaterally disrupting or dismantling a well-

established integrated sector Canada has started attempts to diversify its oil

transportation structure including more rail and new pipeline routes But

as all proposed alternative pipelines have shown the alternatives are contro-

versial and at best years away from making a difference Meanwhile there is

considerable risk in putting too much crude oil on rail as its accident rates

are higher than pipe

Canadian threats to counter US MCOOL action with tariffs on food

products are not going to have much impact in the near future Moreover

an escalating tariff war on food products cannot be won by Canada and will

ultimately harm consumers on both sides of the border US defiance of two

WO rulings also means more uncertainty for Canadian traders

Keystone XL pipeline

Proposed in 983090983088983088983096 the Keystone XL (KXL) extension is part of a pipeline sys-

tem connecting Alberta oil sands and US mid-West and Gulf region refineries

KXL is a 983089983096983097983095 km crude oil pipeline with a capacity of 983092983094983093983088983088983088 barrels per

day (Hussain 983090983088983089983091) It is a substantial private infrastructure proposal that

will create employment and guarantee a secure energy source for the United

States (Millington and Murillo 983090983088983089983091) It is by no means a new feature in

Canada-US energy relations as a dense network of oil and electricity carri-ers cross the border at multiple points

What is unprecedented is that the permit process is now in its sixth

year and the final resolution remains uncertain (by US law a cross-border line

requires Department of State approval) If not resolved in 983090983088983089983092 the question

may well be handed over to the next president after 983090983088983089983094 Te policy uncertainty

associated with KXL approval has by far the largest impact on Canada-US trade

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983089983091

fraserinstituteorg

relations Te dragged-out procedure has chilled relations Te southern leg of

KXL has been completed and the original route objection by Nebraska has been

resolved What remains ostensibly the problem is that the US administration

has identified this heavy oil as a component of its policy objective of curbing

the emission of greenhouses gasses to reduce global warming

Te impact of this pipeline delay in the 983090983095 million barrels per day (bpd)

export of Canadian oil products to the USA reverberates at various levels

Across Canada investment in mining oil and gas extraction for 983090983088983089983091 is pre-

dicted to decrease by 983090983095 percentmdashthe largest decline since the 983090983088983088983096 recession

(Statistics Canada 983090983088983089983091f) In Alberta investment is predicted to increase by

only 983088983089 percent (Statistics Canada 983090983088983089983091f) Capital investment in oil and gas

extraction has not recovered to pre-983090983088983088983096 levels (Industry Canada 983090983088983089983091a)

While the industry has become increasingly dependent on rail trans-

port to move product it is a costly alternative It can cost up to three times

as much as pipeline transport (Millington and Murillo 983090983088983089983091) and its limita-

tions are self-evident because rail movement of oil is constrained by the lim-

ited availability of rail cars In 983090983088983089983090 983089983091983088983088983088983088 bpd of heavy crude was being

transported by rail Tis is expected to rise to 983092983090983093983088983088983088 bpd by the end of

983090983088983089983092 falling short of the 983092983094983093983088983088983088 bpd which could have been moved through

KXL (Hussain 983090983088983089983091) Te forced increase in rail transport has resulted in

unintended costs for the industry a total of US$983089 billion must be invested for

new rail terminals and another US$983092ndash983093 billion for new rail cars (Lewis 983090983088983089983091)

Rail transport is both more costly and more dangerous A recent study

concluded that ldquopipeline transportation is safer than transportation by road

rail or barge as measured by incidents injuries and fatalitiesrdquo (Green amp

Furchtgott-Roth 983090983088983089983091) It is not inconceivable that another major oil acci-

dent either in Canada or the USAmdashsuch as took place in Quebec in July 983090983088983089983091

killing 983092983095 peoplemdashwould result in a moratorium on oil transport by rail with

grave consequences for Canadian producers

983090983088983088983090 Mandatory Country-of-Origin Labeling

Mandatory Country-of-Origin Labeling (MCOOL) is a provision mandated

by Congressional law and first implemented in 983090983088983088983096 Te measure imposes

strict segregation rules on American Canadian and Mexican cattle and hogs

and the subsequent slaughtering and processing of these animals to producebeef and pork products for retail sale Te stated purpose is to create labels

that indicate the origin in part or in whole of the product In effect it is a

veiled trade barrier because it gives US animals and products a competitive

advantage due to higher labeling inventory and processing costs for equiva-

lent Canadian products

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983089983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983096 Synopsis of trade disputes in Canadian-American relations in 983090983088983089983091

Dispute Impact and cost Prospect for resolution

Keystone XL Pipeline Very serious Poor

2008 proposal for a 1897

km 465000 bpd crude oilpipeline spanning fromAlberta down to Nebraska

Downward pressure on investment

Lost wages January 2012postponement is costing US $47million a day in lost wages (ConsumerEnergy Alliance 2013)

Continuation of crude oil pricediscounts due to lack of infrastructure

Costly alternative rail has emerged as atransportation alternative but can costup to three times as much as pipelinetravel (Millington and Murillo 2013)

Permit postponed twice

Resolution is not transparent

Rising risk of decision deferral past 2016

Mandatory Country-of-OriginLabelling (MCOOL)

Serious Poor

2008 CongressionalLaw mandating rulesfor segregated livestockprocessing and packagingand a labeling structure inorder to have food labelsindicate origin of product

Annual cost to Canadian beef and porksector of $1 billion

Deconstruction of a highly integratedtrilateral supply chain industry

MCOOL adds no animal health or foodsafety benefits

US has defied both WTO complaint andthe core part of the WTO Appeal ruling

2013 US reaction has been to strengthenthe discriminatory provision banning co-mingling of meats altogether

Canada plans to retaliate with tariffs butthis is a costly gambit with low chance ofsuccess

Softwood Lumber Agreement Moderate Good

In 2011 American softwoodcompanies took theirCanadian counterparts to theLondon Court of InternationalArbitration accusing themof circumventing the SLA(Foreign Affairs Trade andDevelopment Canada 2012a)

If in violation Canadian industry wouldface $380 million in penalties (TheCanadian Press 2012)

The London Court of InternationalArbitration in 2012 ruled in favor ofCanada (Foreign Affairs Trade andDevelopment Canada 2012a)

SLA was to expire in 2013 but Canadaand the USA extended it until 2015 (CBCNews 2012)

Long-term free trade in lumber needs toreplace SLA

Buy American Provision Serious Partial resolution but high risk ofrecurring Buy American legislation

2009 American Recovery andReinvestment Act

Exclusion of Canadian products andproduction sharing in US public worksprocurement

Canada-US Procurement Agreement in2010 which allowed for the purchaseof Canadian goods on seven US

infrastructure projects valued at morethan $7777000

Canada needs to seek a comprehensiveagreement in order to escape futureAmerican protectionism with allprovinces on board and compliant withthe WTO provision

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The state of Canada-US relations in 983090983088983089983092 983089983093

fraserinstituteorg

Dispute Impact and cost Prospect for resolution

Canadian Wheat Board Long-term benefit Completed

Canadarsquos mandatory wheat

marketing board monopsonyended in 2011

Frequent US action against CWB in the

past will now end as wheat marketingin Canada turns fully market based

Intellectual Property Rights Moderate potential cost Partially resolved

Canada has been on theSpecial 301 Priority Watch Listby the United States TradeRepresentative since 1995

Ongoing threat of US Trade Action andlegal action

Canadian domestic complianceincluding

Strengthening data protection

Participation in Anti-counterfeiting TradeAgreement (ACTA in 2013)

Enacted the Combating CounterfeitProducts Act (2013)

Started the process of strengthening

the Copyright Act and implementingWorld Intellectual Property OrganizationInternet Treaties

In recognition of which Canada has beenremoved from the Special 301 PriorityWatch List

Prescription drugs Serious potential for trade action Indirect progress

The US complaint againstCanada

Imposing price ceilings thatshifts the cost burden of RampDto US firms

Weak protection ofintellectual property rights rethird party sales

Slow prescription drugapproval process causingreduced market access

US firms experience lost revenues andtrade action is a risk

In 2013 CETA agreement with theEuropean Union Canada agrees to givefull patent protection to new drugs fortwo years

Two-year rule may be transferable tofuture Canada-US resolution

Table 983096 continued

Canada and the United States have had a deeply integrated market in

this sector since the early 983089983097983097983088s Animal health and food safety standards have

been largely harmonized As a result highly efficient supply-chain production

methods have made this industry quite efficient However the imposition of

MCOOL has changed all that (Moens amp Leon 983090983088983089983090) Te cost differential haswidened and Canadian exports have dropped dramatically Since 983090983088983088983096 the

cattle sector has lost $983094983092983088 million per year and the hog sector has lost $983093983088983088

million a year (Te Canadian Press 983090983088983089983091a)

In 983090983088983089983090 the World rade Organization (WO) ruled in Canadarsquos favor by

concluding that MCOOL is discriminatory Te WO gave the US until May 983090983091

983090983088983089983091 to act but on that same day the USDA imposed regulatory changes that

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983089983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

actually strengthened the provisions of MCOOL In retaliation the Canadian

government released a list of US exports to Canada that would be subjected

to tariffs and it is preparing to seek a compliance panel at the WO Until this

situation is resolved the Canadian government predicts a continuing annual

loss of $983089 billion for the Canadian red meat sector (Te Canadian Press 983090983088983089983091a)

Softwood lumber

In 983090983088983089983089 several American softwood companies took their Canadian counter-

parts to the Court of International Arbitration in London accusing them of cir-

cumventing the Softwood Lumber Agreement of 983090983088983088983094 (Foreign Affairs rade

and Development Canada 983090983088983089983090a) Te dispute centered on the accelerating pace

of lumber harvests resulting from the pine beetle infestation Te stakes were

high $983091983096983088 million in penalties should Canada lose (Te Canadian Press 983090983088983089983090)

In 983090983088983089983090 the Court of International Arbitration ruled in Canadarsquos favor

(Foreign Affairs rade and Development Canada 983090983088983089983090a) In addition while

the Softwood Lumber Agreement was set to expire in 983090983088983089983091 the Canadian

and American governments successfully negotiated an extension of the

Agreement until 983090983088983089983093 (CBC News 983090983088983089983090) Te fact remains that as long as a

large part of Canadarsquos softwood lumber is managed in terms of quotas and

the stumpage fee system US trade action is very likely

lsquoBuy Americanrsquo provision

Te 983090983088983088983097 American Recovery and Reinvestment Act (ARRA which expired

on September 983091983088 983090983088983089983089) and the more recent 983090983088983089983089 American Jobs Act stipu-

lated that steel iron and other goods used in the repair and construction of

infrastructure projects in the US (highways bridges mass transit and fed-

eral buildings) must be manufactured in the United States (Matthiesen 983090983088983089983089)

In response to ARRA Canada and the US signed the Canada-US

Procurement Agreement in 983090983088983089983088 which allowed for the purchase of Canadian

goods on seven US infrastructure projects valued at more than $983095983095983095983095983088983088983088

or within the 983091983095 states subject to the WO GPA (Government of Canada

983090983088983089983091a) Te 983090983088983089983089 American Jobs Act did not pass in Senate and is thus moot

While the ARRA dispute was partially resolved lsquoBuy Americanrsquo anda counter position of lsquoBuy Canadianrsquo can flare up on either side of the bor-

der Canadian industry is most vulnerable in this uncertainty Te Canadian

government ought to seek a comprehensive Buy American exemption to

escape future American protectionism In so doing all provincial govern-

ments need to be on board in order to make the WO and NAFA rules

function optimally

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The state of Canada-US relations in 983090983088983089983092 983089983095

fraserinstituteorg

Canadian Wheat Board (CWB)

In 983090983088983089983089 the Canadian government removed the monopsony held by the

Canadian Wheat Board Tis unilateral action offers a successful reduction

in bilateral trade distortion oday the CWB continues to operate as a mar-

keting group

Intellectual Property Rights (IPR)

From 983089983097983097983093 through 983090983088983089983091 Canada was on the Special 983091983088983089 Priority Watch

List by the United States rade Representative Te US complaint was that

protection and enforcement of IPR in Canada were weak Te Special 983091983088983089

Priority Watch List is designed to identify US trading partners that are the

worst offenders in IPR protection (Embassy of the United States Ottawa

Canada 983090983088983089983091)

Although the issue is not completely resolved Canada has made sig-

nificant progress in recent years Te federal government has strengthened

data protection regulations criminalized the use of camcorders in theaters

and participates in the Anti-Counterfeiting rade Agreement (ACA) nego-

tiations (983090983088983089983091) Most recently Canada enacted the Combatting Counterfeit

Products Act (Embassy of the United States Ottawa Canada 983090983088983089983091) Te

Canadian Government is in the process of strengthening the Copyright Act

and implementing World Intellectual Property Organization Internet reaties

(Embassy of the United States Ottawa Canada 983090983088983089983091)

As a result of these steps Canada was removed from the Special 983091983088983089

Priority Watch List in 983090983088983089983091

Prescription drugs

Prescription drug prices in Canada are relatively low due to a price ceil-

ing mandated by Canadarsquos healthcare system In addition Health Canada

approval times for prescription drugs significantly lag behind their counter-

parts in the United States and the European Union (Barua and Esmail 983090983088983089983091)

US lawmakers have repeatedly expressed their concerns over cheap prescrip-

tion drugs re-entering the US from Canada (Moens and Gabler 983090983088983089983089) TeEU also asked Canada to strengthen IPR protections for prescription drugs

(Lexchin and Gagnon 983090983088983089983091) Since the signing of the CEA agreement in

principle on October 983089983096 983090983088983089983091 the issue between Canada and the EU is now

resolved (Waldie 983090983088983089983091) Canada has agreed to ldquoEU demands for patent pro-

tection for up to two years on brand-name drugsrdquo (Blanchfield 983090983088983089983091)

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983089983096 fraserinstituteorg

State of the border andregulatory cooperation

Te decline in Americans traveling to Canada corresponds with the US

Greenback losing value against the Canadian dollar (figures 983089983088 983089983089) However

when we consider the extent of the decline in total numbers it appears dispro-

portionate Te change in American travel suggests instead a bigger problem

following the 983097-983089983089 shock Te imposition of new border transit requirements

such as passports as well as longer wait times and more security screening

has likely dampened US travel across this international boundary Given the

modest economic recovery in the USA from the beginning of 983090983088983089983088 onward

one would expect disposable income including for travel to trend back up

Instead the numbers remain stagnant at around 983090983088 million less than half the

number of 983090983088983088983090

While an overall national average for border wait times is not avail-

able data on major border crossings in both Central Canada and British

Columbia indicate that no reductions in wait times have been achieved

between 983090983088983088983094 and 983090983088983089983089 (figure 983089983090) Te problem of inefficiency as presented

by the Canada-US border goes well beyond wait times It includes inefficient

activity away from the border such as extra warehousing and costs of com-

plying with various facilitated traveler and goods programs such as FAS for

trucks loads and drivers

Tere are consistent cost differences between domestic and cross-bor-

der truck-borne trade which point to significant border costs ldquoFor exports

to the US these costs added 983088983097 percent to the delivered price of goods in

983090983088983088983092 Tis figure fell to 983088983092 percent in 983090983088983088983097 hellip Higher fixed costs per shipment

accounted for most of the additional cost of transporting goods to the USrdquo

(Brown and Anderson 983090983088983089983090) When we consider that in the manufacturingsector parts cross the border several times in various stages of assembly we

realize how this cost accumulates and defeats the efficiency gains otherwise

generated by integrated supply chain manufacturing Border costs are typ-

ically passed on to the consumer as fixed costs per shipment

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The state of Canada-US relations in 983090983088983089983092 983089983097

fraserinstituteorg

An unprecedented border problem has arisen in the current USAdministrationrsquos lengthy (six years) review of the permitting of a pipeline

border crossing as proposed in the Keystone XL project As a result oil-by-

rail transport has recently increased while the pipeline mode of Canada-US

trade has seen a drop in growth in the 983090983088983089983089983089983090 period ( figures 983089983091 983089983092)

0

10

20

30

40

50

201220112010200920082007200620052004200320022001200019991998

Figure Travellers entering Canada ndash

Source Statistics Canada (2013e)

US residents Non-US residents

0

3

6

9

12

15

18

0

03

06

09

12

15

18

20122011201020092008200720062005200420032002

Trips Spending US$CA$ (Secondary axis)

Figure US overnight travel to Canada ndash

Source Statistics Canada (2011) Bank of Canada (2013b)

M i l l i o n s o f t r i p

s N o m i n a l C A $ b i l l i o n s

U S $ C A $ ex c h a n

g er a t e

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983090983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

5

10

15

20

201120102009200820072006

Northbound average delay Southbound average delay

Figure Peace Arch average border wait time ndash

Source Cascade Gateway Data (2013)

M i n u t e s

0

25

50

75

100

125

150

175

200

225

250

275

300

201220112010200920082007200620052004

2 0 0 4

U S $ b

i l l i o n s

Figure All surface modes of freight flow data based on value of goods

ndash

Source Bureau of Transportation Statistics (2013)

Truck Rail Pipeline

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983089

fraserinstituteorg

lsquoBeyond the Borderrsquo and Regulatory Cooperation

In 983090983088983089983089 Canada and the United States announced an ambitious agreement

to reduce border costs by means of deeper bilateral regulatory and secur-

ity cooperation Te accord seeks to streamline various border proceduresmdash

some already in existence and some newmdashto improve intelligence-sharing

between law enforcement agencies mutual recognition of passenger baggage

screening improved frameworks for trusted trade programs harmoniza-

tion of NEXUS protocols streamlined supply chains enhanced trade com-

petitiveness collaboration in border infrastructure investment and deeper

cooperation in national security investigations Te agreement is known as

Beyond the Border A Shared Vision for Perimeter Security and Economic

Competitiveness (February 983092 983090983088983089983089)

Te Beyond the Border Vision accord also set up a Regulatory

Cooperation Council In it Canadian and American officials seek to reduce

red tape and harmonize regulations in certain key sectors o date the

Council has announced various plans affecting agriculture and food trans-

portation health personal care products workplace chemicals environmentnano materials and small business loans We summarize the key points of

progress made since 983090983088983089983089 in table 983097

-35

-25

-15

-5

5

15

25

35

20122011201020092008200720062005

Truck Rail Pipeline

Figure Growth rate of all surface modes of freight flows () ndash

Source Bureau of Transportation Statistics (2013) calculations by authors

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983090983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983097 Key elements of Beyond the Border and Regulatory Cooperation

Beyond the Border Program

Integrated Cargo Security Strategy (ICSS)December 2011

Reduces administrative duplication between Canada and the US byaddressing security risks in advance within the shipment supply chainand at the border (Canada Border Services Agency 2013)

Prince Rupert Pilot October 2012 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry via rail is examined by Canadian officials onbehalf of the US (Government of Canada 2013c)

Montreal Pilot January 2013 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry to the US via truck is examined by Canadianofficials on behalf of the US (Government of Canada 2013c)

Pre-load Air Cargo Targeting (PACT) Joint pilot by CBSA and Transport Canada to screen cargo pre-flight onCanada-bound airplanes at foreign airports (Canada Border ServicesAgency 2013)

Tamper Evident Technology PilotOctober 2012

Pilot collaboration between CBSA and US CBP to ensure containersremain sealed upon arrival at the US border (Canada Border Services

Agency 2013)

Truck Cargo Pre-Inspection PilotMarch 2013

Pilot program between the CBSA and the US CBP for pre-inspection ofsouthbound traffic into US (Canada Border Services Agency 2013)

Free and Secure Trade (FAST) PilotSarnia Ontario

Pilot program for usage of FAST lanes without Partners in Protection andCustoms Self Assessment programs (Government of Canada 2013c)

Canada-US Shiprider June 2013 Removal of jurisdictional barriers to improve law enforcement personnelin Windsor-Detroit and Vancouver-Blaine waterways (Government ofCanada 2013c)

EntryExit Initiative Phase II June 2013 Exchange entryexit data between the CBSA and US DHS on individualsat Canada-US land border crossings (Government of Canada 2013c)

Regulatory Cooperation ProgramMemorandum of Understanding between Transport Canada and the RailwayAssociation of Canada September 2013

Framework for Canadian rail emissions between 2011 to 2015(Government of Canada 2013d)

Canada-United States Perimeter Approachto Plant Protection September 2013

Draft framework for increased cooperation and reduction inadministrative duplication between the Canadian Food InspectionAgency (CFIA) and United States Animal and Plant Health InspectionService (APHIS) on trade in plants and plant products (Government ofCanada 2013d)

Common Electronic Submission GatewayPilot (CESG) August 2013

FDA and Health Canada will allow pharmaceutical firms to electronicallysubmit drug applications (Government of Canada 2013d)

Initiative to Align Veterinary DrugApprovals December 2012

Joint reviews between US FDA and Health Canada on veterinary drugproducts (Government of Canada 2013d)

Stricter Air Pollutant Emissions Environment Canada aligns car emissions beginning in 2017 with theUS Environmental Protection Agencyrsquos ldquoTier 3rdquo (Government of Canada2013d)

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The state of Canada-US relations in 983090983088983089983092 983090983091

fraserinstituteorg

On September 983092 983090983088983089983091 $983092983094983094 million in investment was allocated to the

Border Action plan by the Government of Canada in order expand two marine

container examination facilities (Government of Canada 983090983088983089983091c) $983091983091 million

was invested by the Government of Canada in the Asia Pacific Gateway and

rade Corridor Initiative (Government of Canada 983090983088983089983091c) Te Plan includes

an additional 983090983097 harmonization initiatives that will enhance trade activity

between Canada and the US

Neither Beyond the Border nor the Regulatory Cooperation Council

offer further investment or cost estimates on the initiatives described in table

983097 Moens and Gabler (983090983088983089983090) pointed to the need for both the Canadian and

American governments to provide data on border costs so that a cost-benefit

analysis can ensue Nonetheless the small steps of progress towards inte-

grating and harmonizing US and Canadian border practices remains a very

important (long-term) part of reducing the profile of the border

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983090983092 fraserinstituteorg

Canadian and American public perceptions

Tree observations are noteworthy in recent assessments of public percep-

tions between Americans and Canadians First Americans consistently have

a very high favourability rating of Canadians typically in the 983097983088 plus range

(table 983089983088 figure 983089983093) Both as a friend and a strategic ally Americans hold

Canadians in the most favourable light possible (table 983089983089) Disagreements over

policy between the two countries whether in defence and foreign affairs or

over border and trade issues do not move this fundamental asset Canadians

enjoy in dealing with their neighbour

Second Canadians do not have high expectations of either the

American or Canadian government regarding progress in bilateral relations

As table 983089983090 shows Canadians hold Obama in high regard (983094983091 percent) but

only 983093983092 percent expect progress from him in trade relations Prime Minister

Harper is rated slightly ahead of President Obama in terms of working hard

towards improving Canada-US relations (table 983089983091)

Tird and most significant in light of Canadarsquos Catch-983090983090 situation both

Canadians and Americans are more supportive of closer cooperation and inte-

gration policies than is the case for political representatives in either the United

States or Canada In two recent studies we showed how US Senators and House

Representatives are quite critical of Canada with regard to NAFA issues and bor-

der security (Moens and Gabler 983090983088983089983089) Similarly we found that among the three

major political parties in Canadarsquos parliament only one consistently expressed

itself in favour of closer ties with the United States (Moens and Gabler 983090983088983089983089)

A recent survey of American and Canadian (and Mexican) attitudes

towards free trade and NAFA show surprisingly strong data for more trade

integration In response to the statement ldquoTere should be more free trade

between the US Canada and Mexicordquo 983096983088 percent of Canadians approved

as did 983095983092 percent of Americans Even on border security Canadians andAmericans are more pro-cooperation and integration than their governmental

policies suggest In the US 983092983089 percent support a common perimeter while

983090983088 percent are opposed In Canada 983092983091 percent support it and 983091983088 percent are

opposed (Graves Pastor and Basaacutentildeez 983090983088983089983091) Terefore in terms of public

mandate both governments would have a case to work towards broader bilat-

eral (or trilateral) cooperation to lower trade barriers

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The state of Canada-US relations in 983090983088983089983092 983090983093

fraserinstituteorg

Table 983089983088 Canadian favourability rating among Americans (February 983090983088983089983090)

Veryfavourable

Mostlyfavourable

Mostlyunfavourable

Veryfavourable Not sure Total

favourableTotal

unfavourable

53 38 3 2 3 91 5

Note n=1015

Source Gallup Poll (2012)

Table 983089983089 Ally or enemy for Americans (June 983090983088983089983091)

Country Ally Friendly Unfriendly Enemy Total Ally andFriendly

Great Britain 66 25 2 1 91

Canada 61 33 2 1 94

China 11 44 26 14 55

Note n=1529Source Gallup Poll (2013)

88

90

92

94

96

98

201220112010200920082007

Figure Canadian favourability among Americans () ndash

Source Gallup Poll (2012)

f a

v o u r a

b l e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983090 What effect will Obama have on Canada-US relations (November 983090983088983089983090)

Canadians Americans

Positive Negative None Positive Negative None

Relationship 62 5 34 48 12 40

Trade 54 10 35 48 12 39

Harmonizing 53 8 40 47 14 39

Note n=1066

Source Abacus Data (2012)

Table 983089983091 Has each leader worked hard to improve Canada-US relations

(July 983090983088983089983090)

Country Agree Disagree Not sure

Stephen Harper 58 32 10

Barack Obama 53 32 15

Note Sample of Canadians

Source HarrisDecima (2012)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983090983095

US policy uncertainty

Canadian economic prospects face their most important challenge in the

United States Te US economic recovery has been modest and real GDP

growth so far has remained below the post-World War II average of post-

recession periods (figure 983089983094) As we noted above the less-than-stellar US

recovery is made even more challenging for Canadian traders in that pro-

ductivity gains in Canada are lagging while the Canadian dollar remains high

On top of that several American-imposed regulatory obstacles to free trade

are depressing trade prospects in crude oil red meat and public works pro-

curement Tese impediments reduce Canadian competitive access to the

US market

A high level of public spending until the January 983090983088983089983091 sequester and

ongoing monetary stimulation have not produced notable US GDP growth

Te seven post-recession periods below show the current average to be well

below the historical average (Young 983090983088983089983091)

983089983097983092983096-983089983097983093983095 983091983096983088

983089983097983093983096-983089983097983094983095 983092983090983096

983089983097983094983096-983089983097983095983095 983091983089983096

983089983097983095983096-983089983097983096983095 983091983089983093

983089983097983096983096-983089983097983097983095 983091983088983093

983089983097983097983096-983090983088983088983095 983090983097983097

983090983088983088983096-983090983088983089983091 983088983095983091

While economic growth has been modest growth in the public debt

has not (figure 983089983095) Publicly held debt in the US is now at 983095983091 percent of GDP

the highest since 983089983097983092983094 (Congressional Budget Office 983090983088983089983091)

Te widening gap between federal government outlays and revenueshas only recently been capped by the Sequester (figure 983089983096) However the

budget Sequester is temporary and final resolution of public spending and

taxation levels remains unclear given repeated gridlock in presidential-con-

gressional policy making High debt levels combined with stalemate over

taxes and budget cuts have produced a case of policy instability or uncer-

tainty in the last five years (Baker Bloom and Davis 983090983088983089983091)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

US policy uncertainty is further aggravated by inaction on the large

lsquoentitlementrsquo programsmdashSocial Security Medicare and Medicaidmdashwhich are

the major drivers of the long-term gap in revenues and spending

-4

-2

0

2

4

6

8

201220062000199419881982197619701964

Figure US GDP growth rate ndash ( forecast)

Source The World Bank (2013b) OECD (2013)

-10

-8

-6

-4

-2

0

0

20

40

60

80

100

20122011201020092008200720062005200420032002

Government deficit as a percentage of GDP Government debt as a percentage of GDP

Figure US Government deficit and debt as a percentage of GDP ndash

Source Congressional Budget Office (2013)

D e fi c i t p e r c e n t a g e ( ) D

e b t p er c en t a g e ( )

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The state of Canada-US relations in 983090983088983089983092 983090983097

fraserinstituteorg

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

20122003199319831973

Revenue Outlays

Figure US Government revenue and outlays ndash ( US$ billions)

Source Congressional Budget Office (2013)

1 9 8 3 U S $ b i l l i o n s

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983091983088 fraserinstituteorg

Trade diversification

Given the weakness in near-term US opportunities Canadians are (again)

wondering how to pursue trade diversification away from the United States

Te objective is logical and if achieved will prove advantageous but various

trends in trade and investment show that diversification for Canada is a slow

and arduous journey (table 983089983092)

In terms of overall share exports to China in the last five years have

doubled but the numbersmdashfrom 983090983089983095 percent to 983092983090983094 percentmdashremain rela-

tively low In the same period the US-bound share declined by 983091 percent but

remains a towering 983095983092983093983092 percent Te pattern of small overall impact applies

to all the other top trading partners For example exports to the UK have

increased but exports to Japan and Mexico have essentially stalled When we

consider average export growth rates over the last five years (table 983089983093) we see

a very strong rate for China (983089983093983093 percent) and strong rates for the UK and

South Korea (983096983097 percent and 983094983097 percent) However a 983089983093 percent increase in a

983092 percent overall trade share produces little change Te point we are making

is that at this rate and pattern of trade lsquodiversificationrsquo it will actually take a

very long timemdashwhile relatively small upward trends in trade with the United

States could have a quick and very large impact in the opposite direction

On the import side we notice more trade diversification with the US

share at 983093983088 percent and the Chinese share at 983089983089 percent (table 983089983094) Te Chinese

growth rate on the import side is less than on the export side (table 983089983095) Te

most revealing number may be the high average over five years for Mexico

at 983097 percent Tis could be indicative of a growing supply chain with Mexico

While foreign direct investment (FDI) is not a direct indicator of future

trade trends in investment may harbinger change In terms of outbound

FDI we notice that only a small segment (less than 983089983088 percent) is targeted

for manufacturing (table 983089983096) It is investment in this category in which onewould expect growth in supply chains

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983089

fraserinstituteorg

Table 983089983092 Canadarsquos merchandise exports top ten destinations 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 3291 1 777 2361 1 751 2564 1 749

China 92 4 22 97 3 31 114 3 33

UK 114 2 27 105 2 33 141 2 41

Japan 97 3 23 73 4 23 79 4 23

Mexico 51 5 12 42 5 13 43 5 13

Netherlands 32 8 08 24 8 08 28 8 08

South Korea 34 7 08 31 7 10 32 7 09

Germany 39 6 09 33 6 10 34 6 10

France 28 9 07 23 9 07 20 10 06

Brazil 23 10 05 14 10 04 22 9 06

Total 4237 3145 3424

2011 2012Average

shareValue Rank Share Value Rank Share

US 2750 1 737 2783 1 745 752

China 140 3 38 159 2 43 33

UK 157 2 42 154 3 41 37

Japan 89 4 24 85 4 23 23

Mexico 46 5 12 44 5 12 12

Netherlands 40 7 11 37 6 10 09

South Korea 43 6 11 30 7 08 09

Germany 33 8 09 29 8 08 09

France 26 9 07 26 9 07 07

Brazil 24 10 06 21 10 06 06

Total 3732 3734

Source Industry Canada (2013b)

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983091983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983093 Canadian export growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 56 7 -281 9 106 = 5

China 101 6 65 1 187 3

UK 16 9 -73 2 358 2

Japan 202 3 -250 7 106 = 5

Mexico 179 4 -178 6 43 9

Netherlands -85 10 -255 8 183 4

South Korea 276 2 -80 3 52 8

Germany 160 5 -167 4 54 7

France 36 8 -174 5 -122 10

Brazil 706 1 -380 10 603 1

2011 2012Average

Rank Rank

US 104 8 27 2 02

China 270 4 152 1 155

UK 148 6 -02 4 90

Japan 161 5 -29 6 38

Mexico 94 9 -16 5 24

Netherlands 475 1 -55 7 53

South Korea 374 2 -272 10 70

Germany 05 10 -95 9 -09

France 311 3 23 3 15

Brazil 109 7 -92 8 189

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983091

fraserinstituteorg

Table 983089983094 Canadarsquos merchandise imports top ten sources 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 1992 1 524 1633 1 511 1745 1 504

China 374 2 98 347 2 109 382 2 110

Mexico 157 3 41 145 3 45 190 3 55

Japan 134 4 35 108 4 34 115 4 33

Germany 111 5 29 95 5 30 97 5 28

UK 110 6 29 82 6 26 92 6 27

South Korea 53 9 14 52 7 16 53 7 15

Algeria 67 7 18 33 10 10 31 10 09

Italy 45 10 12 39 9 12 40 9 12

France 53 8 14 49 8 15 47 8 13

Total 3804 3194 3465

2011 2012Average

shareValue Rank Share Value Rank Share

US 1846 1 496 1922 1 506 508

China 402 2 108 417 2 110 107

Mexico 205 3 55 210 3 55 50

Japan 109 4 29 123 4 33 33

Germany 107 5 29 118 5 31 29

UK 86 6 23 70 6 18 25

South Korea 55 7 15 52 7 14 15

Algeria 46 9 12 49 8 13 12

Italy 43 10 11 43 9 11 12

France 46 8 12 41 10 11 13

Total 3723 3796

Source Industry Canada (2013b)

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983091983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983095 Old and new trade prospectsmdashimport growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 29 8 -178 7 89 5

China 112 4 -70 2 123 3

Mexico 43 7 -77 4 337 1

Japan -11 10 -192 8 89 4

Germany 105 5 -149 6 44 7

UK 95 6 -252 9 141 2

South Korea 120 3 -14 1 36 8

Algeria 518 1 -511 10 -50 10

Italy 11 9 -132 5 48 6

France 191 2 -70 3 -35 9

2011 2012Average

Rank Rank

US 88 5 57 4 17

China 82 6 53 5 60

Mexico 111 3 39 6 91

Japan -29 9 151 1 01

Germany 132 2 117 2 50

UK -36 10 -173 10 -45

South Korea 76 7 -37 8 37

Algeria 533 1 91 3 116

Italy 95 4 23 7 09

France 22 8 -97 9 02

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983093

fraserinstituteorg

In terms of overall Canadian outbound FDI stocks in the US remain

very high despite the recent US recession while growth in stock in Asia is

modest (figure 983089983097) When we examine Canadian FDI in the so-called BRIC

states we notice that investment in both China and India is relatively small

Canadian mining investment in Brazil is much larger (figure 983090983088) In fact when

we examine amounts of FDI we find that Canada is not really a big BRIC

investor other than Brazil Chile Hong Kong and Peru are larger FDI recipi-

ents than China and India (figure 983090983089)

In terms of FDI flowing into Canada we notice the very large share

(983090983096983094983093 percent) in manufacturing which indicates both the predominant

share of US FDI and the extensive integrated supply chains in Canada-US

manufacturing (table 983089983097) Even more than for outbound FDI inflow stocks

show very large US preponderance (figure 983090983090) Such continued concentra-

tion of US FDI in Canada suggests that Canadian trade diversification is not

just a decision to be made by Canadian producers

Like trade growth Chinese FDI growth in Canada is positive but the

overall numbers are small and do not show rapid growth in the last 983091 years

(figure 983090983091)

Table 983089983096 Top industries for outward stocks of FDI 983090983088983089983090

Category Value Share

Mining oil and gas extraction 1099 188

Oil and gas subcategory 542 93

Manufacturing 569 97

Finance and insurance 2334 399

Management of companies and enterprises 757 129

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

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983091983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

1

2

3

4

5

6

7

8

9

10

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n s

Figure Canadian foreign direct investment (stock) BRIC ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Brazil PRC India Russia

0

20

4060

80

100

120

140

160

180

200

220

240

260

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) various regions

ndash

Notes Excluding Mexico Canadian FDI to Mexico in 2012 was $557 billion

Foreign Direct Investment measures the purchase of various forms of capital stock abroad

However tax havens (Barbados Bermuda etc) are frequently found to be some of the highest

recipients of FDI In reality tax havens do not reflect economic growth as FDI figures invested

into tax havens are often reinvested back to the source country in a concept known as

round-tripping (Financial Post 2013) We have accounted for tax havens by removing them from

tables and figures in this section The numbers corresponding to Figure 19 would be Barbados

($593 billion) Bermuda ($118 billion) British Virgin Islands ($21 billion) Cayman Islands ($302

billion)

Source Foreign Affairs Trade and Development Canada (2013c)

US Europe Asia amp Oceania Central amp South America Africa

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The state of Canada-US relations in 983090983088983089983092 983091983095

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Table 983089983097 Top industries for inward stocks of FDI 983090983088983089983090

Category Value Share

Oil and gas extraction 766 147

Manufacturing 1492 287

Petroleum and coal products manufacturing 377 72

Wholesale trade 395 76

Finance and insurance 699 134

Management of companies and enterprises 999 192

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

0

2

4

6

8

10

12

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) Chile Hong Kong

Peru amp Korea ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Chile Hong Kong Peru Korea

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0

40

80

120

160

200

240

280

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Foreign direct investment (stock) in Canada from top three

countries ndash

Source Foreign Affairs Trade and Development Canada (2013c)

US Netherlands UK

0

2

4

6

8

10

12

201220112010200920082007

2 0 0 2 C A $ b

i l l i o n s

Figure Foreign direct investment (stock) in Canada from China

ndash

Source Foreign Affairs Trade and Development Canada (2013c)

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fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

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Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

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References

Abacus Data (983090983088983089983090 November 983090983088) Beyond the Canadian-American Border

lthttpabacusdatacawp-contentuploads983090983088983089983090983089983089Can-AM_Report_CABC_

Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5662

The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

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983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5962

983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6062

The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 17: Canadas Catch 22 State of Canada Us Relations in 2014

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983089983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

075

080

085

090

095

100

105

2 0 1 3

- 0 7

2 0 1 3

- 0 1

2 0 1 2

- 0 7

2 0 1 2

- 0 1

2 0 1 1

- 0 7

2 0 1 1

- 0 1

2 0 1 0

- 0 7

2 0 1 0

- 0 1

2 0 0 9

- 0 7

2 0 0 9

- 0 1

2 0 0 8

- 0 7

2 0 0 8

- 0 1

2 0 0 7

- 0 7

2 0 0 7

- 0 1

Figure CanadaUS dollar exchange rate ndash

Source Bank of Canada (2013b)

C A U S e x c h a n g e r a t e

Dollar value and productivity trends

Te first factor to consider regarding Canadarsquos trade competitiveness vis-agrave-vis

the United States is the value of the Canadian dollar Te substantial appre-

ciation of the Canadian dollar against the US dollar that began in the early

983090983088983088983088s has stabilized at a much higher average value of the loonie ( figure 983095)

As is well documented such exchange rate appreciation tends to have a strong

effect on current account balances as exports decline (Kappler et al 983090983088983089983089)

A growing account deficit will likely push the value of the Canadian dollar

downward in the longer term and thus offer some remedy

ProductivityOf more concern to Canadians should be the data indicating that Canadian

labour productivity rates are lagging those in the United States (figures 983096 983097)

One would expect that Canadarsquos higher dollar has provided industry in recent

years with an opportunity to improve productivity as imported machinery

and technology would be available at a lower price However Canadarsquos pro-

ductivity rate of growth is modest and in 983090983088983089983090 dips into negative territory

again

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983089983089

fraserinstituteorg

-1

0

1

2

3

20122011201020092008

Canada US

Figure Canada and US rates of output productivity growth ()

ndash

Source Statistics Canada (2013g)

R a t e o f p r o d u c t i v i t y g r o

w t h ( )

-10

-5

0

5

20122011201020092008

Labour productivity (Canada) Real GDP (Canada) Hours worked (Canada)

Labour productivity (US) Real GDP (US) Hours worked (US)

Figure Real US-Canadian output and hours worked () ndash

Source Statistics Canada (2013g)

A n n u a l c

h a n g e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983089983090 fraserinstituteorg

Trade and regulatory barriersdisputes

Table 983096 provides a synopsis of the major trade disputesbarriers that have

played a role in bilateral relations in the last five years and that are pertinent

for the 983090983088983089983092 period (pages 983089983094-983089983095) Te two large disputesmdashKeystone XL and

Mandatory Country-of-Origin Labeling (MCOOL) on red meatmdashare more

ominous than they may seem First both in crude oil products and in cattle

and hogs the United States is unilaterally disrupting or dismantling a well-

established integrated sector Canada has started attempts to diversify its oil

transportation structure including more rail and new pipeline routes But

as all proposed alternative pipelines have shown the alternatives are contro-

versial and at best years away from making a difference Meanwhile there is

considerable risk in putting too much crude oil on rail as its accident rates

are higher than pipe

Canadian threats to counter US MCOOL action with tariffs on food

products are not going to have much impact in the near future Moreover

an escalating tariff war on food products cannot be won by Canada and will

ultimately harm consumers on both sides of the border US defiance of two

WO rulings also means more uncertainty for Canadian traders

Keystone XL pipeline

Proposed in 983090983088983088983096 the Keystone XL (KXL) extension is part of a pipeline sys-

tem connecting Alberta oil sands and US mid-West and Gulf region refineries

KXL is a 983089983096983097983095 km crude oil pipeline with a capacity of 983092983094983093983088983088983088 barrels per

day (Hussain 983090983088983089983091) It is a substantial private infrastructure proposal that

will create employment and guarantee a secure energy source for the United

States (Millington and Murillo 983090983088983089983091) It is by no means a new feature in

Canada-US energy relations as a dense network of oil and electricity carri-ers cross the border at multiple points

What is unprecedented is that the permit process is now in its sixth

year and the final resolution remains uncertain (by US law a cross-border line

requires Department of State approval) If not resolved in 983090983088983089983092 the question

may well be handed over to the next president after 983090983088983089983094 Te policy uncertainty

associated with KXL approval has by far the largest impact on Canada-US trade

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 2062

The state of Canada-US relations in 983090983088983089983092 983089983091

fraserinstituteorg

relations Te dragged-out procedure has chilled relations Te southern leg of

KXL has been completed and the original route objection by Nebraska has been

resolved What remains ostensibly the problem is that the US administration

has identified this heavy oil as a component of its policy objective of curbing

the emission of greenhouses gasses to reduce global warming

Te impact of this pipeline delay in the 983090983095 million barrels per day (bpd)

export of Canadian oil products to the USA reverberates at various levels

Across Canada investment in mining oil and gas extraction for 983090983088983089983091 is pre-

dicted to decrease by 983090983095 percentmdashthe largest decline since the 983090983088983088983096 recession

(Statistics Canada 983090983088983089983091f) In Alberta investment is predicted to increase by

only 983088983089 percent (Statistics Canada 983090983088983089983091f) Capital investment in oil and gas

extraction has not recovered to pre-983090983088983088983096 levels (Industry Canada 983090983088983089983091a)

While the industry has become increasingly dependent on rail trans-

port to move product it is a costly alternative It can cost up to three times

as much as pipeline transport (Millington and Murillo 983090983088983089983091) and its limita-

tions are self-evident because rail movement of oil is constrained by the lim-

ited availability of rail cars In 983090983088983089983090 983089983091983088983088983088983088 bpd of heavy crude was being

transported by rail Tis is expected to rise to 983092983090983093983088983088983088 bpd by the end of

983090983088983089983092 falling short of the 983092983094983093983088983088983088 bpd which could have been moved through

KXL (Hussain 983090983088983089983091) Te forced increase in rail transport has resulted in

unintended costs for the industry a total of US$983089 billion must be invested for

new rail terminals and another US$983092ndash983093 billion for new rail cars (Lewis 983090983088983089983091)

Rail transport is both more costly and more dangerous A recent study

concluded that ldquopipeline transportation is safer than transportation by road

rail or barge as measured by incidents injuries and fatalitiesrdquo (Green amp

Furchtgott-Roth 983090983088983089983091) It is not inconceivable that another major oil acci-

dent either in Canada or the USAmdashsuch as took place in Quebec in July 983090983088983089983091

killing 983092983095 peoplemdashwould result in a moratorium on oil transport by rail with

grave consequences for Canadian producers

983090983088983088983090 Mandatory Country-of-Origin Labeling

Mandatory Country-of-Origin Labeling (MCOOL) is a provision mandated

by Congressional law and first implemented in 983090983088983088983096 Te measure imposes

strict segregation rules on American Canadian and Mexican cattle and hogs

and the subsequent slaughtering and processing of these animals to producebeef and pork products for retail sale Te stated purpose is to create labels

that indicate the origin in part or in whole of the product In effect it is a

veiled trade barrier because it gives US animals and products a competitive

advantage due to higher labeling inventory and processing costs for equiva-

lent Canadian products

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983089983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983096 Synopsis of trade disputes in Canadian-American relations in 983090983088983089983091

Dispute Impact and cost Prospect for resolution

Keystone XL Pipeline Very serious Poor

2008 proposal for a 1897

km 465000 bpd crude oilpipeline spanning fromAlberta down to Nebraska

Downward pressure on investment

Lost wages January 2012postponement is costing US $47million a day in lost wages (ConsumerEnergy Alliance 2013)

Continuation of crude oil pricediscounts due to lack of infrastructure

Costly alternative rail has emerged as atransportation alternative but can costup to three times as much as pipelinetravel (Millington and Murillo 2013)

Permit postponed twice

Resolution is not transparent

Rising risk of decision deferral past 2016

Mandatory Country-of-OriginLabelling (MCOOL)

Serious Poor

2008 CongressionalLaw mandating rulesfor segregated livestockprocessing and packagingand a labeling structure inorder to have food labelsindicate origin of product

Annual cost to Canadian beef and porksector of $1 billion

Deconstruction of a highly integratedtrilateral supply chain industry

MCOOL adds no animal health or foodsafety benefits

US has defied both WTO complaint andthe core part of the WTO Appeal ruling

2013 US reaction has been to strengthenthe discriminatory provision banning co-mingling of meats altogether

Canada plans to retaliate with tariffs butthis is a costly gambit with low chance ofsuccess

Softwood Lumber Agreement Moderate Good

In 2011 American softwoodcompanies took theirCanadian counterparts to theLondon Court of InternationalArbitration accusing themof circumventing the SLA(Foreign Affairs Trade andDevelopment Canada 2012a)

If in violation Canadian industry wouldface $380 million in penalties (TheCanadian Press 2012)

The London Court of InternationalArbitration in 2012 ruled in favor ofCanada (Foreign Affairs Trade andDevelopment Canada 2012a)

SLA was to expire in 2013 but Canadaand the USA extended it until 2015 (CBCNews 2012)

Long-term free trade in lumber needs toreplace SLA

Buy American Provision Serious Partial resolution but high risk ofrecurring Buy American legislation

2009 American Recovery andReinvestment Act

Exclusion of Canadian products andproduction sharing in US public worksprocurement

Canada-US Procurement Agreement in2010 which allowed for the purchaseof Canadian goods on seven US

infrastructure projects valued at morethan $7777000

Canada needs to seek a comprehensiveagreement in order to escape futureAmerican protectionism with allprovinces on board and compliant withthe WTO provision

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The state of Canada-US relations in 983090983088983089983092 983089983093

fraserinstituteorg

Dispute Impact and cost Prospect for resolution

Canadian Wheat Board Long-term benefit Completed

Canadarsquos mandatory wheat

marketing board monopsonyended in 2011

Frequent US action against CWB in the

past will now end as wheat marketingin Canada turns fully market based

Intellectual Property Rights Moderate potential cost Partially resolved

Canada has been on theSpecial 301 Priority Watch Listby the United States TradeRepresentative since 1995

Ongoing threat of US Trade Action andlegal action

Canadian domestic complianceincluding

Strengthening data protection

Participation in Anti-counterfeiting TradeAgreement (ACTA in 2013)

Enacted the Combating CounterfeitProducts Act (2013)

Started the process of strengthening

the Copyright Act and implementingWorld Intellectual Property OrganizationInternet Treaties

In recognition of which Canada has beenremoved from the Special 301 PriorityWatch List

Prescription drugs Serious potential for trade action Indirect progress

The US complaint againstCanada

Imposing price ceilings thatshifts the cost burden of RampDto US firms

Weak protection ofintellectual property rights rethird party sales

Slow prescription drugapproval process causingreduced market access

US firms experience lost revenues andtrade action is a risk

In 2013 CETA agreement with theEuropean Union Canada agrees to givefull patent protection to new drugs fortwo years

Two-year rule may be transferable tofuture Canada-US resolution

Table 983096 continued

Canada and the United States have had a deeply integrated market in

this sector since the early 983089983097983097983088s Animal health and food safety standards have

been largely harmonized As a result highly efficient supply-chain production

methods have made this industry quite efficient However the imposition of

MCOOL has changed all that (Moens amp Leon 983090983088983089983090) Te cost differential haswidened and Canadian exports have dropped dramatically Since 983090983088983088983096 the

cattle sector has lost $983094983092983088 million per year and the hog sector has lost $983093983088983088

million a year (Te Canadian Press 983090983088983089983091a)

In 983090983088983089983090 the World rade Organization (WO) ruled in Canadarsquos favor by

concluding that MCOOL is discriminatory Te WO gave the US until May 983090983091

983090983088983089983091 to act but on that same day the USDA imposed regulatory changes that

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983089983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

actually strengthened the provisions of MCOOL In retaliation the Canadian

government released a list of US exports to Canada that would be subjected

to tariffs and it is preparing to seek a compliance panel at the WO Until this

situation is resolved the Canadian government predicts a continuing annual

loss of $983089 billion for the Canadian red meat sector (Te Canadian Press 983090983088983089983091a)

Softwood lumber

In 983090983088983089983089 several American softwood companies took their Canadian counter-

parts to the Court of International Arbitration in London accusing them of cir-

cumventing the Softwood Lumber Agreement of 983090983088983088983094 (Foreign Affairs rade

and Development Canada 983090983088983089983090a) Te dispute centered on the accelerating pace

of lumber harvests resulting from the pine beetle infestation Te stakes were

high $983091983096983088 million in penalties should Canada lose (Te Canadian Press 983090983088983089983090)

In 983090983088983089983090 the Court of International Arbitration ruled in Canadarsquos favor

(Foreign Affairs rade and Development Canada 983090983088983089983090a) In addition while

the Softwood Lumber Agreement was set to expire in 983090983088983089983091 the Canadian

and American governments successfully negotiated an extension of the

Agreement until 983090983088983089983093 (CBC News 983090983088983089983090) Te fact remains that as long as a

large part of Canadarsquos softwood lumber is managed in terms of quotas and

the stumpage fee system US trade action is very likely

lsquoBuy Americanrsquo provision

Te 983090983088983088983097 American Recovery and Reinvestment Act (ARRA which expired

on September 983091983088 983090983088983089983089) and the more recent 983090983088983089983089 American Jobs Act stipu-

lated that steel iron and other goods used in the repair and construction of

infrastructure projects in the US (highways bridges mass transit and fed-

eral buildings) must be manufactured in the United States (Matthiesen 983090983088983089983089)

In response to ARRA Canada and the US signed the Canada-US

Procurement Agreement in 983090983088983089983088 which allowed for the purchase of Canadian

goods on seven US infrastructure projects valued at more than $983095983095983095983095983088983088983088

or within the 983091983095 states subject to the WO GPA (Government of Canada

983090983088983089983091a) Te 983090983088983089983089 American Jobs Act did not pass in Senate and is thus moot

While the ARRA dispute was partially resolved lsquoBuy Americanrsquo anda counter position of lsquoBuy Canadianrsquo can flare up on either side of the bor-

der Canadian industry is most vulnerable in this uncertainty Te Canadian

government ought to seek a comprehensive Buy American exemption to

escape future American protectionism In so doing all provincial govern-

ments need to be on board in order to make the WO and NAFA rules

function optimally

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The state of Canada-US relations in 983090983088983089983092 983089983095

fraserinstituteorg

Canadian Wheat Board (CWB)

In 983090983088983089983089 the Canadian government removed the monopsony held by the

Canadian Wheat Board Tis unilateral action offers a successful reduction

in bilateral trade distortion oday the CWB continues to operate as a mar-

keting group

Intellectual Property Rights (IPR)

From 983089983097983097983093 through 983090983088983089983091 Canada was on the Special 983091983088983089 Priority Watch

List by the United States rade Representative Te US complaint was that

protection and enforcement of IPR in Canada were weak Te Special 983091983088983089

Priority Watch List is designed to identify US trading partners that are the

worst offenders in IPR protection (Embassy of the United States Ottawa

Canada 983090983088983089983091)

Although the issue is not completely resolved Canada has made sig-

nificant progress in recent years Te federal government has strengthened

data protection regulations criminalized the use of camcorders in theaters

and participates in the Anti-Counterfeiting rade Agreement (ACA) nego-

tiations (983090983088983089983091) Most recently Canada enacted the Combatting Counterfeit

Products Act (Embassy of the United States Ottawa Canada 983090983088983089983091) Te

Canadian Government is in the process of strengthening the Copyright Act

and implementing World Intellectual Property Organization Internet reaties

(Embassy of the United States Ottawa Canada 983090983088983089983091)

As a result of these steps Canada was removed from the Special 983091983088983089

Priority Watch List in 983090983088983089983091

Prescription drugs

Prescription drug prices in Canada are relatively low due to a price ceil-

ing mandated by Canadarsquos healthcare system In addition Health Canada

approval times for prescription drugs significantly lag behind their counter-

parts in the United States and the European Union (Barua and Esmail 983090983088983089983091)

US lawmakers have repeatedly expressed their concerns over cheap prescrip-

tion drugs re-entering the US from Canada (Moens and Gabler 983090983088983089983089) TeEU also asked Canada to strengthen IPR protections for prescription drugs

(Lexchin and Gagnon 983090983088983089983091) Since the signing of the CEA agreement in

principle on October 983089983096 983090983088983089983091 the issue between Canada and the EU is now

resolved (Waldie 983090983088983089983091) Canada has agreed to ldquoEU demands for patent pro-

tection for up to two years on brand-name drugsrdquo (Blanchfield 983090983088983089983091)

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983089983096 fraserinstituteorg

State of the border andregulatory cooperation

Te decline in Americans traveling to Canada corresponds with the US

Greenback losing value against the Canadian dollar (figures 983089983088 983089983089) However

when we consider the extent of the decline in total numbers it appears dispro-

portionate Te change in American travel suggests instead a bigger problem

following the 983097-983089983089 shock Te imposition of new border transit requirements

such as passports as well as longer wait times and more security screening

has likely dampened US travel across this international boundary Given the

modest economic recovery in the USA from the beginning of 983090983088983089983088 onward

one would expect disposable income including for travel to trend back up

Instead the numbers remain stagnant at around 983090983088 million less than half the

number of 983090983088983088983090

While an overall national average for border wait times is not avail-

able data on major border crossings in both Central Canada and British

Columbia indicate that no reductions in wait times have been achieved

between 983090983088983088983094 and 983090983088983089983089 (figure 983089983090) Te problem of inefficiency as presented

by the Canada-US border goes well beyond wait times It includes inefficient

activity away from the border such as extra warehousing and costs of com-

plying with various facilitated traveler and goods programs such as FAS for

trucks loads and drivers

Tere are consistent cost differences between domestic and cross-bor-

der truck-borne trade which point to significant border costs ldquoFor exports

to the US these costs added 983088983097 percent to the delivered price of goods in

983090983088983088983092 Tis figure fell to 983088983092 percent in 983090983088983088983097 hellip Higher fixed costs per shipment

accounted for most of the additional cost of transporting goods to the USrdquo

(Brown and Anderson 983090983088983089983090) When we consider that in the manufacturingsector parts cross the border several times in various stages of assembly we

realize how this cost accumulates and defeats the efficiency gains otherwise

generated by integrated supply chain manufacturing Border costs are typ-

ically passed on to the consumer as fixed costs per shipment

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The state of Canada-US relations in 983090983088983089983092 983089983097

fraserinstituteorg

An unprecedented border problem has arisen in the current USAdministrationrsquos lengthy (six years) review of the permitting of a pipeline

border crossing as proposed in the Keystone XL project As a result oil-by-

rail transport has recently increased while the pipeline mode of Canada-US

trade has seen a drop in growth in the 983090983088983089983089983089983090 period ( figures 983089983091 983089983092)

0

10

20

30

40

50

201220112010200920082007200620052004200320022001200019991998

Figure Travellers entering Canada ndash

Source Statistics Canada (2013e)

US residents Non-US residents

0

3

6

9

12

15

18

0

03

06

09

12

15

18

20122011201020092008200720062005200420032002

Trips Spending US$CA$ (Secondary axis)

Figure US overnight travel to Canada ndash

Source Statistics Canada (2011) Bank of Canada (2013b)

M i l l i o n s o f t r i p

s N o m i n a l C A $ b i l l i o n s

U S $ C A $ ex c h a n

g er a t e

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983090983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

5

10

15

20

201120102009200820072006

Northbound average delay Southbound average delay

Figure Peace Arch average border wait time ndash

Source Cascade Gateway Data (2013)

M i n u t e s

0

25

50

75

100

125

150

175

200

225

250

275

300

201220112010200920082007200620052004

2 0 0 4

U S $ b

i l l i o n s

Figure All surface modes of freight flow data based on value of goods

ndash

Source Bureau of Transportation Statistics (2013)

Truck Rail Pipeline

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983089

fraserinstituteorg

lsquoBeyond the Borderrsquo and Regulatory Cooperation

In 983090983088983089983089 Canada and the United States announced an ambitious agreement

to reduce border costs by means of deeper bilateral regulatory and secur-

ity cooperation Te accord seeks to streamline various border proceduresmdash

some already in existence and some newmdashto improve intelligence-sharing

between law enforcement agencies mutual recognition of passenger baggage

screening improved frameworks for trusted trade programs harmoniza-

tion of NEXUS protocols streamlined supply chains enhanced trade com-

petitiveness collaboration in border infrastructure investment and deeper

cooperation in national security investigations Te agreement is known as

Beyond the Border A Shared Vision for Perimeter Security and Economic

Competitiveness (February 983092 983090983088983089983089)

Te Beyond the Border Vision accord also set up a Regulatory

Cooperation Council In it Canadian and American officials seek to reduce

red tape and harmonize regulations in certain key sectors o date the

Council has announced various plans affecting agriculture and food trans-

portation health personal care products workplace chemicals environmentnano materials and small business loans We summarize the key points of

progress made since 983090983088983089983089 in table 983097

-35

-25

-15

-5

5

15

25

35

20122011201020092008200720062005

Truck Rail Pipeline

Figure Growth rate of all surface modes of freight flows () ndash

Source Bureau of Transportation Statistics (2013) calculations by authors

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983090983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983097 Key elements of Beyond the Border and Regulatory Cooperation

Beyond the Border Program

Integrated Cargo Security Strategy (ICSS)December 2011

Reduces administrative duplication between Canada and the US byaddressing security risks in advance within the shipment supply chainand at the border (Canada Border Services Agency 2013)

Prince Rupert Pilot October 2012 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry via rail is examined by Canadian officials onbehalf of the US (Government of Canada 2013c)

Montreal Pilot January 2013 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry to the US via truck is examined by Canadianofficials on behalf of the US (Government of Canada 2013c)

Pre-load Air Cargo Targeting (PACT) Joint pilot by CBSA and Transport Canada to screen cargo pre-flight onCanada-bound airplanes at foreign airports (Canada Border ServicesAgency 2013)

Tamper Evident Technology PilotOctober 2012

Pilot collaboration between CBSA and US CBP to ensure containersremain sealed upon arrival at the US border (Canada Border Services

Agency 2013)

Truck Cargo Pre-Inspection PilotMarch 2013

Pilot program between the CBSA and the US CBP for pre-inspection ofsouthbound traffic into US (Canada Border Services Agency 2013)

Free and Secure Trade (FAST) PilotSarnia Ontario

Pilot program for usage of FAST lanes without Partners in Protection andCustoms Self Assessment programs (Government of Canada 2013c)

Canada-US Shiprider June 2013 Removal of jurisdictional barriers to improve law enforcement personnelin Windsor-Detroit and Vancouver-Blaine waterways (Government ofCanada 2013c)

EntryExit Initiative Phase II June 2013 Exchange entryexit data between the CBSA and US DHS on individualsat Canada-US land border crossings (Government of Canada 2013c)

Regulatory Cooperation ProgramMemorandum of Understanding between Transport Canada and the RailwayAssociation of Canada September 2013

Framework for Canadian rail emissions between 2011 to 2015(Government of Canada 2013d)

Canada-United States Perimeter Approachto Plant Protection September 2013

Draft framework for increased cooperation and reduction inadministrative duplication between the Canadian Food InspectionAgency (CFIA) and United States Animal and Plant Health InspectionService (APHIS) on trade in plants and plant products (Government ofCanada 2013d)

Common Electronic Submission GatewayPilot (CESG) August 2013

FDA and Health Canada will allow pharmaceutical firms to electronicallysubmit drug applications (Government of Canada 2013d)

Initiative to Align Veterinary DrugApprovals December 2012

Joint reviews between US FDA and Health Canada on veterinary drugproducts (Government of Canada 2013d)

Stricter Air Pollutant Emissions Environment Canada aligns car emissions beginning in 2017 with theUS Environmental Protection Agencyrsquos ldquoTier 3rdquo (Government of Canada2013d)

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The state of Canada-US relations in 983090983088983089983092 983090983091

fraserinstituteorg

On September 983092 983090983088983089983091 $983092983094983094 million in investment was allocated to the

Border Action plan by the Government of Canada in order expand two marine

container examination facilities (Government of Canada 983090983088983089983091c) $983091983091 million

was invested by the Government of Canada in the Asia Pacific Gateway and

rade Corridor Initiative (Government of Canada 983090983088983089983091c) Te Plan includes

an additional 983090983097 harmonization initiatives that will enhance trade activity

between Canada and the US

Neither Beyond the Border nor the Regulatory Cooperation Council

offer further investment or cost estimates on the initiatives described in table

983097 Moens and Gabler (983090983088983089983090) pointed to the need for both the Canadian and

American governments to provide data on border costs so that a cost-benefit

analysis can ensue Nonetheless the small steps of progress towards inte-

grating and harmonizing US and Canadian border practices remains a very

important (long-term) part of reducing the profile of the border

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983090983092 fraserinstituteorg

Canadian and American public perceptions

Tree observations are noteworthy in recent assessments of public percep-

tions between Americans and Canadians First Americans consistently have

a very high favourability rating of Canadians typically in the 983097983088 plus range

(table 983089983088 figure 983089983093) Both as a friend and a strategic ally Americans hold

Canadians in the most favourable light possible (table 983089983089) Disagreements over

policy between the two countries whether in defence and foreign affairs or

over border and trade issues do not move this fundamental asset Canadians

enjoy in dealing with their neighbour

Second Canadians do not have high expectations of either the

American or Canadian government regarding progress in bilateral relations

As table 983089983090 shows Canadians hold Obama in high regard (983094983091 percent) but

only 983093983092 percent expect progress from him in trade relations Prime Minister

Harper is rated slightly ahead of President Obama in terms of working hard

towards improving Canada-US relations (table 983089983091)

Tird and most significant in light of Canadarsquos Catch-983090983090 situation both

Canadians and Americans are more supportive of closer cooperation and inte-

gration policies than is the case for political representatives in either the United

States or Canada In two recent studies we showed how US Senators and House

Representatives are quite critical of Canada with regard to NAFA issues and bor-

der security (Moens and Gabler 983090983088983089983089) Similarly we found that among the three

major political parties in Canadarsquos parliament only one consistently expressed

itself in favour of closer ties with the United States (Moens and Gabler 983090983088983089983089)

A recent survey of American and Canadian (and Mexican) attitudes

towards free trade and NAFA show surprisingly strong data for more trade

integration In response to the statement ldquoTere should be more free trade

between the US Canada and Mexicordquo 983096983088 percent of Canadians approved

as did 983095983092 percent of Americans Even on border security Canadians andAmericans are more pro-cooperation and integration than their governmental

policies suggest In the US 983092983089 percent support a common perimeter while

983090983088 percent are opposed In Canada 983092983091 percent support it and 983091983088 percent are

opposed (Graves Pastor and Basaacutentildeez 983090983088983089983091) Terefore in terms of public

mandate both governments would have a case to work towards broader bilat-

eral (or trilateral) cooperation to lower trade barriers

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The state of Canada-US relations in 983090983088983089983092 983090983093

fraserinstituteorg

Table 983089983088 Canadian favourability rating among Americans (February 983090983088983089983090)

Veryfavourable

Mostlyfavourable

Mostlyunfavourable

Veryfavourable Not sure Total

favourableTotal

unfavourable

53 38 3 2 3 91 5

Note n=1015

Source Gallup Poll (2012)

Table 983089983089 Ally or enemy for Americans (June 983090983088983089983091)

Country Ally Friendly Unfriendly Enemy Total Ally andFriendly

Great Britain 66 25 2 1 91

Canada 61 33 2 1 94

China 11 44 26 14 55

Note n=1529Source Gallup Poll (2013)

88

90

92

94

96

98

201220112010200920082007

Figure Canadian favourability among Americans () ndash

Source Gallup Poll (2012)

f a

v o u r a

b l e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983090 What effect will Obama have on Canada-US relations (November 983090983088983089983090)

Canadians Americans

Positive Negative None Positive Negative None

Relationship 62 5 34 48 12 40

Trade 54 10 35 48 12 39

Harmonizing 53 8 40 47 14 39

Note n=1066

Source Abacus Data (2012)

Table 983089983091 Has each leader worked hard to improve Canada-US relations

(July 983090983088983089983090)

Country Agree Disagree Not sure

Stephen Harper 58 32 10

Barack Obama 53 32 15

Note Sample of Canadians

Source HarrisDecima (2012)

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fraserinstituteorg 983090983095

US policy uncertainty

Canadian economic prospects face their most important challenge in the

United States Te US economic recovery has been modest and real GDP

growth so far has remained below the post-World War II average of post-

recession periods (figure 983089983094) As we noted above the less-than-stellar US

recovery is made even more challenging for Canadian traders in that pro-

ductivity gains in Canada are lagging while the Canadian dollar remains high

On top of that several American-imposed regulatory obstacles to free trade

are depressing trade prospects in crude oil red meat and public works pro-

curement Tese impediments reduce Canadian competitive access to the

US market

A high level of public spending until the January 983090983088983089983091 sequester and

ongoing monetary stimulation have not produced notable US GDP growth

Te seven post-recession periods below show the current average to be well

below the historical average (Young 983090983088983089983091)

983089983097983092983096-983089983097983093983095 983091983096983088

983089983097983093983096-983089983097983094983095 983092983090983096

983089983097983094983096-983089983097983095983095 983091983089983096

983089983097983095983096-983089983097983096983095 983091983089983093

983089983097983096983096-983089983097983097983095 983091983088983093

983089983097983097983096-983090983088983088983095 983090983097983097

983090983088983088983096-983090983088983089983091 983088983095983091

While economic growth has been modest growth in the public debt

has not (figure 983089983095) Publicly held debt in the US is now at 983095983091 percent of GDP

the highest since 983089983097983092983094 (Congressional Budget Office 983090983088983089983091)

Te widening gap between federal government outlays and revenueshas only recently been capped by the Sequester (figure 983089983096) However the

budget Sequester is temporary and final resolution of public spending and

taxation levels remains unclear given repeated gridlock in presidential-con-

gressional policy making High debt levels combined with stalemate over

taxes and budget cuts have produced a case of policy instability or uncer-

tainty in the last five years (Baker Bloom and Davis 983090983088983089983091)

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983090983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

US policy uncertainty is further aggravated by inaction on the large

lsquoentitlementrsquo programsmdashSocial Security Medicare and Medicaidmdashwhich are

the major drivers of the long-term gap in revenues and spending

-4

-2

0

2

4

6

8

201220062000199419881982197619701964

Figure US GDP growth rate ndash ( forecast)

Source The World Bank (2013b) OECD (2013)

-10

-8

-6

-4

-2

0

0

20

40

60

80

100

20122011201020092008200720062005200420032002

Government deficit as a percentage of GDP Government debt as a percentage of GDP

Figure US Government deficit and debt as a percentage of GDP ndash

Source Congressional Budget Office (2013)

D e fi c i t p e r c e n t a g e ( ) D

e b t p er c en t a g e ( )

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The state of Canada-US relations in 983090983088983089983092 983090983097

fraserinstituteorg

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

20122003199319831973

Revenue Outlays

Figure US Government revenue and outlays ndash ( US$ billions)

Source Congressional Budget Office (2013)

1 9 8 3 U S $ b i l l i o n s

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983091983088 fraserinstituteorg

Trade diversification

Given the weakness in near-term US opportunities Canadians are (again)

wondering how to pursue trade diversification away from the United States

Te objective is logical and if achieved will prove advantageous but various

trends in trade and investment show that diversification for Canada is a slow

and arduous journey (table 983089983092)

In terms of overall share exports to China in the last five years have

doubled but the numbersmdashfrom 983090983089983095 percent to 983092983090983094 percentmdashremain rela-

tively low In the same period the US-bound share declined by 983091 percent but

remains a towering 983095983092983093983092 percent Te pattern of small overall impact applies

to all the other top trading partners For example exports to the UK have

increased but exports to Japan and Mexico have essentially stalled When we

consider average export growth rates over the last five years (table 983089983093) we see

a very strong rate for China (983089983093983093 percent) and strong rates for the UK and

South Korea (983096983097 percent and 983094983097 percent) However a 983089983093 percent increase in a

983092 percent overall trade share produces little change Te point we are making

is that at this rate and pattern of trade lsquodiversificationrsquo it will actually take a

very long timemdashwhile relatively small upward trends in trade with the United

States could have a quick and very large impact in the opposite direction

On the import side we notice more trade diversification with the US

share at 983093983088 percent and the Chinese share at 983089983089 percent (table 983089983094) Te Chinese

growth rate on the import side is less than on the export side (table 983089983095) Te

most revealing number may be the high average over five years for Mexico

at 983097 percent Tis could be indicative of a growing supply chain with Mexico

While foreign direct investment (FDI) is not a direct indicator of future

trade trends in investment may harbinger change In terms of outbound

FDI we notice that only a small segment (less than 983089983088 percent) is targeted

for manufacturing (table 983089983096) It is investment in this category in which onewould expect growth in supply chains

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The state of Canada-US relations in 983090983088983089983092 983091983089

fraserinstituteorg

Table 983089983092 Canadarsquos merchandise exports top ten destinations 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 3291 1 777 2361 1 751 2564 1 749

China 92 4 22 97 3 31 114 3 33

UK 114 2 27 105 2 33 141 2 41

Japan 97 3 23 73 4 23 79 4 23

Mexico 51 5 12 42 5 13 43 5 13

Netherlands 32 8 08 24 8 08 28 8 08

South Korea 34 7 08 31 7 10 32 7 09

Germany 39 6 09 33 6 10 34 6 10

France 28 9 07 23 9 07 20 10 06

Brazil 23 10 05 14 10 04 22 9 06

Total 4237 3145 3424

2011 2012Average

shareValue Rank Share Value Rank Share

US 2750 1 737 2783 1 745 752

China 140 3 38 159 2 43 33

UK 157 2 42 154 3 41 37

Japan 89 4 24 85 4 23 23

Mexico 46 5 12 44 5 12 12

Netherlands 40 7 11 37 6 10 09

South Korea 43 6 11 30 7 08 09

Germany 33 8 09 29 8 08 09

France 26 9 07 26 9 07 07

Brazil 24 10 06 21 10 06 06

Total 3732 3734

Source Industry Canada (2013b)

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983091983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983093 Canadian export growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 56 7 -281 9 106 = 5

China 101 6 65 1 187 3

UK 16 9 -73 2 358 2

Japan 202 3 -250 7 106 = 5

Mexico 179 4 -178 6 43 9

Netherlands -85 10 -255 8 183 4

South Korea 276 2 -80 3 52 8

Germany 160 5 -167 4 54 7

France 36 8 -174 5 -122 10

Brazil 706 1 -380 10 603 1

2011 2012Average

Rank Rank

US 104 8 27 2 02

China 270 4 152 1 155

UK 148 6 -02 4 90

Japan 161 5 -29 6 38

Mexico 94 9 -16 5 24

Netherlands 475 1 -55 7 53

South Korea 374 2 -272 10 70

Germany 05 10 -95 9 -09

France 311 3 23 3 15

Brazil 109 7 -92 8 189

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983091

fraserinstituteorg

Table 983089983094 Canadarsquos merchandise imports top ten sources 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 1992 1 524 1633 1 511 1745 1 504

China 374 2 98 347 2 109 382 2 110

Mexico 157 3 41 145 3 45 190 3 55

Japan 134 4 35 108 4 34 115 4 33

Germany 111 5 29 95 5 30 97 5 28

UK 110 6 29 82 6 26 92 6 27

South Korea 53 9 14 52 7 16 53 7 15

Algeria 67 7 18 33 10 10 31 10 09

Italy 45 10 12 39 9 12 40 9 12

France 53 8 14 49 8 15 47 8 13

Total 3804 3194 3465

2011 2012Average

shareValue Rank Share Value Rank Share

US 1846 1 496 1922 1 506 508

China 402 2 108 417 2 110 107

Mexico 205 3 55 210 3 55 50

Japan 109 4 29 123 4 33 33

Germany 107 5 29 118 5 31 29

UK 86 6 23 70 6 18 25

South Korea 55 7 15 52 7 14 15

Algeria 46 9 12 49 8 13 12

Italy 43 10 11 43 9 11 12

France 46 8 12 41 10 11 13

Total 3723 3796

Source Industry Canada (2013b)

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983091983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983095 Old and new trade prospectsmdashimport growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 29 8 -178 7 89 5

China 112 4 -70 2 123 3

Mexico 43 7 -77 4 337 1

Japan -11 10 -192 8 89 4

Germany 105 5 -149 6 44 7

UK 95 6 -252 9 141 2

South Korea 120 3 -14 1 36 8

Algeria 518 1 -511 10 -50 10

Italy 11 9 -132 5 48 6

France 191 2 -70 3 -35 9

2011 2012Average

Rank Rank

US 88 5 57 4 17

China 82 6 53 5 60

Mexico 111 3 39 6 91

Japan -29 9 151 1 01

Germany 132 2 117 2 50

UK -36 10 -173 10 -45

South Korea 76 7 -37 8 37

Algeria 533 1 91 3 116

Italy 95 4 23 7 09

France 22 8 -97 9 02

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983093

fraserinstituteorg

In terms of overall Canadian outbound FDI stocks in the US remain

very high despite the recent US recession while growth in stock in Asia is

modest (figure 983089983097) When we examine Canadian FDI in the so-called BRIC

states we notice that investment in both China and India is relatively small

Canadian mining investment in Brazil is much larger (figure 983090983088) In fact when

we examine amounts of FDI we find that Canada is not really a big BRIC

investor other than Brazil Chile Hong Kong and Peru are larger FDI recipi-

ents than China and India (figure 983090983089)

In terms of FDI flowing into Canada we notice the very large share

(983090983096983094983093 percent) in manufacturing which indicates both the predominant

share of US FDI and the extensive integrated supply chains in Canada-US

manufacturing (table 983089983097) Even more than for outbound FDI inflow stocks

show very large US preponderance (figure 983090983090) Such continued concentra-

tion of US FDI in Canada suggests that Canadian trade diversification is not

just a decision to be made by Canadian producers

Like trade growth Chinese FDI growth in Canada is positive but the

overall numbers are small and do not show rapid growth in the last 983091 years

(figure 983090983091)

Table 983089983096 Top industries for outward stocks of FDI 983090983088983089983090

Category Value Share

Mining oil and gas extraction 1099 188

Oil and gas subcategory 542 93

Manufacturing 569 97

Finance and insurance 2334 399

Management of companies and enterprises 757 129

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

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983091983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

1

2

3

4

5

6

7

8

9

10

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n s

Figure Canadian foreign direct investment (stock) BRIC ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Brazil PRC India Russia

0

20

4060

80

100

120

140

160

180

200

220

240

260

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) various regions

ndash

Notes Excluding Mexico Canadian FDI to Mexico in 2012 was $557 billion

Foreign Direct Investment measures the purchase of various forms of capital stock abroad

However tax havens (Barbados Bermuda etc) are frequently found to be some of the highest

recipients of FDI In reality tax havens do not reflect economic growth as FDI figures invested

into tax havens are often reinvested back to the source country in a concept known as

round-tripping (Financial Post 2013) We have accounted for tax havens by removing them from

tables and figures in this section The numbers corresponding to Figure 19 would be Barbados

($593 billion) Bermuda ($118 billion) British Virgin Islands ($21 billion) Cayman Islands ($302

billion)

Source Foreign Affairs Trade and Development Canada (2013c)

US Europe Asia amp Oceania Central amp South America Africa

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The state of Canada-US relations in 983090983088983089983092 983091983095

fraserinstituteorg

Table 983089983097 Top industries for inward stocks of FDI 983090983088983089983090

Category Value Share

Oil and gas extraction 766 147

Manufacturing 1492 287

Petroleum and coal products manufacturing 377 72

Wholesale trade 395 76

Finance and insurance 699 134

Management of companies and enterprises 999 192

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

0

2

4

6

8

10

12

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) Chile Hong Kong

Peru amp Korea ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Chile Hong Kong Peru Korea

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fraserinstituteorg

0

40

80

120

160

200

240

280

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Foreign direct investment (stock) in Canada from top three

countries ndash

Source Foreign Affairs Trade and Development Canada (2013c)

US Netherlands UK

0

2

4

6

8

10

12

201220112010200920082007

2 0 0 2 C A $ b

i l l i o n s

Figure Foreign direct investment (stock) in Canada from China

ndash

Source Foreign Affairs Trade and Development Canada (2013c)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

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fraserinstituteorg

Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

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References

Abacus Data (983090983088983089983090 November 983090983088) Beyond the Canadian-American Border

lthttpabacusdatacawp-contentuploads983090983088983089983090983089983089Can-AM_Report_CABC_

Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5662

The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5862

The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5962

983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6062

The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6162

983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 18: Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983089983089

fraserinstituteorg

-1

0

1

2

3

20122011201020092008

Canada US

Figure Canada and US rates of output productivity growth ()

ndash

Source Statistics Canada (2013g)

R a t e o f p r o d u c t i v i t y g r o

w t h ( )

-10

-5

0

5

20122011201020092008

Labour productivity (Canada) Real GDP (Canada) Hours worked (Canada)

Labour productivity (US) Real GDP (US) Hours worked (US)

Figure Real US-Canadian output and hours worked () ndash

Source Statistics Canada (2013g)

A n n u a l c

h a n g e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983089983090 fraserinstituteorg

Trade and regulatory barriersdisputes

Table 983096 provides a synopsis of the major trade disputesbarriers that have

played a role in bilateral relations in the last five years and that are pertinent

for the 983090983088983089983092 period (pages 983089983094-983089983095) Te two large disputesmdashKeystone XL and

Mandatory Country-of-Origin Labeling (MCOOL) on red meatmdashare more

ominous than they may seem First both in crude oil products and in cattle

and hogs the United States is unilaterally disrupting or dismantling a well-

established integrated sector Canada has started attempts to diversify its oil

transportation structure including more rail and new pipeline routes But

as all proposed alternative pipelines have shown the alternatives are contro-

versial and at best years away from making a difference Meanwhile there is

considerable risk in putting too much crude oil on rail as its accident rates

are higher than pipe

Canadian threats to counter US MCOOL action with tariffs on food

products are not going to have much impact in the near future Moreover

an escalating tariff war on food products cannot be won by Canada and will

ultimately harm consumers on both sides of the border US defiance of two

WO rulings also means more uncertainty for Canadian traders

Keystone XL pipeline

Proposed in 983090983088983088983096 the Keystone XL (KXL) extension is part of a pipeline sys-

tem connecting Alberta oil sands and US mid-West and Gulf region refineries

KXL is a 983089983096983097983095 km crude oil pipeline with a capacity of 983092983094983093983088983088983088 barrels per

day (Hussain 983090983088983089983091) It is a substantial private infrastructure proposal that

will create employment and guarantee a secure energy source for the United

States (Millington and Murillo 983090983088983089983091) It is by no means a new feature in

Canada-US energy relations as a dense network of oil and electricity carri-ers cross the border at multiple points

What is unprecedented is that the permit process is now in its sixth

year and the final resolution remains uncertain (by US law a cross-border line

requires Department of State approval) If not resolved in 983090983088983089983092 the question

may well be handed over to the next president after 983090983088983089983094 Te policy uncertainty

associated with KXL approval has by far the largest impact on Canada-US trade

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983089983091

fraserinstituteorg

relations Te dragged-out procedure has chilled relations Te southern leg of

KXL has been completed and the original route objection by Nebraska has been

resolved What remains ostensibly the problem is that the US administration

has identified this heavy oil as a component of its policy objective of curbing

the emission of greenhouses gasses to reduce global warming

Te impact of this pipeline delay in the 983090983095 million barrels per day (bpd)

export of Canadian oil products to the USA reverberates at various levels

Across Canada investment in mining oil and gas extraction for 983090983088983089983091 is pre-

dicted to decrease by 983090983095 percentmdashthe largest decline since the 983090983088983088983096 recession

(Statistics Canada 983090983088983089983091f) In Alberta investment is predicted to increase by

only 983088983089 percent (Statistics Canada 983090983088983089983091f) Capital investment in oil and gas

extraction has not recovered to pre-983090983088983088983096 levels (Industry Canada 983090983088983089983091a)

While the industry has become increasingly dependent on rail trans-

port to move product it is a costly alternative It can cost up to three times

as much as pipeline transport (Millington and Murillo 983090983088983089983091) and its limita-

tions are self-evident because rail movement of oil is constrained by the lim-

ited availability of rail cars In 983090983088983089983090 983089983091983088983088983088983088 bpd of heavy crude was being

transported by rail Tis is expected to rise to 983092983090983093983088983088983088 bpd by the end of

983090983088983089983092 falling short of the 983092983094983093983088983088983088 bpd which could have been moved through

KXL (Hussain 983090983088983089983091) Te forced increase in rail transport has resulted in

unintended costs for the industry a total of US$983089 billion must be invested for

new rail terminals and another US$983092ndash983093 billion for new rail cars (Lewis 983090983088983089983091)

Rail transport is both more costly and more dangerous A recent study

concluded that ldquopipeline transportation is safer than transportation by road

rail or barge as measured by incidents injuries and fatalitiesrdquo (Green amp

Furchtgott-Roth 983090983088983089983091) It is not inconceivable that another major oil acci-

dent either in Canada or the USAmdashsuch as took place in Quebec in July 983090983088983089983091

killing 983092983095 peoplemdashwould result in a moratorium on oil transport by rail with

grave consequences for Canadian producers

983090983088983088983090 Mandatory Country-of-Origin Labeling

Mandatory Country-of-Origin Labeling (MCOOL) is a provision mandated

by Congressional law and first implemented in 983090983088983088983096 Te measure imposes

strict segregation rules on American Canadian and Mexican cattle and hogs

and the subsequent slaughtering and processing of these animals to producebeef and pork products for retail sale Te stated purpose is to create labels

that indicate the origin in part or in whole of the product In effect it is a

veiled trade barrier because it gives US animals and products a competitive

advantage due to higher labeling inventory and processing costs for equiva-

lent Canadian products

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983089983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983096 Synopsis of trade disputes in Canadian-American relations in 983090983088983089983091

Dispute Impact and cost Prospect for resolution

Keystone XL Pipeline Very serious Poor

2008 proposal for a 1897

km 465000 bpd crude oilpipeline spanning fromAlberta down to Nebraska

Downward pressure on investment

Lost wages January 2012postponement is costing US $47million a day in lost wages (ConsumerEnergy Alliance 2013)

Continuation of crude oil pricediscounts due to lack of infrastructure

Costly alternative rail has emerged as atransportation alternative but can costup to three times as much as pipelinetravel (Millington and Murillo 2013)

Permit postponed twice

Resolution is not transparent

Rising risk of decision deferral past 2016

Mandatory Country-of-OriginLabelling (MCOOL)

Serious Poor

2008 CongressionalLaw mandating rulesfor segregated livestockprocessing and packagingand a labeling structure inorder to have food labelsindicate origin of product

Annual cost to Canadian beef and porksector of $1 billion

Deconstruction of a highly integratedtrilateral supply chain industry

MCOOL adds no animal health or foodsafety benefits

US has defied both WTO complaint andthe core part of the WTO Appeal ruling

2013 US reaction has been to strengthenthe discriminatory provision banning co-mingling of meats altogether

Canada plans to retaliate with tariffs butthis is a costly gambit with low chance ofsuccess

Softwood Lumber Agreement Moderate Good

In 2011 American softwoodcompanies took theirCanadian counterparts to theLondon Court of InternationalArbitration accusing themof circumventing the SLA(Foreign Affairs Trade andDevelopment Canada 2012a)

If in violation Canadian industry wouldface $380 million in penalties (TheCanadian Press 2012)

The London Court of InternationalArbitration in 2012 ruled in favor ofCanada (Foreign Affairs Trade andDevelopment Canada 2012a)

SLA was to expire in 2013 but Canadaand the USA extended it until 2015 (CBCNews 2012)

Long-term free trade in lumber needs toreplace SLA

Buy American Provision Serious Partial resolution but high risk ofrecurring Buy American legislation

2009 American Recovery andReinvestment Act

Exclusion of Canadian products andproduction sharing in US public worksprocurement

Canada-US Procurement Agreement in2010 which allowed for the purchaseof Canadian goods on seven US

infrastructure projects valued at morethan $7777000

Canada needs to seek a comprehensiveagreement in order to escape futureAmerican protectionism with allprovinces on board and compliant withthe WTO provision

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The state of Canada-US relations in 983090983088983089983092 983089983093

fraserinstituteorg

Dispute Impact and cost Prospect for resolution

Canadian Wheat Board Long-term benefit Completed

Canadarsquos mandatory wheat

marketing board monopsonyended in 2011

Frequent US action against CWB in the

past will now end as wheat marketingin Canada turns fully market based

Intellectual Property Rights Moderate potential cost Partially resolved

Canada has been on theSpecial 301 Priority Watch Listby the United States TradeRepresentative since 1995

Ongoing threat of US Trade Action andlegal action

Canadian domestic complianceincluding

Strengthening data protection

Participation in Anti-counterfeiting TradeAgreement (ACTA in 2013)

Enacted the Combating CounterfeitProducts Act (2013)

Started the process of strengthening

the Copyright Act and implementingWorld Intellectual Property OrganizationInternet Treaties

In recognition of which Canada has beenremoved from the Special 301 PriorityWatch List

Prescription drugs Serious potential for trade action Indirect progress

The US complaint againstCanada

Imposing price ceilings thatshifts the cost burden of RampDto US firms

Weak protection ofintellectual property rights rethird party sales

Slow prescription drugapproval process causingreduced market access

US firms experience lost revenues andtrade action is a risk

In 2013 CETA agreement with theEuropean Union Canada agrees to givefull patent protection to new drugs fortwo years

Two-year rule may be transferable tofuture Canada-US resolution

Table 983096 continued

Canada and the United States have had a deeply integrated market in

this sector since the early 983089983097983097983088s Animal health and food safety standards have

been largely harmonized As a result highly efficient supply-chain production

methods have made this industry quite efficient However the imposition of

MCOOL has changed all that (Moens amp Leon 983090983088983089983090) Te cost differential haswidened and Canadian exports have dropped dramatically Since 983090983088983088983096 the

cattle sector has lost $983094983092983088 million per year and the hog sector has lost $983093983088983088

million a year (Te Canadian Press 983090983088983089983091a)

In 983090983088983089983090 the World rade Organization (WO) ruled in Canadarsquos favor by

concluding that MCOOL is discriminatory Te WO gave the US until May 983090983091

983090983088983089983091 to act but on that same day the USDA imposed regulatory changes that

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983089983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

actually strengthened the provisions of MCOOL In retaliation the Canadian

government released a list of US exports to Canada that would be subjected

to tariffs and it is preparing to seek a compliance panel at the WO Until this

situation is resolved the Canadian government predicts a continuing annual

loss of $983089 billion for the Canadian red meat sector (Te Canadian Press 983090983088983089983091a)

Softwood lumber

In 983090983088983089983089 several American softwood companies took their Canadian counter-

parts to the Court of International Arbitration in London accusing them of cir-

cumventing the Softwood Lumber Agreement of 983090983088983088983094 (Foreign Affairs rade

and Development Canada 983090983088983089983090a) Te dispute centered on the accelerating pace

of lumber harvests resulting from the pine beetle infestation Te stakes were

high $983091983096983088 million in penalties should Canada lose (Te Canadian Press 983090983088983089983090)

In 983090983088983089983090 the Court of International Arbitration ruled in Canadarsquos favor

(Foreign Affairs rade and Development Canada 983090983088983089983090a) In addition while

the Softwood Lumber Agreement was set to expire in 983090983088983089983091 the Canadian

and American governments successfully negotiated an extension of the

Agreement until 983090983088983089983093 (CBC News 983090983088983089983090) Te fact remains that as long as a

large part of Canadarsquos softwood lumber is managed in terms of quotas and

the stumpage fee system US trade action is very likely

lsquoBuy Americanrsquo provision

Te 983090983088983088983097 American Recovery and Reinvestment Act (ARRA which expired

on September 983091983088 983090983088983089983089) and the more recent 983090983088983089983089 American Jobs Act stipu-

lated that steel iron and other goods used in the repair and construction of

infrastructure projects in the US (highways bridges mass transit and fed-

eral buildings) must be manufactured in the United States (Matthiesen 983090983088983089983089)

In response to ARRA Canada and the US signed the Canada-US

Procurement Agreement in 983090983088983089983088 which allowed for the purchase of Canadian

goods on seven US infrastructure projects valued at more than $983095983095983095983095983088983088983088

or within the 983091983095 states subject to the WO GPA (Government of Canada

983090983088983089983091a) Te 983090983088983089983089 American Jobs Act did not pass in Senate and is thus moot

While the ARRA dispute was partially resolved lsquoBuy Americanrsquo anda counter position of lsquoBuy Canadianrsquo can flare up on either side of the bor-

der Canadian industry is most vulnerable in this uncertainty Te Canadian

government ought to seek a comprehensive Buy American exemption to

escape future American protectionism In so doing all provincial govern-

ments need to be on board in order to make the WO and NAFA rules

function optimally

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The state of Canada-US relations in 983090983088983089983092 983089983095

fraserinstituteorg

Canadian Wheat Board (CWB)

In 983090983088983089983089 the Canadian government removed the monopsony held by the

Canadian Wheat Board Tis unilateral action offers a successful reduction

in bilateral trade distortion oday the CWB continues to operate as a mar-

keting group

Intellectual Property Rights (IPR)

From 983089983097983097983093 through 983090983088983089983091 Canada was on the Special 983091983088983089 Priority Watch

List by the United States rade Representative Te US complaint was that

protection and enforcement of IPR in Canada were weak Te Special 983091983088983089

Priority Watch List is designed to identify US trading partners that are the

worst offenders in IPR protection (Embassy of the United States Ottawa

Canada 983090983088983089983091)

Although the issue is not completely resolved Canada has made sig-

nificant progress in recent years Te federal government has strengthened

data protection regulations criminalized the use of camcorders in theaters

and participates in the Anti-Counterfeiting rade Agreement (ACA) nego-

tiations (983090983088983089983091) Most recently Canada enacted the Combatting Counterfeit

Products Act (Embassy of the United States Ottawa Canada 983090983088983089983091) Te

Canadian Government is in the process of strengthening the Copyright Act

and implementing World Intellectual Property Organization Internet reaties

(Embassy of the United States Ottawa Canada 983090983088983089983091)

As a result of these steps Canada was removed from the Special 983091983088983089

Priority Watch List in 983090983088983089983091

Prescription drugs

Prescription drug prices in Canada are relatively low due to a price ceil-

ing mandated by Canadarsquos healthcare system In addition Health Canada

approval times for prescription drugs significantly lag behind their counter-

parts in the United States and the European Union (Barua and Esmail 983090983088983089983091)

US lawmakers have repeatedly expressed their concerns over cheap prescrip-

tion drugs re-entering the US from Canada (Moens and Gabler 983090983088983089983089) TeEU also asked Canada to strengthen IPR protections for prescription drugs

(Lexchin and Gagnon 983090983088983089983091) Since the signing of the CEA agreement in

principle on October 983089983096 983090983088983089983091 the issue between Canada and the EU is now

resolved (Waldie 983090983088983089983091) Canada has agreed to ldquoEU demands for patent pro-

tection for up to two years on brand-name drugsrdquo (Blanchfield 983090983088983089983091)

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983089983096 fraserinstituteorg

State of the border andregulatory cooperation

Te decline in Americans traveling to Canada corresponds with the US

Greenback losing value against the Canadian dollar (figures 983089983088 983089983089) However

when we consider the extent of the decline in total numbers it appears dispro-

portionate Te change in American travel suggests instead a bigger problem

following the 983097-983089983089 shock Te imposition of new border transit requirements

such as passports as well as longer wait times and more security screening

has likely dampened US travel across this international boundary Given the

modest economic recovery in the USA from the beginning of 983090983088983089983088 onward

one would expect disposable income including for travel to trend back up

Instead the numbers remain stagnant at around 983090983088 million less than half the

number of 983090983088983088983090

While an overall national average for border wait times is not avail-

able data on major border crossings in both Central Canada and British

Columbia indicate that no reductions in wait times have been achieved

between 983090983088983088983094 and 983090983088983089983089 (figure 983089983090) Te problem of inefficiency as presented

by the Canada-US border goes well beyond wait times It includes inefficient

activity away from the border such as extra warehousing and costs of com-

plying with various facilitated traveler and goods programs such as FAS for

trucks loads and drivers

Tere are consistent cost differences between domestic and cross-bor-

der truck-borne trade which point to significant border costs ldquoFor exports

to the US these costs added 983088983097 percent to the delivered price of goods in

983090983088983088983092 Tis figure fell to 983088983092 percent in 983090983088983088983097 hellip Higher fixed costs per shipment

accounted for most of the additional cost of transporting goods to the USrdquo

(Brown and Anderson 983090983088983089983090) When we consider that in the manufacturingsector parts cross the border several times in various stages of assembly we

realize how this cost accumulates and defeats the efficiency gains otherwise

generated by integrated supply chain manufacturing Border costs are typ-

ically passed on to the consumer as fixed costs per shipment

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The state of Canada-US relations in 983090983088983089983092 983089983097

fraserinstituteorg

An unprecedented border problem has arisen in the current USAdministrationrsquos lengthy (six years) review of the permitting of a pipeline

border crossing as proposed in the Keystone XL project As a result oil-by-

rail transport has recently increased while the pipeline mode of Canada-US

trade has seen a drop in growth in the 983090983088983089983089983089983090 period ( figures 983089983091 983089983092)

0

10

20

30

40

50

201220112010200920082007200620052004200320022001200019991998

Figure Travellers entering Canada ndash

Source Statistics Canada (2013e)

US residents Non-US residents

0

3

6

9

12

15

18

0

03

06

09

12

15

18

20122011201020092008200720062005200420032002

Trips Spending US$CA$ (Secondary axis)

Figure US overnight travel to Canada ndash

Source Statistics Canada (2011) Bank of Canada (2013b)

M i l l i o n s o f t r i p

s N o m i n a l C A $ b i l l i o n s

U S $ C A $ ex c h a n

g er a t e

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983090983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

5

10

15

20

201120102009200820072006

Northbound average delay Southbound average delay

Figure Peace Arch average border wait time ndash

Source Cascade Gateway Data (2013)

M i n u t e s

0

25

50

75

100

125

150

175

200

225

250

275

300

201220112010200920082007200620052004

2 0 0 4

U S $ b

i l l i o n s

Figure All surface modes of freight flow data based on value of goods

ndash

Source Bureau of Transportation Statistics (2013)

Truck Rail Pipeline

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983089

fraserinstituteorg

lsquoBeyond the Borderrsquo and Regulatory Cooperation

In 983090983088983089983089 Canada and the United States announced an ambitious agreement

to reduce border costs by means of deeper bilateral regulatory and secur-

ity cooperation Te accord seeks to streamline various border proceduresmdash

some already in existence and some newmdashto improve intelligence-sharing

between law enforcement agencies mutual recognition of passenger baggage

screening improved frameworks for trusted trade programs harmoniza-

tion of NEXUS protocols streamlined supply chains enhanced trade com-

petitiveness collaboration in border infrastructure investment and deeper

cooperation in national security investigations Te agreement is known as

Beyond the Border A Shared Vision for Perimeter Security and Economic

Competitiveness (February 983092 983090983088983089983089)

Te Beyond the Border Vision accord also set up a Regulatory

Cooperation Council In it Canadian and American officials seek to reduce

red tape and harmonize regulations in certain key sectors o date the

Council has announced various plans affecting agriculture and food trans-

portation health personal care products workplace chemicals environmentnano materials and small business loans We summarize the key points of

progress made since 983090983088983089983089 in table 983097

-35

-25

-15

-5

5

15

25

35

20122011201020092008200720062005

Truck Rail Pipeline

Figure Growth rate of all surface modes of freight flows () ndash

Source Bureau of Transportation Statistics (2013) calculations by authors

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983090983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983097 Key elements of Beyond the Border and Regulatory Cooperation

Beyond the Border Program

Integrated Cargo Security Strategy (ICSS)December 2011

Reduces administrative duplication between Canada and the US byaddressing security risks in advance within the shipment supply chainand at the border (Canada Border Services Agency 2013)

Prince Rupert Pilot October 2012 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry via rail is examined by Canadian officials onbehalf of the US (Government of Canada 2013c)

Montreal Pilot January 2013 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry to the US via truck is examined by Canadianofficials on behalf of the US (Government of Canada 2013c)

Pre-load Air Cargo Targeting (PACT) Joint pilot by CBSA and Transport Canada to screen cargo pre-flight onCanada-bound airplanes at foreign airports (Canada Border ServicesAgency 2013)

Tamper Evident Technology PilotOctober 2012

Pilot collaboration between CBSA and US CBP to ensure containersremain sealed upon arrival at the US border (Canada Border Services

Agency 2013)

Truck Cargo Pre-Inspection PilotMarch 2013

Pilot program between the CBSA and the US CBP for pre-inspection ofsouthbound traffic into US (Canada Border Services Agency 2013)

Free and Secure Trade (FAST) PilotSarnia Ontario

Pilot program for usage of FAST lanes without Partners in Protection andCustoms Self Assessment programs (Government of Canada 2013c)

Canada-US Shiprider June 2013 Removal of jurisdictional barriers to improve law enforcement personnelin Windsor-Detroit and Vancouver-Blaine waterways (Government ofCanada 2013c)

EntryExit Initiative Phase II June 2013 Exchange entryexit data between the CBSA and US DHS on individualsat Canada-US land border crossings (Government of Canada 2013c)

Regulatory Cooperation ProgramMemorandum of Understanding between Transport Canada and the RailwayAssociation of Canada September 2013

Framework for Canadian rail emissions between 2011 to 2015(Government of Canada 2013d)

Canada-United States Perimeter Approachto Plant Protection September 2013

Draft framework for increased cooperation and reduction inadministrative duplication between the Canadian Food InspectionAgency (CFIA) and United States Animal and Plant Health InspectionService (APHIS) on trade in plants and plant products (Government ofCanada 2013d)

Common Electronic Submission GatewayPilot (CESG) August 2013

FDA and Health Canada will allow pharmaceutical firms to electronicallysubmit drug applications (Government of Canada 2013d)

Initiative to Align Veterinary DrugApprovals December 2012

Joint reviews between US FDA and Health Canada on veterinary drugproducts (Government of Canada 2013d)

Stricter Air Pollutant Emissions Environment Canada aligns car emissions beginning in 2017 with theUS Environmental Protection Agencyrsquos ldquoTier 3rdquo (Government of Canada2013d)

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The state of Canada-US relations in 983090983088983089983092 983090983091

fraserinstituteorg

On September 983092 983090983088983089983091 $983092983094983094 million in investment was allocated to the

Border Action plan by the Government of Canada in order expand two marine

container examination facilities (Government of Canada 983090983088983089983091c) $983091983091 million

was invested by the Government of Canada in the Asia Pacific Gateway and

rade Corridor Initiative (Government of Canada 983090983088983089983091c) Te Plan includes

an additional 983090983097 harmonization initiatives that will enhance trade activity

between Canada and the US

Neither Beyond the Border nor the Regulatory Cooperation Council

offer further investment or cost estimates on the initiatives described in table

983097 Moens and Gabler (983090983088983089983090) pointed to the need for both the Canadian and

American governments to provide data on border costs so that a cost-benefit

analysis can ensue Nonetheless the small steps of progress towards inte-

grating and harmonizing US and Canadian border practices remains a very

important (long-term) part of reducing the profile of the border

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983090983092 fraserinstituteorg

Canadian and American public perceptions

Tree observations are noteworthy in recent assessments of public percep-

tions between Americans and Canadians First Americans consistently have

a very high favourability rating of Canadians typically in the 983097983088 plus range

(table 983089983088 figure 983089983093) Both as a friend and a strategic ally Americans hold

Canadians in the most favourable light possible (table 983089983089) Disagreements over

policy between the two countries whether in defence and foreign affairs or

over border and trade issues do not move this fundamental asset Canadians

enjoy in dealing with their neighbour

Second Canadians do not have high expectations of either the

American or Canadian government regarding progress in bilateral relations

As table 983089983090 shows Canadians hold Obama in high regard (983094983091 percent) but

only 983093983092 percent expect progress from him in trade relations Prime Minister

Harper is rated slightly ahead of President Obama in terms of working hard

towards improving Canada-US relations (table 983089983091)

Tird and most significant in light of Canadarsquos Catch-983090983090 situation both

Canadians and Americans are more supportive of closer cooperation and inte-

gration policies than is the case for political representatives in either the United

States or Canada In two recent studies we showed how US Senators and House

Representatives are quite critical of Canada with regard to NAFA issues and bor-

der security (Moens and Gabler 983090983088983089983089) Similarly we found that among the three

major political parties in Canadarsquos parliament only one consistently expressed

itself in favour of closer ties with the United States (Moens and Gabler 983090983088983089983089)

A recent survey of American and Canadian (and Mexican) attitudes

towards free trade and NAFA show surprisingly strong data for more trade

integration In response to the statement ldquoTere should be more free trade

between the US Canada and Mexicordquo 983096983088 percent of Canadians approved

as did 983095983092 percent of Americans Even on border security Canadians andAmericans are more pro-cooperation and integration than their governmental

policies suggest In the US 983092983089 percent support a common perimeter while

983090983088 percent are opposed In Canada 983092983091 percent support it and 983091983088 percent are

opposed (Graves Pastor and Basaacutentildeez 983090983088983089983091) Terefore in terms of public

mandate both governments would have a case to work towards broader bilat-

eral (or trilateral) cooperation to lower trade barriers

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The state of Canada-US relations in 983090983088983089983092 983090983093

fraserinstituteorg

Table 983089983088 Canadian favourability rating among Americans (February 983090983088983089983090)

Veryfavourable

Mostlyfavourable

Mostlyunfavourable

Veryfavourable Not sure Total

favourableTotal

unfavourable

53 38 3 2 3 91 5

Note n=1015

Source Gallup Poll (2012)

Table 983089983089 Ally or enemy for Americans (June 983090983088983089983091)

Country Ally Friendly Unfriendly Enemy Total Ally andFriendly

Great Britain 66 25 2 1 91

Canada 61 33 2 1 94

China 11 44 26 14 55

Note n=1529Source Gallup Poll (2013)

88

90

92

94

96

98

201220112010200920082007

Figure Canadian favourability among Americans () ndash

Source Gallup Poll (2012)

f a

v o u r a

b l e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983090 What effect will Obama have on Canada-US relations (November 983090983088983089983090)

Canadians Americans

Positive Negative None Positive Negative None

Relationship 62 5 34 48 12 40

Trade 54 10 35 48 12 39

Harmonizing 53 8 40 47 14 39

Note n=1066

Source Abacus Data (2012)

Table 983089983091 Has each leader worked hard to improve Canada-US relations

(July 983090983088983089983090)

Country Agree Disagree Not sure

Stephen Harper 58 32 10

Barack Obama 53 32 15

Note Sample of Canadians

Source HarrisDecima (2012)

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fraserinstituteorg 983090983095

US policy uncertainty

Canadian economic prospects face their most important challenge in the

United States Te US economic recovery has been modest and real GDP

growth so far has remained below the post-World War II average of post-

recession periods (figure 983089983094) As we noted above the less-than-stellar US

recovery is made even more challenging for Canadian traders in that pro-

ductivity gains in Canada are lagging while the Canadian dollar remains high

On top of that several American-imposed regulatory obstacles to free trade

are depressing trade prospects in crude oil red meat and public works pro-

curement Tese impediments reduce Canadian competitive access to the

US market

A high level of public spending until the January 983090983088983089983091 sequester and

ongoing monetary stimulation have not produced notable US GDP growth

Te seven post-recession periods below show the current average to be well

below the historical average (Young 983090983088983089983091)

983089983097983092983096-983089983097983093983095 983091983096983088

983089983097983093983096-983089983097983094983095 983092983090983096

983089983097983094983096-983089983097983095983095 983091983089983096

983089983097983095983096-983089983097983096983095 983091983089983093

983089983097983096983096-983089983097983097983095 983091983088983093

983089983097983097983096-983090983088983088983095 983090983097983097

983090983088983088983096-983090983088983089983091 983088983095983091

While economic growth has been modest growth in the public debt

has not (figure 983089983095) Publicly held debt in the US is now at 983095983091 percent of GDP

the highest since 983089983097983092983094 (Congressional Budget Office 983090983088983089983091)

Te widening gap between federal government outlays and revenueshas only recently been capped by the Sequester (figure 983089983096) However the

budget Sequester is temporary and final resolution of public spending and

taxation levels remains unclear given repeated gridlock in presidential-con-

gressional policy making High debt levels combined with stalemate over

taxes and budget cuts have produced a case of policy instability or uncer-

tainty in the last five years (Baker Bloom and Davis 983090983088983089983091)

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983090983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

US policy uncertainty is further aggravated by inaction on the large

lsquoentitlementrsquo programsmdashSocial Security Medicare and Medicaidmdashwhich are

the major drivers of the long-term gap in revenues and spending

-4

-2

0

2

4

6

8

201220062000199419881982197619701964

Figure US GDP growth rate ndash ( forecast)

Source The World Bank (2013b) OECD (2013)

-10

-8

-6

-4

-2

0

0

20

40

60

80

100

20122011201020092008200720062005200420032002

Government deficit as a percentage of GDP Government debt as a percentage of GDP

Figure US Government deficit and debt as a percentage of GDP ndash

Source Congressional Budget Office (2013)

D e fi c i t p e r c e n t a g e ( ) D

e b t p er c en t a g e ( )

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The state of Canada-US relations in 983090983088983089983092 983090983097

fraserinstituteorg

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

20122003199319831973

Revenue Outlays

Figure US Government revenue and outlays ndash ( US$ billions)

Source Congressional Budget Office (2013)

1 9 8 3 U S $ b i l l i o n s

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983091983088 fraserinstituteorg

Trade diversification

Given the weakness in near-term US opportunities Canadians are (again)

wondering how to pursue trade diversification away from the United States

Te objective is logical and if achieved will prove advantageous but various

trends in trade and investment show that diversification for Canada is a slow

and arduous journey (table 983089983092)

In terms of overall share exports to China in the last five years have

doubled but the numbersmdashfrom 983090983089983095 percent to 983092983090983094 percentmdashremain rela-

tively low In the same period the US-bound share declined by 983091 percent but

remains a towering 983095983092983093983092 percent Te pattern of small overall impact applies

to all the other top trading partners For example exports to the UK have

increased but exports to Japan and Mexico have essentially stalled When we

consider average export growth rates over the last five years (table 983089983093) we see

a very strong rate for China (983089983093983093 percent) and strong rates for the UK and

South Korea (983096983097 percent and 983094983097 percent) However a 983089983093 percent increase in a

983092 percent overall trade share produces little change Te point we are making

is that at this rate and pattern of trade lsquodiversificationrsquo it will actually take a

very long timemdashwhile relatively small upward trends in trade with the United

States could have a quick and very large impact in the opposite direction

On the import side we notice more trade diversification with the US

share at 983093983088 percent and the Chinese share at 983089983089 percent (table 983089983094) Te Chinese

growth rate on the import side is less than on the export side (table 983089983095) Te

most revealing number may be the high average over five years for Mexico

at 983097 percent Tis could be indicative of a growing supply chain with Mexico

While foreign direct investment (FDI) is not a direct indicator of future

trade trends in investment may harbinger change In terms of outbound

FDI we notice that only a small segment (less than 983089983088 percent) is targeted

for manufacturing (table 983089983096) It is investment in this category in which onewould expect growth in supply chains

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The state of Canada-US relations in 983090983088983089983092 983091983089

fraserinstituteorg

Table 983089983092 Canadarsquos merchandise exports top ten destinations 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 3291 1 777 2361 1 751 2564 1 749

China 92 4 22 97 3 31 114 3 33

UK 114 2 27 105 2 33 141 2 41

Japan 97 3 23 73 4 23 79 4 23

Mexico 51 5 12 42 5 13 43 5 13

Netherlands 32 8 08 24 8 08 28 8 08

South Korea 34 7 08 31 7 10 32 7 09

Germany 39 6 09 33 6 10 34 6 10

France 28 9 07 23 9 07 20 10 06

Brazil 23 10 05 14 10 04 22 9 06

Total 4237 3145 3424

2011 2012Average

shareValue Rank Share Value Rank Share

US 2750 1 737 2783 1 745 752

China 140 3 38 159 2 43 33

UK 157 2 42 154 3 41 37

Japan 89 4 24 85 4 23 23

Mexico 46 5 12 44 5 12 12

Netherlands 40 7 11 37 6 10 09

South Korea 43 6 11 30 7 08 09

Germany 33 8 09 29 8 08 09

France 26 9 07 26 9 07 07

Brazil 24 10 06 21 10 06 06

Total 3732 3734

Source Industry Canada (2013b)

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983091983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983093 Canadian export growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 56 7 -281 9 106 = 5

China 101 6 65 1 187 3

UK 16 9 -73 2 358 2

Japan 202 3 -250 7 106 = 5

Mexico 179 4 -178 6 43 9

Netherlands -85 10 -255 8 183 4

South Korea 276 2 -80 3 52 8

Germany 160 5 -167 4 54 7

France 36 8 -174 5 -122 10

Brazil 706 1 -380 10 603 1

2011 2012Average

Rank Rank

US 104 8 27 2 02

China 270 4 152 1 155

UK 148 6 -02 4 90

Japan 161 5 -29 6 38

Mexico 94 9 -16 5 24

Netherlands 475 1 -55 7 53

South Korea 374 2 -272 10 70

Germany 05 10 -95 9 -09

France 311 3 23 3 15

Brazil 109 7 -92 8 189

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983091

fraserinstituteorg

Table 983089983094 Canadarsquos merchandise imports top ten sources 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 1992 1 524 1633 1 511 1745 1 504

China 374 2 98 347 2 109 382 2 110

Mexico 157 3 41 145 3 45 190 3 55

Japan 134 4 35 108 4 34 115 4 33

Germany 111 5 29 95 5 30 97 5 28

UK 110 6 29 82 6 26 92 6 27

South Korea 53 9 14 52 7 16 53 7 15

Algeria 67 7 18 33 10 10 31 10 09

Italy 45 10 12 39 9 12 40 9 12

France 53 8 14 49 8 15 47 8 13

Total 3804 3194 3465

2011 2012Average

shareValue Rank Share Value Rank Share

US 1846 1 496 1922 1 506 508

China 402 2 108 417 2 110 107

Mexico 205 3 55 210 3 55 50

Japan 109 4 29 123 4 33 33

Germany 107 5 29 118 5 31 29

UK 86 6 23 70 6 18 25

South Korea 55 7 15 52 7 14 15

Algeria 46 9 12 49 8 13 12

Italy 43 10 11 43 9 11 12

France 46 8 12 41 10 11 13

Total 3723 3796

Source Industry Canada (2013b)

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983091983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983095 Old and new trade prospectsmdashimport growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 29 8 -178 7 89 5

China 112 4 -70 2 123 3

Mexico 43 7 -77 4 337 1

Japan -11 10 -192 8 89 4

Germany 105 5 -149 6 44 7

UK 95 6 -252 9 141 2

South Korea 120 3 -14 1 36 8

Algeria 518 1 -511 10 -50 10

Italy 11 9 -132 5 48 6

France 191 2 -70 3 -35 9

2011 2012Average

Rank Rank

US 88 5 57 4 17

China 82 6 53 5 60

Mexico 111 3 39 6 91

Japan -29 9 151 1 01

Germany 132 2 117 2 50

UK -36 10 -173 10 -45

South Korea 76 7 -37 8 37

Algeria 533 1 91 3 116

Italy 95 4 23 7 09

France 22 8 -97 9 02

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983093

fraserinstituteorg

In terms of overall Canadian outbound FDI stocks in the US remain

very high despite the recent US recession while growth in stock in Asia is

modest (figure 983089983097) When we examine Canadian FDI in the so-called BRIC

states we notice that investment in both China and India is relatively small

Canadian mining investment in Brazil is much larger (figure 983090983088) In fact when

we examine amounts of FDI we find that Canada is not really a big BRIC

investor other than Brazil Chile Hong Kong and Peru are larger FDI recipi-

ents than China and India (figure 983090983089)

In terms of FDI flowing into Canada we notice the very large share

(983090983096983094983093 percent) in manufacturing which indicates both the predominant

share of US FDI and the extensive integrated supply chains in Canada-US

manufacturing (table 983089983097) Even more than for outbound FDI inflow stocks

show very large US preponderance (figure 983090983090) Such continued concentra-

tion of US FDI in Canada suggests that Canadian trade diversification is not

just a decision to be made by Canadian producers

Like trade growth Chinese FDI growth in Canada is positive but the

overall numbers are small and do not show rapid growth in the last 983091 years

(figure 983090983091)

Table 983089983096 Top industries for outward stocks of FDI 983090983088983089983090

Category Value Share

Mining oil and gas extraction 1099 188

Oil and gas subcategory 542 93

Manufacturing 569 97

Finance and insurance 2334 399

Management of companies and enterprises 757 129

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

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983091983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

1

2

3

4

5

6

7

8

9

10

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n s

Figure Canadian foreign direct investment (stock) BRIC ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Brazil PRC India Russia

0

20

4060

80

100

120

140

160

180

200

220

240

260

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) various regions

ndash

Notes Excluding Mexico Canadian FDI to Mexico in 2012 was $557 billion

Foreign Direct Investment measures the purchase of various forms of capital stock abroad

However tax havens (Barbados Bermuda etc) are frequently found to be some of the highest

recipients of FDI In reality tax havens do not reflect economic growth as FDI figures invested

into tax havens are often reinvested back to the source country in a concept known as

round-tripping (Financial Post 2013) We have accounted for tax havens by removing them from

tables and figures in this section The numbers corresponding to Figure 19 would be Barbados

($593 billion) Bermuda ($118 billion) British Virgin Islands ($21 billion) Cayman Islands ($302

billion)

Source Foreign Affairs Trade and Development Canada (2013c)

US Europe Asia amp Oceania Central amp South America Africa

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The state of Canada-US relations in 983090983088983089983092 983091983095

fraserinstituteorg

Table 983089983097 Top industries for inward stocks of FDI 983090983088983089983090

Category Value Share

Oil and gas extraction 766 147

Manufacturing 1492 287

Petroleum and coal products manufacturing 377 72

Wholesale trade 395 76

Finance and insurance 699 134

Management of companies and enterprises 999 192

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

0

2

4

6

8

10

12

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) Chile Hong Kong

Peru amp Korea ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Chile Hong Kong Peru Korea

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fraserinstituteorg

0

40

80

120

160

200

240

280

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Foreign direct investment (stock) in Canada from top three

countries ndash

Source Foreign Affairs Trade and Development Canada (2013c)

US Netherlands UK

0

2

4

6

8

10

12

201220112010200920082007

2 0 0 2 C A $ b

i l l i o n s

Figure Foreign direct investment (stock) in Canada from China

ndash

Source Foreign Affairs Trade and Development Canada (2013c)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

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Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

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References

Abacus Data (983090983088983089983090 November 983090983088) Beyond the Canadian-American Border

lthttpabacusdatacawp-contentuploads983090983088983089983090983089983089Can-AM_Report_CABC_

Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5662

The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

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983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5862

The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5962

983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6062

The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6162

983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 19: Canadas Catch 22 State of Canada Us Relations in 2014

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983089983090 fraserinstituteorg

Trade and regulatory barriersdisputes

Table 983096 provides a synopsis of the major trade disputesbarriers that have

played a role in bilateral relations in the last five years and that are pertinent

for the 983090983088983089983092 period (pages 983089983094-983089983095) Te two large disputesmdashKeystone XL and

Mandatory Country-of-Origin Labeling (MCOOL) on red meatmdashare more

ominous than they may seem First both in crude oil products and in cattle

and hogs the United States is unilaterally disrupting or dismantling a well-

established integrated sector Canada has started attempts to diversify its oil

transportation structure including more rail and new pipeline routes But

as all proposed alternative pipelines have shown the alternatives are contro-

versial and at best years away from making a difference Meanwhile there is

considerable risk in putting too much crude oil on rail as its accident rates

are higher than pipe

Canadian threats to counter US MCOOL action with tariffs on food

products are not going to have much impact in the near future Moreover

an escalating tariff war on food products cannot be won by Canada and will

ultimately harm consumers on both sides of the border US defiance of two

WO rulings also means more uncertainty for Canadian traders

Keystone XL pipeline

Proposed in 983090983088983088983096 the Keystone XL (KXL) extension is part of a pipeline sys-

tem connecting Alberta oil sands and US mid-West and Gulf region refineries

KXL is a 983089983096983097983095 km crude oil pipeline with a capacity of 983092983094983093983088983088983088 barrels per

day (Hussain 983090983088983089983091) It is a substantial private infrastructure proposal that

will create employment and guarantee a secure energy source for the United

States (Millington and Murillo 983090983088983089983091) It is by no means a new feature in

Canada-US energy relations as a dense network of oil and electricity carri-ers cross the border at multiple points

What is unprecedented is that the permit process is now in its sixth

year and the final resolution remains uncertain (by US law a cross-border line

requires Department of State approval) If not resolved in 983090983088983089983092 the question

may well be handed over to the next president after 983090983088983089983094 Te policy uncertainty

associated with KXL approval has by far the largest impact on Canada-US trade

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 2062

The state of Canada-US relations in 983090983088983089983092 983089983091

fraserinstituteorg

relations Te dragged-out procedure has chilled relations Te southern leg of

KXL has been completed and the original route objection by Nebraska has been

resolved What remains ostensibly the problem is that the US administration

has identified this heavy oil as a component of its policy objective of curbing

the emission of greenhouses gasses to reduce global warming

Te impact of this pipeline delay in the 983090983095 million barrels per day (bpd)

export of Canadian oil products to the USA reverberates at various levels

Across Canada investment in mining oil and gas extraction for 983090983088983089983091 is pre-

dicted to decrease by 983090983095 percentmdashthe largest decline since the 983090983088983088983096 recession

(Statistics Canada 983090983088983089983091f) In Alberta investment is predicted to increase by

only 983088983089 percent (Statistics Canada 983090983088983089983091f) Capital investment in oil and gas

extraction has not recovered to pre-983090983088983088983096 levels (Industry Canada 983090983088983089983091a)

While the industry has become increasingly dependent on rail trans-

port to move product it is a costly alternative It can cost up to three times

as much as pipeline transport (Millington and Murillo 983090983088983089983091) and its limita-

tions are self-evident because rail movement of oil is constrained by the lim-

ited availability of rail cars In 983090983088983089983090 983089983091983088983088983088983088 bpd of heavy crude was being

transported by rail Tis is expected to rise to 983092983090983093983088983088983088 bpd by the end of

983090983088983089983092 falling short of the 983092983094983093983088983088983088 bpd which could have been moved through

KXL (Hussain 983090983088983089983091) Te forced increase in rail transport has resulted in

unintended costs for the industry a total of US$983089 billion must be invested for

new rail terminals and another US$983092ndash983093 billion for new rail cars (Lewis 983090983088983089983091)

Rail transport is both more costly and more dangerous A recent study

concluded that ldquopipeline transportation is safer than transportation by road

rail or barge as measured by incidents injuries and fatalitiesrdquo (Green amp

Furchtgott-Roth 983090983088983089983091) It is not inconceivable that another major oil acci-

dent either in Canada or the USAmdashsuch as took place in Quebec in July 983090983088983089983091

killing 983092983095 peoplemdashwould result in a moratorium on oil transport by rail with

grave consequences for Canadian producers

983090983088983088983090 Mandatory Country-of-Origin Labeling

Mandatory Country-of-Origin Labeling (MCOOL) is a provision mandated

by Congressional law and first implemented in 983090983088983088983096 Te measure imposes

strict segregation rules on American Canadian and Mexican cattle and hogs

and the subsequent slaughtering and processing of these animals to producebeef and pork products for retail sale Te stated purpose is to create labels

that indicate the origin in part or in whole of the product In effect it is a

veiled trade barrier because it gives US animals and products a competitive

advantage due to higher labeling inventory and processing costs for equiva-

lent Canadian products

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983089983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983096 Synopsis of trade disputes in Canadian-American relations in 983090983088983089983091

Dispute Impact and cost Prospect for resolution

Keystone XL Pipeline Very serious Poor

2008 proposal for a 1897

km 465000 bpd crude oilpipeline spanning fromAlberta down to Nebraska

Downward pressure on investment

Lost wages January 2012postponement is costing US $47million a day in lost wages (ConsumerEnergy Alliance 2013)

Continuation of crude oil pricediscounts due to lack of infrastructure

Costly alternative rail has emerged as atransportation alternative but can costup to three times as much as pipelinetravel (Millington and Murillo 2013)

Permit postponed twice

Resolution is not transparent

Rising risk of decision deferral past 2016

Mandatory Country-of-OriginLabelling (MCOOL)

Serious Poor

2008 CongressionalLaw mandating rulesfor segregated livestockprocessing and packagingand a labeling structure inorder to have food labelsindicate origin of product

Annual cost to Canadian beef and porksector of $1 billion

Deconstruction of a highly integratedtrilateral supply chain industry

MCOOL adds no animal health or foodsafety benefits

US has defied both WTO complaint andthe core part of the WTO Appeal ruling

2013 US reaction has been to strengthenthe discriminatory provision banning co-mingling of meats altogether

Canada plans to retaliate with tariffs butthis is a costly gambit with low chance ofsuccess

Softwood Lumber Agreement Moderate Good

In 2011 American softwoodcompanies took theirCanadian counterparts to theLondon Court of InternationalArbitration accusing themof circumventing the SLA(Foreign Affairs Trade andDevelopment Canada 2012a)

If in violation Canadian industry wouldface $380 million in penalties (TheCanadian Press 2012)

The London Court of InternationalArbitration in 2012 ruled in favor ofCanada (Foreign Affairs Trade andDevelopment Canada 2012a)

SLA was to expire in 2013 but Canadaand the USA extended it until 2015 (CBCNews 2012)

Long-term free trade in lumber needs toreplace SLA

Buy American Provision Serious Partial resolution but high risk ofrecurring Buy American legislation

2009 American Recovery andReinvestment Act

Exclusion of Canadian products andproduction sharing in US public worksprocurement

Canada-US Procurement Agreement in2010 which allowed for the purchaseof Canadian goods on seven US

infrastructure projects valued at morethan $7777000

Canada needs to seek a comprehensiveagreement in order to escape futureAmerican protectionism with allprovinces on board and compliant withthe WTO provision

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The state of Canada-US relations in 983090983088983089983092 983089983093

fraserinstituteorg

Dispute Impact and cost Prospect for resolution

Canadian Wheat Board Long-term benefit Completed

Canadarsquos mandatory wheat

marketing board monopsonyended in 2011

Frequent US action against CWB in the

past will now end as wheat marketingin Canada turns fully market based

Intellectual Property Rights Moderate potential cost Partially resolved

Canada has been on theSpecial 301 Priority Watch Listby the United States TradeRepresentative since 1995

Ongoing threat of US Trade Action andlegal action

Canadian domestic complianceincluding

Strengthening data protection

Participation in Anti-counterfeiting TradeAgreement (ACTA in 2013)

Enacted the Combating CounterfeitProducts Act (2013)

Started the process of strengthening

the Copyright Act and implementingWorld Intellectual Property OrganizationInternet Treaties

In recognition of which Canada has beenremoved from the Special 301 PriorityWatch List

Prescription drugs Serious potential for trade action Indirect progress

The US complaint againstCanada

Imposing price ceilings thatshifts the cost burden of RampDto US firms

Weak protection ofintellectual property rights rethird party sales

Slow prescription drugapproval process causingreduced market access

US firms experience lost revenues andtrade action is a risk

In 2013 CETA agreement with theEuropean Union Canada agrees to givefull patent protection to new drugs fortwo years

Two-year rule may be transferable tofuture Canada-US resolution

Table 983096 continued

Canada and the United States have had a deeply integrated market in

this sector since the early 983089983097983097983088s Animal health and food safety standards have

been largely harmonized As a result highly efficient supply-chain production

methods have made this industry quite efficient However the imposition of

MCOOL has changed all that (Moens amp Leon 983090983088983089983090) Te cost differential haswidened and Canadian exports have dropped dramatically Since 983090983088983088983096 the

cattle sector has lost $983094983092983088 million per year and the hog sector has lost $983093983088983088

million a year (Te Canadian Press 983090983088983089983091a)

In 983090983088983089983090 the World rade Organization (WO) ruled in Canadarsquos favor by

concluding that MCOOL is discriminatory Te WO gave the US until May 983090983091

983090983088983089983091 to act but on that same day the USDA imposed regulatory changes that

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983089983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

actually strengthened the provisions of MCOOL In retaliation the Canadian

government released a list of US exports to Canada that would be subjected

to tariffs and it is preparing to seek a compliance panel at the WO Until this

situation is resolved the Canadian government predicts a continuing annual

loss of $983089 billion for the Canadian red meat sector (Te Canadian Press 983090983088983089983091a)

Softwood lumber

In 983090983088983089983089 several American softwood companies took their Canadian counter-

parts to the Court of International Arbitration in London accusing them of cir-

cumventing the Softwood Lumber Agreement of 983090983088983088983094 (Foreign Affairs rade

and Development Canada 983090983088983089983090a) Te dispute centered on the accelerating pace

of lumber harvests resulting from the pine beetle infestation Te stakes were

high $983091983096983088 million in penalties should Canada lose (Te Canadian Press 983090983088983089983090)

In 983090983088983089983090 the Court of International Arbitration ruled in Canadarsquos favor

(Foreign Affairs rade and Development Canada 983090983088983089983090a) In addition while

the Softwood Lumber Agreement was set to expire in 983090983088983089983091 the Canadian

and American governments successfully negotiated an extension of the

Agreement until 983090983088983089983093 (CBC News 983090983088983089983090) Te fact remains that as long as a

large part of Canadarsquos softwood lumber is managed in terms of quotas and

the stumpage fee system US trade action is very likely

lsquoBuy Americanrsquo provision

Te 983090983088983088983097 American Recovery and Reinvestment Act (ARRA which expired

on September 983091983088 983090983088983089983089) and the more recent 983090983088983089983089 American Jobs Act stipu-

lated that steel iron and other goods used in the repair and construction of

infrastructure projects in the US (highways bridges mass transit and fed-

eral buildings) must be manufactured in the United States (Matthiesen 983090983088983089983089)

In response to ARRA Canada and the US signed the Canada-US

Procurement Agreement in 983090983088983089983088 which allowed for the purchase of Canadian

goods on seven US infrastructure projects valued at more than $983095983095983095983095983088983088983088

or within the 983091983095 states subject to the WO GPA (Government of Canada

983090983088983089983091a) Te 983090983088983089983089 American Jobs Act did not pass in Senate and is thus moot

While the ARRA dispute was partially resolved lsquoBuy Americanrsquo anda counter position of lsquoBuy Canadianrsquo can flare up on either side of the bor-

der Canadian industry is most vulnerable in this uncertainty Te Canadian

government ought to seek a comprehensive Buy American exemption to

escape future American protectionism In so doing all provincial govern-

ments need to be on board in order to make the WO and NAFA rules

function optimally

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The state of Canada-US relations in 983090983088983089983092 983089983095

fraserinstituteorg

Canadian Wheat Board (CWB)

In 983090983088983089983089 the Canadian government removed the monopsony held by the

Canadian Wheat Board Tis unilateral action offers a successful reduction

in bilateral trade distortion oday the CWB continues to operate as a mar-

keting group

Intellectual Property Rights (IPR)

From 983089983097983097983093 through 983090983088983089983091 Canada was on the Special 983091983088983089 Priority Watch

List by the United States rade Representative Te US complaint was that

protection and enforcement of IPR in Canada were weak Te Special 983091983088983089

Priority Watch List is designed to identify US trading partners that are the

worst offenders in IPR protection (Embassy of the United States Ottawa

Canada 983090983088983089983091)

Although the issue is not completely resolved Canada has made sig-

nificant progress in recent years Te federal government has strengthened

data protection regulations criminalized the use of camcorders in theaters

and participates in the Anti-Counterfeiting rade Agreement (ACA) nego-

tiations (983090983088983089983091) Most recently Canada enacted the Combatting Counterfeit

Products Act (Embassy of the United States Ottawa Canada 983090983088983089983091) Te

Canadian Government is in the process of strengthening the Copyright Act

and implementing World Intellectual Property Organization Internet reaties

(Embassy of the United States Ottawa Canada 983090983088983089983091)

As a result of these steps Canada was removed from the Special 983091983088983089

Priority Watch List in 983090983088983089983091

Prescription drugs

Prescription drug prices in Canada are relatively low due to a price ceil-

ing mandated by Canadarsquos healthcare system In addition Health Canada

approval times for prescription drugs significantly lag behind their counter-

parts in the United States and the European Union (Barua and Esmail 983090983088983089983091)

US lawmakers have repeatedly expressed their concerns over cheap prescrip-

tion drugs re-entering the US from Canada (Moens and Gabler 983090983088983089983089) TeEU also asked Canada to strengthen IPR protections for prescription drugs

(Lexchin and Gagnon 983090983088983089983091) Since the signing of the CEA agreement in

principle on October 983089983096 983090983088983089983091 the issue between Canada and the EU is now

resolved (Waldie 983090983088983089983091) Canada has agreed to ldquoEU demands for patent pro-

tection for up to two years on brand-name drugsrdquo (Blanchfield 983090983088983089983091)

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983089983096 fraserinstituteorg

State of the border andregulatory cooperation

Te decline in Americans traveling to Canada corresponds with the US

Greenback losing value against the Canadian dollar (figures 983089983088 983089983089) However

when we consider the extent of the decline in total numbers it appears dispro-

portionate Te change in American travel suggests instead a bigger problem

following the 983097-983089983089 shock Te imposition of new border transit requirements

such as passports as well as longer wait times and more security screening

has likely dampened US travel across this international boundary Given the

modest economic recovery in the USA from the beginning of 983090983088983089983088 onward

one would expect disposable income including for travel to trend back up

Instead the numbers remain stagnant at around 983090983088 million less than half the

number of 983090983088983088983090

While an overall national average for border wait times is not avail-

able data on major border crossings in both Central Canada and British

Columbia indicate that no reductions in wait times have been achieved

between 983090983088983088983094 and 983090983088983089983089 (figure 983089983090) Te problem of inefficiency as presented

by the Canada-US border goes well beyond wait times It includes inefficient

activity away from the border such as extra warehousing and costs of com-

plying with various facilitated traveler and goods programs such as FAS for

trucks loads and drivers

Tere are consistent cost differences between domestic and cross-bor-

der truck-borne trade which point to significant border costs ldquoFor exports

to the US these costs added 983088983097 percent to the delivered price of goods in

983090983088983088983092 Tis figure fell to 983088983092 percent in 983090983088983088983097 hellip Higher fixed costs per shipment

accounted for most of the additional cost of transporting goods to the USrdquo

(Brown and Anderson 983090983088983089983090) When we consider that in the manufacturingsector parts cross the border several times in various stages of assembly we

realize how this cost accumulates and defeats the efficiency gains otherwise

generated by integrated supply chain manufacturing Border costs are typ-

ically passed on to the consumer as fixed costs per shipment

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The state of Canada-US relations in 983090983088983089983092 983089983097

fraserinstituteorg

An unprecedented border problem has arisen in the current USAdministrationrsquos lengthy (six years) review of the permitting of a pipeline

border crossing as proposed in the Keystone XL project As a result oil-by-

rail transport has recently increased while the pipeline mode of Canada-US

trade has seen a drop in growth in the 983090983088983089983089983089983090 period ( figures 983089983091 983089983092)

0

10

20

30

40

50

201220112010200920082007200620052004200320022001200019991998

Figure Travellers entering Canada ndash

Source Statistics Canada (2013e)

US residents Non-US residents

0

3

6

9

12

15

18

0

03

06

09

12

15

18

20122011201020092008200720062005200420032002

Trips Spending US$CA$ (Secondary axis)

Figure US overnight travel to Canada ndash

Source Statistics Canada (2011) Bank of Canada (2013b)

M i l l i o n s o f t r i p

s N o m i n a l C A $ b i l l i o n s

U S $ C A $ ex c h a n

g er a t e

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983090983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

5

10

15

20

201120102009200820072006

Northbound average delay Southbound average delay

Figure Peace Arch average border wait time ndash

Source Cascade Gateway Data (2013)

M i n u t e s

0

25

50

75

100

125

150

175

200

225

250

275

300

201220112010200920082007200620052004

2 0 0 4

U S $ b

i l l i o n s

Figure All surface modes of freight flow data based on value of goods

ndash

Source Bureau of Transportation Statistics (2013)

Truck Rail Pipeline

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983089

fraserinstituteorg

lsquoBeyond the Borderrsquo and Regulatory Cooperation

In 983090983088983089983089 Canada and the United States announced an ambitious agreement

to reduce border costs by means of deeper bilateral regulatory and secur-

ity cooperation Te accord seeks to streamline various border proceduresmdash

some already in existence and some newmdashto improve intelligence-sharing

between law enforcement agencies mutual recognition of passenger baggage

screening improved frameworks for trusted trade programs harmoniza-

tion of NEXUS protocols streamlined supply chains enhanced trade com-

petitiveness collaboration in border infrastructure investment and deeper

cooperation in national security investigations Te agreement is known as

Beyond the Border A Shared Vision for Perimeter Security and Economic

Competitiveness (February 983092 983090983088983089983089)

Te Beyond the Border Vision accord also set up a Regulatory

Cooperation Council In it Canadian and American officials seek to reduce

red tape and harmonize regulations in certain key sectors o date the

Council has announced various plans affecting agriculture and food trans-

portation health personal care products workplace chemicals environmentnano materials and small business loans We summarize the key points of

progress made since 983090983088983089983089 in table 983097

-35

-25

-15

-5

5

15

25

35

20122011201020092008200720062005

Truck Rail Pipeline

Figure Growth rate of all surface modes of freight flows () ndash

Source Bureau of Transportation Statistics (2013) calculations by authors

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983090983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983097 Key elements of Beyond the Border and Regulatory Cooperation

Beyond the Border Program

Integrated Cargo Security Strategy (ICSS)December 2011

Reduces administrative duplication between Canada and the US byaddressing security risks in advance within the shipment supply chainand at the border (Canada Border Services Agency 2013)

Prince Rupert Pilot October 2012 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry via rail is examined by Canadian officials onbehalf of the US (Government of Canada 2013c)

Montreal Pilot January 2013 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry to the US via truck is examined by Canadianofficials on behalf of the US (Government of Canada 2013c)

Pre-load Air Cargo Targeting (PACT) Joint pilot by CBSA and Transport Canada to screen cargo pre-flight onCanada-bound airplanes at foreign airports (Canada Border ServicesAgency 2013)

Tamper Evident Technology PilotOctober 2012

Pilot collaboration between CBSA and US CBP to ensure containersremain sealed upon arrival at the US border (Canada Border Services

Agency 2013)

Truck Cargo Pre-Inspection PilotMarch 2013

Pilot program between the CBSA and the US CBP for pre-inspection ofsouthbound traffic into US (Canada Border Services Agency 2013)

Free and Secure Trade (FAST) PilotSarnia Ontario

Pilot program for usage of FAST lanes without Partners in Protection andCustoms Self Assessment programs (Government of Canada 2013c)

Canada-US Shiprider June 2013 Removal of jurisdictional barriers to improve law enforcement personnelin Windsor-Detroit and Vancouver-Blaine waterways (Government ofCanada 2013c)

EntryExit Initiative Phase II June 2013 Exchange entryexit data between the CBSA and US DHS on individualsat Canada-US land border crossings (Government of Canada 2013c)

Regulatory Cooperation ProgramMemorandum of Understanding between Transport Canada and the RailwayAssociation of Canada September 2013

Framework for Canadian rail emissions between 2011 to 2015(Government of Canada 2013d)

Canada-United States Perimeter Approachto Plant Protection September 2013

Draft framework for increased cooperation and reduction inadministrative duplication between the Canadian Food InspectionAgency (CFIA) and United States Animal and Plant Health InspectionService (APHIS) on trade in plants and plant products (Government ofCanada 2013d)

Common Electronic Submission GatewayPilot (CESG) August 2013

FDA and Health Canada will allow pharmaceutical firms to electronicallysubmit drug applications (Government of Canada 2013d)

Initiative to Align Veterinary DrugApprovals December 2012

Joint reviews between US FDA and Health Canada on veterinary drugproducts (Government of Canada 2013d)

Stricter Air Pollutant Emissions Environment Canada aligns car emissions beginning in 2017 with theUS Environmental Protection Agencyrsquos ldquoTier 3rdquo (Government of Canada2013d)

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The state of Canada-US relations in 983090983088983089983092 983090983091

fraserinstituteorg

On September 983092 983090983088983089983091 $983092983094983094 million in investment was allocated to the

Border Action plan by the Government of Canada in order expand two marine

container examination facilities (Government of Canada 983090983088983089983091c) $983091983091 million

was invested by the Government of Canada in the Asia Pacific Gateway and

rade Corridor Initiative (Government of Canada 983090983088983089983091c) Te Plan includes

an additional 983090983097 harmonization initiatives that will enhance trade activity

between Canada and the US

Neither Beyond the Border nor the Regulatory Cooperation Council

offer further investment or cost estimates on the initiatives described in table

983097 Moens and Gabler (983090983088983089983090) pointed to the need for both the Canadian and

American governments to provide data on border costs so that a cost-benefit

analysis can ensue Nonetheless the small steps of progress towards inte-

grating and harmonizing US and Canadian border practices remains a very

important (long-term) part of reducing the profile of the border

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983090983092 fraserinstituteorg

Canadian and American public perceptions

Tree observations are noteworthy in recent assessments of public percep-

tions between Americans and Canadians First Americans consistently have

a very high favourability rating of Canadians typically in the 983097983088 plus range

(table 983089983088 figure 983089983093) Both as a friend and a strategic ally Americans hold

Canadians in the most favourable light possible (table 983089983089) Disagreements over

policy between the two countries whether in defence and foreign affairs or

over border and trade issues do not move this fundamental asset Canadians

enjoy in dealing with their neighbour

Second Canadians do not have high expectations of either the

American or Canadian government regarding progress in bilateral relations

As table 983089983090 shows Canadians hold Obama in high regard (983094983091 percent) but

only 983093983092 percent expect progress from him in trade relations Prime Minister

Harper is rated slightly ahead of President Obama in terms of working hard

towards improving Canada-US relations (table 983089983091)

Tird and most significant in light of Canadarsquos Catch-983090983090 situation both

Canadians and Americans are more supportive of closer cooperation and inte-

gration policies than is the case for political representatives in either the United

States or Canada In two recent studies we showed how US Senators and House

Representatives are quite critical of Canada with regard to NAFA issues and bor-

der security (Moens and Gabler 983090983088983089983089) Similarly we found that among the three

major political parties in Canadarsquos parliament only one consistently expressed

itself in favour of closer ties with the United States (Moens and Gabler 983090983088983089983089)

A recent survey of American and Canadian (and Mexican) attitudes

towards free trade and NAFA show surprisingly strong data for more trade

integration In response to the statement ldquoTere should be more free trade

between the US Canada and Mexicordquo 983096983088 percent of Canadians approved

as did 983095983092 percent of Americans Even on border security Canadians andAmericans are more pro-cooperation and integration than their governmental

policies suggest In the US 983092983089 percent support a common perimeter while

983090983088 percent are opposed In Canada 983092983091 percent support it and 983091983088 percent are

opposed (Graves Pastor and Basaacutentildeez 983090983088983089983091) Terefore in terms of public

mandate both governments would have a case to work towards broader bilat-

eral (or trilateral) cooperation to lower trade barriers

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The state of Canada-US relations in 983090983088983089983092 983090983093

fraserinstituteorg

Table 983089983088 Canadian favourability rating among Americans (February 983090983088983089983090)

Veryfavourable

Mostlyfavourable

Mostlyunfavourable

Veryfavourable Not sure Total

favourableTotal

unfavourable

53 38 3 2 3 91 5

Note n=1015

Source Gallup Poll (2012)

Table 983089983089 Ally or enemy for Americans (June 983090983088983089983091)

Country Ally Friendly Unfriendly Enemy Total Ally andFriendly

Great Britain 66 25 2 1 91

Canada 61 33 2 1 94

China 11 44 26 14 55

Note n=1529Source Gallup Poll (2013)

88

90

92

94

96

98

201220112010200920082007

Figure Canadian favourability among Americans () ndash

Source Gallup Poll (2012)

f a

v o u r a

b l e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983090 What effect will Obama have on Canada-US relations (November 983090983088983089983090)

Canadians Americans

Positive Negative None Positive Negative None

Relationship 62 5 34 48 12 40

Trade 54 10 35 48 12 39

Harmonizing 53 8 40 47 14 39

Note n=1066

Source Abacus Data (2012)

Table 983089983091 Has each leader worked hard to improve Canada-US relations

(July 983090983088983089983090)

Country Agree Disagree Not sure

Stephen Harper 58 32 10

Barack Obama 53 32 15

Note Sample of Canadians

Source HarrisDecima (2012)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983090983095

US policy uncertainty

Canadian economic prospects face their most important challenge in the

United States Te US economic recovery has been modest and real GDP

growth so far has remained below the post-World War II average of post-

recession periods (figure 983089983094) As we noted above the less-than-stellar US

recovery is made even more challenging for Canadian traders in that pro-

ductivity gains in Canada are lagging while the Canadian dollar remains high

On top of that several American-imposed regulatory obstacles to free trade

are depressing trade prospects in crude oil red meat and public works pro-

curement Tese impediments reduce Canadian competitive access to the

US market

A high level of public spending until the January 983090983088983089983091 sequester and

ongoing monetary stimulation have not produced notable US GDP growth

Te seven post-recession periods below show the current average to be well

below the historical average (Young 983090983088983089983091)

983089983097983092983096-983089983097983093983095 983091983096983088

983089983097983093983096-983089983097983094983095 983092983090983096

983089983097983094983096-983089983097983095983095 983091983089983096

983089983097983095983096-983089983097983096983095 983091983089983093

983089983097983096983096-983089983097983097983095 983091983088983093

983089983097983097983096-983090983088983088983095 983090983097983097

983090983088983088983096-983090983088983089983091 983088983095983091

While economic growth has been modest growth in the public debt

has not (figure 983089983095) Publicly held debt in the US is now at 983095983091 percent of GDP

the highest since 983089983097983092983094 (Congressional Budget Office 983090983088983089983091)

Te widening gap between federal government outlays and revenueshas only recently been capped by the Sequester (figure 983089983096) However the

budget Sequester is temporary and final resolution of public spending and

taxation levels remains unclear given repeated gridlock in presidential-con-

gressional policy making High debt levels combined with stalemate over

taxes and budget cuts have produced a case of policy instability or uncer-

tainty in the last five years (Baker Bloom and Davis 983090983088983089983091)

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983090983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

US policy uncertainty is further aggravated by inaction on the large

lsquoentitlementrsquo programsmdashSocial Security Medicare and Medicaidmdashwhich are

the major drivers of the long-term gap in revenues and spending

-4

-2

0

2

4

6

8

201220062000199419881982197619701964

Figure US GDP growth rate ndash ( forecast)

Source The World Bank (2013b) OECD (2013)

-10

-8

-6

-4

-2

0

0

20

40

60

80

100

20122011201020092008200720062005200420032002

Government deficit as a percentage of GDP Government debt as a percentage of GDP

Figure US Government deficit and debt as a percentage of GDP ndash

Source Congressional Budget Office (2013)

D e fi c i t p e r c e n t a g e ( ) D

e b t p er c en t a g e ( )

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The state of Canada-US relations in 983090983088983089983092 983090983097

fraserinstituteorg

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

20122003199319831973

Revenue Outlays

Figure US Government revenue and outlays ndash ( US$ billions)

Source Congressional Budget Office (2013)

1 9 8 3 U S $ b i l l i o n s

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983091983088 fraserinstituteorg

Trade diversification

Given the weakness in near-term US opportunities Canadians are (again)

wondering how to pursue trade diversification away from the United States

Te objective is logical and if achieved will prove advantageous but various

trends in trade and investment show that diversification for Canada is a slow

and arduous journey (table 983089983092)

In terms of overall share exports to China in the last five years have

doubled but the numbersmdashfrom 983090983089983095 percent to 983092983090983094 percentmdashremain rela-

tively low In the same period the US-bound share declined by 983091 percent but

remains a towering 983095983092983093983092 percent Te pattern of small overall impact applies

to all the other top trading partners For example exports to the UK have

increased but exports to Japan and Mexico have essentially stalled When we

consider average export growth rates over the last five years (table 983089983093) we see

a very strong rate for China (983089983093983093 percent) and strong rates for the UK and

South Korea (983096983097 percent and 983094983097 percent) However a 983089983093 percent increase in a

983092 percent overall trade share produces little change Te point we are making

is that at this rate and pattern of trade lsquodiversificationrsquo it will actually take a

very long timemdashwhile relatively small upward trends in trade with the United

States could have a quick and very large impact in the opposite direction

On the import side we notice more trade diversification with the US

share at 983093983088 percent and the Chinese share at 983089983089 percent (table 983089983094) Te Chinese

growth rate on the import side is less than on the export side (table 983089983095) Te

most revealing number may be the high average over five years for Mexico

at 983097 percent Tis could be indicative of a growing supply chain with Mexico

While foreign direct investment (FDI) is not a direct indicator of future

trade trends in investment may harbinger change In terms of outbound

FDI we notice that only a small segment (less than 983089983088 percent) is targeted

for manufacturing (table 983089983096) It is investment in this category in which onewould expect growth in supply chains

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983089

fraserinstituteorg

Table 983089983092 Canadarsquos merchandise exports top ten destinations 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 3291 1 777 2361 1 751 2564 1 749

China 92 4 22 97 3 31 114 3 33

UK 114 2 27 105 2 33 141 2 41

Japan 97 3 23 73 4 23 79 4 23

Mexico 51 5 12 42 5 13 43 5 13

Netherlands 32 8 08 24 8 08 28 8 08

South Korea 34 7 08 31 7 10 32 7 09

Germany 39 6 09 33 6 10 34 6 10

France 28 9 07 23 9 07 20 10 06

Brazil 23 10 05 14 10 04 22 9 06

Total 4237 3145 3424

2011 2012Average

shareValue Rank Share Value Rank Share

US 2750 1 737 2783 1 745 752

China 140 3 38 159 2 43 33

UK 157 2 42 154 3 41 37

Japan 89 4 24 85 4 23 23

Mexico 46 5 12 44 5 12 12

Netherlands 40 7 11 37 6 10 09

South Korea 43 6 11 30 7 08 09

Germany 33 8 09 29 8 08 09

France 26 9 07 26 9 07 07

Brazil 24 10 06 21 10 06 06

Total 3732 3734

Source Industry Canada (2013b)

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983091983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983093 Canadian export growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 56 7 -281 9 106 = 5

China 101 6 65 1 187 3

UK 16 9 -73 2 358 2

Japan 202 3 -250 7 106 = 5

Mexico 179 4 -178 6 43 9

Netherlands -85 10 -255 8 183 4

South Korea 276 2 -80 3 52 8

Germany 160 5 -167 4 54 7

France 36 8 -174 5 -122 10

Brazil 706 1 -380 10 603 1

2011 2012Average

Rank Rank

US 104 8 27 2 02

China 270 4 152 1 155

UK 148 6 -02 4 90

Japan 161 5 -29 6 38

Mexico 94 9 -16 5 24

Netherlands 475 1 -55 7 53

South Korea 374 2 -272 10 70

Germany 05 10 -95 9 -09

France 311 3 23 3 15

Brazil 109 7 -92 8 189

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983091

fraserinstituteorg

Table 983089983094 Canadarsquos merchandise imports top ten sources 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 1992 1 524 1633 1 511 1745 1 504

China 374 2 98 347 2 109 382 2 110

Mexico 157 3 41 145 3 45 190 3 55

Japan 134 4 35 108 4 34 115 4 33

Germany 111 5 29 95 5 30 97 5 28

UK 110 6 29 82 6 26 92 6 27

South Korea 53 9 14 52 7 16 53 7 15

Algeria 67 7 18 33 10 10 31 10 09

Italy 45 10 12 39 9 12 40 9 12

France 53 8 14 49 8 15 47 8 13

Total 3804 3194 3465

2011 2012Average

shareValue Rank Share Value Rank Share

US 1846 1 496 1922 1 506 508

China 402 2 108 417 2 110 107

Mexico 205 3 55 210 3 55 50

Japan 109 4 29 123 4 33 33

Germany 107 5 29 118 5 31 29

UK 86 6 23 70 6 18 25

South Korea 55 7 15 52 7 14 15

Algeria 46 9 12 49 8 13 12

Italy 43 10 11 43 9 11 12

France 46 8 12 41 10 11 13

Total 3723 3796

Source Industry Canada (2013b)

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983091983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983095 Old and new trade prospectsmdashimport growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 29 8 -178 7 89 5

China 112 4 -70 2 123 3

Mexico 43 7 -77 4 337 1

Japan -11 10 -192 8 89 4

Germany 105 5 -149 6 44 7

UK 95 6 -252 9 141 2

South Korea 120 3 -14 1 36 8

Algeria 518 1 -511 10 -50 10

Italy 11 9 -132 5 48 6

France 191 2 -70 3 -35 9

2011 2012Average

Rank Rank

US 88 5 57 4 17

China 82 6 53 5 60

Mexico 111 3 39 6 91

Japan -29 9 151 1 01

Germany 132 2 117 2 50

UK -36 10 -173 10 -45

South Korea 76 7 -37 8 37

Algeria 533 1 91 3 116

Italy 95 4 23 7 09

France 22 8 -97 9 02

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983093

fraserinstituteorg

In terms of overall Canadian outbound FDI stocks in the US remain

very high despite the recent US recession while growth in stock in Asia is

modest (figure 983089983097) When we examine Canadian FDI in the so-called BRIC

states we notice that investment in both China and India is relatively small

Canadian mining investment in Brazil is much larger (figure 983090983088) In fact when

we examine amounts of FDI we find that Canada is not really a big BRIC

investor other than Brazil Chile Hong Kong and Peru are larger FDI recipi-

ents than China and India (figure 983090983089)

In terms of FDI flowing into Canada we notice the very large share

(983090983096983094983093 percent) in manufacturing which indicates both the predominant

share of US FDI and the extensive integrated supply chains in Canada-US

manufacturing (table 983089983097) Even more than for outbound FDI inflow stocks

show very large US preponderance (figure 983090983090) Such continued concentra-

tion of US FDI in Canada suggests that Canadian trade diversification is not

just a decision to be made by Canadian producers

Like trade growth Chinese FDI growth in Canada is positive but the

overall numbers are small and do not show rapid growth in the last 983091 years

(figure 983090983091)

Table 983089983096 Top industries for outward stocks of FDI 983090983088983089983090

Category Value Share

Mining oil and gas extraction 1099 188

Oil and gas subcategory 542 93

Manufacturing 569 97

Finance and insurance 2334 399

Management of companies and enterprises 757 129

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

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983091983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

1

2

3

4

5

6

7

8

9

10

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n s

Figure Canadian foreign direct investment (stock) BRIC ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Brazil PRC India Russia

0

20

4060

80

100

120

140

160

180

200

220

240

260

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) various regions

ndash

Notes Excluding Mexico Canadian FDI to Mexico in 2012 was $557 billion

Foreign Direct Investment measures the purchase of various forms of capital stock abroad

However tax havens (Barbados Bermuda etc) are frequently found to be some of the highest

recipients of FDI In reality tax havens do not reflect economic growth as FDI figures invested

into tax havens are often reinvested back to the source country in a concept known as

round-tripping (Financial Post 2013) We have accounted for tax havens by removing them from

tables and figures in this section The numbers corresponding to Figure 19 would be Barbados

($593 billion) Bermuda ($118 billion) British Virgin Islands ($21 billion) Cayman Islands ($302

billion)

Source Foreign Affairs Trade and Development Canada (2013c)

US Europe Asia amp Oceania Central amp South America Africa

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The state of Canada-US relations in 983090983088983089983092 983091983095

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Table 983089983097 Top industries for inward stocks of FDI 983090983088983089983090

Category Value Share

Oil and gas extraction 766 147

Manufacturing 1492 287

Petroleum and coal products manufacturing 377 72

Wholesale trade 395 76

Finance and insurance 699 134

Management of companies and enterprises 999 192

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

0

2

4

6

8

10

12

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) Chile Hong Kong

Peru amp Korea ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Chile Hong Kong Peru Korea

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0

40

80

120

160

200

240

280

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Foreign direct investment (stock) in Canada from top three

countries ndash

Source Foreign Affairs Trade and Development Canada (2013c)

US Netherlands UK

0

2

4

6

8

10

12

201220112010200920082007

2 0 0 2 C A $ b

i l l i o n s

Figure Foreign direct investment (stock) in Canada from China

ndash

Source Foreign Affairs Trade and Development Canada (2013c)

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fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

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Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

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References

Abacus Data (983090983088983089983090 November 983090983088) Beyond the Canadian-American Border

lthttpabacusdatacawp-contentuploads983090983088983089983090983089983089Can-AM_Report_CABC_

Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5662

The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

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983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5862

The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5962

983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6062

The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6162

983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 20: Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983089983091

fraserinstituteorg

relations Te dragged-out procedure has chilled relations Te southern leg of

KXL has been completed and the original route objection by Nebraska has been

resolved What remains ostensibly the problem is that the US administration

has identified this heavy oil as a component of its policy objective of curbing

the emission of greenhouses gasses to reduce global warming

Te impact of this pipeline delay in the 983090983095 million barrels per day (bpd)

export of Canadian oil products to the USA reverberates at various levels

Across Canada investment in mining oil and gas extraction for 983090983088983089983091 is pre-

dicted to decrease by 983090983095 percentmdashthe largest decline since the 983090983088983088983096 recession

(Statistics Canada 983090983088983089983091f) In Alberta investment is predicted to increase by

only 983088983089 percent (Statistics Canada 983090983088983089983091f) Capital investment in oil and gas

extraction has not recovered to pre-983090983088983088983096 levels (Industry Canada 983090983088983089983091a)

While the industry has become increasingly dependent on rail trans-

port to move product it is a costly alternative It can cost up to three times

as much as pipeline transport (Millington and Murillo 983090983088983089983091) and its limita-

tions are self-evident because rail movement of oil is constrained by the lim-

ited availability of rail cars In 983090983088983089983090 983089983091983088983088983088983088 bpd of heavy crude was being

transported by rail Tis is expected to rise to 983092983090983093983088983088983088 bpd by the end of

983090983088983089983092 falling short of the 983092983094983093983088983088983088 bpd which could have been moved through

KXL (Hussain 983090983088983089983091) Te forced increase in rail transport has resulted in

unintended costs for the industry a total of US$983089 billion must be invested for

new rail terminals and another US$983092ndash983093 billion for new rail cars (Lewis 983090983088983089983091)

Rail transport is both more costly and more dangerous A recent study

concluded that ldquopipeline transportation is safer than transportation by road

rail or barge as measured by incidents injuries and fatalitiesrdquo (Green amp

Furchtgott-Roth 983090983088983089983091) It is not inconceivable that another major oil acci-

dent either in Canada or the USAmdashsuch as took place in Quebec in July 983090983088983089983091

killing 983092983095 peoplemdashwould result in a moratorium on oil transport by rail with

grave consequences for Canadian producers

983090983088983088983090 Mandatory Country-of-Origin Labeling

Mandatory Country-of-Origin Labeling (MCOOL) is a provision mandated

by Congressional law and first implemented in 983090983088983088983096 Te measure imposes

strict segregation rules on American Canadian and Mexican cattle and hogs

and the subsequent slaughtering and processing of these animals to producebeef and pork products for retail sale Te stated purpose is to create labels

that indicate the origin in part or in whole of the product In effect it is a

veiled trade barrier because it gives US animals and products a competitive

advantage due to higher labeling inventory and processing costs for equiva-

lent Canadian products

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983089983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983096 Synopsis of trade disputes in Canadian-American relations in 983090983088983089983091

Dispute Impact and cost Prospect for resolution

Keystone XL Pipeline Very serious Poor

2008 proposal for a 1897

km 465000 bpd crude oilpipeline spanning fromAlberta down to Nebraska

Downward pressure on investment

Lost wages January 2012postponement is costing US $47million a day in lost wages (ConsumerEnergy Alliance 2013)

Continuation of crude oil pricediscounts due to lack of infrastructure

Costly alternative rail has emerged as atransportation alternative but can costup to three times as much as pipelinetravel (Millington and Murillo 2013)

Permit postponed twice

Resolution is not transparent

Rising risk of decision deferral past 2016

Mandatory Country-of-OriginLabelling (MCOOL)

Serious Poor

2008 CongressionalLaw mandating rulesfor segregated livestockprocessing and packagingand a labeling structure inorder to have food labelsindicate origin of product

Annual cost to Canadian beef and porksector of $1 billion

Deconstruction of a highly integratedtrilateral supply chain industry

MCOOL adds no animal health or foodsafety benefits

US has defied both WTO complaint andthe core part of the WTO Appeal ruling

2013 US reaction has been to strengthenthe discriminatory provision banning co-mingling of meats altogether

Canada plans to retaliate with tariffs butthis is a costly gambit with low chance ofsuccess

Softwood Lumber Agreement Moderate Good

In 2011 American softwoodcompanies took theirCanadian counterparts to theLondon Court of InternationalArbitration accusing themof circumventing the SLA(Foreign Affairs Trade andDevelopment Canada 2012a)

If in violation Canadian industry wouldface $380 million in penalties (TheCanadian Press 2012)

The London Court of InternationalArbitration in 2012 ruled in favor ofCanada (Foreign Affairs Trade andDevelopment Canada 2012a)

SLA was to expire in 2013 but Canadaand the USA extended it until 2015 (CBCNews 2012)

Long-term free trade in lumber needs toreplace SLA

Buy American Provision Serious Partial resolution but high risk ofrecurring Buy American legislation

2009 American Recovery andReinvestment Act

Exclusion of Canadian products andproduction sharing in US public worksprocurement

Canada-US Procurement Agreement in2010 which allowed for the purchaseof Canadian goods on seven US

infrastructure projects valued at morethan $7777000

Canada needs to seek a comprehensiveagreement in order to escape futureAmerican protectionism with allprovinces on board and compliant withthe WTO provision

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The state of Canada-US relations in 983090983088983089983092 983089983093

fraserinstituteorg

Dispute Impact and cost Prospect for resolution

Canadian Wheat Board Long-term benefit Completed

Canadarsquos mandatory wheat

marketing board monopsonyended in 2011

Frequent US action against CWB in the

past will now end as wheat marketingin Canada turns fully market based

Intellectual Property Rights Moderate potential cost Partially resolved

Canada has been on theSpecial 301 Priority Watch Listby the United States TradeRepresentative since 1995

Ongoing threat of US Trade Action andlegal action

Canadian domestic complianceincluding

Strengthening data protection

Participation in Anti-counterfeiting TradeAgreement (ACTA in 2013)

Enacted the Combating CounterfeitProducts Act (2013)

Started the process of strengthening

the Copyright Act and implementingWorld Intellectual Property OrganizationInternet Treaties

In recognition of which Canada has beenremoved from the Special 301 PriorityWatch List

Prescription drugs Serious potential for trade action Indirect progress

The US complaint againstCanada

Imposing price ceilings thatshifts the cost burden of RampDto US firms

Weak protection ofintellectual property rights rethird party sales

Slow prescription drugapproval process causingreduced market access

US firms experience lost revenues andtrade action is a risk

In 2013 CETA agreement with theEuropean Union Canada agrees to givefull patent protection to new drugs fortwo years

Two-year rule may be transferable tofuture Canada-US resolution

Table 983096 continued

Canada and the United States have had a deeply integrated market in

this sector since the early 983089983097983097983088s Animal health and food safety standards have

been largely harmonized As a result highly efficient supply-chain production

methods have made this industry quite efficient However the imposition of

MCOOL has changed all that (Moens amp Leon 983090983088983089983090) Te cost differential haswidened and Canadian exports have dropped dramatically Since 983090983088983088983096 the

cattle sector has lost $983094983092983088 million per year and the hog sector has lost $983093983088983088

million a year (Te Canadian Press 983090983088983089983091a)

In 983090983088983089983090 the World rade Organization (WO) ruled in Canadarsquos favor by

concluding that MCOOL is discriminatory Te WO gave the US until May 983090983091

983090983088983089983091 to act but on that same day the USDA imposed regulatory changes that

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983089983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

actually strengthened the provisions of MCOOL In retaliation the Canadian

government released a list of US exports to Canada that would be subjected

to tariffs and it is preparing to seek a compliance panel at the WO Until this

situation is resolved the Canadian government predicts a continuing annual

loss of $983089 billion for the Canadian red meat sector (Te Canadian Press 983090983088983089983091a)

Softwood lumber

In 983090983088983089983089 several American softwood companies took their Canadian counter-

parts to the Court of International Arbitration in London accusing them of cir-

cumventing the Softwood Lumber Agreement of 983090983088983088983094 (Foreign Affairs rade

and Development Canada 983090983088983089983090a) Te dispute centered on the accelerating pace

of lumber harvests resulting from the pine beetle infestation Te stakes were

high $983091983096983088 million in penalties should Canada lose (Te Canadian Press 983090983088983089983090)

In 983090983088983089983090 the Court of International Arbitration ruled in Canadarsquos favor

(Foreign Affairs rade and Development Canada 983090983088983089983090a) In addition while

the Softwood Lumber Agreement was set to expire in 983090983088983089983091 the Canadian

and American governments successfully negotiated an extension of the

Agreement until 983090983088983089983093 (CBC News 983090983088983089983090) Te fact remains that as long as a

large part of Canadarsquos softwood lumber is managed in terms of quotas and

the stumpage fee system US trade action is very likely

lsquoBuy Americanrsquo provision

Te 983090983088983088983097 American Recovery and Reinvestment Act (ARRA which expired

on September 983091983088 983090983088983089983089) and the more recent 983090983088983089983089 American Jobs Act stipu-

lated that steel iron and other goods used in the repair and construction of

infrastructure projects in the US (highways bridges mass transit and fed-

eral buildings) must be manufactured in the United States (Matthiesen 983090983088983089983089)

In response to ARRA Canada and the US signed the Canada-US

Procurement Agreement in 983090983088983089983088 which allowed for the purchase of Canadian

goods on seven US infrastructure projects valued at more than $983095983095983095983095983088983088983088

or within the 983091983095 states subject to the WO GPA (Government of Canada

983090983088983089983091a) Te 983090983088983089983089 American Jobs Act did not pass in Senate and is thus moot

While the ARRA dispute was partially resolved lsquoBuy Americanrsquo anda counter position of lsquoBuy Canadianrsquo can flare up on either side of the bor-

der Canadian industry is most vulnerable in this uncertainty Te Canadian

government ought to seek a comprehensive Buy American exemption to

escape future American protectionism In so doing all provincial govern-

ments need to be on board in order to make the WO and NAFA rules

function optimally

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The state of Canada-US relations in 983090983088983089983092 983089983095

fraserinstituteorg

Canadian Wheat Board (CWB)

In 983090983088983089983089 the Canadian government removed the monopsony held by the

Canadian Wheat Board Tis unilateral action offers a successful reduction

in bilateral trade distortion oday the CWB continues to operate as a mar-

keting group

Intellectual Property Rights (IPR)

From 983089983097983097983093 through 983090983088983089983091 Canada was on the Special 983091983088983089 Priority Watch

List by the United States rade Representative Te US complaint was that

protection and enforcement of IPR in Canada were weak Te Special 983091983088983089

Priority Watch List is designed to identify US trading partners that are the

worst offenders in IPR protection (Embassy of the United States Ottawa

Canada 983090983088983089983091)

Although the issue is not completely resolved Canada has made sig-

nificant progress in recent years Te federal government has strengthened

data protection regulations criminalized the use of camcorders in theaters

and participates in the Anti-Counterfeiting rade Agreement (ACA) nego-

tiations (983090983088983089983091) Most recently Canada enacted the Combatting Counterfeit

Products Act (Embassy of the United States Ottawa Canada 983090983088983089983091) Te

Canadian Government is in the process of strengthening the Copyright Act

and implementing World Intellectual Property Organization Internet reaties

(Embassy of the United States Ottawa Canada 983090983088983089983091)

As a result of these steps Canada was removed from the Special 983091983088983089

Priority Watch List in 983090983088983089983091

Prescription drugs

Prescription drug prices in Canada are relatively low due to a price ceil-

ing mandated by Canadarsquos healthcare system In addition Health Canada

approval times for prescription drugs significantly lag behind their counter-

parts in the United States and the European Union (Barua and Esmail 983090983088983089983091)

US lawmakers have repeatedly expressed their concerns over cheap prescrip-

tion drugs re-entering the US from Canada (Moens and Gabler 983090983088983089983089) TeEU also asked Canada to strengthen IPR protections for prescription drugs

(Lexchin and Gagnon 983090983088983089983091) Since the signing of the CEA agreement in

principle on October 983089983096 983090983088983089983091 the issue between Canada and the EU is now

resolved (Waldie 983090983088983089983091) Canada has agreed to ldquoEU demands for patent pro-

tection for up to two years on brand-name drugsrdquo (Blanchfield 983090983088983089983091)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983089983096 fraserinstituteorg

State of the border andregulatory cooperation

Te decline in Americans traveling to Canada corresponds with the US

Greenback losing value against the Canadian dollar (figures 983089983088 983089983089) However

when we consider the extent of the decline in total numbers it appears dispro-

portionate Te change in American travel suggests instead a bigger problem

following the 983097-983089983089 shock Te imposition of new border transit requirements

such as passports as well as longer wait times and more security screening

has likely dampened US travel across this international boundary Given the

modest economic recovery in the USA from the beginning of 983090983088983089983088 onward

one would expect disposable income including for travel to trend back up

Instead the numbers remain stagnant at around 983090983088 million less than half the

number of 983090983088983088983090

While an overall national average for border wait times is not avail-

able data on major border crossings in both Central Canada and British

Columbia indicate that no reductions in wait times have been achieved

between 983090983088983088983094 and 983090983088983089983089 (figure 983089983090) Te problem of inefficiency as presented

by the Canada-US border goes well beyond wait times It includes inefficient

activity away from the border such as extra warehousing and costs of com-

plying with various facilitated traveler and goods programs such as FAS for

trucks loads and drivers

Tere are consistent cost differences between domestic and cross-bor-

der truck-borne trade which point to significant border costs ldquoFor exports

to the US these costs added 983088983097 percent to the delivered price of goods in

983090983088983088983092 Tis figure fell to 983088983092 percent in 983090983088983088983097 hellip Higher fixed costs per shipment

accounted for most of the additional cost of transporting goods to the USrdquo

(Brown and Anderson 983090983088983089983090) When we consider that in the manufacturingsector parts cross the border several times in various stages of assembly we

realize how this cost accumulates and defeats the efficiency gains otherwise

generated by integrated supply chain manufacturing Border costs are typ-

ically passed on to the consumer as fixed costs per shipment

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The state of Canada-US relations in 983090983088983089983092 983089983097

fraserinstituteorg

An unprecedented border problem has arisen in the current USAdministrationrsquos lengthy (six years) review of the permitting of a pipeline

border crossing as proposed in the Keystone XL project As a result oil-by-

rail transport has recently increased while the pipeline mode of Canada-US

trade has seen a drop in growth in the 983090983088983089983089983089983090 period ( figures 983089983091 983089983092)

0

10

20

30

40

50

201220112010200920082007200620052004200320022001200019991998

Figure Travellers entering Canada ndash

Source Statistics Canada (2013e)

US residents Non-US residents

0

3

6

9

12

15

18

0

03

06

09

12

15

18

20122011201020092008200720062005200420032002

Trips Spending US$CA$ (Secondary axis)

Figure US overnight travel to Canada ndash

Source Statistics Canada (2011) Bank of Canada (2013b)

M i l l i o n s o f t r i p

s N o m i n a l C A $ b i l l i o n s

U S $ C A $ ex c h a n

g er a t e

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983090983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

5

10

15

20

201120102009200820072006

Northbound average delay Southbound average delay

Figure Peace Arch average border wait time ndash

Source Cascade Gateway Data (2013)

M i n u t e s

0

25

50

75

100

125

150

175

200

225

250

275

300

201220112010200920082007200620052004

2 0 0 4

U S $ b

i l l i o n s

Figure All surface modes of freight flow data based on value of goods

ndash

Source Bureau of Transportation Statistics (2013)

Truck Rail Pipeline

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983089

fraserinstituteorg

lsquoBeyond the Borderrsquo and Regulatory Cooperation

In 983090983088983089983089 Canada and the United States announced an ambitious agreement

to reduce border costs by means of deeper bilateral regulatory and secur-

ity cooperation Te accord seeks to streamline various border proceduresmdash

some already in existence and some newmdashto improve intelligence-sharing

between law enforcement agencies mutual recognition of passenger baggage

screening improved frameworks for trusted trade programs harmoniza-

tion of NEXUS protocols streamlined supply chains enhanced trade com-

petitiveness collaboration in border infrastructure investment and deeper

cooperation in national security investigations Te agreement is known as

Beyond the Border A Shared Vision for Perimeter Security and Economic

Competitiveness (February 983092 983090983088983089983089)

Te Beyond the Border Vision accord also set up a Regulatory

Cooperation Council In it Canadian and American officials seek to reduce

red tape and harmonize regulations in certain key sectors o date the

Council has announced various plans affecting agriculture and food trans-

portation health personal care products workplace chemicals environmentnano materials and small business loans We summarize the key points of

progress made since 983090983088983089983089 in table 983097

-35

-25

-15

-5

5

15

25

35

20122011201020092008200720062005

Truck Rail Pipeline

Figure Growth rate of all surface modes of freight flows () ndash

Source Bureau of Transportation Statistics (2013) calculations by authors

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983090983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983097 Key elements of Beyond the Border and Regulatory Cooperation

Beyond the Border Program

Integrated Cargo Security Strategy (ICSS)December 2011

Reduces administrative duplication between Canada and the US byaddressing security risks in advance within the shipment supply chainand at the border (Canada Border Services Agency 2013)

Prince Rupert Pilot October 2012 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry via rail is examined by Canadian officials onbehalf of the US (Government of Canada 2013c)

Montreal Pilot January 2013 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry to the US via truck is examined by Canadianofficials on behalf of the US (Government of Canada 2013c)

Pre-load Air Cargo Targeting (PACT) Joint pilot by CBSA and Transport Canada to screen cargo pre-flight onCanada-bound airplanes at foreign airports (Canada Border ServicesAgency 2013)

Tamper Evident Technology PilotOctober 2012

Pilot collaboration between CBSA and US CBP to ensure containersremain sealed upon arrival at the US border (Canada Border Services

Agency 2013)

Truck Cargo Pre-Inspection PilotMarch 2013

Pilot program between the CBSA and the US CBP for pre-inspection ofsouthbound traffic into US (Canada Border Services Agency 2013)

Free and Secure Trade (FAST) PilotSarnia Ontario

Pilot program for usage of FAST lanes without Partners in Protection andCustoms Self Assessment programs (Government of Canada 2013c)

Canada-US Shiprider June 2013 Removal of jurisdictional barriers to improve law enforcement personnelin Windsor-Detroit and Vancouver-Blaine waterways (Government ofCanada 2013c)

EntryExit Initiative Phase II June 2013 Exchange entryexit data between the CBSA and US DHS on individualsat Canada-US land border crossings (Government of Canada 2013c)

Regulatory Cooperation ProgramMemorandum of Understanding between Transport Canada and the RailwayAssociation of Canada September 2013

Framework for Canadian rail emissions between 2011 to 2015(Government of Canada 2013d)

Canada-United States Perimeter Approachto Plant Protection September 2013

Draft framework for increased cooperation and reduction inadministrative duplication between the Canadian Food InspectionAgency (CFIA) and United States Animal and Plant Health InspectionService (APHIS) on trade in plants and plant products (Government ofCanada 2013d)

Common Electronic Submission GatewayPilot (CESG) August 2013

FDA and Health Canada will allow pharmaceutical firms to electronicallysubmit drug applications (Government of Canada 2013d)

Initiative to Align Veterinary DrugApprovals December 2012

Joint reviews between US FDA and Health Canada on veterinary drugproducts (Government of Canada 2013d)

Stricter Air Pollutant Emissions Environment Canada aligns car emissions beginning in 2017 with theUS Environmental Protection Agencyrsquos ldquoTier 3rdquo (Government of Canada2013d)

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The state of Canada-US relations in 983090983088983089983092 983090983091

fraserinstituteorg

On September 983092 983090983088983089983091 $983092983094983094 million in investment was allocated to the

Border Action plan by the Government of Canada in order expand two marine

container examination facilities (Government of Canada 983090983088983089983091c) $983091983091 million

was invested by the Government of Canada in the Asia Pacific Gateway and

rade Corridor Initiative (Government of Canada 983090983088983089983091c) Te Plan includes

an additional 983090983097 harmonization initiatives that will enhance trade activity

between Canada and the US

Neither Beyond the Border nor the Regulatory Cooperation Council

offer further investment or cost estimates on the initiatives described in table

983097 Moens and Gabler (983090983088983089983090) pointed to the need for both the Canadian and

American governments to provide data on border costs so that a cost-benefit

analysis can ensue Nonetheless the small steps of progress towards inte-

grating and harmonizing US and Canadian border practices remains a very

important (long-term) part of reducing the profile of the border

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983090983092 fraserinstituteorg

Canadian and American public perceptions

Tree observations are noteworthy in recent assessments of public percep-

tions between Americans and Canadians First Americans consistently have

a very high favourability rating of Canadians typically in the 983097983088 plus range

(table 983089983088 figure 983089983093) Both as a friend and a strategic ally Americans hold

Canadians in the most favourable light possible (table 983089983089) Disagreements over

policy between the two countries whether in defence and foreign affairs or

over border and trade issues do not move this fundamental asset Canadians

enjoy in dealing with their neighbour

Second Canadians do not have high expectations of either the

American or Canadian government regarding progress in bilateral relations

As table 983089983090 shows Canadians hold Obama in high regard (983094983091 percent) but

only 983093983092 percent expect progress from him in trade relations Prime Minister

Harper is rated slightly ahead of President Obama in terms of working hard

towards improving Canada-US relations (table 983089983091)

Tird and most significant in light of Canadarsquos Catch-983090983090 situation both

Canadians and Americans are more supportive of closer cooperation and inte-

gration policies than is the case for political representatives in either the United

States or Canada In two recent studies we showed how US Senators and House

Representatives are quite critical of Canada with regard to NAFA issues and bor-

der security (Moens and Gabler 983090983088983089983089) Similarly we found that among the three

major political parties in Canadarsquos parliament only one consistently expressed

itself in favour of closer ties with the United States (Moens and Gabler 983090983088983089983089)

A recent survey of American and Canadian (and Mexican) attitudes

towards free trade and NAFA show surprisingly strong data for more trade

integration In response to the statement ldquoTere should be more free trade

between the US Canada and Mexicordquo 983096983088 percent of Canadians approved

as did 983095983092 percent of Americans Even on border security Canadians andAmericans are more pro-cooperation and integration than their governmental

policies suggest In the US 983092983089 percent support a common perimeter while

983090983088 percent are opposed In Canada 983092983091 percent support it and 983091983088 percent are

opposed (Graves Pastor and Basaacutentildeez 983090983088983089983091) Terefore in terms of public

mandate both governments would have a case to work towards broader bilat-

eral (or trilateral) cooperation to lower trade barriers

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The state of Canada-US relations in 983090983088983089983092 983090983093

fraserinstituteorg

Table 983089983088 Canadian favourability rating among Americans (February 983090983088983089983090)

Veryfavourable

Mostlyfavourable

Mostlyunfavourable

Veryfavourable Not sure Total

favourableTotal

unfavourable

53 38 3 2 3 91 5

Note n=1015

Source Gallup Poll (2012)

Table 983089983089 Ally or enemy for Americans (June 983090983088983089983091)

Country Ally Friendly Unfriendly Enemy Total Ally andFriendly

Great Britain 66 25 2 1 91

Canada 61 33 2 1 94

China 11 44 26 14 55

Note n=1529Source Gallup Poll (2013)

88

90

92

94

96

98

201220112010200920082007

Figure Canadian favourability among Americans () ndash

Source Gallup Poll (2012)

f a

v o u r a

b l e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983090 What effect will Obama have on Canada-US relations (November 983090983088983089983090)

Canadians Americans

Positive Negative None Positive Negative None

Relationship 62 5 34 48 12 40

Trade 54 10 35 48 12 39

Harmonizing 53 8 40 47 14 39

Note n=1066

Source Abacus Data (2012)

Table 983089983091 Has each leader worked hard to improve Canada-US relations

(July 983090983088983089983090)

Country Agree Disagree Not sure

Stephen Harper 58 32 10

Barack Obama 53 32 15

Note Sample of Canadians

Source HarrisDecima (2012)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983090983095

US policy uncertainty

Canadian economic prospects face their most important challenge in the

United States Te US economic recovery has been modest and real GDP

growth so far has remained below the post-World War II average of post-

recession periods (figure 983089983094) As we noted above the less-than-stellar US

recovery is made even more challenging for Canadian traders in that pro-

ductivity gains in Canada are lagging while the Canadian dollar remains high

On top of that several American-imposed regulatory obstacles to free trade

are depressing trade prospects in crude oil red meat and public works pro-

curement Tese impediments reduce Canadian competitive access to the

US market

A high level of public spending until the January 983090983088983089983091 sequester and

ongoing monetary stimulation have not produced notable US GDP growth

Te seven post-recession periods below show the current average to be well

below the historical average (Young 983090983088983089983091)

983089983097983092983096-983089983097983093983095 983091983096983088

983089983097983093983096-983089983097983094983095 983092983090983096

983089983097983094983096-983089983097983095983095 983091983089983096

983089983097983095983096-983089983097983096983095 983091983089983093

983089983097983096983096-983089983097983097983095 983091983088983093

983089983097983097983096-983090983088983088983095 983090983097983097

983090983088983088983096-983090983088983089983091 983088983095983091

While economic growth has been modest growth in the public debt

has not (figure 983089983095) Publicly held debt in the US is now at 983095983091 percent of GDP

the highest since 983089983097983092983094 (Congressional Budget Office 983090983088983089983091)

Te widening gap between federal government outlays and revenueshas only recently been capped by the Sequester (figure 983089983096) However the

budget Sequester is temporary and final resolution of public spending and

taxation levels remains unclear given repeated gridlock in presidential-con-

gressional policy making High debt levels combined with stalemate over

taxes and budget cuts have produced a case of policy instability or uncer-

tainty in the last five years (Baker Bloom and Davis 983090983088983089983091)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

US policy uncertainty is further aggravated by inaction on the large

lsquoentitlementrsquo programsmdashSocial Security Medicare and Medicaidmdashwhich are

the major drivers of the long-term gap in revenues and spending

-4

-2

0

2

4

6

8

201220062000199419881982197619701964

Figure US GDP growth rate ndash ( forecast)

Source The World Bank (2013b) OECD (2013)

-10

-8

-6

-4

-2

0

0

20

40

60

80

100

20122011201020092008200720062005200420032002

Government deficit as a percentage of GDP Government debt as a percentage of GDP

Figure US Government deficit and debt as a percentage of GDP ndash

Source Congressional Budget Office (2013)

D e fi c i t p e r c e n t a g e ( ) D

e b t p er c en t a g e ( )

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983097

fraserinstituteorg

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

20122003199319831973

Revenue Outlays

Figure US Government revenue and outlays ndash ( US$ billions)

Source Congressional Budget Office (2013)

1 9 8 3 U S $ b i l l i o n s

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983091983088 fraserinstituteorg

Trade diversification

Given the weakness in near-term US opportunities Canadians are (again)

wondering how to pursue trade diversification away from the United States

Te objective is logical and if achieved will prove advantageous but various

trends in trade and investment show that diversification for Canada is a slow

and arduous journey (table 983089983092)

In terms of overall share exports to China in the last five years have

doubled but the numbersmdashfrom 983090983089983095 percent to 983092983090983094 percentmdashremain rela-

tively low In the same period the US-bound share declined by 983091 percent but

remains a towering 983095983092983093983092 percent Te pattern of small overall impact applies

to all the other top trading partners For example exports to the UK have

increased but exports to Japan and Mexico have essentially stalled When we

consider average export growth rates over the last five years (table 983089983093) we see

a very strong rate for China (983089983093983093 percent) and strong rates for the UK and

South Korea (983096983097 percent and 983094983097 percent) However a 983089983093 percent increase in a

983092 percent overall trade share produces little change Te point we are making

is that at this rate and pattern of trade lsquodiversificationrsquo it will actually take a

very long timemdashwhile relatively small upward trends in trade with the United

States could have a quick and very large impact in the opposite direction

On the import side we notice more trade diversification with the US

share at 983093983088 percent and the Chinese share at 983089983089 percent (table 983089983094) Te Chinese

growth rate on the import side is less than on the export side (table 983089983095) Te

most revealing number may be the high average over five years for Mexico

at 983097 percent Tis could be indicative of a growing supply chain with Mexico

While foreign direct investment (FDI) is not a direct indicator of future

trade trends in investment may harbinger change In terms of outbound

FDI we notice that only a small segment (less than 983089983088 percent) is targeted

for manufacturing (table 983089983096) It is investment in this category in which onewould expect growth in supply chains

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983089

fraserinstituteorg

Table 983089983092 Canadarsquos merchandise exports top ten destinations 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 3291 1 777 2361 1 751 2564 1 749

China 92 4 22 97 3 31 114 3 33

UK 114 2 27 105 2 33 141 2 41

Japan 97 3 23 73 4 23 79 4 23

Mexico 51 5 12 42 5 13 43 5 13

Netherlands 32 8 08 24 8 08 28 8 08

South Korea 34 7 08 31 7 10 32 7 09

Germany 39 6 09 33 6 10 34 6 10

France 28 9 07 23 9 07 20 10 06

Brazil 23 10 05 14 10 04 22 9 06

Total 4237 3145 3424

2011 2012Average

shareValue Rank Share Value Rank Share

US 2750 1 737 2783 1 745 752

China 140 3 38 159 2 43 33

UK 157 2 42 154 3 41 37

Japan 89 4 24 85 4 23 23

Mexico 46 5 12 44 5 12 12

Netherlands 40 7 11 37 6 10 09

South Korea 43 6 11 30 7 08 09

Germany 33 8 09 29 8 08 09

France 26 9 07 26 9 07 07

Brazil 24 10 06 21 10 06 06

Total 3732 3734

Source Industry Canada (2013b)

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983091983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983093 Canadian export growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 56 7 -281 9 106 = 5

China 101 6 65 1 187 3

UK 16 9 -73 2 358 2

Japan 202 3 -250 7 106 = 5

Mexico 179 4 -178 6 43 9

Netherlands -85 10 -255 8 183 4

South Korea 276 2 -80 3 52 8

Germany 160 5 -167 4 54 7

France 36 8 -174 5 -122 10

Brazil 706 1 -380 10 603 1

2011 2012Average

Rank Rank

US 104 8 27 2 02

China 270 4 152 1 155

UK 148 6 -02 4 90

Japan 161 5 -29 6 38

Mexico 94 9 -16 5 24

Netherlands 475 1 -55 7 53

South Korea 374 2 -272 10 70

Germany 05 10 -95 9 -09

France 311 3 23 3 15

Brazil 109 7 -92 8 189

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983091

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Table 983089983094 Canadarsquos merchandise imports top ten sources 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 1992 1 524 1633 1 511 1745 1 504

China 374 2 98 347 2 109 382 2 110

Mexico 157 3 41 145 3 45 190 3 55

Japan 134 4 35 108 4 34 115 4 33

Germany 111 5 29 95 5 30 97 5 28

UK 110 6 29 82 6 26 92 6 27

South Korea 53 9 14 52 7 16 53 7 15

Algeria 67 7 18 33 10 10 31 10 09

Italy 45 10 12 39 9 12 40 9 12

France 53 8 14 49 8 15 47 8 13

Total 3804 3194 3465

2011 2012Average

shareValue Rank Share Value Rank Share

US 1846 1 496 1922 1 506 508

China 402 2 108 417 2 110 107

Mexico 205 3 55 210 3 55 50

Japan 109 4 29 123 4 33 33

Germany 107 5 29 118 5 31 29

UK 86 6 23 70 6 18 25

South Korea 55 7 15 52 7 14 15

Algeria 46 9 12 49 8 13 12

Italy 43 10 11 43 9 11 12

France 46 8 12 41 10 11 13

Total 3723 3796

Source Industry Canada (2013b)

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983091983092 The state of Canada-US relations in 983090983088983089983092

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Table 983089983095 Old and new trade prospectsmdashimport growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 29 8 -178 7 89 5

China 112 4 -70 2 123 3

Mexico 43 7 -77 4 337 1

Japan -11 10 -192 8 89 4

Germany 105 5 -149 6 44 7

UK 95 6 -252 9 141 2

South Korea 120 3 -14 1 36 8

Algeria 518 1 -511 10 -50 10

Italy 11 9 -132 5 48 6

France 191 2 -70 3 -35 9

2011 2012Average

Rank Rank

US 88 5 57 4 17

China 82 6 53 5 60

Mexico 111 3 39 6 91

Japan -29 9 151 1 01

Germany 132 2 117 2 50

UK -36 10 -173 10 -45

South Korea 76 7 -37 8 37

Algeria 533 1 91 3 116

Italy 95 4 23 7 09

France 22 8 -97 9 02

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983093

fraserinstituteorg

In terms of overall Canadian outbound FDI stocks in the US remain

very high despite the recent US recession while growth in stock in Asia is

modest (figure 983089983097) When we examine Canadian FDI in the so-called BRIC

states we notice that investment in both China and India is relatively small

Canadian mining investment in Brazil is much larger (figure 983090983088) In fact when

we examine amounts of FDI we find that Canada is not really a big BRIC

investor other than Brazil Chile Hong Kong and Peru are larger FDI recipi-

ents than China and India (figure 983090983089)

In terms of FDI flowing into Canada we notice the very large share

(983090983096983094983093 percent) in manufacturing which indicates both the predominant

share of US FDI and the extensive integrated supply chains in Canada-US

manufacturing (table 983089983097) Even more than for outbound FDI inflow stocks

show very large US preponderance (figure 983090983090) Such continued concentra-

tion of US FDI in Canada suggests that Canadian trade diversification is not

just a decision to be made by Canadian producers

Like trade growth Chinese FDI growth in Canada is positive but the

overall numbers are small and do not show rapid growth in the last 983091 years

(figure 983090983091)

Table 983089983096 Top industries for outward stocks of FDI 983090983088983089983090

Category Value Share

Mining oil and gas extraction 1099 188

Oil and gas subcategory 542 93

Manufacturing 569 97

Finance and insurance 2334 399

Management of companies and enterprises 757 129

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

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983091983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

1

2

3

4

5

6

7

8

9

10

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n s

Figure Canadian foreign direct investment (stock) BRIC ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Brazil PRC India Russia

0

20

4060

80

100

120

140

160

180

200

220

240

260

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) various regions

ndash

Notes Excluding Mexico Canadian FDI to Mexico in 2012 was $557 billion

Foreign Direct Investment measures the purchase of various forms of capital stock abroad

However tax havens (Barbados Bermuda etc) are frequently found to be some of the highest

recipients of FDI In reality tax havens do not reflect economic growth as FDI figures invested

into tax havens are often reinvested back to the source country in a concept known as

round-tripping (Financial Post 2013) We have accounted for tax havens by removing them from

tables and figures in this section The numbers corresponding to Figure 19 would be Barbados

($593 billion) Bermuda ($118 billion) British Virgin Islands ($21 billion) Cayman Islands ($302

billion)

Source Foreign Affairs Trade and Development Canada (2013c)

US Europe Asia amp Oceania Central amp South America Africa

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The state of Canada-US relations in 983090983088983089983092 983091983095

fraserinstituteorg

Table 983089983097 Top industries for inward stocks of FDI 983090983088983089983090

Category Value Share

Oil and gas extraction 766 147

Manufacturing 1492 287

Petroleum and coal products manufacturing 377 72

Wholesale trade 395 76

Finance and insurance 699 134

Management of companies and enterprises 999 192

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

0

2

4

6

8

10

12

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) Chile Hong Kong

Peru amp Korea ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Chile Hong Kong Peru Korea

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fraserinstituteorg

0

40

80

120

160

200

240

280

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Foreign direct investment (stock) in Canada from top three

countries ndash

Source Foreign Affairs Trade and Development Canada (2013c)

US Netherlands UK

0

2

4

6

8

10

12

201220112010200920082007

2 0 0 2 C A $ b

i l l i o n s

Figure Foreign direct investment (stock) in Canada from China

ndash

Source Foreign Affairs Trade and Development Canada (2013c)

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fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

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Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

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References

Abacus Data (983090983088983089983090 November 983090983088) Beyond the Canadian-American Border

lthttpabacusdatacawp-contentuploads983090983088983089983090983089983089Can-AM_Report_CABC_

Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

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fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5962

983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6062

The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 21: Canadas Catch 22 State of Canada Us Relations in 2014

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983089983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983096 Synopsis of trade disputes in Canadian-American relations in 983090983088983089983091

Dispute Impact and cost Prospect for resolution

Keystone XL Pipeline Very serious Poor

2008 proposal for a 1897

km 465000 bpd crude oilpipeline spanning fromAlberta down to Nebraska

Downward pressure on investment

Lost wages January 2012postponement is costing US $47million a day in lost wages (ConsumerEnergy Alliance 2013)

Continuation of crude oil pricediscounts due to lack of infrastructure

Costly alternative rail has emerged as atransportation alternative but can costup to three times as much as pipelinetravel (Millington and Murillo 2013)

Permit postponed twice

Resolution is not transparent

Rising risk of decision deferral past 2016

Mandatory Country-of-OriginLabelling (MCOOL)

Serious Poor

2008 CongressionalLaw mandating rulesfor segregated livestockprocessing and packagingand a labeling structure inorder to have food labelsindicate origin of product

Annual cost to Canadian beef and porksector of $1 billion

Deconstruction of a highly integratedtrilateral supply chain industry

MCOOL adds no animal health or foodsafety benefits

US has defied both WTO complaint andthe core part of the WTO Appeal ruling

2013 US reaction has been to strengthenthe discriminatory provision banning co-mingling of meats altogether

Canada plans to retaliate with tariffs butthis is a costly gambit with low chance ofsuccess

Softwood Lumber Agreement Moderate Good

In 2011 American softwoodcompanies took theirCanadian counterparts to theLondon Court of InternationalArbitration accusing themof circumventing the SLA(Foreign Affairs Trade andDevelopment Canada 2012a)

If in violation Canadian industry wouldface $380 million in penalties (TheCanadian Press 2012)

The London Court of InternationalArbitration in 2012 ruled in favor ofCanada (Foreign Affairs Trade andDevelopment Canada 2012a)

SLA was to expire in 2013 but Canadaand the USA extended it until 2015 (CBCNews 2012)

Long-term free trade in lumber needs toreplace SLA

Buy American Provision Serious Partial resolution but high risk ofrecurring Buy American legislation

2009 American Recovery andReinvestment Act

Exclusion of Canadian products andproduction sharing in US public worksprocurement

Canada-US Procurement Agreement in2010 which allowed for the purchaseof Canadian goods on seven US

infrastructure projects valued at morethan $7777000

Canada needs to seek a comprehensiveagreement in order to escape futureAmerican protectionism with allprovinces on board and compliant withthe WTO provision

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The state of Canada-US relations in 983090983088983089983092 983089983093

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Dispute Impact and cost Prospect for resolution

Canadian Wheat Board Long-term benefit Completed

Canadarsquos mandatory wheat

marketing board monopsonyended in 2011

Frequent US action against CWB in the

past will now end as wheat marketingin Canada turns fully market based

Intellectual Property Rights Moderate potential cost Partially resolved

Canada has been on theSpecial 301 Priority Watch Listby the United States TradeRepresentative since 1995

Ongoing threat of US Trade Action andlegal action

Canadian domestic complianceincluding

Strengthening data protection

Participation in Anti-counterfeiting TradeAgreement (ACTA in 2013)

Enacted the Combating CounterfeitProducts Act (2013)

Started the process of strengthening

the Copyright Act and implementingWorld Intellectual Property OrganizationInternet Treaties

In recognition of which Canada has beenremoved from the Special 301 PriorityWatch List

Prescription drugs Serious potential for trade action Indirect progress

The US complaint againstCanada

Imposing price ceilings thatshifts the cost burden of RampDto US firms

Weak protection ofintellectual property rights rethird party sales

Slow prescription drugapproval process causingreduced market access

US firms experience lost revenues andtrade action is a risk

In 2013 CETA agreement with theEuropean Union Canada agrees to givefull patent protection to new drugs fortwo years

Two-year rule may be transferable tofuture Canada-US resolution

Table 983096 continued

Canada and the United States have had a deeply integrated market in

this sector since the early 983089983097983097983088s Animal health and food safety standards have

been largely harmonized As a result highly efficient supply-chain production

methods have made this industry quite efficient However the imposition of

MCOOL has changed all that (Moens amp Leon 983090983088983089983090) Te cost differential haswidened and Canadian exports have dropped dramatically Since 983090983088983088983096 the

cattle sector has lost $983094983092983088 million per year and the hog sector has lost $983093983088983088

million a year (Te Canadian Press 983090983088983089983091a)

In 983090983088983089983090 the World rade Organization (WO) ruled in Canadarsquos favor by

concluding that MCOOL is discriminatory Te WO gave the US until May 983090983091

983090983088983089983091 to act but on that same day the USDA imposed regulatory changes that

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983089983094 The state of Canada-US relations in 983090983088983089983092

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actually strengthened the provisions of MCOOL In retaliation the Canadian

government released a list of US exports to Canada that would be subjected

to tariffs and it is preparing to seek a compliance panel at the WO Until this

situation is resolved the Canadian government predicts a continuing annual

loss of $983089 billion for the Canadian red meat sector (Te Canadian Press 983090983088983089983091a)

Softwood lumber

In 983090983088983089983089 several American softwood companies took their Canadian counter-

parts to the Court of International Arbitration in London accusing them of cir-

cumventing the Softwood Lumber Agreement of 983090983088983088983094 (Foreign Affairs rade

and Development Canada 983090983088983089983090a) Te dispute centered on the accelerating pace

of lumber harvests resulting from the pine beetle infestation Te stakes were

high $983091983096983088 million in penalties should Canada lose (Te Canadian Press 983090983088983089983090)

In 983090983088983089983090 the Court of International Arbitration ruled in Canadarsquos favor

(Foreign Affairs rade and Development Canada 983090983088983089983090a) In addition while

the Softwood Lumber Agreement was set to expire in 983090983088983089983091 the Canadian

and American governments successfully negotiated an extension of the

Agreement until 983090983088983089983093 (CBC News 983090983088983089983090) Te fact remains that as long as a

large part of Canadarsquos softwood lumber is managed in terms of quotas and

the stumpage fee system US trade action is very likely

lsquoBuy Americanrsquo provision

Te 983090983088983088983097 American Recovery and Reinvestment Act (ARRA which expired

on September 983091983088 983090983088983089983089) and the more recent 983090983088983089983089 American Jobs Act stipu-

lated that steel iron and other goods used in the repair and construction of

infrastructure projects in the US (highways bridges mass transit and fed-

eral buildings) must be manufactured in the United States (Matthiesen 983090983088983089983089)

In response to ARRA Canada and the US signed the Canada-US

Procurement Agreement in 983090983088983089983088 which allowed for the purchase of Canadian

goods on seven US infrastructure projects valued at more than $983095983095983095983095983088983088983088

or within the 983091983095 states subject to the WO GPA (Government of Canada

983090983088983089983091a) Te 983090983088983089983089 American Jobs Act did not pass in Senate and is thus moot

While the ARRA dispute was partially resolved lsquoBuy Americanrsquo anda counter position of lsquoBuy Canadianrsquo can flare up on either side of the bor-

der Canadian industry is most vulnerable in this uncertainty Te Canadian

government ought to seek a comprehensive Buy American exemption to

escape future American protectionism In so doing all provincial govern-

ments need to be on board in order to make the WO and NAFA rules

function optimally

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983089983095

fraserinstituteorg

Canadian Wheat Board (CWB)

In 983090983088983089983089 the Canadian government removed the monopsony held by the

Canadian Wheat Board Tis unilateral action offers a successful reduction

in bilateral trade distortion oday the CWB continues to operate as a mar-

keting group

Intellectual Property Rights (IPR)

From 983089983097983097983093 through 983090983088983089983091 Canada was on the Special 983091983088983089 Priority Watch

List by the United States rade Representative Te US complaint was that

protection and enforcement of IPR in Canada were weak Te Special 983091983088983089

Priority Watch List is designed to identify US trading partners that are the

worst offenders in IPR protection (Embassy of the United States Ottawa

Canada 983090983088983089983091)

Although the issue is not completely resolved Canada has made sig-

nificant progress in recent years Te federal government has strengthened

data protection regulations criminalized the use of camcorders in theaters

and participates in the Anti-Counterfeiting rade Agreement (ACA) nego-

tiations (983090983088983089983091) Most recently Canada enacted the Combatting Counterfeit

Products Act (Embassy of the United States Ottawa Canada 983090983088983089983091) Te

Canadian Government is in the process of strengthening the Copyright Act

and implementing World Intellectual Property Organization Internet reaties

(Embassy of the United States Ottawa Canada 983090983088983089983091)

As a result of these steps Canada was removed from the Special 983091983088983089

Priority Watch List in 983090983088983089983091

Prescription drugs

Prescription drug prices in Canada are relatively low due to a price ceil-

ing mandated by Canadarsquos healthcare system In addition Health Canada

approval times for prescription drugs significantly lag behind their counter-

parts in the United States and the European Union (Barua and Esmail 983090983088983089983091)

US lawmakers have repeatedly expressed their concerns over cheap prescrip-

tion drugs re-entering the US from Canada (Moens and Gabler 983090983088983089983089) TeEU also asked Canada to strengthen IPR protections for prescription drugs

(Lexchin and Gagnon 983090983088983089983091) Since the signing of the CEA agreement in

principle on October 983089983096 983090983088983089983091 the issue between Canada and the EU is now

resolved (Waldie 983090983088983089983091) Canada has agreed to ldquoEU demands for patent pro-

tection for up to two years on brand-name drugsrdquo (Blanchfield 983090983088983089983091)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983089983096 fraserinstituteorg

State of the border andregulatory cooperation

Te decline in Americans traveling to Canada corresponds with the US

Greenback losing value against the Canadian dollar (figures 983089983088 983089983089) However

when we consider the extent of the decline in total numbers it appears dispro-

portionate Te change in American travel suggests instead a bigger problem

following the 983097-983089983089 shock Te imposition of new border transit requirements

such as passports as well as longer wait times and more security screening

has likely dampened US travel across this international boundary Given the

modest economic recovery in the USA from the beginning of 983090983088983089983088 onward

one would expect disposable income including for travel to trend back up

Instead the numbers remain stagnant at around 983090983088 million less than half the

number of 983090983088983088983090

While an overall national average for border wait times is not avail-

able data on major border crossings in both Central Canada and British

Columbia indicate that no reductions in wait times have been achieved

between 983090983088983088983094 and 983090983088983089983089 (figure 983089983090) Te problem of inefficiency as presented

by the Canada-US border goes well beyond wait times It includes inefficient

activity away from the border such as extra warehousing and costs of com-

plying with various facilitated traveler and goods programs such as FAS for

trucks loads and drivers

Tere are consistent cost differences between domestic and cross-bor-

der truck-borne trade which point to significant border costs ldquoFor exports

to the US these costs added 983088983097 percent to the delivered price of goods in

983090983088983088983092 Tis figure fell to 983088983092 percent in 983090983088983088983097 hellip Higher fixed costs per shipment

accounted for most of the additional cost of transporting goods to the USrdquo

(Brown and Anderson 983090983088983089983090) When we consider that in the manufacturingsector parts cross the border several times in various stages of assembly we

realize how this cost accumulates and defeats the efficiency gains otherwise

generated by integrated supply chain manufacturing Border costs are typ-

ically passed on to the consumer as fixed costs per shipment

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983089983097

fraserinstituteorg

An unprecedented border problem has arisen in the current USAdministrationrsquos lengthy (six years) review of the permitting of a pipeline

border crossing as proposed in the Keystone XL project As a result oil-by-

rail transport has recently increased while the pipeline mode of Canada-US

trade has seen a drop in growth in the 983090983088983089983089983089983090 period ( figures 983089983091 983089983092)

0

10

20

30

40

50

201220112010200920082007200620052004200320022001200019991998

Figure Travellers entering Canada ndash

Source Statistics Canada (2013e)

US residents Non-US residents

0

3

6

9

12

15

18

0

03

06

09

12

15

18

20122011201020092008200720062005200420032002

Trips Spending US$CA$ (Secondary axis)

Figure US overnight travel to Canada ndash

Source Statistics Canada (2011) Bank of Canada (2013b)

M i l l i o n s o f t r i p

s N o m i n a l C A $ b i l l i o n s

U S $ C A $ ex c h a n

g er a t e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

5

10

15

20

201120102009200820072006

Northbound average delay Southbound average delay

Figure Peace Arch average border wait time ndash

Source Cascade Gateway Data (2013)

M i n u t e s

0

25

50

75

100

125

150

175

200

225

250

275

300

201220112010200920082007200620052004

2 0 0 4

U S $ b

i l l i o n s

Figure All surface modes of freight flow data based on value of goods

ndash

Source Bureau of Transportation Statistics (2013)

Truck Rail Pipeline

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983089

fraserinstituteorg

lsquoBeyond the Borderrsquo and Regulatory Cooperation

In 983090983088983089983089 Canada and the United States announced an ambitious agreement

to reduce border costs by means of deeper bilateral regulatory and secur-

ity cooperation Te accord seeks to streamline various border proceduresmdash

some already in existence and some newmdashto improve intelligence-sharing

between law enforcement agencies mutual recognition of passenger baggage

screening improved frameworks for trusted trade programs harmoniza-

tion of NEXUS protocols streamlined supply chains enhanced trade com-

petitiveness collaboration in border infrastructure investment and deeper

cooperation in national security investigations Te agreement is known as

Beyond the Border A Shared Vision for Perimeter Security and Economic

Competitiveness (February 983092 983090983088983089983089)

Te Beyond the Border Vision accord also set up a Regulatory

Cooperation Council In it Canadian and American officials seek to reduce

red tape and harmonize regulations in certain key sectors o date the

Council has announced various plans affecting agriculture and food trans-

portation health personal care products workplace chemicals environmentnano materials and small business loans We summarize the key points of

progress made since 983090983088983089983089 in table 983097

-35

-25

-15

-5

5

15

25

35

20122011201020092008200720062005

Truck Rail Pipeline

Figure Growth rate of all surface modes of freight flows () ndash

Source Bureau of Transportation Statistics (2013) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983097 Key elements of Beyond the Border and Regulatory Cooperation

Beyond the Border Program

Integrated Cargo Security Strategy (ICSS)December 2011

Reduces administrative duplication between Canada and the US byaddressing security risks in advance within the shipment supply chainand at the border (Canada Border Services Agency 2013)

Prince Rupert Pilot October 2012 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry via rail is examined by Canadian officials onbehalf of the US (Government of Canada 2013c)

Montreal Pilot January 2013 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry to the US via truck is examined by Canadianofficials on behalf of the US (Government of Canada 2013c)

Pre-load Air Cargo Targeting (PACT) Joint pilot by CBSA and Transport Canada to screen cargo pre-flight onCanada-bound airplanes at foreign airports (Canada Border ServicesAgency 2013)

Tamper Evident Technology PilotOctober 2012

Pilot collaboration between CBSA and US CBP to ensure containersremain sealed upon arrival at the US border (Canada Border Services

Agency 2013)

Truck Cargo Pre-Inspection PilotMarch 2013

Pilot program between the CBSA and the US CBP for pre-inspection ofsouthbound traffic into US (Canada Border Services Agency 2013)

Free and Secure Trade (FAST) PilotSarnia Ontario

Pilot program for usage of FAST lanes without Partners in Protection andCustoms Self Assessment programs (Government of Canada 2013c)

Canada-US Shiprider June 2013 Removal of jurisdictional barriers to improve law enforcement personnelin Windsor-Detroit and Vancouver-Blaine waterways (Government ofCanada 2013c)

EntryExit Initiative Phase II June 2013 Exchange entryexit data between the CBSA and US DHS on individualsat Canada-US land border crossings (Government of Canada 2013c)

Regulatory Cooperation ProgramMemorandum of Understanding between Transport Canada and the RailwayAssociation of Canada September 2013

Framework for Canadian rail emissions between 2011 to 2015(Government of Canada 2013d)

Canada-United States Perimeter Approachto Plant Protection September 2013

Draft framework for increased cooperation and reduction inadministrative duplication between the Canadian Food InspectionAgency (CFIA) and United States Animal and Plant Health InspectionService (APHIS) on trade in plants and plant products (Government ofCanada 2013d)

Common Electronic Submission GatewayPilot (CESG) August 2013

FDA and Health Canada will allow pharmaceutical firms to electronicallysubmit drug applications (Government of Canada 2013d)

Initiative to Align Veterinary DrugApprovals December 2012

Joint reviews between US FDA and Health Canada on veterinary drugproducts (Government of Canada 2013d)

Stricter Air Pollutant Emissions Environment Canada aligns car emissions beginning in 2017 with theUS Environmental Protection Agencyrsquos ldquoTier 3rdquo (Government of Canada2013d)

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The state of Canada-US relations in 983090983088983089983092 983090983091

fraserinstituteorg

On September 983092 983090983088983089983091 $983092983094983094 million in investment was allocated to the

Border Action plan by the Government of Canada in order expand two marine

container examination facilities (Government of Canada 983090983088983089983091c) $983091983091 million

was invested by the Government of Canada in the Asia Pacific Gateway and

rade Corridor Initiative (Government of Canada 983090983088983089983091c) Te Plan includes

an additional 983090983097 harmonization initiatives that will enhance trade activity

between Canada and the US

Neither Beyond the Border nor the Regulatory Cooperation Council

offer further investment or cost estimates on the initiatives described in table

983097 Moens and Gabler (983090983088983089983090) pointed to the need for both the Canadian and

American governments to provide data on border costs so that a cost-benefit

analysis can ensue Nonetheless the small steps of progress towards inte-

grating and harmonizing US and Canadian border practices remains a very

important (long-term) part of reducing the profile of the border

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983090983092 fraserinstituteorg

Canadian and American public perceptions

Tree observations are noteworthy in recent assessments of public percep-

tions between Americans and Canadians First Americans consistently have

a very high favourability rating of Canadians typically in the 983097983088 plus range

(table 983089983088 figure 983089983093) Both as a friend and a strategic ally Americans hold

Canadians in the most favourable light possible (table 983089983089) Disagreements over

policy between the two countries whether in defence and foreign affairs or

over border and trade issues do not move this fundamental asset Canadians

enjoy in dealing with their neighbour

Second Canadians do not have high expectations of either the

American or Canadian government regarding progress in bilateral relations

As table 983089983090 shows Canadians hold Obama in high regard (983094983091 percent) but

only 983093983092 percent expect progress from him in trade relations Prime Minister

Harper is rated slightly ahead of President Obama in terms of working hard

towards improving Canada-US relations (table 983089983091)

Tird and most significant in light of Canadarsquos Catch-983090983090 situation both

Canadians and Americans are more supportive of closer cooperation and inte-

gration policies than is the case for political representatives in either the United

States or Canada In two recent studies we showed how US Senators and House

Representatives are quite critical of Canada with regard to NAFA issues and bor-

der security (Moens and Gabler 983090983088983089983089) Similarly we found that among the three

major political parties in Canadarsquos parliament only one consistently expressed

itself in favour of closer ties with the United States (Moens and Gabler 983090983088983089983089)

A recent survey of American and Canadian (and Mexican) attitudes

towards free trade and NAFA show surprisingly strong data for more trade

integration In response to the statement ldquoTere should be more free trade

between the US Canada and Mexicordquo 983096983088 percent of Canadians approved

as did 983095983092 percent of Americans Even on border security Canadians andAmericans are more pro-cooperation and integration than their governmental

policies suggest In the US 983092983089 percent support a common perimeter while

983090983088 percent are opposed In Canada 983092983091 percent support it and 983091983088 percent are

opposed (Graves Pastor and Basaacutentildeez 983090983088983089983091) Terefore in terms of public

mandate both governments would have a case to work towards broader bilat-

eral (or trilateral) cooperation to lower trade barriers

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The state of Canada-US relations in 983090983088983089983092 983090983093

fraserinstituteorg

Table 983089983088 Canadian favourability rating among Americans (February 983090983088983089983090)

Veryfavourable

Mostlyfavourable

Mostlyunfavourable

Veryfavourable Not sure Total

favourableTotal

unfavourable

53 38 3 2 3 91 5

Note n=1015

Source Gallup Poll (2012)

Table 983089983089 Ally or enemy for Americans (June 983090983088983089983091)

Country Ally Friendly Unfriendly Enemy Total Ally andFriendly

Great Britain 66 25 2 1 91

Canada 61 33 2 1 94

China 11 44 26 14 55

Note n=1529Source Gallup Poll (2013)

88

90

92

94

96

98

201220112010200920082007

Figure Canadian favourability among Americans () ndash

Source Gallup Poll (2012)

f a

v o u r a

b l e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983090 What effect will Obama have on Canada-US relations (November 983090983088983089983090)

Canadians Americans

Positive Negative None Positive Negative None

Relationship 62 5 34 48 12 40

Trade 54 10 35 48 12 39

Harmonizing 53 8 40 47 14 39

Note n=1066

Source Abacus Data (2012)

Table 983089983091 Has each leader worked hard to improve Canada-US relations

(July 983090983088983089983090)

Country Agree Disagree Not sure

Stephen Harper 58 32 10

Barack Obama 53 32 15

Note Sample of Canadians

Source HarrisDecima (2012)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983090983095

US policy uncertainty

Canadian economic prospects face their most important challenge in the

United States Te US economic recovery has been modest and real GDP

growth so far has remained below the post-World War II average of post-

recession periods (figure 983089983094) As we noted above the less-than-stellar US

recovery is made even more challenging for Canadian traders in that pro-

ductivity gains in Canada are lagging while the Canadian dollar remains high

On top of that several American-imposed regulatory obstacles to free trade

are depressing trade prospects in crude oil red meat and public works pro-

curement Tese impediments reduce Canadian competitive access to the

US market

A high level of public spending until the January 983090983088983089983091 sequester and

ongoing monetary stimulation have not produced notable US GDP growth

Te seven post-recession periods below show the current average to be well

below the historical average (Young 983090983088983089983091)

983089983097983092983096-983089983097983093983095 983091983096983088

983089983097983093983096-983089983097983094983095 983092983090983096

983089983097983094983096-983089983097983095983095 983091983089983096

983089983097983095983096-983089983097983096983095 983091983089983093

983089983097983096983096-983089983097983097983095 983091983088983093

983089983097983097983096-983090983088983088983095 983090983097983097

983090983088983088983096-983090983088983089983091 983088983095983091

While economic growth has been modest growth in the public debt

has not (figure 983089983095) Publicly held debt in the US is now at 983095983091 percent of GDP

the highest since 983089983097983092983094 (Congressional Budget Office 983090983088983089983091)

Te widening gap between federal government outlays and revenueshas only recently been capped by the Sequester (figure 983089983096) However the

budget Sequester is temporary and final resolution of public spending and

taxation levels remains unclear given repeated gridlock in presidential-con-

gressional policy making High debt levels combined with stalemate over

taxes and budget cuts have produced a case of policy instability or uncer-

tainty in the last five years (Baker Bloom and Davis 983090983088983089983091)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

US policy uncertainty is further aggravated by inaction on the large

lsquoentitlementrsquo programsmdashSocial Security Medicare and Medicaidmdashwhich are

the major drivers of the long-term gap in revenues and spending

-4

-2

0

2

4

6

8

201220062000199419881982197619701964

Figure US GDP growth rate ndash ( forecast)

Source The World Bank (2013b) OECD (2013)

-10

-8

-6

-4

-2

0

0

20

40

60

80

100

20122011201020092008200720062005200420032002

Government deficit as a percentage of GDP Government debt as a percentage of GDP

Figure US Government deficit and debt as a percentage of GDP ndash

Source Congressional Budget Office (2013)

D e fi c i t p e r c e n t a g e ( ) D

e b t p er c en t a g e ( )

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983097

fraserinstituteorg

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

20122003199319831973

Revenue Outlays

Figure US Government revenue and outlays ndash ( US$ billions)

Source Congressional Budget Office (2013)

1 9 8 3 U S $ b i l l i o n s

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 3762

983091983088 fraserinstituteorg

Trade diversification

Given the weakness in near-term US opportunities Canadians are (again)

wondering how to pursue trade diversification away from the United States

Te objective is logical and if achieved will prove advantageous but various

trends in trade and investment show that diversification for Canada is a slow

and arduous journey (table 983089983092)

In terms of overall share exports to China in the last five years have

doubled but the numbersmdashfrom 983090983089983095 percent to 983092983090983094 percentmdashremain rela-

tively low In the same period the US-bound share declined by 983091 percent but

remains a towering 983095983092983093983092 percent Te pattern of small overall impact applies

to all the other top trading partners For example exports to the UK have

increased but exports to Japan and Mexico have essentially stalled When we

consider average export growth rates over the last five years (table 983089983093) we see

a very strong rate for China (983089983093983093 percent) and strong rates for the UK and

South Korea (983096983097 percent and 983094983097 percent) However a 983089983093 percent increase in a

983092 percent overall trade share produces little change Te point we are making

is that at this rate and pattern of trade lsquodiversificationrsquo it will actually take a

very long timemdashwhile relatively small upward trends in trade with the United

States could have a quick and very large impact in the opposite direction

On the import side we notice more trade diversification with the US

share at 983093983088 percent and the Chinese share at 983089983089 percent (table 983089983094) Te Chinese

growth rate on the import side is less than on the export side (table 983089983095) Te

most revealing number may be the high average over five years for Mexico

at 983097 percent Tis could be indicative of a growing supply chain with Mexico

While foreign direct investment (FDI) is not a direct indicator of future

trade trends in investment may harbinger change In terms of outbound

FDI we notice that only a small segment (less than 983089983088 percent) is targeted

for manufacturing (table 983089983096) It is investment in this category in which onewould expect growth in supply chains

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983089

fraserinstituteorg

Table 983089983092 Canadarsquos merchandise exports top ten destinations 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 3291 1 777 2361 1 751 2564 1 749

China 92 4 22 97 3 31 114 3 33

UK 114 2 27 105 2 33 141 2 41

Japan 97 3 23 73 4 23 79 4 23

Mexico 51 5 12 42 5 13 43 5 13

Netherlands 32 8 08 24 8 08 28 8 08

South Korea 34 7 08 31 7 10 32 7 09

Germany 39 6 09 33 6 10 34 6 10

France 28 9 07 23 9 07 20 10 06

Brazil 23 10 05 14 10 04 22 9 06

Total 4237 3145 3424

2011 2012Average

shareValue Rank Share Value Rank Share

US 2750 1 737 2783 1 745 752

China 140 3 38 159 2 43 33

UK 157 2 42 154 3 41 37

Japan 89 4 24 85 4 23 23

Mexico 46 5 12 44 5 12 12

Netherlands 40 7 11 37 6 10 09

South Korea 43 6 11 30 7 08 09

Germany 33 8 09 29 8 08 09

France 26 9 07 26 9 07 07

Brazil 24 10 06 21 10 06 06

Total 3732 3734

Source Industry Canada (2013b)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983091983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983093 Canadian export growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 56 7 -281 9 106 = 5

China 101 6 65 1 187 3

UK 16 9 -73 2 358 2

Japan 202 3 -250 7 106 = 5

Mexico 179 4 -178 6 43 9

Netherlands -85 10 -255 8 183 4

South Korea 276 2 -80 3 52 8

Germany 160 5 -167 4 54 7

France 36 8 -174 5 -122 10

Brazil 706 1 -380 10 603 1

2011 2012Average

Rank Rank

US 104 8 27 2 02

China 270 4 152 1 155

UK 148 6 -02 4 90

Japan 161 5 -29 6 38

Mexico 94 9 -16 5 24

Netherlands 475 1 -55 7 53

South Korea 374 2 -272 10 70

Germany 05 10 -95 9 -09

France 311 3 23 3 15

Brazil 109 7 -92 8 189

Source Industry Canada (2013b) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983091

fraserinstituteorg

Table 983089983094 Canadarsquos merchandise imports top ten sources 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 1992 1 524 1633 1 511 1745 1 504

China 374 2 98 347 2 109 382 2 110

Mexico 157 3 41 145 3 45 190 3 55

Japan 134 4 35 108 4 34 115 4 33

Germany 111 5 29 95 5 30 97 5 28

UK 110 6 29 82 6 26 92 6 27

South Korea 53 9 14 52 7 16 53 7 15

Algeria 67 7 18 33 10 10 31 10 09

Italy 45 10 12 39 9 12 40 9 12

France 53 8 14 49 8 15 47 8 13

Total 3804 3194 3465

2011 2012Average

shareValue Rank Share Value Rank Share

US 1846 1 496 1922 1 506 508

China 402 2 108 417 2 110 107

Mexico 205 3 55 210 3 55 50

Japan 109 4 29 123 4 33 33

Germany 107 5 29 118 5 31 29

UK 86 6 23 70 6 18 25

South Korea 55 7 15 52 7 14 15

Algeria 46 9 12 49 8 13 12

Italy 43 10 11 43 9 11 12

France 46 8 12 41 10 11 13

Total 3723 3796

Source Industry Canada (2013b)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983091983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983095 Old and new trade prospectsmdashimport growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 29 8 -178 7 89 5

China 112 4 -70 2 123 3

Mexico 43 7 -77 4 337 1

Japan -11 10 -192 8 89 4

Germany 105 5 -149 6 44 7

UK 95 6 -252 9 141 2

South Korea 120 3 -14 1 36 8

Algeria 518 1 -511 10 -50 10

Italy 11 9 -132 5 48 6

France 191 2 -70 3 -35 9

2011 2012Average

Rank Rank

US 88 5 57 4 17

China 82 6 53 5 60

Mexico 111 3 39 6 91

Japan -29 9 151 1 01

Germany 132 2 117 2 50

UK -36 10 -173 10 -45

South Korea 76 7 -37 8 37

Algeria 533 1 91 3 116

Italy 95 4 23 7 09

France 22 8 -97 9 02

Source Industry Canada (2013b) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4262

The state of Canada-US relations in 983090983088983089983092 983091983093

fraserinstituteorg

In terms of overall Canadian outbound FDI stocks in the US remain

very high despite the recent US recession while growth in stock in Asia is

modest (figure 983089983097) When we examine Canadian FDI in the so-called BRIC

states we notice that investment in both China and India is relatively small

Canadian mining investment in Brazil is much larger (figure 983090983088) In fact when

we examine amounts of FDI we find that Canada is not really a big BRIC

investor other than Brazil Chile Hong Kong and Peru are larger FDI recipi-

ents than China and India (figure 983090983089)

In terms of FDI flowing into Canada we notice the very large share

(983090983096983094983093 percent) in manufacturing which indicates both the predominant

share of US FDI and the extensive integrated supply chains in Canada-US

manufacturing (table 983089983097) Even more than for outbound FDI inflow stocks

show very large US preponderance (figure 983090983090) Such continued concentra-

tion of US FDI in Canada suggests that Canadian trade diversification is not

just a decision to be made by Canadian producers

Like trade growth Chinese FDI growth in Canada is positive but the

overall numbers are small and do not show rapid growth in the last 983091 years

(figure 983090983091)

Table 983089983096 Top industries for outward stocks of FDI 983090983088983089983090

Category Value Share

Mining oil and gas extraction 1099 188

Oil and gas subcategory 542 93

Manufacturing 569 97

Finance and insurance 2334 399

Management of companies and enterprises 757 129

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4362

983091983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

1

2

3

4

5

6

7

8

9

10

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n s

Figure Canadian foreign direct investment (stock) BRIC ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Brazil PRC India Russia

0

20

4060

80

100

120

140

160

180

200

220

240

260

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) various regions

ndash

Notes Excluding Mexico Canadian FDI to Mexico in 2012 was $557 billion

Foreign Direct Investment measures the purchase of various forms of capital stock abroad

However tax havens (Barbados Bermuda etc) are frequently found to be some of the highest

recipients of FDI In reality tax havens do not reflect economic growth as FDI figures invested

into tax havens are often reinvested back to the source country in a concept known as

round-tripping (Financial Post 2013) We have accounted for tax havens by removing them from

tables and figures in this section The numbers corresponding to Figure 19 would be Barbados

($593 billion) Bermuda ($118 billion) British Virgin Islands ($21 billion) Cayman Islands ($302

billion)

Source Foreign Affairs Trade and Development Canada (2013c)

US Europe Asia amp Oceania Central amp South America Africa

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4462

The state of Canada-US relations in 983090983088983089983092 983091983095

fraserinstituteorg

Table 983089983097 Top industries for inward stocks of FDI 983090983088983089983090

Category Value Share

Oil and gas extraction 766 147

Manufacturing 1492 287

Petroleum and coal products manufacturing 377 72

Wholesale trade 395 76

Finance and insurance 699 134

Management of companies and enterprises 999 192

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

0

2

4

6

8

10

12

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) Chile Hong Kong

Peru amp Korea ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Chile Hong Kong Peru Korea

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4562

983091983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

40

80

120

160

200

240

280

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Foreign direct investment (stock) in Canada from top three

countries ndash

Source Foreign Affairs Trade and Development Canada (2013c)

US Netherlands UK

0

2

4

6

8

10

12

201220112010200920082007

2 0 0 2 C A $ b

i l l i o n s

Figure Foreign direct investment (stock) in Canada from China

ndash

Source Foreign Affairs Trade and Development Canada (2013c)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4662

fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983092983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4862

fraserinstituteorg 983092983089

References

Abacus Data (983090983088983089983090 November 983090983088) Beyond the Canadian-American Border

lthttpabacusdatacawp-contentuploads983090983088983089983090983089983089Can-AM_Report_CABC_

Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5862

The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5962

983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6062

The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 22: Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983089983093

fraserinstituteorg

Dispute Impact and cost Prospect for resolution

Canadian Wheat Board Long-term benefit Completed

Canadarsquos mandatory wheat

marketing board monopsonyended in 2011

Frequent US action against CWB in the

past will now end as wheat marketingin Canada turns fully market based

Intellectual Property Rights Moderate potential cost Partially resolved

Canada has been on theSpecial 301 Priority Watch Listby the United States TradeRepresentative since 1995

Ongoing threat of US Trade Action andlegal action

Canadian domestic complianceincluding

Strengthening data protection

Participation in Anti-counterfeiting TradeAgreement (ACTA in 2013)

Enacted the Combating CounterfeitProducts Act (2013)

Started the process of strengthening

the Copyright Act and implementingWorld Intellectual Property OrganizationInternet Treaties

In recognition of which Canada has beenremoved from the Special 301 PriorityWatch List

Prescription drugs Serious potential for trade action Indirect progress

The US complaint againstCanada

Imposing price ceilings thatshifts the cost burden of RampDto US firms

Weak protection ofintellectual property rights rethird party sales

Slow prescription drugapproval process causingreduced market access

US firms experience lost revenues andtrade action is a risk

In 2013 CETA agreement with theEuropean Union Canada agrees to givefull patent protection to new drugs fortwo years

Two-year rule may be transferable tofuture Canada-US resolution

Table 983096 continued

Canada and the United States have had a deeply integrated market in

this sector since the early 983089983097983097983088s Animal health and food safety standards have

been largely harmonized As a result highly efficient supply-chain production

methods have made this industry quite efficient However the imposition of

MCOOL has changed all that (Moens amp Leon 983090983088983089983090) Te cost differential haswidened and Canadian exports have dropped dramatically Since 983090983088983088983096 the

cattle sector has lost $983094983092983088 million per year and the hog sector has lost $983093983088983088

million a year (Te Canadian Press 983090983088983089983091a)

In 983090983088983089983090 the World rade Organization (WO) ruled in Canadarsquos favor by

concluding that MCOOL is discriminatory Te WO gave the US until May 983090983091

983090983088983089983091 to act but on that same day the USDA imposed regulatory changes that

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983089983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

actually strengthened the provisions of MCOOL In retaliation the Canadian

government released a list of US exports to Canada that would be subjected

to tariffs and it is preparing to seek a compliance panel at the WO Until this

situation is resolved the Canadian government predicts a continuing annual

loss of $983089 billion for the Canadian red meat sector (Te Canadian Press 983090983088983089983091a)

Softwood lumber

In 983090983088983089983089 several American softwood companies took their Canadian counter-

parts to the Court of International Arbitration in London accusing them of cir-

cumventing the Softwood Lumber Agreement of 983090983088983088983094 (Foreign Affairs rade

and Development Canada 983090983088983089983090a) Te dispute centered on the accelerating pace

of lumber harvests resulting from the pine beetle infestation Te stakes were

high $983091983096983088 million in penalties should Canada lose (Te Canadian Press 983090983088983089983090)

In 983090983088983089983090 the Court of International Arbitration ruled in Canadarsquos favor

(Foreign Affairs rade and Development Canada 983090983088983089983090a) In addition while

the Softwood Lumber Agreement was set to expire in 983090983088983089983091 the Canadian

and American governments successfully negotiated an extension of the

Agreement until 983090983088983089983093 (CBC News 983090983088983089983090) Te fact remains that as long as a

large part of Canadarsquos softwood lumber is managed in terms of quotas and

the stumpage fee system US trade action is very likely

lsquoBuy Americanrsquo provision

Te 983090983088983088983097 American Recovery and Reinvestment Act (ARRA which expired

on September 983091983088 983090983088983089983089) and the more recent 983090983088983089983089 American Jobs Act stipu-

lated that steel iron and other goods used in the repair and construction of

infrastructure projects in the US (highways bridges mass transit and fed-

eral buildings) must be manufactured in the United States (Matthiesen 983090983088983089983089)

In response to ARRA Canada and the US signed the Canada-US

Procurement Agreement in 983090983088983089983088 which allowed for the purchase of Canadian

goods on seven US infrastructure projects valued at more than $983095983095983095983095983088983088983088

or within the 983091983095 states subject to the WO GPA (Government of Canada

983090983088983089983091a) Te 983090983088983089983089 American Jobs Act did not pass in Senate and is thus moot

While the ARRA dispute was partially resolved lsquoBuy Americanrsquo anda counter position of lsquoBuy Canadianrsquo can flare up on either side of the bor-

der Canadian industry is most vulnerable in this uncertainty Te Canadian

government ought to seek a comprehensive Buy American exemption to

escape future American protectionism In so doing all provincial govern-

ments need to be on board in order to make the WO and NAFA rules

function optimally

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983089983095

fraserinstituteorg

Canadian Wheat Board (CWB)

In 983090983088983089983089 the Canadian government removed the monopsony held by the

Canadian Wheat Board Tis unilateral action offers a successful reduction

in bilateral trade distortion oday the CWB continues to operate as a mar-

keting group

Intellectual Property Rights (IPR)

From 983089983097983097983093 through 983090983088983089983091 Canada was on the Special 983091983088983089 Priority Watch

List by the United States rade Representative Te US complaint was that

protection and enforcement of IPR in Canada were weak Te Special 983091983088983089

Priority Watch List is designed to identify US trading partners that are the

worst offenders in IPR protection (Embassy of the United States Ottawa

Canada 983090983088983089983091)

Although the issue is not completely resolved Canada has made sig-

nificant progress in recent years Te federal government has strengthened

data protection regulations criminalized the use of camcorders in theaters

and participates in the Anti-Counterfeiting rade Agreement (ACA) nego-

tiations (983090983088983089983091) Most recently Canada enacted the Combatting Counterfeit

Products Act (Embassy of the United States Ottawa Canada 983090983088983089983091) Te

Canadian Government is in the process of strengthening the Copyright Act

and implementing World Intellectual Property Organization Internet reaties

(Embassy of the United States Ottawa Canada 983090983088983089983091)

As a result of these steps Canada was removed from the Special 983091983088983089

Priority Watch List in 983090983088983089983091

Prescription drugs

Prescription drug prices in Canada are relatively low due to a price ceil-

ing mandated by Canadarsquos healthcare system In addition Health Canada

approval times for prescription drugs significantly lag behind their counter-

parts in the United States and the European Union (Barua and Esmail 983090983088983089983091)

US lawmakers have repeatedly expressed their concerns over cheap prescrip-

tion drugs re-entering the US from Canada (Moens and Gabler 983090983088983089983089) TeEU also asked Canada to strengthen IPR protections for prescription drugs

(Lexchin and Gagnon 983090983088983089983091) Since the signing of the CEA agreement in

principle on October 983089983096 983090983088983089983091 the issue between Canada and the EU is now

resolved (Waldie 983090983088983089983091) Canada has agreed to ldquoEU demands for patent pro-

tection for up to two years on brand-name drugsrdquo (Blanchfield 983090983088983089983091)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 2562

983089983096 fraserinstituteorg

State of the border andregulatory cooperation

Te decline in Americans traveling to Canada corresponds with the US

Greenback losing value against the Canadian dollar (figures 983089983088 983089983089) However

when we consider the extent of the decline in total numbers it appears dispro-

portionate Te change in American travel suggests instead a bigger problem

following the 983097-983089983089 shock Te imposition of new border transit requirements

such as passports as well as longer wait times and more security screening

has likely dampened US travel across this international boundary Given the

modest economic recovery in the USA from the beginning of 983090983088983089983088 onward

one would expect disposable income including for travel to trend back up

Instead the numbers remain stagnant at around 983090983088 million less than half the

number of 983090983088983088983090

While an overall national average for border wait times is not avail-

able data on major border crossings in both Central Canada and British

Columbia indicate that no reductions in wait times have been achieved

between 983090983088983088983094 and 983090983088983089983089 (figure 983089983090) Te problem of inefficiency as presented

by the Canada-US border goes well beyond wait times It includes inefficient

activity away from the border such as extra warehousing and costs of com-

plying with various facilitated traveler and goods programs such as FAS for

trucks loads and drivers

Tere are consistent cost differences between domestic and cross-bor-

der truck-borne trade which point to significant border costs ldquoFor exports

to the US these costs added 983088983097 percent to the delivered price of goods in

983090983088983088983092 Tis figure fell to 983088983092 percent in 983090983088983088983097 hellip Higher fixed costs per shipment

accounted for most of the additional cost of transporting goods to the USrdquo

(Brown and Anderson 983090983088983089983090) When we consider that in the manufacturingsector parts cross the border several times in various stages of assembly we

realize how this cost accumulates and defeats the efficiency gains otherwise

generated by integrated supply chain manufacturing Border costs are typ-

ically passed on to the consumer as fixed costs per shipment

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983089983097

fraserinstituteorg

An unprecedented border problem has arisen in the current USAdministrationrsquos lengthy (six years) review of the permitting of a pipeline

border crossing as proposed in the Keystone XL project As a result oil-by-

rail transport has recently increased while the pipeline mode of Canada-US

trade has seen a drop in growth in the 983090983088983089983089983089983090 period ( figures 983089983091 983089983092)

0

10

20

30

40

50

201220112010200920082007200620052004200320022001200019991998

Figure Travellers entering Canada ndash

Source Statistics Canada (2013e)

US residents Non-US residents

0

3

6

9

12

15

18

0

03

06

09

12

15

18

20122011201020092008200720062005200420032002

Trips Spending US$CA$ (Secondary axis)

Figure US overnight travel to Canada ndash

Source Statistics Canada (2011) Bank of Canada (2013b)

M i l l i o n s o f t r i p

s N o m i n a l C A $ b i l l i o n s

U S $ C A $ ex c h a n

g er a t e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 2762

983090983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

5

10

15

20

201120102009200820072006

Northbound average delay Southbound average delay

Figure Peace Arch average border wait time ndash

Source Cascade Gateway Data (2013)

M i n u t e s

0

25

50

75

100

125

150

175

200

225

250

275

300

201220112010200920082007200620052004

2 0 0 4

U S $ b

i l l i o n s

Figure All surface modes of freight flow data based on value of goods

ndash

Source Bureau of Transportation Statistics (2013)

Truck Rail Pipeline

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983089

fraserinstituteorg

lsquoBeyond the Borderrsquo and Regulatory Cooperation

In 983090983088983089983089 Canada and the United States announced an ambitious agreement

to reduce border costs by means of deeper bilateral regulatory and secur-

ity cooperation Te accord seeks to streamline various border proceduresmdash

some already in existence and some newmdashto improve intelligence-sharing

between law enforcement agencies mutual recognition of passenger baggage

screening improved frameworks for trusted trade programs harmoniza-

tion of NEXUS protocols streamlined supply chains enhanced trade com-

petitiveness collaboration in border infrastructure investment and deeper

cooperation in national security investigations Te agreement is known as

Beyond the Border A Shared Vision for Perimeter Security and Economic

Competitiveness (February 983092 983090983088983089983089)

Te Beyond the Border Vision accord also set up a Regulatory

Cooperation Council In it Canadian and American officials seek to reduce

red tape and harmonize regulations in certain key sectors o date the

Council has announced various plans affecting agriculture and food trans-

portation health personal care products workplace chemicals environmentnano materials and small business loans We summarize the key points of

progress made since 983090983088983089983089 in table 983097

-35

-25

-15

-5

5

15

25

35

20122011201020092008200720062005

Truck Rail Pipeline

Figure Growth rate of all surface modes of freight flows () ndash

Source Bureau of Transportation Statistics (2013) calculations by authors

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983090983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983097 Key elements of Beyond the Border and Regulatory Cooperation

Beyond the Border Program

Integrated Cargo Security Strategy (ICSS)December 2011

Reduces administrative duplication between Canada and the US byaddressing security risks in advance within the shipment supply chainand at the border (Canada Border Services Agency 2013)

Prince Rupert Pilot October 2012 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry via rail is examined by Canadian officials onbehalf of the US (Government of Canada 2013c)

Montreal Pilot January 2013 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry to the US via truck is examined by Canadianofficials on behalf of the US (Government of Canada 2013c)

Pre-load Air Cargo Targeting (PACT) Joint pilot by CBSA and Transport Canada to screen cargo pre-flight onCanada-bound airplanes at foreign airports (Canada Border ServicesAgency 2013)

Tamper Evident Technology PilotOctober 2012

Pilot collaboration between CBSA and US CBP to ensure containersremain sealed upon arrival at the US border (Canada Border Services

Agency 2013)

Truck Cargo Pre-Inspection PilotMarch 2013

Pilot program between the CBSA and the US CBP for pre-inspection ofsouthbound traffic into US (Canada Border Services Agency 2013)

Free and Secure Trade (FAST) PilotSarnia Ontario

Pilot program for usage of FAST lanes without Partners in Protection andCustoms Self Assessment programs (Government of Canada 2013c)

Canada-US Shiprider June 2013 Removal of jurisdictional barriers to improve law enforcement personnelin Windsor-Detroit and Vancouver-Blaine waterways (Government ofCanada 2013c)

EntryExit Initiative Phase II June 2013 Exchange entryexit data between the CBSA and US DHS on individualsat Canada-US land border crossings (Government of Canada 2013c)

Regulatory Cooperation ProgramMemorandum of Understanding between Transport Canada and the RailwayAssociation of Canada September 2013

Framework for Canadian rail emissions between 2011 to 2015(Government of Canada 2013d)

Canada-United States Perimeter Approachto Plant Protection September 2013

Draft framework for increased cooperation and reduction inadministrative duplication between the Canadian Food InspectionAgency (CFIA) and United States Animal and Plant Health InspectionService (APHIS) on trade in plants and plant products (Government ofCanada 2013d)

Common Electronic Submission GatewayPilot (CESG) August 2013

FDA and Health Canada will allow pharmaceutical firms to electronicallysubmit drug applications (Government of Canada 2013d)

Initiative to Align Veterinary DrugApprovals December 2012

Joint reviews between US FDA and Health Canada on veterinary drugproducts (Government of Canada 2013d)

Stricter Air Pollutant Emissions Environment Canada aligns car emissions beginning in 2017 with theUS Environmental Protection Agencyrsquos ldquoTier 3rdquo (Government of Canada2013d)

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The state of Canada-US relations in 983090983088983089983092 983090983091

fraserinstituteorg

On September 983092 983090983088983089983091 $983092983094983094 million in investment was allocated to the

Border Action plan by the Government of Canada in order expand two marine

container examination facilities (Government of Canada 983090983088983089983091c) $983091983091 million

was invested by the Government of Canada in the Asia Pacific Gateway and

rade Corridor Initiative (Government of Canada 983090983088983089983091c) Te Plan includes

an additional 983090983097 harmonization initiatives that will enhance trade activity

between Canada and the US

Neither Beyond the Border nor the Regulatory Cooperation Council

offer further investment or cost estimates on the initiatives described in table

983097 Moens and Gabler (983090983088983089983090) pointed to the need for both the Canadian and

American governments to provide data on border costs so that a cost-benefit

analysis can ensue Nonetheless the small steps of progress towards inte-

grating and harmonizing US and Canadian border practices remains a very

important (long-term) part of reducing the profile of the border

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983090983092 fraserinstituteorg

Canadian and American public perceptions

Tree observations are noteworthy in recent assessments of public percep-

tions between Americans and Canadians First Americans consistently have

a very high favourability rating of Canadians typically in the 983097983088 plus range

(table 983089983088 figure 983089983093) Both as a friend and a strategic ally Americans hold

Canadians in the most favourable light possible (table 983089983089) Disagreements over

policy between the two countries whether in defence and foreign affairs or

over border and trade issues do not move this fundamental asset Canadians

enjoy in dealing with their neighbour

Second Canadians do not have high expectations of either the

American or Canadian government regarding progress in bilateral relations

As table 983089983090 shows Canadians hold Obama in high regard (983094983091 percent) but

only 983093983092 percent expect progress from him in trade relations Prime Minister

Harper is rated slightly ahead of President Obama in terms of working hard

towards improving Canada-US relations (table 983089983091)

Tird and most significant in light of Canadarsquos Catch-983090983090 situation both

Canadians and Americans are more supportive of closer cooperation and inte-

gration policies than is the case for political representatives in either the United

States or Canada In two recent studies we showed how US Senators and House

Representatives are quite critical of Canada with regard to NAFA issues and bor-

der security (Moens and Gabler 983090983088983089983089) Similarly we found that among the three

major political parties in Canadarsquos parliament only one consistently expressed

itself in favour of closer ties with the United States (Moens and Gabler 983090983088983089983089)

A recent survey of American and Canadian (and Mexican) attitudes

towards free trade and NAFA show surprisingly strong data for more trade

integration In response to the statement ldquoTere should be more free trade

between the US Canada and Mexicordquo 983096983088 percent of Canadians approved

as did 983095983092 percent of Americans Even on border security Canadians andAmericans are more pro-cooperation and integration than their governmental

policies suggest In the US 983092983089 percent support a common perimeter while

983090983088 percent are opposed In Canada 983092983091 percent support it and 983091983088 percent are

opposed (Graves Pastor and Basaacutentildeez 983090983088983089983091) Terefore in terms of public

mandate both governments would have a case to work towards broader bilat-

eral (or trilateral) cooperation to lower trade barriers

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The state of Canada-US relations in 983090983088983089983092 983090983093

fraserinstituteorg

Table 983089983088 Canadian favourability rating among Americans (February 983090983088983089983090)

Veryfavourable

Mostlyfavourable

Mostlyunfavourable

Veryfavourable Not sure Total

favourableTotal

unfavourable

53 38 3 2 3 91 5

Note n=1015

Source Gallup Poll (2012)

Table 983089983089 Ally or enemy for Americans (June 983090983088983089983091)

Country Ally Friendly Unfriendly Enemy Total Ally andFriendly

Great Britain 66 25 2 1 91

Canada 61 33 2 1 94

China 11 44 26 14 55

Note n=1529Source Gallup Poll (2013)

88

90

92

94

96

98

201220112010200920082007

Figure Canadian favourability among Americans () ndash

Source Gallup Poll (2012)

f a

v o u r a

b l e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983090 What effect will Obama have on Canada-US relations (November 983090983088983089983090)

Canadians Americans

Positive Negative None Positive Negative None

Relationship 62 5 34 48 12 40

Trade 54 10 35 48 12 39

Harmonizing 53 8 40 47 14 39

Note n=1066

Source Abacus Data (2012)

Table 983089983091 Has each leader worked hard to improve Canada-US relations

(July 983090983088983089983090)

Country Agree Disagree Not sure

Stephen Harper 58 32 10

Barack Obama 53 32 15

Note Sample of Canadians

Source HarrisDecima (2012)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983090983095

US policy uncertainty

Canadian economic prospects face their most important challenge in the

United States Te US economic recovery has been modest and real GDP

growth so far has remained below the post-World War II average of post-

recession periods (figure 983089983094) As we noted above the less-than-stellar US

recovery is made even more challenging for Canadian traders in that pro-

ductivity gains in Canada are lagging while the Canadian dollar remains high

On top of that several American-imposed regulatory obstacles to free trade

are depressing trade prospects in crude oil red meat and public works pro-

curement Tese impediments reduce Canadian competitive access to the

US market

A high level of public spending until the January 983090983088983089983091 sequester and

ongoing monetary stimulation have not produced notable US GDP growth

Te seven post-recession periods below show the current average to be well

below the historical average (Young 983090983088983089983091)

983089983097983092983096-983089983097983093983095 983091983096983088

983089983097983093983096-983089983097983094983095 983092983090983096

983089983097983094983096-983089983097983095983095 983091983089983096

983089983097983095983096-983089983097983096983095 983091983089983093

983089983097983096983096-983089983097983097983095 983091983088983093

983089983097983097983096-983090983088983088983095 983090983097983097

983090983088983088983096-983090983088983089983091 983088983095983091

While economic growth has been modest growth in the public debt

has not (figure 983089983095) Publicly held debt in the US is now at 983095983091 percent of GDP

the highest since 983089983097983092983094 (Congressional Budget Office 983090983088983089983091)

Te widening gap between federal government outlays and revenueshas only recently been capped by the Sequester (figure 983089983096) However the

budget Sequester is temporary and final resolution of public spending and

taxation levels remains unclear given repeated gridlock in presidential-con-

gressional policy making High debt levels combined with stalemate over

taxes and budget cuts have produced a case of policy instability or uncer-

tainty in the last five years (Baker Bloom and Davis 983090983088983089983091)

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fraserinstituteorg

US policy uncertainty is further aggravated by inaction on the large

lsquoentitlementrsquo programsmdashSocial Security Medicare and Medicaidmdashwhich are

the major drivers of the long-term gap in revenues and spending

-4

-2

0

2

4

6

8

201220062000199419881982197619701964

Figure US GDP growth rate ndash ( forecast)

Source The World Bank (2013b) OECD (2013)

-10

-8

-6

-4

-2

0

0

20

40

60

80

100

20122011201020092008200720062005200420032002

Government deficit as a percentage of GDP Government debt as a percentage of GDP

Figure US Government deficit and debt as a percentage of GDP ndash

Source Congressional Budget Office (2013)

D e fi c i t p e r c e n t a g e ( ) D

e b t p er c en t a g e ( )

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The state of Canada-US relations in 983090983088983089983092 983090983097

fraserinstituteorg

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

20122003199319831973

Revenue Outlays

Figure US Government revenue and outlays ndash ( US$ billions)

Source Congressional Budget Office (2013)

1 9 8 3 U S $ b i l l i o n s

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983091983088 fraserinstituteorg

Trade diversification

Given the weakness in near-term US opportunities Canadians are (again)

wondering how to pursue trade diversification away from the United States

Te objective is logical and if achieved will prove advantageous but various

trends in trade and investment show that diversification for Canada is a slow

and arduous journey (table 983089983092)

In terms of overall share exports to China in the last five years have

doubled but the numbersmdashfrom 983090983089983095 percent to 983092983090983094 percentmdashremain rela-

tively low In the same period the US-bound share declined by 983091 percent but

remains a towering 983095983092983093983092 percent Te pattern of small overall impact applies

to all the other top trading partners For example exports to the UK have

increased but exports to Japan and Mexico have essentially stalled When we

consider average export growth rates over the last five years (table 983089983093) we see

a very strong rate for China (983089983093983093 percent) and strong rates for the UK and

South Korea (983096983097 percent and 983094983097 percent) However a 983089983093 percent increase in a

983092 percent overall trade share produces little change Te point we are making

is that at this rate and pattern of trade lsquodiversificationrsquo it will actually take a

very long timemdashwhile relatively small upward trends in trade with the United

States could have a quick and very large impact in the opposite direction

On the import side we notice more trade diversification with the US

share at 983093983088 percent and the Chinese share at 983089983089 percent (table 983089983094) Te Chinese

growth rate on the import side is less than on the export side (table 983089983095) Te

most revealing number may be the high average over five years for Mexico

at 983097 percent Tis could be indicative of a growing supply chain with Mexico

While foreign direct investment (FDI) is not a direct indicator of future

trade trends in investment may harbinger change In terms of outbound

FDI we notice that only a small segment (less than 983089983088 percent) is targeted

for manufacturing (table 983089983096) It is investment in this category in which onewould expect growth in supply chains

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The state of Canada-US relations in 983090983088983089983092 983091983089

fraserinstituteorg

Table 983089983092 Canadarsquos merchandise exports top ten destinations 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 3291 1 777 2361 1 751 2564 1 749

China 92 4 22 97 3 31 114 3 33

UK 114 2 27 105 2 33 141 2 41

Japan 97 3 23 73 4 23 79 4 23

Mexico 51 5 12 42 5 13 43 5 13

Netherlands 32 8 08 24 8 08 28 8 08

South Korea 34 7 08 31 7 10 32 7 09

Germany 39 6 09 33 6 10 34 6 10

France 28 9 07 23 9 07 20 10 06

Brazil 23 10 05 14 10 04 22 9 06

Total 4237 3145 3424

2011 2012Average

shareValue Rank Share Value Rank Share

US 2750 1 737 2783 1 745 752

China 140 3 38 159 2 43 33

UK 157 2 42 154 3 41 37

Japan 89 4 24 85 4 23 23

Mexico 46 5 12 44 5 12 12

Netherlands 40 7 11 37 6 10 09

South Korea 43 6 11 30 7 08 09

Germany 33 8 09 29 8 08 09

France 26 9 07 26 9 07 07

Brazil 24 10 06 21 10 06 06

Total 3732 3734

Source Industry Canada (2013b)

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983091983090 The state of Canada-US relations in 983090983088983089983092

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Table 983089983093 Canadian export growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 56 7 -281 9 106 = 5

China 101 6 65 1 187 3

UK 16 9 -73 2 358 2

Japan 202 3 -250 7 106 = 5

Mexico 179 4 -178 6 43 9

Netherlands -85 10 -255 8 183 4

South Korea 276 2 -80 3 52 8

Germany 160 5 -167 4 54 7

France 36 8 -174 5 -122 10

Brazil 706 1 -380 10 603 1

2011 2012Average

Rank Rank

US 104 8 27 2 02

China 270 4 152 1 155

UK 148 6 -02 4 90

Japan 161 5 -29 6 38

Mexico 94 9 -16 5 24

Netherlands 475 1 -55 7 53

South Korea 374 2 -272 10 70

Germany 05 10 -95 9 -09

France 311 3 23 3 15

Brazil 109 7 -92 8 189

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983091

fraserinstituteorg

Table 983089983094 Canadarsquos merchandise imports top ten sources 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 1992 1 524 1633 1 511 1745 1 504

China 374 2 98 347 2 109 382 2 110

Mexico 157 3 41 145 3 45 190 3 55

Japan 134 4 35 108 4 34 115 4 33

Germany 111 5 29 95 5 30 97 5 28

UK 110 6 29 82 6 26 92 6 27

South Korea 53 9 14 52 7 16 53 7 15

Algeria 67 7 18 33 10 10 31 10 09

Italy 45 10 12 39 9 12 40 9 12

France 53 8 14 49 8 15 47 8 13

Total 3804 3194 3465

2011 2012Average

shareValue Rank Share Value Rank Share

US 1846 1 496 1922 1 506 508

China 402 2 108 417 2 110 107

Mexico 205 3 55 210 3 55 50

Japan 109 4 29 123 4 33 33

Germany 107 5 29 118 5 31 29

UK 86 6 23 70 6 18 25

South Korea 55 7 15 52 7 14 15

Algeria 46 9 12 49 8 13 12

Italy 43 10 11 43 9 11 12

France 46 8 12 41 10 11 13

Total 3723 3796

Source Industry Canada (2013b)

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983091983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983095 Old and new trade prospectsmdashimport growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 29 8 -178 7 89 5

China 112 4 -70 2 123 3

Mexico 43 7 -77 4 337 1

Japan -11 10 -192 8 89 4

Germany 105 5 -149 6 44 7

UK 95 6 -252 9 141 2

South Korea 120 3 -14 1 36 8

Algeria 518 1 -511 10 -50 10

Italy 11 9 -132 5 48 6

France 191 2 -70 3 -35 9

2011 2012Average

Rank Rank

US 88 5 57 4 17

China 82 6 53 5 60

Mexico 111 3 39 6 91

Japan -29 9 151 1 01

Germany 132 2 117 2 50

UK -36 10 -173 10 -45

South Korea 76 7 -37 8 37

Algeria 533 1 91 3 116

Italy 95 4 23 7 09

France 22 8 -97 9 02

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983093

fraserinstituteorg

In terms of overall Canadian outbound FDI stocks in the US remain

very high despite the recent US recession while growth in stock in Asia is

modest (figure 983089983097) When we examine Canadian FDI in the so-called BRIC

states we notice that investment in both China and India is relatively small

Canadian mining investment in Brazil is much larger (figure 983090983088) In fact when

we examine amounts of FDI we find that Canada is not really a big BRIC

investor other than Brazil Chile Hong Kong and Peru are larger FDI recipi-

ents than China and India (figure 983090983089)

In terms of FDI flowing into Canada we notice the very large share

(983090983096983094983093 percent) in manufacturing which indicates both the predominant

share of US FDI and the extensive integrated supply chains in Canada-US

manufacturing (table 983089983097) Even more than for outbound FDI inflow stocks

show very large US preponderance (figure 983090983090) Such continued concentra-

tion of US FDI in Canada suggests that Canadian trade diversification is not

just a decision to be made by Canadian producers

Like trade growth Chinese FDI growth in Canada is positive but the

overall numbers are small and do not show rapid growth in the last 983091 years

(figure 983090983091)

Table 983089983096 Top industries for outward stocks of FDI 983090983088983089983090

Category Value Share

Mining oil and gas extraction 1099 188

Oil and gas subcategory 542 93

Manufacturing 569 97

Finance and insurance 2334 399

Management of companies and enterprises 757 129

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

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983091983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

1

2

3

4

5

6

7

8

9

10

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n s

Figure Canadian foreign direct investment (stock) BRIC ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Brazil PRC India Russia

0

20

4060

80

100

120

140

160

180

200

220

240

260

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) various regions

ndash

Notes Excluding Mexico Canadian FDI to Mexico in 2012 was $557 billion

Foreign Direct Investment measures the purchase of various forms of capital stock abroad

However tax havens (Barbados Bermuda etc) are frequently found to be some of the highest

recipients of FDI In reality tax havens do not reflect economic growth as FDI figures invested

into tax havens are often reinvested back to the source country in a concept known as

round-tripping (Financial Post 2013) We have accounted for tax havens by removing them from

tables and figures in this section The numbers corresponding to Figure 19 would be Barbados

($593 billion) Bermuda ($118 billion) British Virgin Islands ($21 billion) Cayman Islands ($302

billion)

Source Foreign Affairs Trade and Development Canada (2013c)

US Europe Asia amp Oceania Central amp South America Africa

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The state of Canada-US relations in 983090983088983089983092 983091983095

fraserinstituteorg

Table 983089983097 Top industries for inward stocks of FDI 983090983088983089983090

Category Value Share

Oil and gas extraction 766 147

Manufacturing 1492 287

Petroleum and coal products manufacturing 377 72

Wholesale trade 395 76

Finance and insurance 699 134

Management of companies and enterprises 999 192

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

0

2

4

6

8

10

12

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) Chile Hong Kong

Peru amp Korea ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Chile Hong Kong Peru Korea

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983091983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

40

80

120

160

200

240

280

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Foreign direct investment (stock) in Canada from top three

countries ndash

Source Foreign Affairs Trade and Development Canada (2013c)

US Netherlands UK

0

2

4

6

8

10

12

201220112010200920082007

2 0 0 2 C A $ b

i l l i o n s

Figure Foreign direct investment (stock) in Canada from China

ndash

Source Foreign Affairs Trade and Development Canada (2013c)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4762

983092983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4862

fraserinstituteorg 983092983089

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lthttpabacusdatacawp-contentuploads983090983088983089983090983089983089Can-AM_Report_CABC_

Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5662

The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5762

983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5862

The state of Canada-US relations in 983090983088983089983092 983093983089

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DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

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Ordering publicationso order printed publications from the Fraser Institute please contact the

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bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

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bull 983094983088983092983095983089983092983092983093983096983090

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CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983090 The state of Canada-US relations in 983090983088983089983092

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o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

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Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

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The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

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983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 23: Canadas Catch 22 State of Canada Us Relations in 2014

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983089983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

actually strengthened the provisions of MCOOL In retaliation the Canadian

government released a list of US exports to Canada that would be subjected

to tariffs and it is preparing to seek a compliance panel at the WO Until this

situation is resolved the Canadian government predicts a continuing annual

loss of $983089 billion for the Canadian red meat sector (Te Canadian Press 983090983088983089983091a)

Softwood lumber

In 983090983088983089983089 several American softwood companies took their Canadian counter-

parts to the Court of International Arbitration in London accusing them of cir-

cumventing the Softwood Lumber Agreement of 983090983088983088983094 (Foreign Affairs rade

and Development Canada 983090983088983089983090a) Te dispute centered on the accelerating pace

of lumber harvests resulting from the pine beetle infestation Te stakes were

high $983091983096983088 million in penalties should Canada lose (Te Canadian Press 983090983088983089983090)

In 983090983088983089983090 the Court of International Arbitration ruled in Canadarsquos favor

(Foreign Affairs rade and Development Canada 983090983088983089983090a) In addition while

the Softwood Lumber Agreement was set to expire in 983090983088983089983091 the Canadian

and American governments successfully negotiated an extension of the

Agreement until 983090983088983089983093 (CBC News 983090983088983089983090) Te fact remains that as long as a

large part of Canadarsquos softwood lumber is managed in terms of quotas and

the stumpage fee system US trade action is very likely

lsquoBuy Americanrsquo provision

Te 983090983088983088983097 American Recovery and Reinvestment Act (ARRA which expired

on September 983091983088 983090983088983089983089) and the more recent 983090983088983089983089 American Jobs Act stipu-

lated that steel iron and other goods used in the repair and construction of

infrastructure projects in the US (highways bridges mass transit and fed-

eral buildings) must be manufactured in the United States (Matthiesen 983090983088983089983089)

In response to ARRA Canada and the US signed the Canada-US

Procurement Agreement in 983090983088983089983088 which allowed for the purchase of Canadian

goods on seven US infrastructure projects valued at more than $983095983095983095983095983088983088983088

or within the 983091983095 states subject to the WO GPA (Government of Canada

983090983088983089983091a) Te 983090983088983089983089 American Jobs Act did not pass in Senate and is thus moot

While the ARRA dispute was partially resolved lsquoBuy Americanrsquo anda counter position of lsquoBuy Canadianrsquo can flare up on either side of the bor-

der Canadian industry is most vulnerable in this uncertainty Te Canadian

government ought to seek a comprehensive Buy American exemption to

escape future American protectionism In so doing all provincial govern-

ments need to be on board in order to make the WO and NAFA rules

function optimally

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983089983095

fraserinstituteorg

Canadian Wheat Board (CWB)

In 983090983088983089983089 the Canadian government removed the monopsony held by the

Canadian Wheat Board Tis unilateral action offers a successful reduction

in bilateral trade distortion oday the CWB continues to operate as a mar-

keting group

Intellectual Property Rights (IPR)

From 983089983097983097983093 through 983090983088983089983091 Canada was on the Special 983091983088983089 Priority Watch

List by the United States rade Representative Te US complaint was that

protection and enforcement of IPR in Canada were weak Te Special 983091983088983089

Priority Watch List is designed to identify US trading partners that are the

worst offenders in IPR protection (Embassy of the United States Ottawa

Canada 983090983088983089983091)

Although the issue is not completely resolved Canada has made sig-

nificant progress in recent years Te federal government has strengthened

data protection regulations criminalized the use of camcorders in theaters

and participates in the Anti-Counterfeiting rade Agreement (ACA) nego-

tiations (983090983088983089983091) Most recently Canada enacted the Combatting Counterfeit

Products Act (Embassy of the United States Ottawa Canada 983090983088983089983091) Te

Canadian Government is in the process of strengthening the Copyright Act

and implementing World Intellectual Property Organization Internet reaties

(Embassy of the United States Ottawa Canada 983090983088983089983091)

As a result of these steps Canada was removed from the Special 983091983088983089

Priority Watch List in 983090983088983089983091

Prescription drugs

Prescription drug prices in Canada are relatively low due to a price ceil-

ing mandated by Canadarsquos healthcare system In addition Health Canada

approval times for prescription drugs significantly lag behind their counter-

parts in the United States and the European Union (Barua and Esmail 983090983088983089983091)

US lawmakers have repeatedly expressed their concerns over cheap prescrip-

tion drugs re-entering the US from Canada (Moens and Gabler 983090983088983089983089) TeEU also asked Canada to strengthen IPR protections for prescription drugs

(Lexchin and Gagnon 983090983088983089983091) Since the signing of the CEA agreement in

principle on October 983089983096 983090983088983089983091 the issue between Canada and the EU is now

resolved (Waldie 983090983088983089983091) Canada has agreed to ldquoEU demands for patent pro-

tection for up to two years on brand-name drugsrdquo (Blanchfield 983090983088983089983091)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983089983096 fraserinstituteorg

State of the border andregulatory cooperation

Te decline in Americans traveling to Canada corresponds with the US

Greenback losing value against the Canadian dollar (figures 983089983088 983089983089) However

when we consider the extent of the decline in total numbers it appears dispro-

portionate Te change in American travel suggests instead a bigger problem

following the 983097-983089983089 shock Te imposition of new border transit requirements

such as passports as well as longer wait times and more security screening

has likely dampened US travel across this international boundary Given the

modest economic recovery in the USA from the beginning of 983090983088983089983088 onward

one would expect disposable income including for travel to trend back up

Instead the numbers remain stagnant at around 983090983088 million less than half the

number of 983090983088983088983090

While an overall national average for border wait times is not avail-

able data on major border crossings in both Central Canada and British

Columbia indicate that no reductions in wait times have been achieved

between 983090983088983088983094 and 983090983088983089983089 (figure 983089983090) Te problem of inefficiency as presented

by the Canada-US border goes well beyond wait times It includes inefficient

activity away from the border such as extra warehousing and costs of com-

plying with various facilitated traveler and goods programs such as FAS for

trucks loads and drivers

Tere are consistent cost differences between domestic and cross-bor-

der truck-borne trade which point to significant border costs ldquoFor exports

to the US these costs added 983088983097 percent to the delivered price of goods in

983090983088983088983092 Tis figure fell to 983088983092 percent in 983090983088983088983097 hellip Higher fixed costs per shipment

accounted for most of the additional cost of transporting goods to the USrdquo

(Brown and Anderson 983090983088983089983090) When we consider that in the manufacturingsector parts cross the border several times in various stages of assembly we

realize how this cost accumulates and defeats the efficiency gains otherwise

generated by integrated supply chain manufacturing Border costs are typ-

ically passed on to the consumer as fixed costs per shipment

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The state of Canada-US relations in 983090983088983089983092 983089983097

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An unprecedented border problem has arisen in the current USAdministrationrsquos lengthy (six years) review of the permitting of a pipeline

border crossing as proposed in the Keystone XL project As a result oil-by-

rail transport has recently increased while the pipeline mode of Canada-US

trade has seen a drop in growth in the 983090983088983089983089983089983090 period ( figures 983089983091 983089983092)

0

10

20

30

40

50

201220112010200920082007200620052004200320022001200019991998

Figure Travellers entering Canada ndash

Source Statistics Canada (2013e)

US residents Non-US residents

0

3

6

9

12

15

18

0

03

06

09

12

15

18

20122011201020092008200720062005200420032002

Trips Spending US$CA$ (Secondary axis)

Figure US overnight travel to Canada ndash

Source Statistics Canada (2011) Bank of Canada (2013b)

M i l l i o n s o f t r i p

s N o m i n a l C A $ b i l l i o n s

U S $ C A $ ex c h a n

g er a t e

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983090983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

5

10

15

20

201120102009200820072006

Northbound average delay Southbound average delay

Figure Peace Arch average border wait time ndash

Source Cascade Gateway Data (2013)

M i n u t e s

0

25

50

75

100

125

150

175

200

225

250

275

300

201220112010200920082007200620052004

2 0 0 4

U S $ b

i l l i o n s

Figure All surface modes of freight flow data based on value of goods

ndash

Source Bureau of Transportation Statistics (2013)

Truck Rail Pipeline

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983089

fraserinstituteorg

lsquoBeyond the Borderrsquo and Regulatory Cooperation

In 983090983088983089983089 Canada and the United States announced an ambitious agreement

to reduce border costs by means of deeper bilateral regulatory and secur-

ity cooperation Te accord seeks to streamline various border proceduresmdash

some already in existence and some newmdashto improve intelligence-sharing

between law enforcement agencies mutual recognition of passenger baggage

screening improved frameworks for trusted trade programs harmoniza-

tion of NEXUS protocols streamlined supply chains enhanced trade com-

petitiveness collaboration in border infrastructure investment and deeper

cooperation in national security investigations Te agreement is known as

Beyond the Border A Shared Vision for Perimeter Security and Economic

Competitiveness (February 983092 983090983088983089983089)

Te Beyond the Border Vision accord also set up a Regulatory

Cooperation Council In it Canadian and American officials seek to reduce

red tape and harmonize regulations in certain key sectors o date the

Council has announced various plans affecting agriculture and food trans-

portation health personal care products workplace chemicals environmentnano materials and small business loans We summarize the key points of

progress made since 983090983088983089983089 in table 983097

-35

-25

-15

-5

5

15

25

35

20122011201020092008200720062005

Truck Rail Pipeline

Figure Growth rate of all surface modes of freight flows () ndash

Source Bureau of Transportation Statistics (2013) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983090 The state of Canada-US relations in 983090983088983089983092

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Table 983097 Key elements of Beyond the Border and Regulatory Cooperation

Beyond the Border Program

Integrated Cargo Security Strategy (ICSS)December 2011

Reduces administrative duplication between Canada and the US byaddressing security risks in advance within the shipment supply chainand at the border (Canada Border Services Agency 2013)

Prince Rupert Pilot October 2012 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry via rail is examined by Canadian officials onbehalf of the US (Government of Canada 2013c)

Montreal Pilot January 2013 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry to the US via truck is examined by Canadianofficials on behalf of the US (Government of Canada 2013c)

Pre-load Air Cargo Targeting (PACT) Joint pilot by CBSA and Transport Canada to screen cargo pre-flight onCanada-bound airplanes at foreign airports (Canada Border ServicesAgency 2013)

Tamper Evident Technology PilotOctober 2012

Pilot collaboration between CBSA and US CBP to ensure containersremain sealed upon arrival at the US border (Canada Border Services

Agency 2013)

Truck Cargo Pre-Inspection PilotMarch 2013

Pilot program between the CBSA and the US CBP for pre-inspection ofsouthbound traffic into US (Canada Border Services Agency 2013)

Free and Secure Trade (FAST) PilotSarnia Ontario

Pilot program for usage of FAST lanes without Partners in Protection andCustoms Self Assessment programs (Government of Canada 2013c)

Canada-US Shiprider June 2013 Removal of jurisdictional barriers to improve law enforcement personnelin Windsor-Detroit and Vancouver-Blaine waterways (Government ofCanada 2013c)

EntryExit Initiative Phase II June 2013 Exchange entryexit data between the CBSA and US DHS on individualsat Canada-US land border crossings (Government of Canada 2013c)

Regulatory Cooperation ProgramMemorandum of Understanding between Transport Canada and the RailwayAssociation of Canada September 2013

Framework for Canadian rail emissions between 2011 to 2015(Government of Canada 2013d)

Canada-United States Perimeter Approachto Plant Protection September 2013

Draft framework for increased cooperation and reduction inadministrative duplication between the Canadian Food InspectionAgency (CFIA) and United States Animal and Plant Health InspectionService (APHIS) on trade in plants and plant products (Government ofCanada 2013d)

Common Electronic Submission GatewayPilot (CESG) August 2013

FDA and Health Canada will allow pharmaceutical firms to electronicallysubmit drug applications (Government of Canada 2013d)

Initiative to Align Veterinary DrugApprovals December 2012

Joint reviews between US FDA and Health Canada on veterinary drugproducts (Government of Canada 2013d)

Stricter Air Pollutant Emissions Environment Canada aligns car emissions beginning in 2017 with theUS Environmental Protection Agencyrsquos ldquoTier 3rdquo (Government of Canada2013d)

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The state of Canada-US relations in 983090983088983089983092 983090983091

fraserinstituteorg

On September 983092 983090983088983089983091 $983092983094983094 million in investment was allocated to the

Border Action plan by the Government of Canada in order expand two marine

container examination facilities (Government of Canada 983090983088983089983091c) $983091983091 million

was invested by the Government of Canada in the Asia Pacific Gateway and

rade Corridor Initiative (Government of Canada 983090983088983089983091c) Te Plan includes

an additional 983090983097 harmonization initiatives that will enhance trade activity

between Canada and the US

Neither Beyond the Border nor the Regulatory Cooperation Council

offer further investment or cost estimates on the initiatives described in table

983097 Moens and Gabler (983090983088983089983090) pointed to the need for both the Canadian and

American governments to provide data on border costs so that a cost-benefit

analysis can ensue Nonetheless the small steps of progress towards inte-

grating and harmonizing US and Canadian border practices remains a very

important (long-term) part of reducing the profile of the border

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983090983092 fraserinstituteorg

Canadian and American public perceptions

Tree observations are noteworthy in recent assessments of public percep-

tions between Americans and Canadians First Americans consistently have

a very high favourability rating of Canadians typically in the 983097983088 plus range

(table 983089983088 figure 983089983093) Both as a friend and a strategic ally Americans hold

Canadians in the most favourable light possible (table 983089983089) Disagreements over

policy between the two countries whether in defence and foreign affairs or

over border and trade issues do not move this fundamental asset Canadians

enjoy in dealing with their neighbour

Second Canadians do not have high expectations of either the

American or Canadian government regarding progress in bilateral relations

As table 983089983090 shows Canadians hold Obama in high regard (983094983091 percent) but

only 983093983092 percent expect progress from him in trade relations Prime Minister

Harper is rated slightly ahead of President Obama in terms of working hard

towards improving Canada-US relations (table 983089983091)

Tird and most significant in light of Canadarsquos Catch-983090983090 situation both

Canadians and Americans are more supportive of closer cooperation and inte-

gration policies than is the case for political representatives in either the United

States or Canada In two recent studies we showed how US Senators and House

Representatives are quite critical of Canada with regard to NAFA issues and bor-

der security (Moens and Gabler 983090983088983089983089) Similarly we found that among the three

major political parties in Canadarsquos parliament only one consistently expressed

itself in favour of closer ties with the United States (Moens and Gabler 983090983088983089983089)

A recent survey of American and Canadian (and Mexican) attitudes

towards free trade and NAFA show surprisingly strong data for more trade

integration In response to the statement ldquoTere should be more free trade

between the US Canada and Mexicordquo 983096983088 percent of Canadians approved

as did 983095983092 percent of Americans Even on border security Canadians andAmericans are more pro-cooperation and integration than their governmental

policies suggest In the US 983092983089 percent support a common perimeter while

983090983088 percent are opposed In Canada 983092983091 percent support it and 983091983088 percent are

opposed (Graves Pastor and Basaacutentildeez 983090983088983089983091) Terefore in terms of public

mandate both governments would have a case to work towards broader bilat-

eral (or trilateral) cooperation to lower trade barriers

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983093

fraserinstituteorg

Table 983089983088 Canadian favourability rating among Americans (February 983090983088983089983090)

Veryfavourable

Mostlyfavourable

Mostlyunfavourable

Veryfavourable Not sure Total

favourableTotal

unfavourable

53 38 3 2 3 91 5

Note n=1015

Source Gallup Poll (2012)

Table 983089983089 Ally or enemy for Americans (June 983090983088983089983091)

Country Ally Friendly Unfriendly Enemy Total Ally andFriendly

Great Britain 66 25 2 1 91

Canada 61 33 2 1 94

China 11 44 26 14 55

Note n=1529Source Gallup Poll (2013)

88

90

92

94

96

98

201220112010200920082007

Figure Canadian favourability among Americans () ndash

Source Gallup Poll (2012)

f a

v o u r a

b l e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983090 What effect will Obama have on Canada-US relations (November 983090983088983089983090)

Canadians Americans

Positive Negative None Positive Negative None

Relationship 62 5 34 48 12 40

Trade 54 10 35 48 12 39

Harmonizing 53 8 40 47 14 39

Note n=1066

Source Abacus Data (2012)

Table 983089983091 Has each leader worked hard to improve Canada-US relations

(July 983090983088983089983090)

Country Agree Disagree Not sure

Stephen Harper 58 32 10

Barack Obama 53 32 15

Note Sample of Canadians

Source HarrisDecima (2012)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983090983095

US policy uncertainty

Canadian economic prospects face their most important challenge in the

United States Te US economic recovery has been modest and real GDP

growth so far has remained below the post-World War II average of post-

recession periods (figure 983089983094) As we noted above the less-than-stellar US

recovery is made even more challenging for Canadian traders in that pro-

ductivity gains in Canada are lagging while the Canadian dollar remains high

On top of that several American-imposed regulatory obstacles to free trade

are depressing trade prospects in crude oil red meat and public works pro-

curement Tese impediments reduce Canadian competitive access to the

US market

A high level of public spending until the January 983090983088983089983091 sequester and

ongoing monetary stimulation have not produced notable US GDP growth

Te seven post-recession periods below show the current average to be well

below the historical average (Young 983090983088983089983091)

983089983097983092983096-983089983097983093983095 983091983096983088

983089983097983093983096-983089983097983094983095 983092983090983096

983089983097983094983096-983089983097983095983095 983091983089983096

983089983097983095983096-983089983097983096983095 983091983089983093

983089983097983096983096-983089983097983097983095 983091983088983093

983089983097983097983096-983090983088983088983095 983090983097983097

983090983088983088983096-983090983088983089983091 983088983095983091

While economic growth has been modest growth in the public debt

has not (figure 983089983095) Publicly held debt in the US is now at 983095983091 percent of GDP

the highest since 983089983097983092983094 (Congressional Budget Office 983090983088983089983091)

Te widening gap between federal government outlays and revenueshas only recently been capped by the Sequester (figure 983089983096) However the

budget Sequester is temporary and final resolution of public spending and

taxation levels remains unclear given repeated gridlock in presidential-con-

gressional policy making High debt levels combined with stalemate over

taxes and budget cuts have produced a case of policy instability or uncer-

tainty in the last five years (Baker Bloom and Davis 983090983088983089983091)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

US policy uncertainty is further aggravated by inaction on the large

lsquoentitlementrsquo programsmdashSocial Security Medicare and Medicaidmdashwhich are

the major drivers of the long-term gap in revenues and spending

-4

-2

0

2

4

6

8

201220062000199419881982197619701964

Figure US GDP growth rate ndash ( forecast)

Source The World Bank (2013b) OECD (2013)

-10

-8

-6

-4

-2

0

0

20

40

60

80

100

20122011201020092008200720062005200420032002

Government deficit as a percentage of GDP Government debt as a percentage of GDP

Figure US Government deficit and debt as a percentage of GDP ndash

Source Congressional Budget Office (2013)

D e fi c i t p e r c e n t a g e ( ) D

e b t p er c en t a g e ( )

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The state of Canada-US relations in 983090983088983089983092 983090983097

fraserinstituteorg

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

20122003199319831973

Revenue Outlays

Figure US Government revenue and outlays ndash ( US$ billions)

Source Congressional Budget Office (2013)

1 9 8 3 U S $ b i l l i o n s

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983091983088 fraserinstituteorg

Trade diversification

Given the weakness in near-term US opportunities Canadians are (again)

wondering how to pursue trade diversification away from the United States

Te objective is logical and if achieved will prove advantageous but various

trends in trade and investment show that diversification for Canada is a slow

and arduous journey (table 983089983092)

In terms of overall share exports to China in the last five years have

doubled but the numbersmdashfrom 983090983089983095 percent to 983092983090983094 percentmdashremain rela-

tively low In the same period the US-bound share declined by 983091 percent but

remains a towering 983095983092983093983092 percent Te pattern of small overall impact applies

to all the other top trading partners For example exports to the UK have

increased but exports to Japan and Mexico have essentially stalled When we

consider average export growth rates over the last five years (table 983089983093) we see

a very strong rate for China (983089983093983093 percent) and strong rates for the UK and

South Korea (983096983097 percent and 983094983097 percent) However a 983089983093 percent increase in a

983092 percent overall trade share produces little change Te point we are making

is that at this rate and pattern of trade lsquodiversificationrsquo it will actually take a

very long timemdashwhile relatively small upward trends in trade with the United

States could have a quick and very large impact in the opposite direction

On the import side we notice more trade diversification with the US

share at 983093983088 percent and the Chinese share at 983089983089 percent (table 983089983094) Te Chinese

growth rate on the import side is less than on the export side (table 983089983095) Te

most revealing number may be the high average over five years for Mexico

at 983097 percent Tis could be indicative of a growing supply chain with Mexico

While foreign direct investment (FDI) is not a direct indicator of future

trade trends in investment may harbinger change In terms of outbound

FDI we notice that only a small segment (less than 983089983088 percent) is targeted

for manufacturing (table 983089983096) It is investment in this category in which onewould expect growth in supply chains

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983089

fraserinstituteorg

Table 983089983092 Canadarsquos merchandise exports top ten destinations 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 3291 1 777 2361 1 751 2564 1 749

China 92 4 22 97 3 31 114 3 33

UK 114 2 27 105 2 33 141 2 41

Japan 97 3 23 73 4 23 79 4 23

Mexico 51 5 12 42 5 13 43 5 13

Netherlands 32 8 08 24 8 08 28 8 08

South Korea 34 7 08 31 7 10 32 7 09

Germany 39 6 09 33 6 10 34 6 10

France 28 9 07 23 9 07 20 10 06

Brazil 23 10 05 14 10 04 22 9 06

Total 4237 3145 3424

2011 2012Average

shareValue Rank Share Value Rank Share

US 2750 1 737 2783 1 745 752

China 140 3 38 159 2 43 33

UK 157 2 42 154 3 41 37

Japan 89 4 24 85 4 23 23

Mexico 46 5 12 44 5 12 12

Netherlands 40 7 11 37 6 10 09

South Korea 43 6 11 30 7 08 09

Germany 33 8 09 29 8 08 09

France 26 9 07 26 9 07 07

Brazil 24 10 06 21 10 06 06

Total 3732 3734

Source Industry Canada (2013b)

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983091983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983093 Canadian export growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 56 7 -281 9 106 = 5

China 101 6 65 1 187 3

UK 16 9 -73 2 358 2

Japan 202 3 -250 7 106 = 5

Mexico 179 4 -178 6 43 9

Netherlands -85 10 -255 8 183 4

South Korea 276 2 -80 3 52 8

Germany 160 5 -167 4 54 7

France 36 8 -174 5 -122 10

Brazil 706 1 -380 10 603 1

2011 2012Average

Rank Rank

US 104 8 27 2 02

China 270 4 152 1 155

UK 148 6 -02 4 90

Japan 161 5 -29 6 38

Mexico 94 9 -16 5 24

Netherlands 475 1 -55 7 53

South Korea 374 2 -272 10 70

Germany 05 10 -95 9 -09

France 311 3 23 3 15

Brazil 109 7 -92 8 189

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983091

fraserinstituteorg

Table 983089983094 Canadarsquos merchandise imports top ten sources 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 1992 1 524 1633 1 511 1745 1 504

China 374 2 98 347 2 109 382 2 110

Mexico 157 3 41 145 3 45 190 3 55

Japan 134 4 35 108 4 34 115 4 33

Germany 111 5 29 95 5 30 97 5 28

UK 110 6 29 82 6 26 92 6 27

South Korea 53 9 14 52 7 16 53 7 15

Algeria 67 7 18 33 10 10 31 10 09

Italy 45 10 12 39 9 12 40 9 12

France 53 8 14 49 8 15 47 8 13

Total 3804 3194 3465

2011 2012Average

shareValue Rank Share Value Rank Share

US 1846 1 496 1922 1 506 508

China 402 2 108 417 2 110 107

Mexico 205 3 55 210 3 55 50

Japan 109 4 29 123 4 33 33

Germany 107 5 29 118 5 31 29

UK 86 6 23 70 6 18 25

South Korea 55 7 15 52 7 14 15

Algeria 46 9 12 49 8 13 12

Italy 43 10 11 43 9 11 12

France 46 8 12 41 10 11 13

Total 3723 3796

Source Industry Canada (2013b)

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983091983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983095 Old and new trade prospectsmdashimport growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 29 8 -178 7 89 5

China 112 4 -70 2 123 3

Mexico 43 7 -77 4 337 1

Japan -11 10 -192 8 89 4

Germany 105 5 -149 6 44 7

UK 95 6 -252 9 141 2

South Korea 120 3 -14 1 36 8

Algeria 518 1 -511 10 -50 10

Italy 11 9 -132 5 48 6

France 191 2 -70 3 -35 9

2011 2012Average

Rank Rank

US 88 5 57 4 17

China 82 6 53 5 60

Mexico 111 3 39 6 91

Japan -29 9 151 1 01

Germany 132 2 117 2 50

UK -36 10 -173 10 -45

South Korea 76 7 -37 8 37

Algeria 533 1 91 3 116

Italy 95 4 23 7 09

France 22 8 -97 9 02

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983093

fraserinstituteorg

In terms of overall Canadian outbound FDI stocks in the US remain

very high despite the recent US recession while growth in stock in Asia is

modest (figure 983089983097) When we examine Canadian FDI in the so-called BRIC

states we notice that investment in both China and India is relatively small

Canadian mining investment in Brazil is much larger (figure 983090983088) In fact when

we examine amounts of FDI we find that Canada is not really a big BRIC

investor other than Brazil Chile Hong Kong and Peru are larger FDI recipi-

ents than China and India (figure 983090983089)

In terms of FDI flowing into Canada we notice the very large share

(983090983096983094983093 percent) in manufacturing which indicates both the predominant

share of US FDI and the extensive integrated supply chains in Canada-US

manufacturing (table 983089983097) Even more than for outbound FDI inflow stocks

show very large US preponderance (figure 983090983090) Such continued concentra-

tion of US FDI in Canada suggests that Canadian trade diversification is not

just a decision to be made by Canadian producers

Like trade growth Chinese FDI growth in Canada is positive but the

overall numbers are small and do not show rapid growth in the last 983091 years

(figure 983090983091)

Table 983089983096 Top industries for outward stocks of FDI 983090983088983089983090

Category Value Share

Mining oil and gas extraction 1099 188

Oil and gas subcategory 542 93

Manufacturing 569 97

Finance and insurance 2334 399

Management of companies and enterprises 757 129

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

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983091983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

1

2

3

4

5

6

7

8

9

10

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n s

Figure Canadian foreign direct investment (stock) BRIC ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Brazil PRC India Russia

0

20

4060

80

100

120

140

160

180

200

220

240

260

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) various regions

ndash

Notes Excluding Mexico Canadian FDI to Mexico in 2012 was $557 billion

Foreign Direct Investment measures the purchase of various forms of capital stock abroad

However tax havens (Barbados Bermuda etc) are frequently found to be some of the highest

recipients of FDI In reality tax havens do not reflect economic growth as FDI figures invested

into tax havens are often reinvested back to the source country in a concept known as

round-tripping (Financial Post 2013) We have accounted for tax havens by removing them from

tables and figures in this section The numbers corresponding to Figure 19 would be Barbados

($593 billion) Bermuda ($118 billion) British Virgin Islands ($21 billion) Cayman Islands ($302

billion)

Source Foreign Affairs Trade and Development Canada (2013c)

US Europe Asia amp Oceania Central amp South America Africa

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The state of Canada-US relations in 983090983088983089983092 983091983095

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Table 983089983097 Top industries for inward stocks of FDI 983090983088983089983090

Category Value Share

Oil and gas extraction 766 147

Manufacturing 1492 287

Petroleum and coal products manufacturing 377 72

Wholesale trade 395 76

Finance and insurance 699 134

Management of companies and enterprises 999 192

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

0

2

4

6

8

10

12

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) Chile Hong Kong

Peru amp Korea ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Chile Hong Kong Peru Korea

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0

40

80

120

160

200

240

280

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Foreign direct investment (stock) in Canada from top three

countries ndash

Source Foreign Affairs Trade and Development Canada (2013c)

US Netherlands UK

0

2

4

6

8

10

12

201220112010200920082007

2 0 0 2 C A $ b

i l l i o n s

Figure Foreign direct investment (stock) in Canada from China

ndash

Source Foreign Affairs Trade and Development Canada (2013c)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

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Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

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References

Abacus Data (983090983088983089983090 November 983090983088) Beyond the Canadian-American Border

lthttpabacusdatacawp-contentuploads983090983088983089983090983089983089Can-AM_Report_CABC_

Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5662

The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

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983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5862

The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5962

983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6062

The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6162

983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 24: Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983089983095

fraserinstituteorg

Canadian Wheat Board (CWB)

In 983090983088983089983089 the Canadian government removed the monopsony held by the

Canadian Wheat Board Tis unilateral action offers a successful reduction

in bilateral trade distortion oday the CWB continues to operate as a mar-

keting group

Intellectual Property Rights (IPR)

From 983089983097983097983093 through 983090983088983089983091 Canada was on the Special 983091983088983089 Priority Watch

List by the United States rade Representative Te US complaint was that

protection and enforcement of IPR in Canada were weak Te Special 983091983088983089

Priority Watch List is designed to identify US trading partners that are the

worst offenders in IPR protection (Embassy of the United States Ottawa

Canada 983090983088983089983091)

Although the issue is not completely resolved Canada has made sig-

nificant progress in recent years Te federal government has strengthened

data protection regulations criminalized the use of camcorders in theaters

and participates in the Anti-Counterfeiting rade Agreement (ACA) nego-

tiations (983090983088983089983091) Most recently Canada enacted the Combatting Counterfeit

Products Act (Embassy of the United States Ottawa Canada 983090983088983089983091) Te

Canadian Government is in the process of strengthening the Copyright Act

and implementing World Intellectual Property Organization Internet reaties

(Embassy of the United States Ottawa Canada 983090983088983089983091)

As a result of these steps Canada was removed from the Special 983091983088983089

Priority Watch List in 983090983088983089983091

Prescription drugs

Prescription drug prices in Canada are relatively low due to a price ceil-

ing mandated by Canadarsquos healthcare system In addition Health Canada

approval times for prescription drugs significantly lag behind their counter-

parts in the United States and the European Union (Barua and Esmail 983090983088983089983091)

US lawmakers have repeatedly expressed their concerns over cheap prescrip-

tion drugs re-entering the US from Canada (Moens and Gabler 983090983088983089983089) TeEU also asked Canada to strengthen IPR protections for prescription drugs

(Lexchin and Gagnon 983090983088983089983091) Since the signing of the CEA agreement in

principle on October 983089983096 983090983088983089983091 the issue between Canada and the EU is now

resolved (Waldie 983090983088983089983091) Canada has agreed to ldquoEU demands for patent pro-

tection for up to two years on brand-name drugsrdquo (Blanchfield 983090983088983089983091)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 2562

983089983096 fraserinstituteorg

State of the border andregulatory cooperation

Te decline in Americans traveling to Canada corresponds with the US

Greenback losing value against the Canadian dollar (figures 983089983088 983089983089) However

when we consider the extent of the decline in total numbers it appears dispro-

portionate Te change in American travel suggests instead a bigger problem

following the 983097-983089983089 shock Te imposition of new border transit requirements

such as passports as well as longer wait times and more security screening

has likely dampened US travel across this international boundary Given the

modest economic recovery in the USA from the beginning of 983090983088983089983088 onward

one would expect disposable income including for travel to trend back up

Instead the numbers remain stagnant at around 983090983088 million less than half the

number of 983090983088983088983090

While an overall national average for border wait times is not avail-

able data on major border crossings in both Central Canada and British

Columbia indicate that no reductions in wait times have been achieved

between 983090983088983088983094 and 983090983088983089983089 (figure 983089983090) Te problem of inefficiency as presented

by the Canada-US border goes well beyond wait times It includes inefficient

activity away from the border such as extra warehousing and costs of com-

plying with various facilitated traveler and goods programs such as FAS for

trucks loads and drivers

Tere are consistent cost differences between domestic and cross-bor-

der truck-borne trade which point to significant border costs ldquoFor exports

to the US these costs added 983088983097 percent to the delivered price of goods in

983090983088983088983092 Tis figure fell to 983088983092 percent in 983090983088983088983097 hellip Higher fixed costs per shipment

accounted for most of the additional cost of transporting goods to the USrdquo

(Brown and Anderson 983090983088983089983090) When we consider that in the manufacturingsector parts cross the border several times in various stages of assembly we

realize how this cost accumulates and defeats the efficiency gains otherwise

generated by integrated supply chain manufacturing Border costs are typ-

ically passed on to the consumer as fixed costs per shipment

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983089983097

fraserinstituteorg

An unprecedented border problem has arisen in the current USAdministrationrsquos lengthy (six years) review of the permitting of a pipeline

border crossing as proposed in the Keystone XL project As a result oil-by-

rail transport has recently increased while the pipeline mode of Canada-US

trade has seen a drop in growth in the 983090983088983089983089983089983090 period ( figures 983089983091 983089983092)

0

10

20

30

40

50

201220112010200920082007200620052004200320022001200019991998

Figure Travellers entering Canada ndash

Source Statistics Canada (2013e)

US residents Non-US residents

0

3

6

9

12

15

18

0

03

06

09

12

15

18

20122011201020092008200720062005200420032002

Trips Spending US$CA$ (Secondary axis)

Figure US overnight travel to Canada ndash

Source Statistics Canada (2011) Bank of Canada (2013b)

M i l l i o n s o f t r i p

s N o m i n a l C A $ b i l l i o n s

U S $ C A $ ex c h a n

g er a t e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

5

10

15

20

201120102009200820072006

Northbound average delay Southbound average delay

Figure Peace Arch average border wait time ndash

Source Cascade Gateway Data (2013)

M i n u t e s

0

25

50

75

100

125

150

175

200

225

250

275

300

201220112010200920082007200620052004

2 0 0 4

U S $ b

i l l i o n s

Figure All surface modes of freight flow data based on value of goods

ndash

Source Bureau of Transportation Statistics (2013)

Truck Rail Pipeline

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983089

fraserinstituteorg

lsquoBeyond the Borderrsquo and Regulatory Cooperation

In 983090983088983089983089 Canada and the United States announced an ambitious agreement

to reduce border costs by means of deeper bilateral regulatory and secur-

ity cooperation Te accord seeks to streamline various border proceduresmdash

some already in existence and some newmdashto improve intelligence-sharing

between law enforcement agencies mutual recognition of passenger baggage

screening improved frameworks for trusted trade programs harmoniza-

tion of NEXUS protocols streamlined supply chains enhanced trade com-

petitiveness collaboration in border infrastructure investment and deeper

cooperation in national security investigations Te agreement is known as

Beyond the Border A Shared Vision for Perimeter Security and Economic

Competitiveness (February 983092 983090983088983089983089)

Te Beyond the Border Vision accord also set up a Regulatory

Cooperation Council In it Canadian and American officials seek to reduce

red tape and harmonize regulations in certain key sectors o date the

Council has announced various plans affecting agriculture and food trans-

portation health personal care products workplace chemicals environmentnano materials and small business loans We summarize the key points of

progress made since 983090983088983089983089 in table 983097

-35

-25

-15

-5

5

15

25

35

20122011201020092008200720062005

Truck Rail Pipeline

Figure Growth rate of all surface modes of freight flows () ndash

Source Bureau of Transportation Statistics (2013) calculations by authors

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983090983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983097 Key elements of Beyond the Border and Regulatory Cooperation

Beyond the Border Program

Integrated Cargo Security Strategy (ICSS)December 2011

Reduces administrative duplication between Canada and the US byaddressing security risks in advance within the shipment supply chainand at the border (Canada Border Services Agency 2013)

Prince Rupert Pilot October 2012 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry via rail is examined by Canadian officials onbehalf of the US (Government of Canada 2013c)

Montreal Pilot January 2013 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry to the US via truck is examined by Canadianofficials on behalf of the US (Government of Canada 2013c)

Pre-load Air Cargo Targeting (PACT) Joint pilot by CBSA and Transport Canada to screen cargo pre-flight onCanada-bound airplanes at foreign airports (Canada Border ServicesAgency 2013)

Tamper Evident Technology PilotOctober 2012

Pilot collaboration between CBSA and US CBP to ensure containersremain sealed upon arrival at the US border (Canada Border Services

Agency 2013)

Truck Cargo Pre-Inspection PilotMarch 2013

Pilot program between the CBSA and the US CBP for pre-inspection ofsouthbound traffic into US (Canada Border Services Agency 2013)

Free and Secure Trade (FAST) PilotSarnia Ontario

Pilot program for usage of FAST lanes without Partners in Protection andCustoms Self Assessment programs (Government of Canada 2013c)

Canada-US Shiprider June 2013 Removal of jurisdictional barriers to improve law enforcement personnelin Windsor-Detroit and Vancouver-Blaine waterways (Government ofCanada 2013c)

EntryExit Initiative Phase II June 2013 Exchange entryexit data between the CBSA and US DHS on individualsat Canada-US land border crossings (Government of Canada 2013c)

Regulatory Cooperation ProgramMemorandum of Understanding between Transport Canada and the RailwayAssociation of Canada September 2013

Framework for Canadian rail emissions between 2011 to 2015(Government of Canada 2013d)

Canada-United States Perimeter Approachto Plant Protection September 2013

Draft framework for increased cooperation and reduction inadministrative duplication between the Canadian Food InspectionAgency (CFIA) and United States Animal and Plant Health InspectionService (APHIS) on trade in plants and plant products (Government ofCanada 2013d)

Common Electronic Submission GatewayPilot (CESG) August 2013

FDA and Health Canada will allow pharmaceutical firms to electronicallysubmit drug applications (Government of Canada 2013d)

Initiative to Align Veterinary DrugApprovals December 2012

Joint reviews between US FDA and Health Canada on veterinary drugproducts (Government of Canada 2013d)

Stricter Air Pollutant Emissions Environment Canada aligns car emissions beginning in 2017 with theUS Environmental Protection Agencyrsquos ldquoTier 3rdquo (Government of Canada2013d)

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The state of Canada-US relations in 983090983088983089983092 983090983091

fraserinstituteorg

On September 983092 983090983088983089983091 $983092983094983094 million in investment was allocated to the

Border Action plan by the Government of Canada in order expand two marine

container examination facilities (Government of Canada 983090983088983089983091c) $983091983091 million

was invested by the Government of Canada in the Asia Pacific Gateway and

rade Corridor Initiative (Government of Canada 983090983088983089983091c) Te Plan includes

an additional 983090983097 harmonization initiatives that will enhance trade activity

between Canada and the US

Neither Beyond the Border nor the Regulatory Cooperation Council

offer further investment or cost estimates on the initiatives described in table

983097 Moens and Gabler (983090983088983089983090) pointed to the need for both the Canadian and

American governments to provide data on border costs so that a cost-benefit

analysis can ensue Nonetheless the small steps of progress towards inte-

grating and harmonizing US and Canadian border practices remains a very

important (long-term) part of reducing the profile of the border

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983090983092 fraserinstituteorg

Canadian and American public perceptions

Tree observations are noteworthy in recent assessments of public percep-

tions between Americans and Canadians First Americans consistently have

a very high favourability rating of Canadians typically in the 983097983088 plus range

(table 983089983088 figure 983089983093) Both as a friend and a strategic ally Americans hold

Canadians in the most favourable light possible (table 983089983089) Disagreements over

policy between the two countries whether in defence and foreign affairs or

over border and trade issues do not move this fundamental asset Canadians

enjoy in dealing with their neighbour

Second Canadians do not have high expectations of either the

American or Canadian government regarding progress in bilateral relations

As table 983089983090 shows Canadians hold Obama in high regard (983094983091 percent) but

only 983093983092 percent expect progress from him in trade relations Prime Minister

Harper is rated slightly ahead of President Obama in terms of working hard

towards improving Canada-US relations (table 983089983091)

Tird and most significant in light of Canadarsquos Catch-983090983090 situation both

Canadians and Americans are more supportive of closer cooperation and inte-

gration policies than is the case for political representatives in either the United

States or Canada In two recent studies we showed how US Senators and House

Representatives are quite critical of Canada with regard to NAFA issues and bor-

der security (Moens and Gabler 983090983088983089983089) Similarly we found that among the three

major political parties in Canadarsquos parliament only one consistently expressed

itself in favour of closer ties with the United States (Moens and Gabler 983090983088983089983089)

A recent survey of American and Canadian (and Mexican) attitudes

towards free trade and NAFA show surprisingly strong data for more trade

integration In response to the statement ldquoTere should be more free trade

between the US Canada and Mexicordquo 983096983088 percent of Canadians approved

as did 983095983092 percent of Americans Even on border security Canadians andAmericans are more pro-cooperation and integration than their governmental

policies suggest In the US 983092983089 percent support a common perimeter while

983090983088 percent are opposed In Canada 983092983091 percent support it and 983091983088 percent are

opposed (Graves Pastor and Basaacutentildeez 983090983088983089983091) Terefore in terms of public

mandate both governments would have a case to work towards broader bilat-

eral (or trilateral) cooperation to lower trade barriers

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The state of Canada-US relations in 983090983088983089983092 983090983093

fraserinstituteorg

Table 983089983088 Canadian favourability rating among Americans (February 983090983088983089983090)

Veryfavourable

Mostlyfavourable

Mostlyunfavourable

Veryfavourable Not sure Total

favourableTotal

unfavourable

53 38 3 2 3 91 5

Note n=1015

Source Gallup Poll (2012)

Table 983089983089 Ally or enemy for Americans (June 983090983088983089983091)

Country Ally Friendly Unfriendly Enemy Total Ally andFriendly

Great Britain 66 25 2 1 91

Canada 61 33 2 1 94

China 11 44 26 14 55

Note n=1529Source Gallup Poll (2013)

88

90

92

94

96

98

201220112010200920082007

Figure Canadian favourability among Americans () ndash

Source Gallup Poll (2012)

f a

v o u r a

b l e

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983090983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983090 What effect will Obama have on Canada-US relations (November 983090983088983089983090)

Canadians Americans

Positive Negative None Positive Negative None

Relationship 62 5 34 48 12 40

Trade 54 10 35 48 12 39

Harmonizing 53 8 40 47 14 39

Note n=1066

Source Abacus Data (2012)

Table 983089983091 Has each leader worked hard to improve Canada-US relations

(July 983090983088983089983090)

Country Agree Disagree Not sure

Stephen Harper 58 32 10

Barack Obama 53 32 15

Note Sample of Canadians

Source HarrisDecima (2012)

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fraserinstituteorg 983090983095

US policy uncertainty

Canadian economic prospects face their most important challenge in the

United States Te US economic recovery has been modest and real GDP

growth so far has remained below the post-World War II average of post-

recession periods (figure 983089983094) As we noted above the less-than-stellar US

recovery is made even more challenging for Canadian traders in that pro-

ductivity gains in Canada are lagging while the Canadian dollar remains high

On top of that several American-imposed regulatory obstacles to free trade

are depressing trade prospects in crude oil red meat and public works pro-

curement Tese impediments reduce Canadian competitive access to the

US market

A high level of public spending until the January 983090983088983089983091 sequester and

ongoing monetary stimulation have not produced notable US GDP growth

Te seven post-recession periods below show the current average to be well

below the historical average (Young 983090983088983089983091)

983089983097983092983096-983089983097983093983095 983091983096983088

983089983097983093983096-983089983097983094983095 983092983090983096

983089983097983094983096-983089983097983095983095 983091983089983096

983089983097983095983096-983089983097983096983095 983091983089983093

983089983097983096983096-983089983097983097983095 983091983088983093

983089983097983097983096-983090983088983088983095 983090983097983097

983090983088983088983096-983090983088983089983091 983088983095983091

While economic growth has been modest growth in the public debt

has not (figure 983089983095) Publicly held debt in the US is now at 983095983091 percent of GDP

the highest since 983089983097983092983094 (Congressional Budget Office 983090983088983089983091)

Te widening gap between federal government outlays and revenueshas only recently been capped by the Sequester (figure 983089983096) However the

budget Sequester is temporary and final resolution of public spending and

taxation levels remains unclear given repeated gridlock in presidential-con-

gressional policy making High debt levels combined with stalemate over

taxes and budget cuts have produced a case of policy instability or uncer-

tainty in the last five years (Baker Bloom and Davis 983090983088983089983091)

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983090983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

US policy uncertainty is further aggravated by inaction on the large

lsquoentitlementrsquo programsmdashSocial Security Medicare and Medicaidmdashwhich are

the major drivers of the long-term gap in revenues and spending

-4

-2

0

2

4

6

8

201220062000199419881982197619701964

Figure US GDP growth rate ndash ( forecast)

Source The World Bank (2013b) OECD (2013)

-10

-8

-6

-4

-2

0

0

20

40

60

80

100

20122011201020092008200720062005200420032002

Government deficit as a percentage of GDP Government debt as a percentage of GDP

Figure US Government deficit and debt as a percentage of GDP ndash

Source Congressional Budget Office (2013)

D e fi c i t p e r c e n t a g e ( ) D

e b t p er c en t a g e ( )

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The state of Canada-US relations in 983090983088983089983092 983090983097

fraserinstituteorg

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

20122003199319831973

Revenue Outlays

Figure US Government revenue and outlays ndash ( US$ billions)

Source Congressional Budget Office (2013)

1 9 8 3 U S $ b i l l i o n s

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983091983088 fraserinstituteorg

Trade diversification

Given the weakness in near-term US opportunities Canadians are (again)

wondering how to pursue trade diversification away from the United States

Te objective is logical and if achieved will prove advantageous but various

trends in trade and investment show that diversification for Canada is a slow

and arduous journey (table 983089983092)

In terms of overall share exports to China in the last five years have

doubled but the numbersmdashfrom 983090983089983095 percent to 983092983090983094 percentmdashremain rela-

tively low In the same period the US-bound share declined by 983091 percent but

remains a towering 983095983092983093983092 percent Te pattern of small overall impact applies

to all the other top trading partners For example exports to the UK have

increased but exports to Japan and Mexico have essentially stalled When we

consider average export growth rates over the last five years (table 983089983093) we see

a very strong rate for China (983089983093983093 percent) and strong rates for the UK and

South Korea (983096983097 percent and 983094983097 percent) However a 983089983093 percent increase in a

983092 percent overall trade share produces little change Te point we are making

is that at this rate and pattern of trade lsquodiversificationrsquo it will actually take a

very long timemdashwhile relatively small upward trends in trade with the United

States could have a quick and very large impact in the opposite direction

On the import side we notice more trade diversification with the US

share at 983093983088 percent and the Chinese share at 983089983089 percent (table 983089983094) Te Chinese

growth rate on the import side is less than on the export side (table 983089983095) Te

most revealing number may be the high average over five years for Mexico

at 983097 percent Tis could be indicative of a growing supply chain with Mexico

While foreign direct investment (FDI) is not a direct indicator of future

trade trends in investment may harbinger change In terms of outbound

FDI we notice that only a small segment (less than 983089983088 percent) is targeted

for manufacturing (table 983089983096) It is investment in this category in which onewould expect growth in supply chains

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983089

fraserinstituteorg

Table 983089983092 Canadarsquos merchandise exports top ten destinations 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 3291 1 777 2361 1 751 2564 1 749

China 92 4 22 97 3 31 114 3 33

UK 114 2 27 105 2 33 141 2 41

Japan 97 3 23 73 4 23 79 4 23

Mexico 51 5 12 42 5 13 43 5 13

Netherlands 32 8 08 24 8 08 28 8 08

South Korea 34 7 08 31 7 10 32 7 09

Germany 39 6 09 33 6 10 34 6 10

France 28 9 07 23 9 07 20 10 06

Brazil 23 10 05 14 10 04 22 9 06

Total 4237 3145 3424

2011 2012Average

shareValue Rank Share Value Rank Share

US 2750 1 737 2783 1 745 752

China 140 3 38 159 2 43 33

UK 157 2 42 154 3 41 37

Japan 89 4 24 85 4 23 23

Mexico 46 5 12 44 5 12 12

Netherlands 40 7 11 37 6 10 09

South Korea 43 6 11 30 7 08 09

Germany 33 8 09 29 8 08 09

France 26 9 07 26 9 07 07

Brazil 24 10 06 21 10 06 06

Total 3732 3734

Source Industry Canada (2013b)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983091983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983093 Canadian export growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 56 7 -281 9 106 = 5

China 101 6 65 1 187 3

UK 16 9 -73 2 358 2

Japan 202 3 -250 7 106 = 5

Mexico 179 4 -178 6 43 9

Netherlands -85 10 -255 8 183 4

South Korea 276 2 -80 3 52 8

Germany 160 5 -167 4 54 7

France 36 8 -174 5 -122 10

Brazil 706 1 -380 10 603 1

2011 2012Average

Rank Rank

US 104 8 27 2 02

China 270 4 152 1 155

UK 148 6 -02 4 90

Japan 161 5 -29 6 38

Mexico 94 9 -16 5 24

Netherlands 475 1 -55 7 53

South Korea 374 2 -272 10 70

Germany 05 10 -95 9 -09

France 311 3 23 3 15

Brazil 109 7 -92 8 189

Source Industry Canada (2013b) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983091

fraserinstituteorg

Table 983089983094 Canadarsquos merchandise imports top ten sources 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 1992 1 524 1633 1 511 1745 1 504

China 374 2 98 347 2 109 382 2 110

Mexico 157 3 41 145 3 45 190 3 55

Japan 134 4 35 108 4 34 115 4 33

Germany 111 5 29 95 5 30 97 5 28

UK 110 6 29 82 6 26 92 6 27

South Korea 53 9 14 52 7 16 53 7 15

Algeria 67 7 18 33 10 10 31 10 09

Italy 45 10 12 39 9 12 40 9 12

France 53 8 14 49 8 15 47 8 13

Total 3804 3194 3465

2011 2012Average

shareValue Rank Share Value Rank Share

US 1846 1 496 1922 1 506 508

China 402 2 108 417 2 110 107

Mexico 205 3 55 210 3 55 50

Japan 109 4 29 123 4 33 33

Germany 107 5 29 118 5 31 29

UK 86 6 23 70 6 18 25

South Korea 55 7 15 52 7 14 15

Algeria 46 9 12 49 8 13 12

Italy 43 10 11 43 9 11 12

France 46 8 12 41 10 11 13

Total 3723 3796

Source Industry Canada (2013b)

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983091983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983095 Old and new trade prospectsmdashimport growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 29 8 -178 7 89 5

China 112 4 -70 2 123 3

Mexico 43 7 -77 4 337 1

Japan -11 10 -192 8 89 4

Germany 105 5 -149 6 44 7

UK 95 6 -252 9 141 2

South Korea 120 3 -14 1 36 8

Algeria 518 1 -511 10 -50 10

Italy 11 9 -132 5 48 6

France 191 2 -70 3 -35 9

2011 2012Average

Rank Rank

US 88 5 57 4 17

China 82 6 53 5 60

Mexico 111 3 39 6 91

Japan -29 9 151 1 01

Germany 132 2 117 2 50

UK -36 10 -173 10 -45

South Korea 76 7 -37 8 37

Algeria 533 1 91 3 116

Italy 95 4 23 7 09

France 22 8 -97 9 02

Source Industry Canada (2013b) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983093

fraserinstituteorg

In terms of overall Canadian outbound FDI stocks in the US remain

very high despite the recent US recession while growth in stock in Asia is

modest (figure 983089983097) When we examine Canadian FDI in the so-called BRIC

states we notice that investment in both China and India is relatively small

Canadian mining investment in Brazil is much larger (figure 983090983088) In fact when

we examine amounts of FDI we find that Canada is not really a big BRIC

investor other than Brazil Chile Hong Kong and Peru are larger FDI recipi-

ents than China and India (figure 983090983089)

In terms of FDI flowing into Canada we notice the very large share

(983090983096983094983093 percent) in manufacturing which indicates both the predominant

share of US FDI and the extensive integrated supply chains in Canada-US

manufacturing (table 983089983097) Even more than for outbound FDI inflow stocks

show very large US preponderance (figure 983090983090) Such continued concentra-

tion of US FDI in Canada suggests that Canadian trade diversification is not

just a decision to be made by Canadian producers

Like trade growth Chinese FDI growth in Canada is positive but the

overall numbers are small and do not show rapid growth in the last 983091 years

(figure 983090983091)

Table 983089983096 Top industries for outward stocks of FDI 983090983088983089983090

Category Value Share

Mining oil and gas extraction 1099 188

Oil and gas subcategory 542 93

Manufacturing 569 97

Finance and insurance 2334 399

Management of companies and enterprises 757 129

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

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983091983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

1

2

3

4

5

6

7

8

9

10

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n s

Figure Canadian foreign direct investment (stock) BRIC ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Brazil PRC India Russia

0

20

4060

80

100

120

140

160

180

200

220

240

260

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) various regions

ndash

Notes Excluding Mexico Canadian FDI to Mexico in 2012 was $557 billion

Foreign Direct Investment measures the purchase of various forms of capital stock abroad

However tax havens (Barbados Bermuda etc) are frequently found to be some of the highest

recipients of FDI In reality tax havens do not reflect economic growth as FDI figures invested

into tax havens are often reinvested back to the source country in a concept known as

round-tripping (Financial Post 2013) We have accounted for tax havens by removing them from

tables and figures in this section The numbers corresponding to Figure 19 would be Barbados

($593 billion) Bermuda ($118 billion) British Virgin Islands ($21 billion) Cayman Islands ($302

billion)

Source Foreign Affairs Trade and Development Canada (2013c)

US Europe Asia amp Oceania Central amp South America Africa

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The state of Canada-US relations in 983090983088983089983092 983091983095

fraserinstituteorg

Table 983089983097 Top industries for inward stocks of FDI 983090983088983089983090

Category Value Share

Oil and gas extraction 766 147

Manufacturing 1492 287

Petroleum and coal products manufacturing 377 72

Wholesale trade 395 76

Finance and insurance 699 134

Management of companies and enterprises 999 192

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

0

2

4

6

8

10

12

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) Chile Hong Kong

Peru amp Korea ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Chile Hong Kong Peru Korea

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4562

983091983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

40

80

120

160

200

240

280

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Foreign direct investment (stock) in Canada from top three

countries ndash

Source Foreign Affairs Trade and Development Canada (2013c)

US Netherlands UK

0

2

4

6

8

10

12

201220112010200920082007

2 0 0 2 C A $ b

i l l i o n s

Figure Foreign direct investment (stock) in Canada from China

ndash

Source Foreign Affairs Trade and Development Canada (2013c)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4662

fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4762

983092983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4862

fraserinstituteorg 983092983089

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Abacus Data (983090983088983089983090 November 983090983088) Beyond the Canadian-American Border

lthttpabacusdatacawp-contentuploads983090983088983089983090983089983089Can-AM_Report_CABC_

Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983090 The state of Canada-US relations in 983090983088983089983092

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Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 25: Canadas Catch 22 State of Canada Us Relations in 2014

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983089983096 fraserinstituteorg

State of the border andregulatory cooperation

Te decline in Americans traveling to Canada corresponds with the US

Greenback losing value against the Canadian dollar (figures 983089983088 983089983089) However

when we consider the extent of the decline in total numbers it appears dispro-

portionate Te change in American travel suggests instead a bigger problem

following the 983097-983089983089 shock Te imposition of new border transit requirements

such as passports as well as longer wait times and more security screening

has likely dampened US travel across this international boundary Given the

modest economic recovery in the USA from the beginning of 983090983088983089983088 onward

one would expect disposable income including for travel to trend back up

Instead the numbers remain stagnant at around 983090983088 million less than half the

number of 983090983088983088983090

While an overall national average for border wait times is not avail-

able data on major border crossings in both Central Canada and British

Columbia indicate that no reductions in wait times have been achieved

between 983090983088983088983094 and 983090983088983089983089 (figure 983089983090) Te problem of inefficiency as presented

by the Canada-US border goes well beyond wait times It includes inefficient

activity away from the border such as extra warehousing and costs of com-

plying with various facilitated traveler and goods programs such as FAS for

trucks loads and drivers

Tere are consistent cost differences between domestic and cross-bor-

der truck-borne trade which point to significant border costs ldquoFor exports

to the US these costs added 983088983097 percent to the delivered price of goods in

983090983088983088983092 Tis figure fell to 983088983092 percent in 983090983088983088983097 hellip Higher fixed costs per shipment

accounted for most of the additional cost of transporting goods to the USrdquo

(Brown and Anderson 983090983088983089983090) When we consider that in the manufacturingsector parts cross the border several times in various stages of assembly we

realize how this cost accumulates and defeats the efficiency gains otherwise

generated by integrated supply chain manufacturing Border costs are typ-

ically passed on to the consumer as fixed costs per shipment

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The state of Canada-US relations in 983090983088983089983092 983089983097

fraserinstituteorg

An unprecedented border problem has arisen in the current USAdministrationrsquos lengthy (six years) review of the permitting of a pipeline

border crossing as proposed in the Keystone XL project As a result oil-by-

rail transport has recently increased while the pipeline mode of Canada-US

trade has seen a drop in growth in the 983090983088983089983089983089983090 period ( figures 983089983091 983089983092)

0

10

20

30

40

50

201220112010200920082007200620052004200320022001200019991998

Figure Travellers entering Canada ndash

Source Statistics Canada (2013e)

US residents Non-US residents

0

3

6

9

12

15

18

0

03

06

09

12

15

18

20122011201020092008200720062005200420032002

Trips Spending US$CA$ (Secondary axis)

Figure US overnight travel to Canada ndash

Source Statistics Canada (2011) Bank of Canada (2013b)

M i l l i o n s o f t r i p

s N o m i n a l C A $ b i l l i o n s

U S $ C A $ ex c h a n

g er a t e

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fraserinstituteorg

0

5

10

15

20

201120102009200820072006

Northbound average delay Southbound average delay

Figure Peace Arch average border wait time ndash

Source Cascade Gateway Data (2013)

M i n u t e s

0

25

50

75

100

125

150

175

200

225

250

275

300

201220112010200920082007200620052004

2 0 0 4

U S $ b

i l l i o n s

Figure All surface modes of freight flow data based on value of goods

ndash

Source Bureau of Transportation Statistics (2013)

Truck Rail Pipeline

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983089

fraserinstituteorg

lsquoBeyond the Borderrsquo and Regulatory Cooperation

In 983090983088983089983089 Canada and the United States announced an ambitious agreement

to reduce border costs by means of deeper bilateral regulatory and secur-

ity cooperation Te accord seeks to streamline various border proceduresmdash

some already in existence and some newmdashto improve intelligence-sharing

between law enforcement agencies mutual recognition of passenger baggage

screening improved frameworks for trusted trade programs harmoniza-

tion of NEXUS protocols streamlined supply chains enhanced trade com-

petitiveness collaboration in border infrastructure investment and deeper

cooperation in national security investigations Te agreement is known as

Beyond the Border A Shared Vision for Perimeter Security and Economic

Competitiveness (February 983092 983090983088983089983089)

Te Beyond the Border Vision accord also set up a Regulatory

Cooperation Council In it Canadian and American officials seek to reduce

red tape and harmonize regulations in certain key sectors o date the

Council has announced various plans affecting agriculture and food trans-

portation health personal care products workplace chemicals environmentnano materials and small business loans We summarize the key points of

progress made since 983090983088983089983089 in table 983097

-35

-25

-15

-5

5

15

25

35

20122011201020092008200720062005

Truck Rail Pipeline

Figure Growth rate of all surface modes of freight flows () ndash

Source Bureau of Transportation Statistics (2013) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983090 The state of Canada-US relations in 983090983088983089983092

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Table 983097 Key elements of Beyond the Border and Regulatory Cooperation

Beyond the Border Program

Integrated Cargo Security Strategy (ICSS)December 2011

Reduces administrative duplication between Canada and the US byaddressing security risks in advance within the shipment supply chainand at the border (Canada Border Services Agency 2013)

Prince Rupert Pilot October 2012 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry via rail is examined by Canadian officials onbehalf of the US (Government of Canada 2013c)

Montreal Pilot January 2013 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry to the US via truck is examined by Canadianofficials on behalf of the US (Government of Canada 2013c)

Pre-load Air Cargo Targeting (PACT) Joint pilot by CBSA and Transport Canada to screen cargo pre-flight onCanada-bound airplanes at foreign airports (Canada Border ServicesAgency 2013)

Tamper Evident Technology PilotOctober 2012

Pilot collaboration between CBSA and US CBP to ensure containersremain sealed upon arrival at the US border (Canada Border Services

Agency 2013)

Truck Cargo Pre-Inspection PilotMarch 2013

Pilot program between the CBSA and the US CBP for pre-inspection ofsouthbound traffic into US (Canada Border Services Agency 2013)

Free and Secure Trade (FAST) PilotSarnia Ontario

Pilot program for usage of FAST lanes without Partners in Protection andCustoms Self Assessment programs (Government of Canada 2013c)

Canada-US Shiprider June 2013 Removal of jurisdictional barriers to improve law enforcement personnelin Windsor-Detroit and Vancouver-Blaine waterways (Government ofCanada 2013c)

EntryExit Initiative Phase II June 2013 Exchange entryexit data between the CBSA and US DHS on individualsat Canada-US land border crossings (Government of Canada 2013c)

Regulatory Cooperation ProgramMemorandum of Understanding between Transport Canada and the RailwayAssociation of Canada September 2013

Framework for Canadian rail emissions between 2011 to 2015(Government of Canada 2013d)

Canada-United States Perimeter Approachto Plant Protection September 2013

Draft framework for increased cooperation and reduction inadministrative duplication between the Canadian Food InspectionAgency (CFIA) and United States Animal and Plant Health InspectionService (APHIS) on trade in plants and plant products (Government ofCanada 2013d)

Common Electronic Submission GatewayPilot (CESG) August 2013

FDA and Health Canada will allow pharmaceutical firms to electronicallysubmit drug applications (Government of Canada 2013d)

Initiative to Align Veterinary DrugApprovals December 2012

Joint reviews between US FDA and Health Canada on veterinary drugproducts (Government of Canada 2013d)

Stricter Air Pollutant Emissions Environment Canada aligns car emissions beginning in 2017 with theUS Environmental Protection Agencyrsquos ldquoTier 3rdquo (Government of Canada2013d)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983091

fraserinstituteorg

On September 983092 983090983088983089983091 $983092983094983094 million in investment was allocated to the

Border Action plan by the Government of Canada in order expand two marine

container examination facilities (Government of Canada 983090983088983089983091c) $983091983091 million

was invested by the Government of Canada in the Asia Pacific Gateway and

rade Corridor Initiative (Government of Canada 983090983088983089983091c) Te Plan includes

an additional 983090983097 harmonization initiatives that will enhance trade activity

between Canada and the US

Neither Beyond the Border nor the Regulatory Cooperation Council

offer further investment or cost estimates on the initiatives described in table

983097 Moens and Gabler (983090983088983089983090) pointed to the need for both the Canadian and

American governments to provide data on border costs so that a cost-benefit

analysis can ensue Nonetheless the small steps of progress towards inte-

grating and harmonizing US and Canadian border practices remains a very

important (long-term) part of reducing the profile of the border

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983092 fraserinstituteorg

Canadian and American public perceptions

Tree observations are noteworthy in recent assessments of public percep-

tions between Americans and Canadians First Americans consistently have

a very high favourability rating of Canadians typically in the 983097983088 plus range

(table 983089983088 figure 983089983093) Both as a friend and a strategic ally Americans hold

Canadians in the most favourable light possible (table 983089983089) Disagreements over

policy between the two countries whether in defence and foreign affairs or

over border and trade issues do not move this fundamental asset Canadians

enjoy in dealing with their neighbour

Second Canadians do not have high expectations of either the

American or Canadian government regarding progress in bilateral relations

As table 983089983090 shows Canadians hold Obama in high regard (983094983091 percent) but

only 983093983092 percent expect progress from him in trade relations Prime Minister

Harper is rated slightly ahead of President Obama in terms of working hard

towards improving Canada-US relations (table 983089983091)

Tird and most significant in light of Canadarsquos Catch-983090983090 situation both

Canadians and Americans are more supportive of closer cooperation and inte-

gration policies than is the case for political representatives in either the United

States or Canada In two recent studies we showed how US Senators and House

Representatives are quite critical of Canada with regard to NAFA issues and bor-

der security (Moens and Gabler 983090983088983089983089) Similarly we found that among the three

major political parties in Canadarsquos parliament only one consistently expressed

itself in favour of closer ties with the United States (Moens and Gabler 983090983088983089983089)

A recent survey of American and Canadian (and Mexican) attitudes

towards free trade and NAFA show surprisingly strong data for more trade

integration In response to the statement ldquoTere should be more free trade

between the US Canada and Mexicordquo 983096983088 percent of Canadians approved

as did 983095983092 percent of Americans Even on border security Canadians andAmericans are more pro-cooperation and integration than their governmental

policies suggest In the US 983092983089 percent support a common perimeter while

983090983088 percent are opposed In Canada 983092983091 percent support it and 983091983088 percent are

opposed (Graves Pastor and Basaacutentildeez 983090983088983089983091) Terefore in terms of public

mandate both governments would have a case to work towards broader bilat-

eral (or trilateral) cooperation to lower trade barriers

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983093

fraserinstituteorg

Table 983089983088 Canadian favourability rating among Americans (February 983090983088983089983090)

Veryfavourable

Mostlyfavourable

Mostlyunfavourable

Veryfavourable Not sure Total

favourableTotal

unfavourable

53 38 3 2 3 91 5

Note n=1015

Source Gallup Poll (2012)

Table 983089983089 Ally or enemy for Americans (June 983090983088983089983091)

Country Ally Friendly Unfriendly Enemy Total Ally andFriendly

Great Britain 66 25 2 1 91

Canada 61 33 2 1 94

China 11 44 26 14 55

Note n=1529Source Gallup Poll (2013)

88

90

92

94

96

98

201220112010200920082007

Figure Canadian favourability among Americans () ndash

Source Gallup Poll (2012)

f a

v o u r a

b l e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983090 What effect will Obama have on Canada-US relations (November 983090983088983089983090)

Canadians Americans

Positive Negative None Positive Negative None

Relationship 62 5 34 48 12 40

Trade 54 10 35 48 12 39

Harmonizing 53 8 40 47 14 39

Note n=1066

Source Abacus Data (2012)

Table 983089983091 Has each leader worked hard to improve Canada-US relations

(July 983090983088983089983090)

Country Agree Disagree Not sure

Stephen Harper 58 32 10

Barack Obama 53 32 15

Note Sample of Canadians

Source HarrisDecima (2012)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983090983095

US policy uncertainty

Canadian economic prospects face their most important challenge in the

United States Te US economic recovery has been modest and real GDP

growth so far has remained below the post-World War II average of post-

recession periods (figure 983089983094) As we noted above the less-than-stellar US

recovery is made even more challenging for Canadian traders in that pro-

ductivity gains in Canada are lagging while the Canadian dollar remains high

On top of that several American-imposed regulatory obstacles to free trade

are depressing trade prospects in crude oil red meat and public works pro-

curement Tese impediments reduce Canadian competitive access to the

US market

A high level of public spending until the January 983090983088983089983091 sequester and

ongoing monetary stimulation have not produced notable US GDP growth

Te seven post-recession periods below show the current average to be well

below the historical average (Young 983090983088983089983091)

983089983097983092983096-983089983097983093983095 983091983096983088

983089983097983093983096-983089983097983094983095 983092983090983096

983089983097983094983096-983089983097983095983095 983091983089983096

983089983097983095983096-983089983097983096983095 983091983089983093

983089983097983096983096-983089983097983097983095 983091983088983093

983089983097983097983096-983090983088983088983095 983090983097983097

983090983088983088983096-983090983088983089983091 983088983095983091

While economic growth has been modest growth in the public debt

has not (figure 983089983095) Publicly held debt in the US is now at 983095983091 percent of GDP

the highest since 983089983097983092983094 (Congressional Budget Office 983090983088983089983091)

Te widening gap between federal government outlays and revenueshas only recently been capped by the Sequester (figure 983089983096) However the

budget Sequester is temporary and final resolution of public spending and

taxation levels remains unclear given repeated gridlock in presidential-con-

gressional policy making High debt levels combined with stalemate over

taxes and budget cuts have produced a case of policy instability or uncer-

tainty in the last five years (Baker Bloom and Davis 983090983088983089983091)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

US policy uncertainty is further aggravated by inaction on the large

lsquoentitlementrsquo programsmdashSocial Security Medicare and Medicaidmdashwhich are

the major drivers of the long-term gap in revenues and spending

-4

-2

0

2

4

6

8

201220062000199419881982197619701964

Figure US GDP growth rate ndash ( forecast)

Source The World Bank (2013b) OECD (2013)

-10

-8

-6

-4

-2

0

0

20

40

60

80

100

20122011201020092008200720062005200420032002

Government deficit as a percentage of GDP Government debt as a percentage of GDP

Figure US Government deficit and debt as a percentage of GDP ndash

Source Congressional Budget Office (2013)

D e fi c i t p e r c e n t a g e ( ) D

e b t p er c en t a g e ( )

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983097

fraserinstituteorg

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

20122003199319831973

Revenue Outlays

Figure US Government revenue and outlays ndash ( US$ billions)

Source Congressional Budget Office (2013)

1 9 8 3 U S $ b i l l i o n s

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983091983088 fraserinstituteorg

Trade diversification

Given the weakness in near-term US opportunities Canadians are (again)

wondering how to pursue trade diversification away from the United States

Te objective is logical and if achieved will prove advantageous but various

trends in trade and investment show that diversification for Canada is a slow

and arduous journey (table 983089983092)

In terms of overall share exports to China in the last five years have

doubled but the numbersmdashfrom 983090983089983095 percent to 983092983090983094 percentmdashremain rela-

tively low In the same period the US-bound share declined by 983091 percent but

remains a towering 983095983092983093983092 percent Te pattern of small overall impact applies

to all the other top trading partners For example exports to the UK have

increased but exports to Japan and Mexico have essentially stalled When we

consider average export growth rates over the last five years (table 983089983093) we see

a very strong rate for China (983089983093983093 percent) and strong rates for the UK and

South Korea (983096983097 percent and 983094983097 percent) However a 983089983093 percent increase in a

983092 percent overall trade share produces little change Te point we are making

is that at this rate and pattern of trade lsquodiversificationrsquo it will actually take a

very long timemdashwhile relatively small upward trends in trade with the United

States could have a quick and very large impact in the opposite direction

On the import side we notice more trade diversification with the US

share at 983093983088 percent and the Chinese share at 983089983089 percent (table 983089983094) Te Chinese

growth rate on the import side is less than on the export side (table 983089983095) Te

most revealing number may be the high average over five years for Mexico

at 983097 percent Tis could be indicative of a growing supply chain with Mexico

While foreign direct investment (FDI) is not a direct indicator of future

trade trends in investment may harbinger change In terms of outbound

FDI we notice that only a small segment (less than 983089983088 percent) is targeted

for manufacturing (table 983089983096) It is investment in this category in which onewould expect growth in supply chains

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983089

fraserinstituteorg

Table 983089983092 Canadarsquos merchandise exports top ten destinations 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 3291 1 777 2361 1 751 2564 1 749

China 92 4 22 97 3 31 114 3 33

UK 114 2 27 105 2 33 141 2 41

Japan 97 3 23 73 4 23 79 4 23

Mexico 51 5 12 42 5 13 43 5 13

Netherlands 32 8 08 24 8 08 28 8 08

South Korea 34 7 08 31 7 10 32 7 09

Germany 39 6 09 33 6 10 34 6 10

France 28 9 07 23 9 07 20 10 06

Brazil 23 10 05 14 10 04 22 9 06

Total 4237 3145 3424

2011 2012Average

shareValue Rank Share Value Rank Share

US 2750 1 737 2783 1 745 752

China 140 3 38 159 2 43 33

UK 157 2 42 154 3 41 37

Japan 89 4 24 85 4 23 23

Mexico 46 5 12 44 5 12 12

Netherlands 40 7 11 37 6 10 09

South Korea 43 6 11 30 7 08 09

Germany 33 8 09 29 8 08 09

France 26 9 07 26 9 07 07

Brazil 24 10 06 21 10 06 06

Total 3732 3734

Source Industry Canada (2013b)

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983091983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983093 Canadian export growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 56 7 -281 9 106 = 5

China 101 6 65 1 187 3

UK 16 9 -73 2 358 2

Japan 202 3 -250 7 106 = 5

Mexico 179 4 -178 6 43 9

Netherlands -85 10 -255 8 183 4

South Korea 276 2 -80 3 52 8

Germany 160 5 -167 4 54 7

France 36 8 -174 5 -122 10

Brazil 706 1 -380 10 603 1

2011 2012Average

Rank Rank

US 104 8 27 2 02

China 270 4 152 1 155

UK 148 6 -02 4 90

Japan 161 5 -29 6 38

Mexico 94 9 -16 5 24

Netherlands 475 1 -55 7 53

South Korea 374 2 -272 10 70

Germany 05 10 -95 9 -09

France 311 3 23 3 15

Brazil 109 7 -92 8 189

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983091

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Table 983089983094 Canadarsquos merchandise imports top ten sources 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 1992 1 524 1633 1 511 1745 1 504

China 374 2 98 347 2 109 382 2 110

Mexico 157 3 41 145 3 45 190 3 55

Japan 134 4 35 108 4 34 115 4 33

Germany 111 5 29 95 5 30 97 5 28

UK 110 6 29 82 6 26 92 6 27

South Korea 53 9 14 52 7 16 53 7 15

Algeria 67 7 18 33 10 10 31 10 09

Italy 45 10 12 39 9 12 40 9 12

France 53 8 14 49 8 15 47 8 13

Total 3804 3194 3465

2011 2012Average

shareValue Rank Share Value Rank Share

US 1846 1 496 1922 1 506 508

China 402 2 108 417 2 110 107

Mexico 205 3 55 210 3 55 50

Japan 109 4 29 123 4 33 33

Germany 107 5 29 118 5 31 29

UK 86 6 23 70 6 18 25

South Korea 55 7 15 52 7 14 15

Algeria 46 9 12 49 8 13 12

Italy 43 10 11 43 9 11 12

France 46 8 12 41 10 11 13

Total 3723 3796

Source Industry Canada (2013b)

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983091983092 The state of Canada-US relations in 983090983088983089983092

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Table 983089983095 Old and new trade prospectsmdashimport growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 29 8 -178 7 89 5

China 112 4 -70 2 123 3

Mexico 43 7 -77 4 337 1

Japan -11 10 -192 8 89 4

Germany 105 5 -149 6 44 7

UK 95 6 -252 9 141 2

South Korea 120 3 -14 1 36 8

Algeria 518 1 -511 10 -50 10

Italy 11 9 -132 5 48 6

France 191 2 -70 3 -35 9

2011 2012Average

Rank Rank

US 88 5 57 4 17

China 82 6 53 5 60

Mexico 111 3 39 6 91

Japan -29 9 151 1 01

Germany 132 2 117 2 50

UK -36 10 -173 10 -45

South Korea 76 7 -37 8 37

Algeria 533 1 91 3 116

Italy 95 4 23 7 09

France 22 8 -97 9 02

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983093

fraserinstituteorg

In terms of overall Canadian outbound FDI stocks in the US remain

very high despite the recent US recession while growth in stock in Asia is

modest (figure 983089983097) When we examine Canadian FDI in the so-called BRIC

states we notice that investment in both China and India is relatively small

Canadian mining investment in Brazil is much larger (figure 983090983088) In fact when

we examine amounts of FDI we find that Canada is not really a big BRIC

investor other than Brazil Chile Hong Kong and Peru are larger FDI recipi-

ents than China and India (figure 983090983089)

In terms of FDI flowing into Canada we notice the very large share

(983090983096983094983093 percent) in manufacturing which indicates both the predominant

share of US FDI and the extensive integrated supply chains in Canada-US

manufacturing (table 983089983097) Even more than for outbound FDI inflow stocks

show very large US preponderance (figure 983090983090) Such continued concentra-

tion of US FDI in Canada suggests that Canadian trade diversification is not

just a decision to be made by Canadian producers

Like trade growth Chinese FDI growth in Canada is positive but the

overall numbers are small and do not show rapid growth in the last 983091 years

(figure 983090983091)

Table 983089983096 Top industries for outward stocks of FDI 983090983088983089983090

Category Value Share

Mining oil and gas extraction 1099 188

Oil and gas subcategory 542 93

Manufacturing 569 97

Finance and insurance 2334 399

Management of companies and enterprises 757 129

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

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983091983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

1

2

3

4

5

6

7

8

9

10

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n s

Figure Canadian foreign direct investment (stock) BRIC ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Brazil PRC India Russia

0

20

4060

80

100

120

140

160

180

200

220

240

260

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) various regions

ndash

Notes Excluding Mexico Canadian FDI to Mexico in 2012 was $557 billion

Foreign Direct Investment measures the purchase of various forms of capital stock abroad

However tax havens (Barbados Bermuda etc) are frequently found to be some of the highest

recipients of FDI In reality tax havens do not reflect economic growth as FDI figures invested

into tax havens are often reinvested back to the source country in a concept known as

round-tripping (Financial Post 2013) We have accounted for tax havens by removing them from

tables and figures in this section The numbers corresponding to Figure 19 would be Barbados

($593 billion) Bermuda ($118 billion) British Virgin Islands ($21 billion) Cayman Islands ($302

billion)

Source Foreign Affairs Trade and Development Canada (2013c)

US Europe Asia amp Oceania Central amp South America Africa

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The state of Canada-US relations in 983090983088983089983092 983091983095

fraserinstituteorg

Table 983089983097 Top industries for inward stocks of FDI 983090983088983089983090

Category Value Share

Oil and gas extraction 766 147

Manufacturing 1492 287

Petroleum and coal products manufacturing 377 72

Wholesale trade 395 76

Finance and insurance 699 134

Management of companies and enterprises 999 192

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

0

2

4

6

8

10

12

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) Chile Hong Kong

Peru amp Korea ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Chile Hong Kong Peru Korea

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fraserinstituteorg

0

40

80

120

160

200

240

280

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Foreign direct investment (stock) in Canada from top three

countries ndash

Source Foreign Affairs Trade and Development Canada (2013c)

US Netherlands UK

0

2

4

6

8

10

12

201220112010200920082007

2 0 0 2 C A $ b

i l l i o n s

Figure Foreign direct investment (stock) in Canada from China

ndash

Source Foreign Affairs Trade and Development Canada (2013c)

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fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

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Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

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References

Abacus Data (983090983088983089983090 November 983090983088) Beyond the Canadian-American Border

lthttpabacusdatacawp-contentuploads983090983088983089983090983089983089Can-AM_Report_CABC_

Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6062

The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 26: Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983089983097

fraserinstituteorg

An unprecedented border problem has arisen in the current USAdministrationrsquos lengthy (six years) review of the permitting of a pipeline

border crossing as proposed in the Keystone XL project As a result oil-by-

rail transport has recently increased while the pipeline mode of Canada-US

trade has seen a drop in growth in the 983090983088983089983089983089983090 period ( figures 983089983091 983089983092)

0

10

20

30

40

50

201220112010200920082007200620052004200320022001200019991998

Figure Travellers entering Canada ndash

Source Statistics Canada (2013e)

US residents Non-US residents

0

3

6

9

12

15

18

0

03

06

09

12

15

18

20122011201020092008200720062005200420032002

Trips Spending US$CA$ (Secondary axis)

Figure US overnight travel to Canada ndash

Source Statistics Canada (2011) Bank of Canada (2013b)

M i l l i o n s o f t r i p

s N o m i n a l C A $ b i l l i o n s

U S $ C A $ ex c h a n

g er a t e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

5

10

15

20

201120102009200820072006

Northbound average delay Southbound average delay

Figure Peace Arch average border wait time ndash

Source Cascade Gateway Data (2013)

M i n u t e s

0

25

50

75

100

125

150

175

200

225

250

275

300

201220112010200920082007200620052004

2 0 0 4

U S $ b

i l l i o n s

Figure All surface modes of freight flow data based on value of goods

ndash

Source Bureau of Transportation Statistics (2013)

Truck Rail Pipeline

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983089

fraserinstituteorg

lsquoBeyond the Borderrsquo and Regulatory Cooperation

In 983090983088983089983089 Canada and the United States announced an ambitious agreement

to reduce border costs by means of deeper bilateral regulatory and secur-

ity cooperation Te accord seeks to streamline various border proceduresmdash

some already in existence and some newmdashto improve intelligence-sharing

between law enforcement agencies mutual recognition of passenger baggage

screening improved frameworks for trusted trade programs harmoniza-

tion of NEXUS protocols streamlined supply chains enhanced trade com-

petitiveness collaboration in border infrastructure investment and deeper

cooperation in national security investigations Te agreement is known as

Beyond the Border A Shared Vision for Perimeter Security and Economic

Competitiveness (February 983092 983090983088983089983089)

Te Beyond the Border Vision accord also set up a Regulatory

Cooperation Council In it Canadian and American officials seek to reduce

red tape and harmonize regulations in certain key sectors o date the

Council has announced various plans affecting agriculture and food trans-

portation health personal care products workplace chemicals environmentnano materials and small business loans We summarize the key points of

progress made since 983090983088983089983089 in table 983097

-35

-25

-15

-5

5

15

25

35

20122011201020092008200720062005

Truck Rail Pipeline

Figure Growth rate of all surface modes of freight flows () ndash

Source Bureau of Transportation Statistics (2013) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983097 Key elements of Beyond the Border and Regulatory Cooperation

Beyond the Border Program

Integrated Cargo Security Strategy (ICSS)December 2011

Reduces administrative duplication between Canada and the US byaddressing security risks in advance within the shipment supply chainand at the border (Canada Border Services Agency 2013)

Prince Rupert Pilot October 2012 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry via rail is examined by Canadian officials onbehalf of the US (Government of Canada 2013c)

Montreal Pilot January 2013 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry to the US via truck is examined by Canadianofficials on behalf of the US (Government of Canada 2013c)

Pre-load Air Cargo Targeting (PACT) Joint pilot by CBSA and Transport Canada to screen cargo pre-flight onCanada-bound airplanes at foreign airports (Canada Border ServicesAgency 2013)

Tamper Evident Technology PilotOctober 2012

Pilot collaboration between CBSA and US CBP to ensure containersremain sealed upon arrival at the US border (Canada Border Services

Agency 2013)

Truck Cargo Pre-Inspection PilotMarch 2013

Pilot program between the CBSA and the US CBP for pre-inspection ofsouthbound traffic into US (Canada Border Services Agency 2013)

Free and Secure Trade (FAST) PilotSarnia Ontario

Pilot program for usage of FAST lanes without Partners in Protection andCustoms Self Assessment programs (Government of Canada 2013c)

Canada-US Shiprider June 2013 Removal of jurisdictional barriers to improve law enforcement personnelin Windsor-Detroit and Vancouver-Blaine waterways (Government ofCanada 2013c)

EntryExit Initiative Phase II June 2013 Exchange entryexit data between the CBSA and US DHS on individualsat Canada-US land border crossings (Government of Canada 2013c)

Regulatory Cooperation ProgramMemorandum of Understanding between Transport Canada and the RailwayAssociation of Canada September 2013

Framework for Canadian rail emissions between 2011 to 2015(Government of Canada 2013d)

Canada-United States Perimeter Approachto Plant Protection September 2013

Draft framework for increased cooperation and reduction inadministrative duplication between the Canadian Food InspectionAgency (CFIA) and United States Animal and Plant Health InspectionService (APHIS) on trade in plants and plant products (Government ofCanada 2013d)

Common Electronic Submission GatewayPilot (CESG) August 2013

FDA and Health Canada will allow pharmaceutical firms to electronicallysubmit drug applications (Government of Canada 2013d)

Initiative to Align Veterinary DrugApprovals December 2012

Joint reviews between US FDA and Health Canada on veterinary drugproducts (Government of Canada 2013d)

Stricter Air Pollutant Emissions Environment Canada aligns car emissions beginning in 2017 with theUS Environmental Protection Agencyrsquos ldquoTier 3rdquo (Government of Canada2013d)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983091

fraserinstituteorg

On September 983092 983090983088983089983091 $983092983094983094 million in investment was allocated to the

Border Action plan by the Government of Canada in order expand two marine

container examination facilities (Government of Canada 983090983088983089983091c) $983091983091 million

was invested by the Government of Canada in the Asia Pacific Gateway and

rade Corridor Initiative (Government of Canada 983090983088983089983091c) Te Plan includes

an additional 983090983097 harmonization initiatives that will enhance trade activity

between Canada and the US

Neither Beyond the Border nor the Regulatory Cooperation Council

offer further investment or cost estimates on the initiatives described in table

983097 Moens and Gabler (983090983088983089983090) pointed to the need for both the Canadian and

American governments to provide data on border costs so that a cost-benefit

analysis can ensue Nonetheless the small steps of progress towards inte-

grating and harmonizing US and Canadian border practices remains a very

important (long-term) part of reducing the profile of the border

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983090983092 fraserinstituteorg

Canadian and American public perceptions

Tree observations are noteworthy in recent assessments of public percep-

tions between Americans and Canadians First Americans consistently have

a very high favourability rating of Canadians typically in the 983097983088 plus range

(table 983089983088 figure 983089983093) Both as a friend and a strategic ally Americans hold

Canadians in the most favourable light possible (table 983089983089) Disagreements over

policy between the two countries whether in defence and foreign affairs or

over border and trade issues do not move this fundamental asset Canadians

enjoy in dealing with their neighbour

Second Canadians do not have high expectations of either the

American or Canadian government regarding progress in bilateral relations

As table 983089983090 shows Canadians hold Obama in high regard (983094983091 percent) but

only 983093983092 percent expect progress from him in trade relations Prime Minister

Harper is rated slightly ahead of President Obama in terms of working hard

towards improving Canada-US relations (table 983089983091)

Tird and most significant in light of Canadarsquos Catch-983090983090 situation both

Canadians and Americans are more supportive of closer cooperation and inte-

gration policies than is the case for political representatives in either the United

States or Canada In two recent studies we showed how US Senators and House

Representatives are quite critical of Canada with regard to NAFA issues and bor-

der security (Moens and Gabler 983090983088983089983089) Similarly we found that among the three

major political parties in Canadarsquos parliament only one consistently expressed

itself in favour of closer ties with the United States (Moens and Gabler 983090983088983089983089)

A recent survey of American and Canadian (and Mexican) attitudes

towards free trade and NAFA show surprisingly strong data for more trade

integration In response to the statement ldquoTere should be more free trade

between the US Canada and Mexicordquo 983096983088 percent of Canadians approved

as did 983095983092 percent of Americans Even on border security Canadians andAmericans are more pro-cooperation and integration than their governmental

policies suggest In the US 983092983089 percent support a common perimeter while

983090983088 percent are opposed In Canada 983092983091 percent support it and 983091983088 percent are

opposed (Graves Pastor and Basaacutentildeez 983090983088983089983091) Terefore in terms of public

mandate both governments would have a case to work towards broader bilat-

eral (or trilateral) cooperation to lower trade barriers

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The state of Canada-US relations in 983090983088983089983092 983090983093

fraserinstituteorg

Table 983089983088 Canadian favourability rating among Americans (February 983090983088983089983090)

Veryfavourable

Mostlyfavourable

Mostlyunfavourable

Veryfavourable Not sure Total

favourableTotal

unfavourable

53 38 3 2 3 91 5

Note n=1015

Source Gallup Poll (2012)

Table 983089983089 Ally or enemy for Americans (June 983090983088983089983091)

Country Ally Friendly Unfriendly Enemy Total Ally andFriendly

Great Britain 66 25 2 1 91

Canada 61 33 2 1 94

China 11 44 26 14 55

Note n=1529Source Gallup Poll (2013)

88

90

92

94

96

98

201220112010200920082007

Figure Canadian favourability among Americans () ndash

Source Gallup Poll (2012)

f a

v o u r a

b l e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983090 What effect will Obama have on Canada-US relations (November 983090983088983089983090)

Canadians Americans

Positive Negative None Positive Negative None

Relationship 62 5 34 48 12 40

Trade 54 10 35 48 12 39

Harmonizing 53 8 40 47 14 39

Note n=1066

Source Abacus Data (2012)

Table 983089983091 Has each leader worked hard to improve Canada-US relations

(July 983090983088983089983090)

Country Agree Disagree Not sure

Stephen Harper 58 32 10

Barack Obama 53 32 15

Note Sample of Canadians

Source HarrisDecima (2012)

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fraserinstituteorg 983090983095

US policy uncertainty

Canadian economic prospects face their most important challenge in the

United States Te US economic recovery has been modest and real GDP

growth so far has remained below the post-World War II average of post-

recession periods (figure 983089983094) As we noted above the less-than-stellar US

recovery is made even more challenging for Canadian traders in that pro-

ductivity gains in Canada are lagging while the Canadian dollar remains high

On top of that several American-imposed regulatory obstacles to free trade

are depressing trade prospects in crude oil red meat and public works pro-

curement Tese impediments reduce Canadian competitive access to the

US market

A high level of public spending until the January 983090983088983089983091 sequester and

ongoing monetary stimulation have not produced notable US GDP growth

Te seven post-recession periods below show the current average to be well

below the historical average (Young 983090983088983089983091)

983089983097983092983096-983089983097983093983095 983091983096983088

983089983097983093983096-983089983097983094983095 983092983090983096

983089983097983094983096-983089983097983095983095 983091983089983096

983089983097983095983096-983089983097983096983095 983091983089983093

983089983097983096983096-983089983097983097983095 983091983088983093

983089983097983097983096-983090983088983088983095 983090983097983097

983090983088983088983096-983090983088983089983091 983088983095983091

While economic growth has been modest growth in the public debt

has not (figure 983089983095) Publicly held debt in the US is now at 983095983091 percent of GDP

the highest since 983089983097983092983094 (Congressional Budget Office 983090983088983089983091)

Te widening gap between federal government outlays and revenueshas only recently been capped by the Sequester (figure 983089983096) However the

budget Sequester is temporary and final resolution of public spending and

taxation levels remains unclear given repeated gridlock in presidential-con-

gressional policy making High debt levels combined with stalemate over

taxes and budget cuts have produced a case of policy instability or uncer-

tainty in the last five years (Baker Bloom and Davis 983090983088983089983091)

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fraserinstituteorg

US policy uncertainty is further aggravated by inaction on the large

lsquoentitlementrsquo programsmdashSocial Security Medicare and Medicaidmdashwhich are

the major drivers of the long-term gap in revenues and spending

-4

-2

0

2

4

6

8

201220062000199419881982197619701964

Figure US GDP growth rate ndash ( forecast)

Source The World Bank (2013b) OECD (2013)

-10

-8

-6

-4

-2

0

0

20

40

60

80

100

20122011201020092008200720062005200420032002

Government deficit as a percentage of GDP Government debt as a percentage of GDP

Figure US Government deficit and debt as a percentage of GDP ndash

Source Congressional Budget Office (2013)

D e fi c i t p e r c e n t a g e ( ) D

e b t p er c en t a g e ( )

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The state of Canada-US relations in 983090983088983089983092 983090983097

fraserinstituteorg

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

20122003199319831973

Revenue Outlays

Figure US Government revenue and outlays ndash ( US$ billions)

Source Congressional Budget Office (2013)

1 9 8 3 U S $ b i l l i o n s

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983091983088 fraserinstituteorg

Trade diversification

Given the weakness in near-term US opportunities Canadians are (again)

wondering how to pursue trade diversification away from the United States

Te objective is logical and if achieved will prove advantageous but various

trends in trade and investment show that diversification for Canada is a slow

and arduous journey (table 983089983092)

In terms of overall share exports to China in the last five years have

doubled but the numbersmdashfrom 983090983089983095 percent to 983092983090983094 percentmdashremain rela-

tively low In the same period the US-bound share declined by 983091 percent but

remains a towering 983095983092983093983092 percent Te pattern of small overall impact applies

to all the other top trading partners For example exports to the UK have

increased but exports to Japan and Mexico have essentially stalled When we

consider average export growth rates over the last five years (table 983089983093) we see

a very strong rate for China (983089983093983093 percent) and strong rates for the UK and

South Korea (983096983097 percent and 983094983097 percent) However a 983089983093 percent increase in a

983092 percent overall trade share produces little change Te point we are making

is that at this rate and pattern of trade lsquodiversificationrsquo it will actually take a

very long timemdashwhile relatively small upward trends in trade with the United

States could have a quick and very large impact in the opposite direction

On the import side we notice more trade diversification with the US

share at 983093983088 percent and the Chinese share at 983089983089 percent (table 983089983094) Te Chinese

growth rate on the import side is less than on the export side (table 983089983095) Te

most revealing number may be the high average over five years for Mexico

at 983097 percent Tis could be indicative of a growing supply chain with Mexico

While foreign direct investment (FDI) is not a direct indicator of future

trade trends in investment may harbinger change In terms of outbound

FDI we notice that only a small segment (less than 983089983088 percent) is targeted

for manufacturing (table 983089983096) It is investment in this category in which onewould expect growth in supply chains

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The state of Canada-US relations in 983090983088983089983092 983091983089

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Table 983089983092 Canadarsquos merchandise exports top ten destinations 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 3291 1 777 2361 1 751 2564 1 749

China 92 4 22 97 3 31 114 3 33

UK 114 2 27 105 2 33 141 2 41

Japan 97 3 23 73 4 23 79 4 23

Mexico 51 5 12 42 5 13 43 5 13

Netherlands 32 8 08 24 8 08 28 8 08

South Korea 34 7 08 31 7 10 32 7 09

Germany 39 6 09 33 6 10 34 6 10

France 28 9 07 23 9 07 20 10 06

Brazil 23 10 05 14 10 04 22 9 06

Total 4237 3145 3424

2011 2012Average

shareValue Rank Share Value Rank Share

US 2750 1 737 2783 1 745 752

China 140 3 38 159 2 43 33

UK 157 2 42 154 3 41 37

Japan 89 4 24 85 4 23 23

Mexico 46 5 12 44 5 12 12

Netherlands 40 7 11 37 6 10 09

South Korea 43 6 11 30 7 08 09

Germany 33 8 09 29 8 08 09

France 26 9 07 26 9 07 07

Brazil 24 10 06 21 10 06 06

Total 3732 3734

Source Industry Canada (2013b)

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983091983090 The state of Canada-US relations in 983090983088983089983092

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Table 983089983093 Canadian export growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 56 7 -281 9 106 = 5

China 101 6 65 1 187 3

UK 16 9 -73 2 358 2

Japan 202 3 -250 7 106 = 5

Mexico 179 4 -178 6 43 9

Netherlands -85 10 -255 8 183 4

South Korea 276 2 -80 3 52 8

Germany 160 5 -167 4 54 7

France 36 8 -174 5 -122 10

Brazil 706 1 -380 10 603 1

2011 2012Average

Rank Rank

US 104 8 27 2 02

China 270 4 152 1 155

UK 148 6 -02 4 90

Japan 161 5 -29 6 38

Mexico 94 9 -16 5 24

Netherlands 475 1 -55 7 53

South Korea 374 2 -272 10 70

Germany 05 10 -95 9 -09

France 311 3 23 3 15

Brazil 109 7 -92 8 189

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983091

fraserinstituteorg

Table 983089983094 Canadarsquos merchandise imports top ten sources 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 1992 1 524 1633 1 511 1745 1 504

China 374 2 98 347 2 109 382 2 110

Mexico 157 3 41 145 3 45 190 3 55

Japan 134 4 35 108 4 34 115 4 33

Germany 111 5 29 95 5 30 97 5 28

UK 110 6 29 82 6 26 92 6 27

South Korea 53 9 14 52 7 16 53 7 15

Algeria 67 7 18 33 10 10 31 10 09

Italy 45 10 12 39 9 12 40 9 12

France 53 8 14 49 8 15 47 8 13

Total 3804 3194 3465

2011 2012Average

shareValue Rank Share Value Rank Share

US 1846 1 496 1922 1 506 508

China 402 2 108 417 2 110 107

Mexico 205 3 55 210 3 55 50

Japan 109 4 29 123 4 33 33

Germany 107 5 29 118 5 31 29

UK 86 6 23 70 6 18 25

South Korea 55 7 15 52 7 14 15

Algeria 46 9 12 49 8 13 12

Italy 43 10 11 43 9 11 12

France 46 8 12 41 10 11 13

Total 3723 3796

Source Industry Canada (2013b)

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983091983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983095 Old and new trade prospectsmdashimport growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 29 8 -178 7 89 5

China 112 4 -70 2 123 3

Mexico 43 7 -77 4 337 1

Japan -11 10 -192 8 89 4

Germany 105 5 -149 6 44 7

UK 95 6 -252 9 141 2

South Korea 120 3 -14 1 36 8

Algeria 518 1 -511 10 -50 10

Italy 11 9 -132 5 48 6

France 191 2 -70 3 -35 9

2011 2012Average

Rank Rank

US 88 5 57 4 17

China 82 6 53 5 60

Mexico 111 3 39 6 91

Japan -29 9 151 1 01

Germany 132 2 117 2 50

UK -36 10 -173 10 -45

South Korea 76 7 -37 8 37

Algeria 533 1 91 3 116

Italy 95 4 23 7 09

France 22 8 -97 9 02

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983093

fraserinstituteorg

In terms of overall Canadian outbound FDI stocks in the US remain

very high despite the recent US recession while growth in stock in Asia is

modest (figure 983089983097) When we examine Canadian FDI in the so-called BRIC

states we notice that investment in both China and India is relatively small

Canadian mining investment in Brazil is much larger (figure 983090983088) In fact when

we examine amounts of FDI we find that Canada is not really a big BRIC

investor other than Brazil Chile Hong Kong and Peru are larger FDI recipi-

ents than China and India (figure 983090983089)

In terms of FDI flowing into Canada we notice the very large share

(983090983096983094983093 percent) in manufacturing which indicates both the predominant

share of US FDI and the extensive integrated supply chains in Canada-US

manufacturing (table 983089983097) Even more than for outbound FDI inflow stocks

show very large US preponderance (figure 983090983090) Such continued concentra-

tion of US FDI in Canada suggests that Canadian trade diversification is not

just a decision to be made by Canadian producers

Like trade growth Chinese FDI growth in Canada is positive but the

overall numbers are small and do not show rapid growth in the last 983091 years

(figure 983090983091)

Table 983089983096 Top industries for outward stocks of FDI 983090983088983089983090

Category Value Share

Mining oil and gas extraction 1099 188

Oil and gas subcategory 542 93

Manufacturing 569 97

Finance and insurance 2334 399

Management of companies and enterprises 757 129

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

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983091983094 The state of Canada-US relations in 983090983088983089983092

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0

1

2

3

4

5

6

7

8

9

10

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n s

Figure Canadian foreign direct investment (stock) BRIC ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Brazil PRC India Russia

0

20

4060

80

100

120

140

160

180

200

220

240

260

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) various regions

ndash

Notes Excluding Mexico Canadian FDI to Mexico in 2012 was $557 billion

Foreign Direct Investment measures the purchase of various forms of capital stock abroad

However tax havens (Barbados Bermuda etc) are frequently found to be some of the highest

recipients of FDI In reality tax havens do not reflect economic growth as FDI figures invested

into tax havens are often reinvested back to the source country in a concept known as

round-tripping (Financial Post 2013) We have accounted for tax havens by removing them from

tables and figures in this section The numbers corresponding to Figure 19 would be Barbados

($593 billion) Bermuda ($118 billion) British Virgin Islands ($21 billion) Cayman Islands ($302

billion)

Source Foreign Affairs Trade and Development Canada (2013c)

US Europe Asia amp Oceania Central amp South America Africa

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The state of Canada-US relations in 983090983088983089983092 983091983095

fraserinstituteorg

Table 983089983097 Top industries for inward stocks of FDI 983090983088983089983090

Category Value Share

Oil and gas extraction 766 147

Manufacturing 1492 287

Petroleum and coal products manufacturing 377 72

Wholesale trade 395 76

Finance and insurance 699 134

Management of companies and enterprises 999 192

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

0

2

4

6

8

10

12

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) Chile Hong Kong

Peru amp Korea ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Chile Hong Kong Peru Korea

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983091983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

40

80

120

160

200

240

280

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Foreign direct investment (stock) in Canada from top three

countries ndash

Source Foreign Affairs Trade and Development Canada (2013c)

US Netherlands UK

0

2

4

6

8

10

12

201220112010200920082007

2 0 0 2 C A $ b

i l l i o n s

Figure Foreign direct investment (stock) in Canada from China

ndash

Source Foreign Affairs Trade and Development Canada (2013c)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

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Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

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References

Abacus Data (983090983088983089983090 November 983090983088) Beyond the Canadian-American Border

lthttpabacusdatacawp-contentuploads983090983088983089983090983089983089Can-AM_Report_CABC_

Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5662

The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5862

The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5962

983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6062

The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 27: Canadas Catch 22 State of Canada Us Relations in 2014

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983090983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

5

10

15

20

201120102009200820072006

Northbound average delay Southbound average delay

Figure Peace Arch average border wait time ndash

Source Cascade Gateway Data (2013)

M i n u t e s

0

25

50

75

100

125

150

175

200

225

250

275

300

201220112010200920082007200620052004

2 0 0 4

U S $ b

i l l i o n s

Figure All surface modes of freight flow data based on value of goods

ndash

Source Bureau of Transportation Statistics (2013)

Truck Rail Pipeline

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983089

fraserinstituteorg

lsquoBeyond the Borderrsquo and Regulatory Cooperation

In 983090983088983089983089 Canada and the United States announced an ambitious agreement

to reduce border costs by means of deeper bilateral regulatory and secur-

ity cooperation Te accord seeks to streamline various border proceduresmdash

some already in existence and some newmdashto improve intelligence-sharing

between law enforcement agencies mutual recognition of passenger baggage

screening improved frameworks for trusted trade programs harmoniza-

tion of NEXUS protocols streamlined supply chains enhanced trade com-

petitiveness collaboration in border infrastructure investment and deeper

cooperation in national security investigations Te agreement is known as

Beyond the Border A Shared Vision for Perimeter Security and Economic

Competitiveness (February 983092 983090983088983089983089)

Te Beyond the Border Vision accord also set up a Regulatory

Cooperation Council In it Canadian and American officials seek to reduce

red tape and harmonize regulations in certain key sectors o date the

Council has announced various plans affecting agriculture and food trans-

portation health personal care products workplace chemicals environmentnano materials and small business loans We summarize the key points of

progress made since 983090983088983089983089 in table 983097

-35

-25

-15

-5

5

15

25

35

20122011201020092008200720062005

Truck Rail Pipeline

Figure Growth rate of all surface modes of freight flows () ndash

Source Bureau of Transportation Statistics (2013) calculations by authors

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983090983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983097 Key elements of Beyond the Border and Regulatory Cooperation

Beyond the Border Program

Integrated Cargo Security Strategy (ICSS)December 2011

Reduces administrative duplication between Canada and the US byaddressing security risks in advance within the shipment supply chainand at the border (Canada Border Services Agency 2013)

Prince Rupert Pilot October 2012 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry via rail is examined by Canadian officials onbehalf of the US (Government of Canada 2013c)

Montreal Pilot January 2013 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry to the US via truck is examined by Canadianofficials on behalf of the US (Government of Canada 2013c)

Pre-load Air Cargo Targeting (PACT) Joint pilot by CBSA and Transport Canada to screen cargo pre-flight onCanada-bound airplanes at foreign airports (Canada Border ServicesAgency 2013)

Tamper Evident Technology PilotOctober 2012

Pilot collaboration between CBSA and US CBP to ensure containersremain sealed upon arrival at the US border (Canada Border Services

Agency 2013)

Truck Cargo Pre-Inspection PilotMarch 2013

Pilot program between the CBSA and the US CBP for pre-inspection ofsouthbound traffic into US (Canada Border Services Agency 2013)

Free and Secure Trade (FAST) PilotSarnia Ontario

Pilot program for usage of FAST lanes without Partners in Protection andCustoms Self Assessment programs (Government of Canada 2013c)

Canada-US Shiprider June 2013 Removal of jurisdictional barriers to improve law enforcement personnelin Windsor-Detroit and Vancouver-Blaine waterways (Government ofCanada 2013c)

EntryExit Initiative Phase II June 2013 Exchange entryexit data between the CBSA and US DHS on individualsat Canada-US land border crossings (Government of Canada 2013c)

Regulatory Cooperation ProgramMemorandum of Understanding between Transport Canada and the RailwayAssociation of Canada September 2013

Framework for Canadian rail emissions between 2011 to 2015(Government of Canada 2013d)

Canada-United States Perimeter Approachto Plant Protection September 2013

Draft framework for increased cooperation and reduction inadministrative duplication between the Canadian Food InspectionAgency (CFIA) and United States Animal and Plant Health InspectionService (APHIS) on trade in plants and plant products (Government ofCanada 2013d)

Common Electronic Submission GatewayPilot (CESG) August 2013

FDA and Health Canada will allow pharmaceutical firms to electronicallysubmit drug applications (Government of Canada 2013d)

Initiative to Align Veterinary DrugApprovals December 2012

Joint reviews between US FDA and Health Canada on veterinary drugproducts (Government of Canada 2013d)

Stricter Air Pollutant Emissions Environment Canada aligns car emissions beginning in 2017 with theUS Environmental Protection Agencyrsquos ldquoTier 3rdquo (Government of Canada2013d)

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The state of Canada-US relations in 983090983088983089983092 983090983091

fraserinstituteorg

On September 983092 983090983088983089983091 $983092983094983094 million in investment was allocated to the

Border Action plan by the Government of Canada in order expand two marine

container examination facilities (Government of Canada 983090983088983089983091c) $983091983091 million

was invested by the Government of Canada in the Asia Pacific Gateway and

rade Corridor Initiative (Government of Canada 983090983088983089983091c) Te Plan includes

an additional 983090983097 harmonization initiatives that will enhance trade activity

between Canada and the US

Neither Beyond the Border nor the Regulatory Cooperation Council

offer further investment or cost estimates on the initiatives described in table

983097 Moens and Gabler (983090983088983089983090) pointed to the need for both the Canadian and

American governments to provide data on border costs so that a cost-benefit

analysis can ensue Nonetheless the small steps of progress towards inte-

grating and harmonizing US and Canadian border practices remains a very

important (long-term) part of reducing the profile of the border

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983090983092 fraserinstituteorg

Canadian and American public perceptions

Tree observations are noteworthy in recent assessments of public percep-

tions between Americans and Canadians First Americans consistently have

a very high favourability rating of Canadians typically in the 983097983088 plus range

(table 983089983088 figure 983089983093) Both as a friend and a strategic ally Americans hold

Canadians in the most favourable light possible (table 983089983089) Disagreements over

policy between the two countries whether in defence and foreign affairs or

over border and trade issues do not move this fundamental asset Canadians

enjoy in dealing with their neighbour

Second Canadians do not have high expectations of either the

American or Canadian government regarding progress in bilateral relations

As table 983089983090 shows Canadians hold Obama in high regard (983094983091 percent) but

only 983093983092 percent expect progress from him in trade relations Prime Minister

Harper is rated slightly ahead of President Obama in terms of working hard

towards improving Canada-US relations (table 983089983091)

Tird and most significant in light of Canadarsquos Catch-983090983090 situation both

Canadians and Americans are more supportive of closer cooperation and inte-

gration policies than is the case for political representatives in either the United

States or Canada In two recent studies we showed how US Senators and House

Representatives are quite critical of Canada with regard to NAFA issues and bor-

der security (Moens and Gabler 983090983088983089983089) Similarly we found that among the three

major political parties in Canadarsquos parliament only one consistently expressed

itself in favour of closer ties with the United States (Moens and Gabler 983090983088983089983089)

A recent survey of American and Canadian (and Mexican) attitudes

towards free trade and NAFA show surprisingly strong data for more trade

integration In response to the statement ldquoTere should be more free trade

between the US Canada and Mexicordquo 983096983088 percent of Canadians approved

as did 983095983092 percent of Americans Even on border security Canadians andAmericans are more pro-cooperation and integration than their governmental

policies suggest In the US 983092983089 percent support a common perimeter while

983090983088 percent are opposed In Canada 983092983091 percent support it and 983091983088 percent are

opposed (Graves Pastor and Basaacutentildeez 983090983088983089983091) Terefore in terms of public

mandate both governments would have a case to work towards broader bilat-

eral (or trilateral) cooperation to lower trade barriers

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The state of Canada-US relations in 983090983088983089983092 983090983093

fraserinstituteorg

Table 983089983088 Canadian favourability rating among Americans (February 983090983088983089983090)

Veryfavourable

Mostlyfavourable

Mostlyunfavourable

Veryfavourable Not sure Total

favourableTotal

unfavourable

53 38 3 2 3 91 5

Note n=1015

Source Gallup Poll (2012)

Table 983089983089 Ally or enemy for Americans (June 983090983088983089983091)

Country Ally Friendly Unfriendly Enemy Total Ally andFriendly

Great Britain 66 25 2 1 91

Canada 61 33 2 1 94

China 11 44 26 14 55

Note n=1529Source Gallup Poll (2013)

88

90

92

94

96

98

201220112010200920082007

Figure Canadian favourability among Americans () ndash

Source Gallup Poll (2012)

f a

v o u r a

b l e

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983090983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983090 What effect will Obama have on Canada-US relations (November 983090983088983089983090)

Canadians Americans

Positive Negative None Positive Negative None

Relationship 62 5 34 48 12 40

Trade 54 10 35 48 12 39

Harmonizing 53 8 40 47 14 39

Note n=1066

Source Abacus Data (2012)

Table 983089983091 Has each leader worked hard to improve Canada-US relations

(July 983090983088983089983090)

Country Agree Disagree Not sure

Stephen Harper 58 32 10

Barack Obama 53 32 15

Note Sample of Canadians

Source HarrisDecima (2012)

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fraserinstituteorg 983090983095

US policy uncertainty

Canadian economic prospects face their most important challenge in the

United States Te US economic recovery has been modest and real GDP

growth so far has remained below the post-World War II average of post-

recession periods (figure 983089983094) As we noted above the less-than-stellar US

recovery is made even more challenging for Canadian traders in that pro-

ductivity gains in Canada are lagging while the Canadian dollar remains high

On top of that several American-imposed regulatory obstacles to free trade

are depressing trade prospects in crude oil red meat and public works pro-

curement Tese impediments reduce Canadian competitive access to the

US market

A high level of public spending until the January 983090983088983089983091 sequester and

ongoing monetary stimulation have not produced notable US GDP growth

Te seven post-recession periods below show the current average to be well

below the historical average (Young 983090983088983089983091)

983089983097983092983096-983089983097983093983095 983091983096983088

983089983097983093983096-983089983097983094983095 983092983090983096

983089983097983094983096-983089983097983095983095 983091983089983096

983089983097983095983096-983089983097983096983095 983091983089983093

983089983097983096983096-983089983097983097983095 983091983088983093

983089983097983097983096-983090983088983088983095 983090983097983097

983090983088983088983096-983090983088983089983091 983088983095983091

While economic growth has been modest growth in the public debt

has not (figure 983089983095) Publicly held debt in the US is now at 983095983091 percent of GDP

the highest since 983089983097983092983094 (Congressional Budget Office 983090983088983089983091)

Te widening gap between federal government outlays and revenueshas only recently been capped by the Sequester (figure 983089983096) However the

budget Sequester is temporary and final resolution of public spending and

taxation levels remains unclear given repeated gridlock in presidential-con-

gressional policy making High debt levels combined with stalemate over

taxes and budget cuts have produced a case of policy instability or uncer-

tainty in the last five years (Baker Bloom and Davis 983090983088983089983091)

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fraserinstituteorg

US policy uncertainty is further aggravated by inaction on the large

lsquoentitlementrsquo programsmdashSocial Security Medicare and Medicaidmdashwhich are

the major drivers of the long-term gap in revenues and spending

-4

-2

0

2

4

6

8

201220062000199419881982197619701964

Figure US GDP growth rate ndash ( forecast)

Source The World Bank (2013b) OECD (2013)

-10

-8

-6

-4

-2

0

0

20

40

60

80

100

20122011201020092008200720062005200420032002

Government deficit as a percentage of GDP Government debt as a percentage of GDP

Figure US Government deficit and debt as a percentage of GDP ndash

Source Congressional Budget Office (2013)

D e fi c i t p e r c e n t a g e ( ) D

e b t p er c en t a g e ( )

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The state of Canada-US relations in 983090983088983089983092 983090983097

fraserinstituteorg

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

20122003199319831973

Revenue Outlays

Figure US Government revenue and outlays ndash ( US$ billions)

Source Congressional Budget Office (2013)

1 9 8 3 U S $ b i l l i o n s

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983091983088 fraserinstituteorg

Trade diversification

Given the weakness in near-term US opportunities Canadians are (again)

wondering how to pursue trade diversification away from the United States

Te objective is logical and if achieved will prove advantageous but various

trends in trade and investment show that diversification for Canada is a slow

and arduous journey (table 983089983092)

In terms of overall share exports to China in the last five years have

doubled but the numbersmdashfrom 983090983089983095 percent to 983092983090983094 percentmdashremain rela-

tively low In the same period the US-bound share declined by 983091 percent but

remains a towering 983095983092983093983092 percent Te pattern of small overall impact applies

to all the other top trading partners For example exports to the UK have

increased but exports to Japan and Mexico have essentially stalled When we

consider average export growth rates over the last five years (table 983089983093) we see

a very strong rate for China (983089983093983093 percent) and strong rates for the UK and

South Korea (983096983097 percent and 983094983097 percent) However a 983089983093 percent increase in a

983092 percent overall trade share produces little change Te point we are making

is that at this rate and pattern of trade lsquodiversificationrsquo it will actually take a

very long timemdashwhile relatively small upward trends in trade with the United

States could have a quick and very large impact in the opposite direction

On the import side we notice more trade diversification with the US

share at 983093983088 percent and the Chinese share at 983089983089 percent (table 983089983094) Te Chinese

growth rate on the import side is less than on the export side (table 983089983095) Te

most revealing number may be the high average over five years for Mexico

at 983097 percent Tis could be indicative of a growing supply chain with Mexico

While foreign direct investment (FDI) is not a direct indicator of future

trade trends in investment may harbinger change In terms of outbound

FDI we notice that only a small segment (less than 983089983088 percent) is targeted

for manufacturing (table 983089983096) It is investment in this category in which onewould expect growth in supply chains

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The state of Canada-US relations in 983090983088983089983092 983091983089

fraserinstituteorg

Table 983089983092 Canadarsquos merchandise exports top ten destinations 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 3291 1 777 2361 1 751 2564 1 749

China 92 4 22 97 3 31 114 3 33

UK 114 2 27 105 2 33 141 2 41

Japan 97 3 23 73 4 23 79 4 23

Mexico 51 5 12 42 5 13 43 5 13

Netherlands 32 8 08 24 8 08 28 8 08

South Korea 34 7 08 31 7 10 32 7 09

Germany 39 6 09 33 6 10 34 6 10

France 28 9 07 23 9 07 20 10 06

Brazil 23 10 05 14 10 04 22 9 06

Total 4237 3145 3424

2011 2012Average

shareValue Rank Share Value Rank Share

US 2750 1 737 2783 1 745 752

China 140 3 38 159 2 43 33

UK 157 2 42 154 3 41 37

Japan 89 4 24 85 4 23 23

Mexico 46 5 12 44 5 12 12

Netherlands 40 7 11 37 6 10 09

South Korea 43 6 11 30 7 08 09

Germany 33 8 09 29 8 08 09

France 26 9 07 26 9 07 07

Brazil 24 10 06 21 10 06 06

Total 3732 3734

Source Industry Canada (2013b)

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983091983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983093 Canadian export growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 56 7 -281 9 106 = 5

China 101 6 65 1 187 3

UK 16 9 -73 2 358 2

Japan 202 3 -250 7 106 = 5

Mexico 179 4 -178 6 43 9

Netherlands -85 10 -255 8 183 4

South Korea 276 2 -80 3 52 8

Germany 160 5 -167 4 54 7

France 36 8 -174 5 -122 10

Brazil 706 1 -380 10 603 1

2011 2012Average

Rank Rank

US 104 8 27 2 02

China 270 4 152 1 155

UK 148 6 -02 4 90

Japan 161 5 -29 6 38

Mexico 94 9 -16 5 24

Netherlands 475 1 -55 7 53

South Korea 374 2 -272 10 70

Germany 05 10 -95 9 -09

France 311 3 23 3 15

Brazil 109 7 -92 8 189

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983091

fraserinstituteorg

Table 983089983094 Canadarsquos merchandise imports top ten sources 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 1992 1 524 1633 1 511 1745 1 504

China 374 2 98 347 2 109 382 2 110

Mexico 157 3 41 145 3 45 190 3 55

Japan 134 4 35 108 4 34 115 4 33

Germany 111 5 29 95 5 30 97 5 28

UK 110 6 29 82 6 26 92 6 27

South Korea 53 9 14 52 7 16 53 7 15

Algeria 67 7 18 33 10 10 31 10 09

Italy 45 10 12 39 9 12 40 9 12

France 53 8 14 49 8 15 47 8 13

Total 3804 3194 3465

2011 2012Average

shareValue Rank Share Value Rank Share

US 1846 1 496 1922 1 506 508

China 402 2 108 417 2 110 107

Mexico 205 3 55 210 3 55 50

Japan 109 4 29 123 4 33 33

Germany 107 5 29 118 5 31 29

UK 86 6 23 70 6 18 25

South Korea 55 7 15 52 7 14 15

Algeria 46 9 12 49 8 13 12

Italy 43 10 11 43 9 11 12

France 46 8 12 41 10 11 13

Total 3723 3796

Source Industry Canada (2013b)

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983091983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983095 Old and new trade prospectsmdashimport growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 29 8 -178 7 89 5

China 112 4 -70 2 123 3

Mexico 43 7 -77 4 337 1

Japan -11 10 -192 8 89 4

Germany 105 5 -149 6 44 7

UK 95 6 -252 9 141 2

South Korea 120 3 -14 1 36 8

Algeria 518 1 -511 10 -50 10

Italy 11 9 -132 5 48 6

France 191 2 -70 3 -35 9

2011 2012Average

Rank Rank

US 88 5 57 4 17

China 82 6 53 5 60

Mexico 111 3 39 6 91

Japan -29 9 151 1 01

Germany 132 2 117 2 50

UK -36 10 -173 10 -45

South Korea 76 7 -37 8 37

Algeria 533 1 91 3 116

Italy 95 4 23 7 09

France 22 8 -97 9 02

Source Industry Canada (2013b) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983093

fraserinstituteorg

In terms of overall Canadian outbound FDI stocks in the US remain

very high despite the recent US recession while growth in stock in Asia is

modest (figure 983089983097) When we examine Canadian FDI in the so-called BRIC

states we notice that investment in both China and India is relatively small

Canadian mining investment in Brazil is much larger (figure 983090983088) In fact when

we examine amounts of FDI we find that Canada is not really a big BRIC

investor other than Brazil Chile Hong Kong and Peru are larger FDI recipi-

ents than China and India (figure 983090983089)

In terms of FDI flowing into Canada we notice the very large share

(983090983096983094983093 percent) in manufacturing which indicates both the predominant

share of US FDI and the extensive integrated supply chains in Canada-US

manufacturing (table 983089983097) Even more than for outbound FDI inflow stocks

show very large US preponderance (figure 983090983090) Such continued concentra-

tion of US FDI in Canada suggests that Canadian trade diversification is not

just a decision to be made by Canadian producers

Like trade growth Chinese FDI growth in Canada is positive but the

overall numbers are small and do not show rapid growth in the last 983091 years

(figure 983090983091)

Table 983089983096 Top industries for outward stocks of FDI 983090983088983089983090

Category Value Share

Mining oil and gas extraction 1099 188

Oil and gas subcategory 542 93

Manufacturing 569 97

Finance and insurance 2334 399

Management of companies and enterprises 757 129

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

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983091983094 The state of Canada-US relations in 983090983088983089983092

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0

1

2

3

4

5

6

7

8

9

10

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n s

Figure Canadian foreign direct investment (stock) BRIC ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Brazil PRC India Russia

0

20

4060

80

100

120

140

160

180

200

220

240

260

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) various regions

ndash

Notes Excluding Mexico Canadian FDI to Mexico in 2012 was $557 billion

Foreign Direct Investment measures the purchase of various forms of capital stock abroad

However tax havens (Barbados Bermuda etc) are frequently found to be some of the highest

recipients of FDI In reality tax havens do not reflect economic growth as FDI figures invested

into tax havens are often reinvested back to the source country in a concept known as

round-tripping (Financial Post 2013) We have accounted for tax havens by removing them from

tables and figures in this section The numbers corresponding to Figure 19 would be Barbados

($593 billion) Bermuda ($118 billion) British Virgin Islands ($21 billion) Cayman Islands ($302

billion)

Source Foreign Affairs Trade and Development Canada (2013c)

US Europe Asia amp Oceania Central amp South America Africa

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4462

The state of Canada-US relations in 983090983088983089983092 983091983095

fraserinstituteorg

Table 983089983097 Top industries for inward stocks of FDI 983090983088983089983090

Category Value Share

Oil and gas extraction 766 147

Manufacturing 1492 287

Petroleum and coal products manufacturing 377 72

Wholesale trade 395 76

Finance and insurance 699 134

Management of companies and enterprises 999 192

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

0

2

4

6

8

10

12

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) Chile Hong Kong

Peru amp Korea ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Chile Hong Kong Peru Korea

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4562

983091983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

40

80

120

160

200

240

280

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Foreign direct investment (stock) in Canada from top three

countries ndash

Source Foreign Affairs Trade and Development Canada (2013c)

US Netherlands UK

0

2

4

6

8

10

12

201220112010200920082007

2 0 0 2 C A $ b

i l l i o n s

Figure Foreign direct investment (stock) in Canada from China

ndash

Source Foreign Affairs Trade and Development Canada (2013c)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4662

fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4762

983092983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4862

fraserinstituteorg 983092983089

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Abacus Data (983090983088983089983090 November 983090983088) Beyond the Canadian-American Border

lthttpabacusdatacawp-contentuploads983090983088983089983090983089983089Can-AM_Report_CABC_

Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 28: Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983089

fraserinstituteorg

lsquoBeyond the Borderrsquo and Regulatory Cooperation

In 983090983088983089983089 Canada and the United States announced an ambitious agreement

to reduce border costs by means of deeper bilateral regulatory and secur-

ity cooperation Te accord seeks to streamline various border proceduresmdash

some already in existence and some newmdashto improve intelligence-sharing

between law enforcement agencies mutual recognition of passenger baggage

screening improved frameworks for trusted trade programs harmoniza-

tion of NEXUS protocols streamlined supply chains enhanced trade com-

petitiveness collaboration in border infrastructure investment and deeper

cooperation in national security investigations Te agreement is known as

Beyond the Border A Shared Vision for Perimeter Security and Economic

Competitiveness (February 983092 983090983088983089983089)

Te Beyond the Border Vision accord also set up a Regulatory

Cooperation Council In it Canadian and American officials seek to reduce

red tape and harmonize regulations in certain key sectors o date the

Council has announced various plans affecting agriculture and food trans-

portation health personal care products workplace chemicals environmentnano materials and small business loans We summarize the key points of

progress made since 983090983088983089983089 in table 983097

-35

-25

-15

-5

5

15

25

35

20122011201020092008200720062005

Truck Rail Pipeline

Figure Growth rate of all surface modes of freight flows () ndash

Source Bureau of Transportation Statistics (2013) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983097 Key elements of Beyond the Border and Regulatory Cooperation

Beyond the Border Program

Integrated Cargo Security Strategy (ICSS)December 2011

Reduces administrative duplication between Canada and the US byaddressing security risks in advance within the shipment supply chainand at the border (Canada Border Services Agency 2013)

Prince Rupert Pilot October 2012 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry via rail is examined by Canadian officials onbehalf of the US (Government of Canada 2013c)

Montreal Pilot January 2013 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry to the US via truck is examined by Canadianofficials on behalf of the US (Government of Canada 2013c)

Pre-load Air Cargo Targeting (PACT) Joint pilot by CBSA and Transport Canada to screen cargo pre-flight onCanada-bound airplanes at foreign airports (Canada Border ServicesAgency 2013)

Tamper Evident Technology PilotOctober 2012

Pilot collaboration between CBSA and US CBP to ensure containersremain sealed upon arrival at the US border (Canada Border Services

Agency 2013)

Truck Cargo Pre-Inspection PilotMarch 2013

Pilot program between the CBSA and the US CBP for pre-inspection ofsouthbound traffic into US (Canada Border Services Agency 2013)

Free and Secure Trade (FAST) PilotSarnia Ontario

Pilot program for usage of FAST lanes without Partners in Protection andCustoms Self Assessment programs (Government of Canada 2013c)

Canada-US Shiprider June 2013 Removal of jurisdictional barriers to improve law enforcement personnelin Windsor-Detroit and Vancouver-Blaine waterways (Government ofCanada 2013c)

EntryExit Initiative Phase II June 2013 Exchange entryexit data between the CBSA and US DHS on individualsat Canada-US land border crossings (Government of Canada 2013c)

Regulatory Cooperation ProgramMemorandum of Understanding between Transport Canada and the RailwayAssociation of Canada September 2013

Framework for Canadian rail emissions between 2011 to 2015(Government of Canada 2013d)

Canada-United States Perimeter Approachto Plant Protection September 2013

Draft framework for increased cooperation and reduction inadministrative duplication between the Canadian Food InspectionAgency (CFIA) and United States Animal and Plant Health InspectionService (APHIS) on trade in plants and plant products (Government ofCanada 2013d)

Common Electronic Submission GatewayPilot (CESG) August 2013

FDA and Health Canada will allow pharmaceutical firms to electronicallysubmit drug applications (Government of Canada 2013d)

Initiative to Align Veterinary DrugApprovals December 2012

Joint reviews between US FDA and Health Canada on veterinary drugproducts (Government of Canada 2013d)

Stricter Air Pollutant Emissions Environment Canada aligns car emissions beginning in 2017 with theUS Environmental Protection Agencyrsquos ldquoTier 3rdquo (Government of Canada2013d)

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The state of Canada-US relations in 983090983088983089983092 983090983091

fraserinstituteorg

On September 983092 983090983088983089983091 $983092983094983094 million in investment was allocated to the

Border Action plan by the Government of Canada in order expand two marine

container examination facilities (Government of Canada 983090983088983089983091c) $983091983091 million

was invested by the Government of Canada in the Asia Pacific Gateway and

rade Corridor Initiative (Government of Canada 983090983088983089983091c) Te Plan includes

an additional 983090983097 harmonization initiatives that will enhance trade activity

between Canada and the US

Neither Beyond the Border nor the Regulatory Cooperation Council

offer further investment or cost estimates on the initiatives described in table

983097 Moens and Gabler (983090983088983089983090) pointed to the need for both the Canadian and

American governments to provide data on border costs so that a cost-benefit

analysis can ensue Nonetheless the small steps of progress towards inte-

grating and harmonizing US and Canadian border practices remains a very

important (long-term) part of reducing the profile of the border

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983092 fraserinstituteorg

Canadian and American public perceptions

Tree observations are noteworthy in recent assessments of public percep-

tions between Americans and Canadians First Americans consistently have

a very high favourability rating of Canadians typically in the 983097983088 plus range

(table 983089983088 figure 983089983093) Both as a friend and a strategic ally Americans hold

Canadians in the most favourable light possible (table 983089983089) Disagreements over

policy between the two countries whether in defence and foreign affairs or

over border and trade issues do not move this fundamental asset Canadians

enjoy in dealing with their neighbour

Second Canadians do not have high expectations of either the

American or Canadian government regarding progress in bilateral relations

As table 983089983090 shows Canadians hold Obama in high regard (983094983091 percent) but

only 983093983092 percent expect progress from him in trade relations Prime Minister

Harper is rated slightly ahead of President Obama in terms of working hard

towards improving Canada-US relations (table 983089983091)

Tird and most significant in light of Canadarsquos Catch-983090983090 situation both

Canadians and Americans are more supportive of closer cooperation and inte-

gration policies than is the case for political representatives in either the United

States or Canada In two recent studies we showed how US Senators and House

Representatives are quite critical of Canada with regard to NAFA issues and bor-

der security (Moens and Gabler 983090983088983089983089) Similarly we found that among the three

major political parties in Canadarsquos parliament only one consistently expressed

itself in favour of closer ties with the United States (Moens and Gabler 983090983088983089983089)

A recent survey of American and Canadian (and Mexican) attitudes

towards free trade and NAFA show surprisingly strong data for more trade

integration In response to the statement ldquoTere should be more free trade

between the US Canada and Mexicordquo 983096983088 percent of Canadians approved

as did 983095983092 percent of Americans Even on border security Canadians andAmericans are more pro-cooperation and integration than their governmental

policies suggest In the US 983092983089 percent support a common perimeter while

983090983088 percent are opposed In Canada 983092983091 percent support it and 983091983088 percent are

opposed (Graves Pastor and Basaacutentildeez 983090983088983089983091) Terefore in terms of public

mandate both governments would have a case to work towards broader bilat-

eral (or trilateral) cooperation to lower trade barriers

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983093

fraserinstituteorg

Table 983089983088 Canadian favourability rating among Americans (February 983090983088983089983090)

Veryfavourable

Mostlyfavourable

Mostlyunfavourable

Veryfavourable Not sure Total

favourableTotal

unfavourable

53 38 3 2 3 91 5

Note n=1015

Source Gallup Poll (2012)

Table 983089983089 Ally or enemy for Americans (June 983090983088983089983091)

Country Ally Friendly Unfriendly Enemy Total Ally andFriendly

Great Britain 66 25 2 1 91

Canada 61 33 2 1 94

China 11 44 26 14 55

Note n=1529Source Gallup Poll (2013)

88

90

92

94

96

98

201220112010200920082007

Figure Canadian favourability among Americans () ndash

Source Gallup Poll (2012)

f a

v o u r a

b l e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983090 What effect will Obama have on Canada-US relations (November 983090983088983089983090)

Canadians Americans

Positive Negative None Positive Negative None

Relationship 62 5 34 48 12 40

Trade 54 10 35 48 12 39

Harmonizing 53 8 40 47 14 39

Note n=1066

Source Abacus Data (2012)

Table 983089983091 Has each leader worked hard to improve Canada-US relations

(July 983090983088983089983090)

Country Agree Disagree Not sure

Stephen Harper 58 32 10

Barack Obama 53 32 15

Note Sample of Canadians

Source HarrisDecima (2012)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983090983095

US policy uncertainty

Canadian economic prospects face their most important challenge in the

United States Te US economic recovery has been modest and real GDP

growth so far has remained below the post-World War II average of post-

recession periods (figure 983089983094) As we noted above the less-than-stellar US

recovery is made even more challenging for Canadian traders in that pro-

ductivity gains in Canada are lagging while the Canadian dollar remains high

On top of that several American-imposed regulatory obstacles to free trade

are depressing trade prospects in crude oil red meat and public works pro-

curement Tese impediments reduce Canadian competitive access to the

US market

A high level of public spending until the January 983090983088983089983091 sequester and

ongoing monetary stimulation have not produced notable US GDP growth

Te seven post-recession periods below show the current average to be well

below the historical average (Young 983090983088983089983091)

983089983097983092983096-983089983097983093983095 983091983096983088

983089983097983093983096-983089983097983094983095 983092983090983096

983089983097983094983096-983089983097983095983095 983091983089983096

983089983097983095983096-983089983097983096983095 983091983089983093

983089983097983096983096-983089983097983097983095 983091983088983093

983089983097983097983096-983090983088983088983095 983090983097983097

983090983088983088983096-983090983088983089983091 983088983095983091

While economic growth has been modest growth in the public debt

has not (figure 983089983095) Publicly held debt in the US is now at 983095983091 percent of GDP

the highest since 983089983097983092983094 (Congressional Budget Office 983090983088983089983091)

Te widening gap between federal government outlays and revenueshas only recently been capped by the Sequester (figure 983089983096) However the

budget Sequester is temporary and final resolution of public spending and

taxation levels remains unclear given repeated gridlock in presidential-con-

gressional policy making High debt levels combined with stalemate over

taxes and budget cuts have produced a case of policy instability or uncer-

tainty in the last five years (Baker Bloom and Davis 983090983088983089983091)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

US policy uncertainty is further aggravated by inaction on the large

lsquoentitlementrsquo programsmdashSocial Security Medicare and Medicaidmdashwhich are

the major drivers of the long-term gap in revenues and spending

-4

-2

0

2

4

6

8

201220062000199419881982197619701964

Figure US GDP growth rate ndash ( forecast)

Source The World Bank (2013b) OECD (2013)

-10

-8

-6

-4

-2

0

0

20

40

60

80

100

20122011201020092008200720062005200420032002

Government deficit as a percentage of GDP Government debt as a percentage of GDP

Figure US Government deficit and debt as a percentage of GDP ndash

Source Congressional Budget Office (2013)

D e fi c i t p e r c e n t a g e ( ) D

e b t p er c en t a g e ( )

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983097

fraserinstituteorg

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

20122003199319831973

Revenue Outlays

Figure US Government revenue and outlays ndash ( US$ billions)

Source Congressional Budget Office (2013)

1 9 8 3 U S $ b i l l i o n s

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983091983088 fraserinstituteorg

Trade diversification

Given the weakness in near-term US opportunities Canadians are (again)

wondering how to pursue trade diversification away from the United States

Te objective is logical and if achieved will prove advantageous but various

trends in trade and investment show that diversification for Canada is a slow

and arduous journey (table 983089983092)

In terms of overall share exports to China in the last five years have

doubled but the numbersmdashfrom 983090983089983095 percent to 983092983090983094 percentmdashremain rela-

tively low In the same period the US-bound share declined by 983091 percent but

remains a towering 983095983092983093983092 percent Te pattern of small overall impact applies

to all the other top trading partners For example exports to the UK have

increased but exports to Japan and Mexico have essentially stalled When we

consider average export growth rates over the last five years (table 983089983093) we see

a very strong rate for China (983089983093983093 percent) and strong rates for the UK and

South Korea (983096983097 percent and 983094983097 percent) However a 983089983093 percent increase in a

983092 percent overall trade share produces little change Te point we are making

is that at this rate and pattern of trade lsquodiversificationrsquo it will actually take a

very long timemdashwhile relatively small upward trends in trade with the United

States could have a quick and very large impact in the opposite direction

On the import side we notice more trade diversification with the US

share at 983093983088 percent and the Chinese share at 983089983089 percent (table 983089983094) Te Chinese

growth rate on the import side is less than on the export side (table 983089983095) Te

most revealing number may be the high average over five years for Mexico

at 983097 percent Tis could be indicative of a growing supply chain with Mexico

While foreign direct investment (FDI) is not a direct indicator of future

trade trends in investment may harbinger change In terms of outbound

FDI we notice that only a small segment (less than 983089983088 percent) is targeted

for manufacturing (table 983089983096) It is investment in this category in which onewould expect growth in supply chains

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983089

fraserinstituteorg

Table 983089983092 Canadarsquos merchandise exports top ten destinations 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 3291 1 777 2361 1 751 2564 1 749

China 92 4 22 97 3 31 114 3 33

UK 114 2 27 105 2 33 141 2 41

Japan 97 3 23 73 4 23 79 4 23

Mexico 51 5 12 42 5 13 43 5 13

Netherlands 32 8 08 24 8 08 28 8 08

South Korea 34 7 08 31 7 10 32 7 09

Germany 39 6 09 33 6 10 34 6 10

France 28 9 07 23 9 07 20 10 06

Brazil 23 10 05 14 10 04 22 9 06

Total 4237 3145 3424

2011 2012Average

shareValue Rank Share Value Rank Share

US 2750 1 737 2783 1 745 752

China 140 3 38 159 2 43 33

UK 157 2 42 154 3 41 37

Japan 89 4 24 85 4 23 23

Mexico 46 5 12 44 5 12 12

Netherlands 40 7 11 37 6 10 09

South Korea 43 6 11 30 7 08 09

Germany 33 8 09 29 8 08 09

France 26 9 07 26 9 07 07

Brazil 24 10 06 21 10 06 06

Total 3732 3734

Source Industry Canada (2013b)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983091983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983093 Canadian export growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 56 7 -281 9 106 = 5

China 101 6 65 1 187 3

UK 16 9 -73 2 358 2

Japan 202 3 -250 7 106 = 5

Mexico 179 4 -178 6 43 9

Netherlands -85 10 -255 8 183 4

South Korea 276 2 -80 3 52 8

Germany 160 5 -167 4 54 7

France 36 8 -174 5 -122 10

Brazil 706 1 -380 10 603 1

2011 2012Average

Rank Rank

US 104 8 27 2 02

China 270 4 152 1 155

UK 148 6 -02 4 90

Japan 161 5 -29 6 38

Mexico 94 9 -16 5 24

Netherlands 475 1 -55 7 53

South Korea 374 2 -272 10 70

Germany 05 10 -95 9 -09

France 311 3 23 3 15

Brazil 109 7 -92 8 189

Source Industry Canada (2013b) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983091

fraserinstituteorg

Table 983089983094 Canadarsquos merchandise imports top ten sources 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 1992 1 524 1633 1 511 1745 1 504

China 374 2 98 347 2 109 382 2 110

Mexico 157 3 41 145 3 45 190 3 55

Japan 134 4 35 108 4 34 115 4 33

Germany 111 5 29 95 5 30 97 5 28

UK 110 6 29 82 6 26 92 6 27

South Korea 53 9 14 52 7 16 53 7 15

Algeria 67 7 18 33 10 10 31 10 09

Italy 45 10 12 39 9 12 40 9 12

France 53 8 14 49 8 15 47 8 13

Total 3804 3194 3465

2011 2012Average

shareValue Rank Share Value Rank Share

US 1846 1 496 1922 1 506 508

China 402 2 108 417 2 110 107

Mexico 205 3 55 210 3 55 50

Japan 109 4 29 123 4 33 33

Germany 107 5 29 118 5 31 29

UK 86 6 23 70 6 18 25

South Korea 55 7 15 52 7 14 15

Algeria 46 9 12 49 8 13 12

Italy 43 10 11 43 9 11 12

France 46 8 12 41 10 11 13

Total 3723 3796

Source Industry Canada (2013b)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4162

983091983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983095 Old and new trade prospectsmdashimport growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 29 8 -178 7 89 5

China 112 4 -70 2 123 3

Mexico 43 7 -77 4 337 1

Japan -11 10 -192 8 89 4

Germany 105 5 -149 6 44 7

UK 95 6 -252 9 141 2

South Korea 120 3 -14 1 36 8

Algeria 518 1 -511 10 -50 10

Italy 11 9 -132 5 48 6

France 191 2 -70 3 -35 9

2011 2012Average

Rank Rank

US 88 5 57 4 17

China 82 6 53 5 60

Mexico 111 3 39 6 91

Japan -29 9 151 1 01

Germany 132 2 117 2 50

UK -36 10 -173 10 -45

South Korea 76 7 -37 8 37

Algeria 533 1 91 3 116

Italy 95 4 23 7 09

France 22 8 -97 9 02

Source Industry Canada (2013b) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4262

The state of Canada-US relations in 983090983088983089983092 983091983093

fraserinstituteorg

In terms of overall Canadian outbound FDI stocks in the US remain

very high despite the recent US recession while growth in stock in Asia is

modest (figure 983089983097) When we examine Canadian FDI in the so-called BRIC

states we notice that investment in both China and India is relatively small

Canadian mining investment in Brazil is much larger (figure 983090983088) In fact when

we examine amounts of FDI we find that Canada is not really a big BRIC

investor other than Brazil Chile Hong Kong and Peru are larger FDI recipi-

ents than China and India (figure 983090983089)

In terms of FDI flowing into Canada we notice the very large share

(983090983096983094983093 percent) in manufacturing which indicates both the predominant

share of US FDI and the extensive integrated supply chains in Canada-US

manufacturing (table 983089983097) Even more than for outbound FDI inflow stocks

show very large US preponderance (figure 983090983090) Such continued concentra-

tion of US FDI in Canada suggests that Canadian trade diversification is not

just a decision to be made by Canadian producers

Like trade growth Chinese FDI growth in Canada is positive but the

overall numbers are small and do not show rapid growth in the last 983091 years

(figure 983090983091)

Table 983089983096 Top industries for outward stocks of FDI 983090983088983089983090

Category Value Share

Mining oil and gas extraction 1099 188

Oil and gas subcategory 542 93

Manufacturing 569 97

Finance and insurance 2334 399

Management of companies and enterprises 757 129

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4362

983091983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

1

2

3

4

5

6

7

8

9

10

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n s

Figure Canadian foreign direct investment (stock) BRIC ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Brazil PRC India Russia

0

20

4060

80

100

120

140

160

180

200

220

240

260

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) various regions

ndash

Notes Excluding Mexico Canadian FDI to Mexico in 2012 was $557 billion

Foreign Direct Investment measures the purchase of various forms of capital stock abroad

However tax havens (Barbados Bermuda etc) are frequently found to be some of the highest

recipients of FDI In reality tax havens do not reflect economic growth as FDI figures invested

into tax havens are often reinvested back to the source country in a concept known as

round-tripping (Financial Post 2013) We have accounted for tax havens by removing them from

tables and figures in this section The numbers corresponding to Figure 19 would be Barbados

($593 billion) Bermuda ($118 billion) British Virgin Islands ($21 billion) Cayman Islands ($302

billion)

Source Foreign Affairs Trade and Development Canada (2013c)

US Europe Asia amp Oceania Central amp South America Africa

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4462

The state of Canada-US relations in 983090983088983089983092 983091983095

fraserinstituteorg

Table 983089983097 Top industries for inward stocks of FDI 983090983088983089983090

Category Value Share

Oil and gas extraction 766 147

Manufacturing 1492 287

Petroleum and coal products manufacturing 377 72

Wholesale trade 395 76

Finance and insurance 699 134

Management of companies and enterprises 999 192

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

0

2

4

6

8

10

12

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) Chile Hong Kong

Peru amp Korea ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Chile Hong Kong Peru Korea

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4562

983091983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

40

80

120

160

200

240

280

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Foreign direct investment (stock) in Canada from top three

countries ndash

Source Foreign Affairs Trade and Development Canada (2013c)

US Netherlands UK

0

2

4

6

8

10

12

201220112010200920082007

2 0 0 2 C A $ b

i l l i o n s

Figure Foreign direct investment (stock) in Canada from China

ndash

Source Foreign Affairs Trade and Development Canada (2013c)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4662

fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983092983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4862

fraserinstituteorg 983092983089

References

Abacus Data (983090983088983089983090 November 983090983088) Beyond the Canadian-American Border

lthttpabacusdatacawp-contentuploads983090983088983089983090983089983089Can-AM_Report_CABC_

Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5962

983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6062

The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 29: Canadas Catch 22 State of Canada Us Relations in 2014

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983090983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983097 Key elements of Beyond the Border and Regulatory Cooperation

Beyond the Border Program

Integrated Cargo Security Strategy (ICSS)December 2011

Reduces administrative duplication between Canada and the US byaddressing security risks in advance within the shipment supply chainand at the border (Canada Border Services Agency 2013)

Prince Rupert Pilot October 2012 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry via rail is examined by Canadian officials onbehalf of the US (Government of Canada 2013c)

Montreal Pilot January 2013 Offshore cargo heading to the US via marine transport and thenforwarded from port of entry to the US via truck is examined by Canadianofficials on behalf of the US (Government of Canada 2013c)

Pre-load Air Cargo Targeting (PACT) Joint pilot by CBSA and Transport Canada to screen cargo pre-flight onCanada-bound airplanes at foreign airports (Canada Border ServicesAgency 2013)

Tamper Evident Technology PilotOctober 2012

Pilot collaboration between CBSA and US CBP to ensure containersremain sealed upon arrival at the US border (Canada Border Services

Agency 2013)

Truck Cargo Pre-Inspection PilotMarch 2013

Pilot program between the CBSA and the US CBP for pre-inspection ofsouthbound traffic into US (Canada Border Services Agency 2013)

Free and Secure Trade (FAST) PilotSarnia Ontario

Pilot program for usage of FAST lanes without Partners in Protection andCustoms Self Assessment programs (Government of Canada 2013c)

Canada-US Shiprider June 2013 Removal of jurisdictional barriers to improve law enforcement personnelin Windsor-Detroit and Vancouver-Blaine waterways (Government ofCanada 2013c)

EntryExit Initiative Phase II June 2013 Exchange entryexit data between the CBSA and US DHS on individualsat Canada-US land border crossings (Government of Canada 2013c)

Regulatory Cooperation ProgramMemorandum of Understanding between Transport Canada and the RailwayAssociation of Canada September 2013

Framework for Canadian rail emissions between 2011 to 2015(Government of Canada 2013d)

Canada-United States Perimeter Approachto Plant Protection September 2013

Draft framework for increased cooperation and reduction inadministrative duplication between the Canadian Food InspectionAgency (CFIA) and United States Animal and Plant Health InspectionService (APHIS) on trade in plants and plant products (Government ofCanada 2013d)

Common Electronic Submission GatewayPilot (CESG) August 2013

FDA and Health Canada will allow pharmaceutical firms to electronicallysubmit drug applications (Government of Canada 2013d)

Initiative to Align Veterinary DrugApprovals December 2012

Joint reviews between US FDA and Health Canada on veterinary drugproducts (Government of Canada 2013d)

Stricter Air Pollutant Emissions Environment Canada aligns car emissions beginning in 2017 with theUS Environmental Protection Agencyrsquos ldquoTier 3rdquo (Government of Canada2013d)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983091

fraserinstituteorg

On September 983092 983090983088983089983091 $983092983094983094 million in investment was allocated to the

Border Action plan by the Government of Canada in order expand two marine

container examination facilities (Government of Canada 983090983088983089983091c) $983091983091 million

was invested by the Government of Canada in the Asia Pacific Gateway and

rade Corridor Initiative (Government of Canada 983090983088983089983091c) Te Plan includes

an additional 983090983097 harmonization initiatives that will enhance trade activity

between Canada and the US

Neither Beyond the Border nor the Regulatory Cooperation Council

offer further investment or cost estimates on the initiatives described in table

983097 Moens and Gabler (983090983088983089983090) pointed to the need for both the Canadian and

American governments to provide data on border costs so that a cost-benefit

analysis can ensue Nonetheless the small steps of progress towards inte-

grating and harmonizing US and Canadian border practices remains a very

important (long-term) part of reducing the profile of the border

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983092 fraserinstituteorg

Canadian and American public perceptions

Tree observations are noteworthy in recent assessments of public percep-

tions between Americans and Canadians First Americans consistently have

a very high favourability rating of Canadians typically in the 983097983088 plus range

(table 983089983088 figure 983089983093) Both as a friend and a strategic ally Americans hold

Canadians in the most favourable light possible (table 983089983089) Disagreements over

policy between the two countries whether in defence and foreign affairs or

over border and trade issues do not move this fundamental asset Canadians

enjoy in dealing with their neighbour

Second Canadians do not have high expectations of either the

American or Canadian government regarding progress in bilateral relations

As table 983089983090 shows Canadians hold Obama in high regard (983094983091 percent) but

only 983093983092 percent expect progress from him in trade relations Prime Minister

Harper is rated slightly ahead of President Obama in terms of working hard

towards improving Canada-US relations (table 983089983091)

Tird and most significant in light of Canadarsquos Catch-983090983090 situation both

Canadians and Americans are more supportive of closer cooperation and inte-

gration policies than is the case for political representatives in either the United

States or Canada In two recent studies we showed how US Senators and House

Representatives are quite critical of Canada with regard to NAFA issues and bor-

der security (Moens and Gabler 983090983088983089983089) Similarly we found that among the three

major political parties in Canadarsquos parliament only one consistently expressed

itself in favour of closer ties with the United States (Moens and Gabler 983090983088983089983089)

A recent survey of American and Canadian (and Mexican) attitudes

towards free trade and NAFA show surprisingly strong data for more trade

integration In response to the statement ldquoTere should be more free trade

between the US Canada and Mexicordquo 983096983088 percent of Canadians approved

as did 983095983092 percent of Americans Even on border security Canadians andAmericans are more pro-cooperation and integration than their governmental

policies suggest In the US 983092983089 percent support a common perimeter while

983090983088 percent are opposed In Canada 983092983091 percent support it and 983091983088 percent are

opposed (Graves Pastor and Basaacutentildeez 983090983088983089983091) Terefore in terms of public

mandate both governments would have a case to work towards broader bilat-

eral (or trilateral) cooperation to lower trade barriers

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983093

fraserinstituteorg

Table 983089983088 Canadian favourability rating among Americans (February 983090983088983089983090)

Veryfavourable

Mostlyfavourable

Mostlyunfavourable

Veryfavourable Not sure Total

favourableTotal

unfavourable

53 38 3 2 3 91 5

Note n=1015

Source Gallup Poll (2012)

Table 983089983089 Ally or enemy for Americans (June 983090983088983089983091)

Country Ally Friendly Unfriendly Enemy Total Ally andFriendly

Great Britain 66 25 2 1 91

Canada 61 33 2 1 94

China 11 44 26 14 55

Note n=1529Source Gallup Poll (2013)

88

90

92

94

96

98

201220112010200920082007

Figure Canadian favourability among Americans () ndash

Source Gallup Poll (2012)

f a

v o u r a

b l e

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983090 What effect will Obama have on Canada-US relations (November 983090983088983089983090)

Canadians Americans

Positive Negative None Positive Negative None

Relationship 62 5 34 48 12 40

Trade 54 10 35 48 12 39

Harmonizing 53 8 40 47 14 39

Note n=1066

Source Abacus Data (2012)

Table 983089983091 Has each leader worked hard to improve Canada-US relations

(July 983090983088983089983090)

Country Agree Disagree Not sure

Stephen Harper 58 32 10

Barack Obama 53 32 15

Note Sample of Canadians

Source HarrisDecima (2012)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983090983095

US policy uncertainty

Canadian economic prospects face their most important challenge in the

United States Te US economic recovery has been modest and real GDP

growth so far has remained below the post-World War II average of post-

recession periods (figure 983089983094) As we noted above the less-than-stellar US

recovery is made even more challenging for Canadian traders in that pro-

ductivity gains in Canada are lagging while the Canadian dollar remains high

On top of that several American-imposed regulatory obstacles to free trade

are depressing trade prospects in crude oil red meat and public works pro-

curement Tese impediments reduce Canadian competitive access to the

US market

A high level of public spending until the January 983090983088983089983091 sequester and

ongoing monetary stimulation have not produced notable US GDP growth

Te seven post-recession periods below show the current average to be well

below the historical average (Young 983090983088983089983091)

983089983097983092983096-983089983097983093983095 983091983096983088

983089983097983093983096-983089983097983094983095 983092983090983096

983089983097983094983096-983089983097983095983095 983091983089983096

983089983097983095983096-983089983097983096983095 983091983089983093

983089983097983096983096-983089983097983097983095 983091983088983093

983089983097983097983096-983090983088983088983095 983090983097983097

983090983088983088983096-983090983088983089983091 983088983095983091

While economic growth has been modest growth in the public debt

has not (figure 983089983095) Publicly held debt in the US is now at 983095983091 percent of GDP

the highest since 983089983097983092983094 (Congressional Budget Office 983090983088983089983091)

Te widening gap between federal government outlays and revenueshas only recently been capped by the Sequester (figure 983089983096) However the

budget Sequester is temporary and final resolution of public spending and

taxation levels remains unclear given repeated gridlock in presidential-con-

gressional policy making High debt levels combined with stalemate over

taxes and budget cuts have produced a case of policy instability or uncer-

tainty in the last five years (Baker Bloom and Davis 983090983088983089983091)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

US policy uncertainty is further aggravated by inaction on the large

lsquoentitlementrsquo programsmdashSocial Security Medicare and Medicaidmdashwhich are

the major drivers of the long-term gap in revenues and spending

-4

-2

0

2

4

6

8

201220062000199419881982197619701964

Figure US GDP growth rate ndash ( forecast)

Source The World Bank (2013b) OECD (2013)

-10

-8

-6

-4

-2

0

0

20

40

60

80

100

20122011201020092008200720062005200420032002

Government deficit as a percentage of GDP Government debt as a percentage of GDP

Figure US Government deficit and debt as a percentage of GDP ndash

Source Congressional Budget Office (2013)

D e fi c i t p e r c e n t a g e ( ) D

e b t p er c en t a g e ( )

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The state of Canada-US relations in 983090983088983089983092 983090983097

fraserinstituteorg

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

20122003199319831973

Revenue Outlays

Figure US Government revenue and outlays ndash ( US$ billions)

Source Congressional Budget Office (2013)

1 9 8 3 U S $ b i l l i o n s

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983091983088 fraserinstituteorg

Trade diversification

Given the weakness in near-term US opportunities Canadians are (again)

wondering how to pursue trade diversification away from the United States

Te objective is logical and if achieved will prove advantageous but various

trends in trade and investment show that diversification for Canada is a slow

and arduous journey (table 983089983092)

In terms of overall share exports to China in the last five years have

doubled but the numbersmdashfrom 983090983089983095 percent to 983092983090983094 percentmdashremain rela-

tively low In the same period the US-bound share declined by 983091 percent but

remains a towering 983095983092983093983092 percent Te pattern of small overall impact applies

to all the other top trading partners For example exports to the UK have

increased but exports to Japan and Mexico have essentially stalled When we

consider average export growth rates over the last five years (table 983089983093) we see

a very strong rate for China (983089983093983093 percent) and strong rates for the UK and

South Korea (983096983097 percent and 983094983097 percent) However a 983089983093 percent increase in a

983092 percent overall trade share produces little change Te point we are making

is that at this rate and pattern of trade lsquodiversificationrsquo it will actually take a

very long timemdashwhile relatively small upward trends in trade with the United

States could have a quick and very large impact in the opposite direction

On the import side we notice more trade diversification with the US

share at 983093983088 percent and the Chinese share at 983089983089 percent (table 983089983094) Te Chinese

growth rate on the import side is less than on the export side (table 983089983095) Te

most revealing number may be the high average over five years for Mexico

at 983097 percent Tis could be indicative of a growing supply chain with Mexico

While foreign direct investment (FDI) is not a direct indicator of future

trade trends in investment may harbinger change In terms of outbound

FDI we notice that only a small segment (less than 983089983088 percent) is targeted

for manufacturing (table 983089983096) It is investment in this category in which onewould expect growth in supply chains

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983089

fraserinstituteorg

Table 983089983092 Canadarsquos merchandise exports top ten destinations 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 3291 1 777 2361 1 751 2564 1 749

China 92 4 22 97 3 31 114 3 33

UK 114 2 27 105 2 33 141 2 41

Japan 97 3 23 73 4 23 79 4 23

Mexico 51 5 12 42 5 13 43 5 13

Netherlands 32 8 08 24 8 08 28 8 08

South Korea 34 7 08 31 7 10 32 7 09

Germany 39 6 09 33 6 10 34 6 10

France 28 9 07 23 9 07 20 10 06

Brazil 23 10 05 14 10 04 22 9 06

Total 4237 3145 3424

2011 2012Average

shareValue Rank Share Value Rank Share

US 2750 1 737 2783 1 745 752

China 140 3 38 159 2 43 33

UK 157 2 42 154 3 41 37

Japan 89 4 24 85 4 23 23

Mexico 46 5 12 44 5 12 12

Netherlands 40 7 11 37 6 10 09

South Korea 43 6 11 30 7 08 09

Germany 33 8 09 29 8 08 09

France 26 9 07 26 9 07 07

Brazil 24 10 06 21 10 06 06

Total 3732 3734

Source Industry Canada (2013b)

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983091983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983093 Canadian export growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 56 7 -281 9 106 = 5

China 101 6 65 1 187 3

UK 16 9 -73 2 358 2

Japan 202 3 -250 7 106 = 5

Mexico 179 4 -178 6 43 9

Netherlands -85 10 -255 8 183 4

South Korea 276 2 -80 3 52 8

Germany 160 5 -167 4 54 7

France 36 8 -174 5 -122 10

Brazil 706 1 -380 10 603 1

2011 2012Average

Rank Rank

US 104 8 27 2 02

China 270 4 152 1 155

UK 148 6 -02 4 90

Japan 161 5 -29 6 38

Mexico 94 9 -16 5 24

Netherlands 475 1 -55 7 53

South Korea 374 2 -272 10 70

Germany 05 10 -95 9 -09

France 311 3 23 3 15

Brazil 109 7 -92 8 189

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983091

fraserinstituteorg

Table 983089983094 Canadarsquos merchandise imports top ten sources 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 1992 1 524 1633 1 511 1745 1 504

China 374 2 98 347 2 109 382 2 110

Mexico 157 3 41 145 3 45 190 3 55

Japan 134 4 35 108 4 34 115 4 33

Germany 111 5 29 95 5 30 97 5 28

UK 110 6 29 82 6 26 92 6 27

South Korea 53 9 14 52 7 16 53 7 15

Algeria 67 7 18 33 10 10 31 10 09

Italy 45 10 12 39 9 12 40 9 12

France 53 8 14 49 8 15 47 8 13

Total 3804 3194 3465

2011 2012Average

shareValue Rank Share Value Rank Share

US 1846 1 496 1922 1 506 508

China 402 2 108 417 2 110 107

Mexico 205 3 55 210 3 55 50

Japan 109 4 29 123 4 33 33

Germany 107 5 29 118 5 31 29

UK 86 6 23 70 6 18 25

South Korea 55 7 15 52 7 14 15

Algeria 46 9 12 49 8 13 12

Italy 43 10 11 43 9 11 12

France 46 8 12 41 10 11 13

Total 3723 3796

Source Industry Canada (2013b)

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983091983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983095 Old and new trade prospectsmdashimport growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 29 8 -178 7 89 5

China 112 4 -70 2 123 3

Mexico 43 7 -77 4 337 1

Japan -11 10 -192 8 89 4

Germany 105 5 -149 6 44 7

UK 95 6 -252 9 141 2

South Korea 120 3 -14 1 36 8

Algeria 518 1 -511 10 -50 10

Italy 11 9 -132 5 48 6

France 191 2 -70 3 -35 9

2011 2012Average

Rank Rank

US 88 5 57 4 17

China 82 6 53 5 60

Mexico 111 3 39 6 91

Japan -29 9 151 1 01

Germany 132 2 117 2 50

UK -36 10 -173 10 -45

South Korea 76 7 -37 8 37

Algeria 533 1 91 3 116

Italy 95 4 23 7 09

France 22 8 -97 9 02

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983093

fraserinstituteorg

In terms of overall Canadian outbound FDI stocks in the US remain

very high despite the recent US recession while growth in stock in Asia is

modest (figure 983089983097) When we examine Canadian FDI in the so-called BRIC

states we notice that investment in both China and India is relatively small

Canadian mining investment in Brazil is much larger (figure 983090983088) In fact when

we examine amounts of FDI we find that Canada is not really a big BRIC

investor other than Brazil Chile Hong Kong and Peru are larger FDI recipi-

ents than China and India (figure 983090983089)

In terms of FDI flowing into Canada we notice the very large share

(983090983096983094983093 percent) in manufacturing which indicates both the predominant

share of US FDI and the extensive integrated supply chains in Canada-US

manufacturing (table 983089983097) Even more than for outbound FDI inflow stocks

show very large US preponderance (figure 983090983090) Such continued concentra-

tion of US FDI in Canada suggests that Canadian trade diversification is not

just a decision to be made by Canadian producers

Like trade growth Chinese FDI growth in Canada is positive but the

overall numbers are small and do not show rapid growth in the last 983091 years

(figure 983090983091)

Table 983089983096 Top industries for outward stocks of FDI 983090983088983089983090

Category Value Share

Mining oil and gas extraction 1099 188

Oil and gas subcategory 542 93

Manufacturing 569 97

Finance and insurance 2334 399

Management of companies and enterprises 757 129

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

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983091983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

1

2

3

4

5

6

7

8

9

10

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n s

Figure Canadian foreign direct investment (stock) BRIC ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Brazil PRC India Russia

0

20

4060

80

100

120

140

160

180

200

220

240

260

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) various regions

ndash

Notes Excluding Mexico Canadian FDI to Mexico in 2012 was $557 billion

Foreign Direct Investment measures the purchase of various forms of capital stock abroad

However tax havens (Barbados Bermuda etc) are frequently found to be some of the highest

recipients of FDI In reality tax havens do not reflect economic growth as FDI figures invested

into tax havens are often reinvested back to the source country in a concept known as

round-tripping (Financial Post 2013) We have accounted for tax havens by removing them from

tables and figures in this section The numbers corresponding to Figure 19 would be Barbados

($593 billion) Bermuda ($118 billion) British Virgin Islands ($21 billion) Cayman Islands ($302

billion)

Source Foreign Affairs Trade and Development Canada (2013c)

US Europe Asia amp Oceania Central amp South America Africa

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The state of Canada-US relations in 983090983088983089983092 983091983095

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Table 983089983097 Top industries for inward stocks of FDI 983090983088983089983090

Category Value Share

Oil and gas extraction 766 147

Manufacturing 1492 287

Petroleum and coal products manufacturing 377 72

Wholesale trade 395 76

Finance and insurance 699 134

Management of companies and enterprises 999 192

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

0

2

4

6

8

10

12

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) Chile Hong Kong

Peru amp Korea ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Chile Hong Kong Peru Korea

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0

40

80

120

160

200

240

280

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Foreign direct investment (stock) in Canada from top three

countries ndash

Source Foreign Affairs Trade and Development Canada (2013c)

US Netherlands UK

0

2

4

6

8

10

12

201220112010200920082007

2 0 0 2 C A $ b

i l l i o n s

Figure Foreign direct investment (stock) in Canada from China

ndash

Source Foreign Affairs Trade and Development Canada (2013c)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

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Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

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References

Abacus Data (983090983088983089983090 November 983090983088) Beyond the Canadian-American Border

lthttpabacusdatacawp-contentuploads983090983088983089983090983089983089Can-AM_Report_CABC_

Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5662

The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5862

The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5962

983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6062

The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6162

983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 30: Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983091

fraserinstituteorg

On September 983092 983090983088983089983091 $983092983094983094 million in investment was allocated to the

Border Action plan by the Government of Canada in order expand two marine

container examination facilities (Government of Canada 983090983088983089983091c) $983091983091 million

was invested by the Government of Canada in the Asia Pacific Gateway and

rade Corridor Initiative (Government of Canada 983090983088983089983091c) Te Plan includes

an additional 983090983097 harmonization initiatives that will enhance trade activity

between Canada and the US

Neither Beyond the Border nor the Regulatory Cooperation Council

offer further investment or cost estimates on the initiatives described in table

983097 Moens and Gabler (983090983088983089983090) pointed to the need for both the Canadian and

American governments to provide data on border costs so that a cost-benefit

analysis can ensue Nonetheless the small steps of progress towards inte-

grating and harmonizing US and Canadian border practices remains a very

important (long-term) part of reducing the profile of the border

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983092 fraserinstituteorg

Canadian and American public perceptions

Tree observations are noteworthy in recent assessments of public percep-

tions between Americans and Canadians First Americans consistently have

a very high favourability rating of Canadians typically in the 983097983088 plus range

(table 983089983088 figure 983089983093) Both as a friend and a strategic ally Americans hold

Canadians in the most favourable light possible (table 983089983089) Disagreements over

policy between the two countries whether in defence and foreign affairs or

over border and trade issues do not move this fundamental asset Canadians

enjoy in dealing with their neighbour

Second Canadians do not have high expectations of either the

American or Canadian government regarding progress in bilateral relations

As table 983089983090 shows Canadians hold Obama in high regard (983094983091 percent) but

only 983093983092 percent expect progress from him in trade relations Prime Minister

Harper is rated slightly ahead of President Obama in terms of working hard

towards improving Canada-US relations (table 983089983091)

Tird and most significant in light of Canadarsquos Catch-983090983090 situation both

Canadians and Americans are more supportive of closer cooperation and inte-

gration policies than is the case for political representatives in either the United

States or Canada In two recent studies we showed how US Senators and House

Representatives are quite critical of Canada with regard to NAFA issues and bor-

der security (Moens and Gabler 983090983088983089983089) Similarly we found that among the three

major political parties in Canadarsquos parliament only one consistently expressed

itself in favour of closer ties with the United States (Moens and Gabler 983090983088983089983089)

A recent survey of American and Canadian (and Mexican) attitudes

towards free trade and NAFA show surprisingly strong data for more trade

integration In response to the statement ldquoTere should be more free trade

between the US Canada and Mexicordquo 983096983088 percent of Canadians approved

as did 983095983092 percent of Americans Even on border security Canadians andAmericans are more pro-cooperation and integration than their governmental

policies suggest In the US 983092983089 percent support a common perimeter while

983090983088 percent are opposed In Canada 983092983091 percent support it and 983091983088 percent are

opposed (Graves Pastor and Basaacutentildeez 983090983088983089983091) Terefore in terms of public

mandate both governments would have a case to work towards broader bilat-

eral (or trilateral) cooperation to lower trade barriers

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983093

fraserinstituteorg

Table 983089983088 Canadian favourability rating among Americans (February 983090983088983089983090)

Veryfavourable

Mostlyfavourable

Mostlyunfavourable

Veryfavourable Not sure Total

favourableTotal

unfavourable

53 38 3 2 3 91 5

Note n=1015

Source Gallup Poll (2012)

Table 983089983089 Ally or enemy for Americans (June 983090983088983089983091)

Country Ally Friendly Unfriendly Enemy Total Ally andFriendly

Great Britain 66 25 2 1 91

Canada 61 33 2 1 94

China 11 44 26 14 55

Note n=1529Source Gallup Poll (2013)

88

90

92

94

96

98

201220112010200920082007

Figure Canadian favourability among Americans () ndash

Source Gallup Poll (2012)

f a

v o u r a

b l e

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983090983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983090 What effect will Obama have on Canada-US relations (November 983090983088983089983090)

Canadians Americans

Positive Negative None Positive Negative None

Relationship 62 5 34 48 12 40

Trade 54 10 35 48 12 39

Harmonizing 53 8 40 47 14 39

Note n=1066

Source Abacus Data (2012)

Table 983089983091 Has each leader worked hard to improve Canada-US relations

(July 983090983088983089983090)

Country Agree Disagree Not sure

Stephen Harper 58 32 10

Barack Obama 53 32 15

Note Sample of Canadians

Source HarrisDecima (2012)

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fraserinstituteorg 983090983095

US policy uncertainty

Canadian economic prospects face their most important challenge in the

United States Te US economic recovery has been modest and real GDP

growth so far has remained below the post-World War II average of post-

recession periods (figure 983089983094) As we noted above the less-than-stellar US

recovery is made even more challenging for Canadian traders in that pro-

ductivity gains in Canada are lagging while the Canadian dollar remains high

On top of that several American-imposed regulatory obstacles to free trade

are depressing trade prospects in crude oil red meat and public works pro-

curement Tese impediments reduce Canadian competitive access to the

US market

A high level of public spending until the January 983090983088983089983091 sequester and

ongoing monetary stimulation have not produced notable US GDP growth

Te seven post-recession periods below show the current average to be well

below the historical average (Young 983090983088983089983091)

983089983097983092983096-983089983097983093983095 983091983096983088

983089983097983093983096-983089983097983094983095 983092983090983096

983089983097983094983096-983089983097983095983095 983091983089983096

983089983097983095983096-983089983097983096983095 983091983089983093

983089983097983096983096-983089983097983097983095 983091983088983093

983089983097983097983096-983090983088983088983095 983090983097983097

983090983088983088983096-983090983088983089983091 983088983095983091

While economic growth has been modest growth in the public debt

has not (figure 983089983095) Publicly held debt in the US is now at 983095983091 percent of GDP

the highest since 983089983097983092983094 (Congressional Budget Office 983090983088983089983091)

Te widening gap between federal government outlays and revenueshas only recently been capped by the Sequester (figure 983089983096) However the

budget Sequester is temporary and final resolution of public spending and

taxation levels remains unclear given repeated gridlock in presidential-con-

gressional policy making High debt levels combined with stalemate over

taxes and budget cuts have produced a case of policy instability or uncer-

tainty in the last five years (Baker Bloom and Davis 983090983088983089983091)

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US policy uncertainty is further aggravated by inaction on the large

lsquoentitlementrsquo programsmdashSocial Security Medicare and Medicaidmdashwhich are

the major drivers of the long-term gap in revenues and spending

-4

-2

0

2

4

6

8

201220062000199419881982197619701964

Figure US GDP growth rate ndash ( forecast)

Source The World Bank (2013b) OECD (2013)

-10

-8

-6

-4

-2

0

0

20

40

60

80

100

20122011201020092008200720062005200420032002

Government deficit as a percentage of GDP Government debt as a percentage of GDP

Figure US Government deficit and debt as a percentage of GDP ndash

Source Congressional Budget Office (2013)

D e fi c i t p e r c e n t a g e ( ) D

e b t p er c en t a g e ( )

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The state of Canada-US relations in 983090983088983089983092 983090983097

fraserinstituteorg

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

20122003199319831973

Revenue Outlays

Figure US Government revenue and outlays ndash ( US$ billions)

Source Congressional Budget Office (2013)

1 9 8 3 U S $ b i l l i o n s

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983091983088 fraserinstituteorg

Trade diversification

Given the weakness in near-term US opportunities Canadians are (again)

wondering how to pursue trade diversification away from the United States

Te objective is logical and if achieved will prove advantageous but various

trends in trade and investment show that diversification for Canada is a slow

and arduous journey (table 983089983092)

In terms of overall share exports to China in the last five years have

doubled but the numbersmdashfrom 983090983089983095 percent to 983092983090983094 percentmdashremain rela-

tively low In the same period the US-bound share declined by 983091 percent but

remains a towering 983095983092983093983092 percent Te pattern of small overall impact applies

to all the other top trading partners For example exports to the UK have

increased but exports to Japan and Mexico have essentially stalled When we

consider average export growth rates over the last five years (table 983089983093) we see

a very strong rate for China (983089983093983093 percent) and strong rates for the UK and

South Korea (983096983097 percent and 983094983097 percent) However a 983089983093 percent increase in a

983092 percent overall trade share produces little change Te point we are making

is that at this rate and pattern of trade lsquodiversificationrsquo it will actually take a

very long timemdashwhile relatively small upward trends in trade with the United

States could have a quick and very large impact in the opposite direction

On the import side we notice more trade diversification with the US

share at 983093983088 percent and the Chinese share at 983089983089 percent (table 983089983094) Te Chinese

growth rate on the import side is less than on the export side (table 983089983095) Te

most revealing number may be the high average over five years for Mexico

at 983097 percent Tis could be indicative of a growing supply chain with Mexico

While foreign direct investment (FDI) is not a direct indicator of future

trade trends in investment may harbinger change In terms of outbound

FDI we notice that only a small segment (less than 983089983088 percent) is targeted

for manufacturing (table 983089983096) It is investment in this category in which onewould expect growth in supply chains

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The state of Canada-US relations in 983090983088983089983092 983091983089

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Table 983089983092 Canadarsquos merchandise exports top ten destinations 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 3291 1 777 2361 1 751 2564 1 749

China 92 4 22 97 3 31 114 3 33

UK 114 2 27 105 2 33 141 2 41

Japan 97 3 23 73 4 23 79 4 23

Mexico 51 5 12 42 5 13 43 5 13

Netherlands 32 8 08 24 8 08 28 8 08

South Korea 34 7 08 31 7 10 32 7 09

Germany 39 6 09 33 6 10 34 6 10

France 28 9 07 23 9 07 20 10 06

Brazil 23 10 05 14 10 04 22 9 06

Total 4237 3145 3424

2011 2012Average

shareValue Rank Share Value Rank Share

US 2750 1 737 2783 1 745 752

China 140 3 38 159 2 43 33

UK 157 2 42 154 3 41 37

Japan 89 4 24 85 4 23 23

Mexico 46 5 12 44 5 12 12

Netherlands 40 7 11 37 6 10 09

South Korea 43 6 11 30 7 08 09

Germany 33 8 09 29 8 08 09

France 26 9 07 26 9 07 07

Brazil 24 10 06 21 10 06 06

Total 3732 3734

Source Industry Canada (2013b)

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Table 983089983093 Canadian export growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 56 7 -281 9 106 = 5

China 101 6 65 1 187 3

UK 16 9 -73 2 358 2

Japan 202 3 -250 7 106 = 5

Mexico 179 4 -178 6 43 9

Netherlands -85 10 -255 8 183 4

South Korea 276 2 -80 3 52 8

Germany 160 5 -167 4 54 7

France 36 8 -174 5 -122 10

Brazil 706 1 -380 10 603 1

2011 2012Average

Rank Rank

US 104 8 27 2 02

China 270 4 152 1 155

UK 148 6 -02 4 90

Japan 161 5 -29 6 38

Mexico 94 9 -16 5 24

Netherlands 475 1 -55 7 53

South Korea 374 2 -272 10 70

Germany 05 10 -95 9 -09

France 311 3 23 3 15

Brazil 109 7 -92 8 189

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983091

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Table 983089983094 Canadarsquos merchandise imports top ten sources 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 1992 1 524 1633 1 511 1745 1 504

China 374 2 98 347 2 109 382 2 110

Mexico 157 3 41 145 3 45 190 3 55

Japan 134 4 35 108 4 34 115 4 33

Germany 111 5 29 95 5 30 97 5 28

UK 110 6 29 82 6 26 92 6 27

South Korea 53 9 14 52 7 16 53 7 15

Algeria 67 7 18 33 10 10 31 10 09

Italy 45 10 12 39 9 12 40 9 12

France 53 8 14 49 8 15 47 8 13

Total 3804 3194 3465

2011 2012Average

shareValue Rank Share Value Rank Share

US 1846 1 496 1922 1 506 508

China 402 2 108 417 2 110 107

Mexico 205 3 55 210 3 55 50

Japan 109 4 29 123 4 33 33

Germany 107 5 29 118 5 31 29

UK 86 6 23 70 6 18 25

South Korea 55 7 15 52 7 14 15

Algeria 46 9 12 49 8 13 12

Italy 43 10 11 43 9 11 12

France 46 8 12 41 10 11 13

Total 3723 3796

Source Industry Canada (2013b)

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Table 983089983095 Old and new trade prospectsmdashimport growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 29 8 -178 7 89 5

China 112 4 -70 2 123 3

Mexico 43 7 -77 4 337 1

Japan -11 10 -192 8 89 4

Germany 105 5 -149 6 44 7

UK 95 6 -252 9 141 2

South Korea 120 3 -14 1 36 8

Algeria 518 1 -511 10 -50 10

Italy 11 9 -132 5 48 6

France 191 2 -70 3 -35 9

2011 2012Average

Rank Rank

US 88 5 57 4 17

China 82 6 53 5 60

Mexico 111 3 39 6 91

Japan -29 9 151 1 01

Germany 132 2 117 2 50

UK -36 10 -173 10 -45

South Korea 76 7 -37 8 37

Algeria 533 1 91 3 116

Italy 95 4 23 7 09

France 22 8 -97 9 02

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983093

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In terms of overall Canadian outbound FDI stocks in the US remain

very high despite the recent US recession while growth in stock in Asia is

modest (figure 983089983097) When we examine Canadian FDI in the so-called BRIC

states we notice that investment in both China and India is relatively small

Canadian mining investment in Brazil is much larger (figure 983090983088) In fact when

we examine amounts of FDI we find that Canada is not really a big BRIC

investor other than Brazil Chile Hong Kong and Peru are larger FDI recipi-

ents than China and India (figure 983090983089)

In terms of FDI flowing into Canada we notice the very large share

(983090983096983094983093 percent) in manufacturing which indicates both the predominant

share of US FDI and the extensive integrated supply chains in Canada-US

manufacturing (table 983089983097) Even more than for outbound FDI inflow stocks

show very large US preponderance (figure 983090983090) Such continued concentra-

tion of US FDI in Canada suggests that Canadian trade diversification is not

just a decision to be made by Canadian producers

Like trade growth Chinese FDI growth in Canada is positive but the

overall numbers are small and do not show rapid growth in the last 983091 years

(figure 983090983091)

Table 983089983096 Top industries for outward stocks of FDI 983090983088983089983090

Category Value Share

Mining oil and gas extraction 1099 188

Oil and gas subcategory 542 93

Manufacturing 569 97

Finance and insurance 2334 399

Management of companies and enterprises 757 129

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

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0

1

2

3

4

5

6

7

8

9

10

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n s

Figure Canadian foreign direct investment (stock) BRIC ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Brazil PRC India Russia

0

20

4060

80

100

120

140

160

180

200

220

240

260

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) various regions

ndash

Notes Excluding Mexico Canadian FDI to Mexico in 2012 was $557 billion

Foreign Direct Investment measures the purchase of various forms of capital stock abroad

However tax havens (Barbados Bermuda etc) are frequently found to be some of the highest

recipients of FDI In reality tax havens do not reflect economic growth as FDI figures invested

into tax havens are often reinvested back to the source country in a concept known as

round-tripping (Financial Post 2013) We have accounted for tax havens by removing them from

tables and figures in this section The numbers corresponding to Figure 19 would be Barbados

($593 billion) Bermuda ($118 billion) British Virgin Islands ($21 billion) Cayman Islands ($302

billion)

Source Foreign Affairs Trade and Development Canada (2013c)

US Europe Asia amp Oceania Central amp South America Africa

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The state of Canada-US relations in 983090983088983089983092 983091983095

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Table 983089983097 Top industries for inward stocks of FDI 983090983088983089983090

Category Value Share

Oil and gas extraction 766 147

Manufacturing 1492 287

Petroleum and coal products manufacturing 377 72

Wholesale trade 395 76

Finance and insurance 699 134

Management of companies and enterprises 999 192

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

0

2

4

6

8

10

12

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) Chile Hong Kong

Peru amp Korea ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Chile Hong Kong Peru Korea

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0

40

80

120

160

200

240

280

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Foreign direct investment (stock) in Canada from top three

countries ndash

Source Foreign Affairs Trade and Development Canada (2013c)

US Netherlands UK

0

2

4

6

8

10

12

201220112010200920082007

2 0 0 2 C A $ b

i l l i o n s

Figure Foreign direct investment (stock) in Canada from China

ndash

Source Foreign Affairs Trade and Development Canada (2013c)

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fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

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Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

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References

Abacus Data (983090983088983089983090 November 983090983088) Beyond the Canadian-American Border

lthttpabacusdatacawp-contentuploads983090983088983089983090983089983089Can-AM_Report_CABC_

Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5662

The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5862

The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5962

983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6062

The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6162

983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 31: Canadas Catch 22 State of Canada Us Relations in 2014

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983090983092 fraserinstituteorg

Canadian and American public perceptions

Tree observations are noteworthy in recent assessments of public percep-

tions between Americans and Canadians First Americans consistently have

a very high favourability rating of Canadians typically in the 983097983088 plus range

(table 983089983088 figure 983089983093) Both as a friend and a strategic ally Americans hold

Canadians in the most favourable light possible (table 983089983089) Disagreements over

policy between the two countries whether in defence and foreign affairs or

over border and trade issues do not move this fundamental asset Canadians

enjoy in dealing with their neighbour

Second Canadians do not have high expectations of either the

American or Canadian government regarding progress in bilateral relations

As table 983089983090 shows Canadians hold Obama in high regard (983094983091 percent) but

only 983093983092 percent expect progress from him in trade relations Prime Minister

Harper is rated slightly ahead of President Obama in terms of working hard

towards improving Canada-US relations (table 983089983091)

Tird and most significant in light of Canadarsquos Catch-983090983090 situation both

Canadians and Americans are more supportive of closer cooperation and inte-

gration policies than is the case for political representatives in either the United

States or Canada In two recent studies we showed how US Senators and House

Representatives are quite critical of Canada with regard to NAFA issues and bor-

der security (Moens and Gabler 983090983088983089983089) Similarly we found that among the three

major political parties in Canadarsquos parliament only one consistently expressed

itself in favour of closer ties with the United States (Moens and Gabler 983090983088983089983089)

A recent survey of American and Canadian (and Mexican) attitudes

towards free trade and NAFA show surprisingly strong data for more trade

integration In response to the statement ldquoTere should be more free trade

between the US Canada and Mexicordquo 983096983088 percent of Canadians approved

as did 983095983092 percent of Americans Even on border security Canadians andAmericans are more pro-cooperation and integration than their governmental

policies suggest In the US 983092983089 percent support a common perimeter while

983090983088 percent are opposed In Canada 983092983091 percent support it and 983091983088 percent are

opposed (Graves Pastor and Basaacutentildeez 983090983088983089983091) Terefore in terms of public

mandate both governments would have a case to work towards broader bilat-

eral (or trilateral) cooperation to lower trade barriers

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The state of Canada-US relations in 983090983088983089983092 983090983093

fraserinstituteorg

Table 983089983088 Canadian favourability rating among Americans (February 983090983088983089983090)

Veryfavourable

Mostlyfavourable

Mostlyunfavourable

Veryfavourable Not sure Total

favourableTotal

unfavourable

53 38 3 2 3 91 5

Note n=1015

Source Gallup Poll (2012)

Table 983089983089 Ally or enemy for Americans (June 983090983088983089983091)

Country Ally Friendly Unfriendly Enemy Total Ally andFriendly

Great Britain 66 25 2 1 91

Canada 61 33 2 1 94

China 11 44 26 14 55

Note n=1529Source Gallup Poll (2013)

88

90

92

94

96

98

201220112010200920082007

Figure Canadian favourability among Americans () ndash

Source Gallup Poll (2012)

f a

v o u r a

b l e

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983090983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983090 What effect will Obama have on Canada-US relations (November 983090983088983089983090)

Canadians Americans

Positive Negative None Positive Negative None

Relationship 62 5 34 48 12 40

Trade 54 10 35 48 12 39

Harmonizing 53 8 40 47 14 39

Note n=1066

Source Abacus Data (2012)

Table 983089983091 Has each leader worked hard to improve Canada-US relations

(July 983090983088983089983090)

Country Agree Disagree Not sure

Stephen Harper 58 32 10

Barack Obama 53 32 15

Note Sample of Canadians

Source HarrisDecima (2012)

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fraserinstituteorg 983090983095

US policy uncertainty

Canadian economic prospects face their most important challenge in the

United States Te US economic recovery has been modest and real GDP

growth so far has remained below the post-World War II average of post-

recession periods (figure 983089983094) As we noted above the less-than-stellar US

recovery is made even more challenging for Canadian traders in that pro-

ductivity gains in Canada are lagging while the Canadian dollar remains high

On top of that several American-imposed regulatory obstacles to free trade

are depressing trade prospects in crude oil red meat and public works pro-

curement Tese impediments reduce Canadian competitive access to the

US market

A high level of public spending until the January 983090983088983089983091 sequester and

ongoing monetary stimulation have not produced notable US GDP growth

Te seven post-recession periods below show the current average to be well

below the historical average (Young 983090983088983089983091)

983089983097983092983096-983089983097983093983095 983091983096983088

983089983097983093983096-983089983097983094983095 983092983090983096

983089983097983094983096-983089983097983095983095 983091983089983096

983089983097983095983096-983089983097983096983095 983091983089983093

983089983097983096983096-983089983097983097983095 983091983088983093

983089983097983097983096-983090983088983088983095 983090983097983097

983090983088983088983096-983090983088983089983091 983088983095983091

While economic growth has been modest growth in the public debt

has not (figure 983089983095) Publicly held debt in the US is now at 983095983091 percent of GDP

the highest since 983089983097983092983094 (Congressional Budget Office 983090983088983089983091)

Te widening gap between federal government outlays and revenueshas only recently been capped by the Sequester (figure 983089983096) However the

budget Sequester is temporary and final resolution of public spending and

taxation levels remains unclear given repeated gridlock in presidential-con-

gressional policy making High debt levels combined with stalemate over

taxes and budget cuts have produced a case of policy instability or uncer-

tainty in the last five years (Baker Bloom and Davis 983090983088983089983091)

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983090983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

US policy uncertainty is further aggravated by inaction on the large

lsquoentitlementrsquo programsmdashSocial Security Medicare and Medicaidmdashwhich are

the major drivers of the long-term gap in revenues and spending

-4

-2

0

2

4

6

8

201220062000199419881982197619701964

Figure US GDP growth rate ndash ( forecast)

Source The World Bank (2013b) OECD (2013)

-10

-8

-6

-4

-2

0

0

20

40

60

80

100

20122011201020092008200720062005200420032002

Government deficit as a percentage of GDP Government debt as a percentage of GDP

Figure US Government deficit and debt as a percentage of GDP ndash

Source Congressional Budget Office (2013)

D e fi c i t p e r c e n t a g e ( ) D

e b t p er c en t a g e ( )

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The state of Canada-US relations in 983090983088983089983092 983090983097

fraserinstituteorg

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

20122003199319831973

Revenue Outlays

Figure US Government revenue and outlays ndash ( US$ billions)

Source Congressional Budget Office (2013)

1 9 8 3 U S $ b i l l i o n s

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983091983088 fraserinstituteorg

Trade diversification

Given the weakness in near-term US opportunities Canadians are (again)

wondering how to pursue trade diversification away from the United States

Te objective is logical and if achieved will prove advantageous but various

trends in trade and investment show that diversification for Canada is a slow

and arduous journey (table 983089983092)

In terms of overall share exports to China in the last five years have

doubled but the numbersmdashfrom 983090983089983095 percent to 983092983090983094 percentmdashremain rela-

tively low In the same period the US-bound share declined by 983091 percent but

remains a towering 983095983092983093983092 percent Te pattern of small overall impact applies

to all the other top trading partners For example exports to the UK have

increased but exports to Japan and Mexico have essentially stalled When we

consider average export growth rates over the last five years (table 983089983093) we see

a very strong rate for China (983089983093983093 percent) and strong rates for the UK and

South Korea (983096983097 percent and 983094983097 percent) However a 983089983093 percent increase in a

983092 percent overall trade share produces little change Te point we are making

is that at this rate and pattern of trade lsquodiversificationrsquo it will actually take a

very long timemdashwhile relatively small upward trends in trade with the United

States could have a quick and very large impact in the opposite direction

On the import side we notice more trade diversification with the US

share at 983093983088 percent and the Chinese share at 983089983089 percent (table 983089983094) Te Chinese

growth rate on the import side is less than on the export side (table 983089983095) Te

most revealing number may be the high average over five years for Mexico

at 983097 percent Tis could be indicative of a growing supply chain with Mexico

While foreign direct investment (FDI) is not a direct indicator of future

trade trends in investment may harbinger change In terms of outbound

FDI we notice that only a small segment (less than 983089983088 percent) is targeted

for manufacturing (table 983089983096) It is investment in this category in which onewould expect growth in supply chains

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The state of Canada-US relations in 983090983088983089983092 983091983089

fraserinstituteorg

Table 983089983092 Canadarsquos merchandise exports top ten destinations 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 3291 1 777 2361 1 751 2564 1 749

China 92 4 22 97 3 31 114 3 33

UK 114 2 27 105 2 33 141 2 41

Japan 97 3 23 73 4 23 79 4 23

Mexico 51 5 12 42 5 13 43 5 13

Netherlands 32 8 08 24 8 08 28 8 08

South Korea 34 7 08 31 7 10 32 7 09

Germany 39 6 09 33 6 10 34 6 10

France 28 9 07 23 9 07 20 10 06

Brazil 23 10 05 14 10 04 22 9 06

Total 4237 3145 3424

2011 2012Average

shareValue Rank Share Value Rank Share

US 2750 1 737 2783 1 745 752

China 140 3 38 159 2 43 33

UK 157 2 42 154 3 41 37

Japan 89 4 24 85 4 23 23

Mexico 46 5 12 44 5 12 12

Netherlands 40 7 11 37 6 10 09

South Korea 43 6 11 30 7 08 09

Germany 33 8 09 29 8 08 09

France 26 9 07 26 9 07 07

Brazil 24 10 06 21 10 06 06

Total 3732 3734

Source Industry Canada (2013b)

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Table 983089983093 Canadian export growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 56 7 -281 9 106 = 5

China 101 6 65 1 187 3

UK 16 9 -73 2 358 2

Japan 202 3 -250 7 106 = 5

Mexico 179 4 -178 6 43 9

Netherlands -85 10 -255 8 183 4

South Korea 276 2 -80 3 52 8

Germany 160 5 -167 4 54 7

France 36 8 -174 5 -122 10

Brazil 706 1 -380 10 603 1

2011 2012Average

Rank Rank

US 104 8 27 2 02

China 270 4 152 1 155

UK 148 6 -02 4 90

Japan 161 5 -29 6 38

Mexico 94 9 -16 5 24

Netherlands 475 1 -55 7 53

South Korea 374 2 -272 10 70

Germany 05 10 -95 9 -09

France 311 3 23 3 15

Brazil 109 7 -92 8 189

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983091

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Table 983089983094 Canadarsquos merchandise imports top ten sources 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 1992 1 524 1633 1 511 1745 1 504

China 374 2 98 347 2 109 382 2 110

Mexico 157 3 41 145 3 45 190 3 55

Japan 134 4 35 108 4 34 115 4 33

Germany 111 5 29 95 5 30 97 5 28

UK 110 6 29 82 6 26 92 6 27

South Korea 53 9 14 52 7 16 53 7 15

Algeria 67 7 18 33 10 10 31 10 09

Italy 45 10 12 39 9 12 40 9 12

France 53 8 14 49 8 15 47 8 13

Total 3804 3194 3465

2011 2012Average

shareValue Rank Share Value Rank Share

US 1846 1 496 1922 1 506 508

China 402 2 108 417 2 110 107

Mexico 205 3 55 210 3 55 50

Japan 109 4 29 123 4 33 33

Germany 107 5 29 118 5 31 29

UK 86 6 23 70 6 18 25

South Korea 55 7 15 52 7 14 15

Algeria 46 9 12 49 8 13 12

Italy 43 10 11 43 9 11 12

France 46 8 12 41 10 11 13

Total 3723 3796

Source Industry Canada (2013b)

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983091983092 The state of Canada-US relations in 983090983088983089983092

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Table 983089983095 Old and new trade prospectsmdashimport growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 29 8 -178 7 89 5

China 112 4 -70 2 123 3

Mexico 43 7 -77 4 337 1

Japan -11 10 -192 8 89 4

Germany 105 5 -149 6 44 7

UK 95 6 -252 9 141 2

South Korea 120 3 -14 1 36 8

Algeria 518 1 -511 10 -50 10

Italy 11 9 -132 5 48 6

France 191 2 -70 3 -35 9

2011 2012Average

Rank Rank

US 88 5 57 4 17

China 82 6 53 5 60

Mexico 111 3 39 6 91

Japan -29 9 151 1 01

Germany 132 2 117 2 50

UK -36 10 -173 10 -45

South Korea 76 7 -37 8 37

Algeria 533 1 91 3 116

Italy 95 4 23 7 09

France 22 8 -97 9 02

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983093

fraserinstituteorg

In terms of overall Canadian outbound FDI stocks in the US remain

very high despite the recent US recession while growth in stock in Asia is

modest (figure 983089983097) When we examine Canadian FDI in the so-called BRIC

states we notice that investment in both China and India is relatively small

Canadian mining investment in Brazil is much larger (figure 983090983088) In fact when

we examine amounts of FDI we find that Canada is not really a big BRIC

investor other than Brazil Chile Hong Kong and Peru are larger FDI recipi-

ents than China and India (figure 983090983089)

In terms of FDI flowing into Canada we notice the very large share

(983090983096983094983093 percent) in manufacturing which indicates both the predominant

share of US FDI and the extensive integrated supply chains in Canada-US

manufacturing (table 983089983097) Even more than for outbound FDI inflow stocks

show very large US preponderance (figure 983090983090) Such continued concentra-

tion of US FDI in Canada suggests that Canadian trade diversification is not

just a decision to be made by Canadian producers

Like trade growth Chinese FDI growth in Canada is positive but the

overall numbers are small and do not show rapid growth in the last 983091 years

(figure 983090983091)

Table 983089983096 Top industries for outward stocks of FDI 983090983088983089983090

Category Value Share

Mining oil and gas extraction 1099 188

Oil and gas subcategory 542 93

Manufacturing 569 97

Finance and insurance 2334 399

Management of companies and enterprises 757 129

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

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983091983094 The state of Canada-US relations in 983090983088983089983092

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0

1

2

3

4

5

6

7

8

9

10

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n s

Figure Canadian foreign direct investment (stock) BRIC ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Brazil PRC India Russia

0

20

4060

80

100

120

140

160

180

200

220

240

260

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) various regions

ndash

Notes Excluding Mexico Canadian FDI to Mexico in 2012 was $557 billion

Foreign Direct Investment measures the purchase of various forms of capital stock abroad

However tax havens (Barbados Bermuda etc) are frequently found to be some of the highest

recipients of FDI In reality tax havens do not reflect economic growth as FDI figures invested

into tax havens are often reinvested back to the source country in a concept known as

round-tripping (Financial Post 2013) We have accounted for tax havens by removing them from

tables and figures in this section The numbers corresponding to Figure 19 would be Barbados

($593 billion) Bermuda ($118 billion) British Virgin Islands ($21 billion) Cayman Islands ($302

billion)

Source Foreign Affairs Trade and Development Canada (2013c)

US Europe Asia amp Oceania Central amp South America Africa

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The state of Canada-US relations in 983090983088983089983092 983091983095

fraserinstituteorg

Table 983089983097 Top industries for inward stocks of FDI 983090983088983089983090

Category Value Share

Oil and gas extraction 766 147

Manufacturing 1492 287

Petroleum and coal products manufacturing 377 72

Wholesale trade 395 76

Finance and insurance 699 134

Management of companies and enterprises 999 192

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

0

2

4

6

8

10

12

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) Chile Hong Kong

Peru amp Korea ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Chile Hong Kong Peru Korea

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fraserinstituteorg

0

40

80

120

160

200

240

280

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Foreign direct investment (stock) in Canada from top three

countries ndash

Source Foreign Affairs Trade and Development Canada (2013c)

US Netherlands UK

0

2

4

6

8

10

12

201220112010200920082007

2 0 0 2 C A $ b

i l l i o n s

Figure Foreign direct investment (stock) in Canada from China

ndash

Source Foreign Affairs Trade and Development Canada (2013c)

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fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

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Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

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References

Abacus Data (983090983088983089983090 November 983090983088) Beyond the Canadian-American Border

lthttpabacusdatacawp-contentuploads983090983088983089983090983089983089Can-AM_Report_CABC_

Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5662

The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5862

The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5962

983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6062

The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6162

983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 32: Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983093

fraserinstituteorg

Table 983089983088 Canadian favourability rating among Americans (February 983090983088983089983090)

Veryfavourable

Mostlyfavourable

Mostlyunfavourable

Veryfavourable Not sure Total

favourableTotal

unfavourable

53 38 3 2 3 91 5

Note n=1015

Source Gallup Poll (2012)

Table 983089983089 Ally or enemy for Americans (June 983090983088983089983091)

Country Ally Friendly Unfriendly Enemy Total Ally andFriendly

Great Britain 66 25 2 1 91

Canada 61 33 2 1 94

China 11 44 26 14 55

Note n=1529Source Gallup Poll (2013)

88

90

92

94

96

98

201220112010200920082007

Figure Canadian favourability among Americans () ndash

Source Gallup Poll (2012)

f a

v o u r a

b l e

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983090983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983090 What effect will Obama have on Canada-US relations (November 983090983088983089983090)

Canadians Americans

Positive Negative None Positive Negative None

Relationship 62 5 34 48 12 40

Trade 54 10 35 48 12 39

Harmonizing 53 8 40 47 14 39

Note n=1066

Source Abacus Data (2012)

Table 983089983091 Has each leader worked hard to improve Canada-US relations

(July 983090983088983089983090)

Country Agree Disagree Not sure

Stephen Harper 58 32 10

Barack Obama 53 32 15

Note Sample of Canadians

Source HarrisDecima (2012)

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fraserinstituteorg 983090983095

US policy uncertainty

Canadian economic prospects face their most important challenge in the

United States Te US economic recovery has been modest and real GDP

growth so far has remained below the post-World War II average of post-

recession periods (figure 983089983094) As we noted above the less-than-stellar US

recovery is made even more challenging for Canadian traders in that pro-

ductivity gains in Canada are lagging while the Canadian dollar remains high

On top of that several American-imposed regulatory obstacles to free trade

are depressing trade prospects in crude oil red meat and public works pro-

curement Tese impediments reduce Canadian competitive access to the

US market

A high level of public spending until the January 983090983088983089983091 sequester and

ongoing monetary stimulation have not produced notable US GDP growth

Te seven post-recession periods below show the current average to be well

below the historical average (Young 983090983088983089983091)

983089983097983092983096-983089983097983093983095 983091983096983088

983089983097983093983096-983089983097983094983095 983092983090983096

983089983097983094983096-983089983097983095983095 983091983089983096

983089983097983095983096-983089983097983096983095 983091983089983093

983089983097983096983096-983089983097983097983095 983091983088983093

983089983097983097983096-983090983088983088983095 983090983097983097

983090983088983088983096-983090983088983089983091 983088983095983091

While economic growth has been modest growth in the public debt

has not (figure 983089983095) Publicly held debt in the US is now at 983095983091 percent of GDP

the highest since 983089983097983092983094 (Congressional Budget Office 983090983088983089983091)

Te widening gap between federal government outlays and revenueshas only recently been capped by the Sequester (figure 983089983096) However the

budget Sequester is temporary and final resolution of public spending and

taxation levels remains unclear given repeated gridlock in presidential-con-

gressional policy making High debt levels combined with stalemate over

taxes and budget cuts have produced a case of policy instability or uncer-

tainty in the last five years (Baker Bloom and Davis 983090983088983089983091)

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fraserinstituteorg

US policy uncertainty is further aggravated by inaction on the large

lsquoentitlementrsquo programsmdashSocial Security Medicare and Medicaidmdashwhich are

the major drivers of the long-term gap in revenues and spending

-4

-2

0

2

4

6

8

201220062000199419881982197619701964

Figure US GDP growth rate ndash ( forecast)

Source The World Bank (2013b) OECD (2013)

-10

-8

-6

-4

-2

0

0

20

40

60

80

100

20122011201020092008200720062005200420032002

Government deficit as a percentage of GDP Government debt as a percentage of GDP

Figure US Government deficit and debt as a percentage of GDP ndash

Source Congressional Budget Office (2013)

D e fi c i t p e r c e n t a g e ( ) D

e b t p er c en t a g e ( )

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The state of Canada-US relations in 983090983088983089983092 983090983097

fraserinstituteorg

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

20122003199319831973

Revenue Outlays

Figure US Government revenue and outlays ndash ( US$ billions)

Source Congressional Budget Office (2013)

1 9 8 3 U S $ b i l l i o n s

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983091983088 fraserinstituteorg

Trade diversification

Given the weakness in near-term US opportunities Canadians are (again)

wondering how to pursue trade diversification away from the United States

Te objective is logical and if achieved will prove advantageous but various

trends in trade and investment show that diversification for Canada is a slow

and arduous journey (table 983089983092)

In terms of overall share exports to China in the last five years have

doubled but the numbersmdashfrom 983090983089983095 percent to 983092983090983094 percentmdashremain rela-

tively low In the same period the US-bound share declined by 983091 percent but

remains a towering 983095983092983093983092 percent Te pattern of small overall impact applies

to all the other top trading partners For example exports to the UK have

increased but exports to Japan and Mexico have essentially stalled When we

consider average export growth rates over the last five years (table 983089983093) we see

a very strong rate for China (983089983093983093 percent) and strong rates for the UK and

South Korea (983096983097 percent and 983094983097 percent) However a 983089983093 percent increase in a

983092 percent overall trade share produces little change Te point we are making

is that at this rate and pattern of trade lsquodiversificationrsquo it will actually take a

very long timemdashwhile relatively small upward trends in trade with the United

States could have a quick and very large impact in the opposite direction

On the import side we notice more trade diversification with the US

share at 983093983088 percent and the Chinese share at 983089983089 percent (table 983089983094) Te Chinese

growth rate on the import side is less than on the export side (table 983089983095) Te

most revealing number may be the high average over five years for Mexico

at 983097 percent Tis could be indicative of a growing supply chain with Mexico

While foreign direct investment (FDI) is not a direct indicator of future

trade trends in investment may harbinger change In terms of outbound

FDI we notice that only a small segment (less than 983089983088 percent) is targeted

for manufacturing (table 983089983096) It is investment in this category in which onewould expect growth in supply chains

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The state of Canada-US relations in 983090983088983089983092 983091983089

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Table 983089983092 Canadarsquos merchandise exports top ten destinations 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 3291 1 777 2361 1 751 2564 1 749

China 92 4 22 97 3 31 114 3 33

UK 114 2 27 105 2 33 141 2 41

Japan 97 3 23 73 4 23 79 4 23

Mexico 51 5 12 42 5 13 43 5 13

Netherlands 32 8 08 24 8 08 28 8 08

South Korea 34 7 08 31 7 10 32 7 09

Germany 39 6 09 33 6 10 34 6 10

France 28 9 07 23 9 07 20 10 06

Brazil 23 10 05 14 10 04 22 9 06

Total 4237 3145 3424

2011 2012Average

shareValue Rank Share Value Rank Share

US 2750 1 737 2783 1 745 752

China 140 3 38 159 2 43 33

UK 157 2 42 154 3 41 37

Japan 89 4 24 85 4 23 23

Mexico 46 5 12 44 5 12 12

Netherlands 40 7 11 37 6 10 09

South Korea 43 6 11 30 7 08 09

Germany 33 8 09 29 8 08 09

France 26 9 07 26 9 07 07

Brazil 24 10 06 21 10 06 06

Total 3732 3734

Source Industry Canada (2013b)

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Table 983089983093 Canadian export growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 56 7 -281 9 106 = 5

China 101 6 65 1 187 3

UK 16 9 -73 2 358 2

Japan 202 3 -250 7 106 = 5

Mexico 179 4 -178 6 43 9

Netherlands -85 10 -255 8 183 4

South Korea 276 2 -80 3 52 8

Germany 160 5 -167 4 54 7

France 36 8 -174 5 -122 10

Brazil 706 1 -380 10 603 1

2011 2012Average

Rank Rank

US 104 8 27 2 02

China 270 4 152 1 155

UK 148 6 -02 4 90

Japan 161 5 -29 6 38

Mexico 94 9 -16 5 24

Netherlands 475 1 -55 7 53

South Korea 374 2 -272 10 70

Germany 05 10 -95 9 -09

France 311 3 23 3 15

Brazil 109 7 -92 8 189

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983091

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Table 983089983094 Canadarsquos merchandise imports top ten sources 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 1992 1 524 1633 1 511 1745 1 504

China 374 2 98 347 2 109 382 2 110

Mexico 157 3 41 145 3 45 190 3 55

Japan 134 4 35 108 4 34 115 4 33

Germany 111 5 29 95 5 30 97 5 28

UK 110 6 29 82 6 26 92 6 27

South Korea 53 9 14 52 7 16 53 7 15

Algeria 67 7 18 33 10 10 31 10 09

Italy 45 10 12 39 9 12 40 9 12

France 53 8 14 49 8 15 47 8 13

Total 3804 3194 3465

2011 2012Average

shareValue Rank Share Value Rank Share

US 1846 1 496 1922 1 506 508

China 402 2 108 417 2 110 107

Mexico 205 3 55 210 3 55 50

Japan 109 4 29 123 4 33 33

Germany 107 5 29 118 5 31 29

UK 86 6 23 70 6 18 25

South Korea 55 7 15 52 7 14 15

Algeria 46 9 12 49 8 13 12

Italy 43 10 11 43 9 11 12

France 46 8 12 41 10 11 13

Total 3723 3796

Source Industry Canada (2013b)

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983091983092 The state of Canada-US relations in 983090983088983089983092

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Table 983089983095 Old and new trade prospectsmdashimport growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 29 8 -178 7 89 5

China 112 4 -70 2 123 3

Mexico 43 7 -77 4 337 1

Japan -11 10 -192 8 89 4

Germany 105 5 -149 6 44 7

UK 95 6 -252 9 141 2

South Korea 120 3 -14 1 36 8

Algeria 518 1 -511 10 -50 10

Italy 11 9 -132 5 48 6

France 191 2 -70 3 -35 9

2011 2012Average

Rank Rank

US 88 5 57 4 17

China 82 6 53 5 60

Mexico 111 3 39 6 91

Japan -29 9 151 1 01

Germany 132 2 117 2 50

UK -36 10 -173 10 -45

South Korea 76 7 -37 8 37

Algeria 533 1 91 3 116

Italy 95 4 23 7 09

France 22 8 -97 9 02

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983093

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In terms of overall Canadian outbound FDI stocks in the US remain

very high despite the recent US recession while growth in stock in Asia is

modest (figure 983089983097) When we examine Canadian FDI in the so-called BRIC

states we notice that investment in both China and India is relatively small

Canadian mining investment in Brazil is much larger (figure 983090983088) In fact when

we examine amounts of FDI we find that Canada is not really a big BRIC

investor other than Brazil Chile Hong Kong and Peru are larger FDI recipi-

ents than China and India (figure 983090983089)

In terms of FDI flowing into Canada we notice the very large share

(983090983096983094983093 percent) in manufacturing which indicates both the predominant

share of US FDI and the extensive integrated supply chains in Canada-US

manufacturing (table 983089983097) Even more than for outbound FDI inflow stocks

show very large US preponderance (figure 983090983090) Such continued concentra-

tion of US FDI in Canada suggests that Canadian trade diversification is not

just a decision to be made by Canadian producers

Like trade growth Chinese FDI growth in Canada is positive but the

overall numbers are small and do not show rapid growth in the last 983091 years

(figure 983090983091)

Table 983089983096 Top industries for outward stocks of FDI 983090983088983089983090

Category Value Share

Mining oil and gas extraction 1099 188

Oil and gas subcategory 542 93

Manufacturing 569 97

Finance and insurance 2334 399

Management of companies and enterprises 757 129

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

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983091983094 The state of Canada-US relations in 983090983088983089983092

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0

1

2

3

4

5

6

7

8

9

10

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n s

Figure Canadian foreign direct investment (stock) BRIC ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Brazil PRC India Russia

0

20

4060

80

100

120

140

160

180

200

220

240

260

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) various regions

ndash

Notes Excluding Mexico Canadian FDI to Mexico in 2012 was $557 billion

Foreign Direct Investment measures the purchase of various forms of capital stock abroad

However tax havens (Barbados Bermuda etc) are frequently found to be some of the highest

recipients of FDI In reality tax havens do not reflect economic growth as FDI figures invested

into tax havens are often reinvested back to the source country in a concept known as

round-tripping (Financial Post 2013) We have accounted for tax havens by removing them from

tables and figures in this section The numbers corresponding to Figure 19 would be Barbados

($593 billion) Bermuda ($118 billion) British Virgin Islands ($21 billion) Cayman Islands ($302

billion)

Source Foreign Affairs Trade and Development Canada (2013c)

US Europe Asia amp Oceania Central amp South America Africa

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The state of Canada-US relations in 983090983088983089983092 983091983095

fraserinstituteorg

Table 983089983097 Top industries for inward stocks of FDI 983090983088983089983090

Category Value Share

Oil and gas extraction 766 147

Manufacturing 1492 287

Petroleum and coal products manufacturing 377 72

Wholesale trade 395 76

Finance and insurance 699 134

Management of companies and enterprises 999 192

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

0

2

4

6

8

10

12

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) Chile Hong Kong

Peru amp Korea ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Chile Hong Kong Peru Korea

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0

40

80

120

160

200

240

280

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Foreign direct investment (stock) in Canada from top three

countries ndash

Source Foreign Affairs Trade and Development Canada (2013c)

US Netherlands UK

0

2

4

6

8

10

12

201220112010200920082007

2 0 0 2 C A $ b

i l l i o n s

Figure Foreign direct investment (stock) in Canada from China

ndash

Source Foreign Affairs Trade and Development Canada (2013c)

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fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

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Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

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References

Abacus Data (983090983088983089983090 November 983090983088) Beyond the Canadian-American Border

lthttpabacusdatacawp-contentuploads983090983088983089983090983089983089Can-AM_Report_CABC_

Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5662

The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5862

The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5962

983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6062

The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6162

983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 33: Canadas Catch 22 State of Canada Us Relations in 2014

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983090983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983090 What effect will Obama have on Canada-US relations (November 983090983088983089983090)

Canadians Americans

Positive Negative None Positive Negative None

Relationship 62 5 34 48 12 40

Trade 54 10 35 48 12 39

Harmonizing 53 8 40 47 14 39

Note n=1066

Source Abacus Data (2012)

Table 983089983091 Has each leader worked hard to improve Canada-US relations

(July 983090983088983089983090)

Country Agree Disagree Not sure

Stephen Harper 58 32 10

Barack Obama 53 32 15

Note Sample of Canadians

Source HarrisDecima (2012)

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fraserinstituteorg 983090983095

US policy uncertainty

Canadian economic prospects face their most important challenge in the

United States Te US economic recovery has been modest and real GDP

growth so far has remained below the post-World War II average of post-

recession periods (figure 983089983094) As we noted above the less-than-stellar US

recovery is made even more challenging for Canadian traders in that pro-

ductivity gains in Canada are lagging while the Canadian dollar remains high

On top of that several American-imposed regulatory obstacles to free trade

are depressing trade prospects in crude oil red meat and public works pro-

curement Tese impediments reduce Canadian competitive access to the

US market

A high level of public spending until the January 983090983088983089983091 sequester and

ongoing monetary stimulation have not produced notable US GDP growth

Te seven post-recession periods below show the current average to be well

below the historical average (Young 983090983088983089983091)

983089983097983092983096-983089983097983093983095 983091983096983088

983089983097983093983096-983089983097983094983095 983092983090983096

983089983097983094983096-983089983097983095983095 983091983089983096

983089983097983095983096-983089983097983096983095 983091983089983093

983089983097983096983096-983089983097983097983095 983091983088983093

983089983097983097983096-983090983088983088983095 983090983097983097

983090983088983088983096-983090983088983089983091 983088983095983091

While economic growth has been modest growth in the public debt

has not (figure 983089983095) Publicly held debt in the US is now at 983095983091 percent of GDP

the highest since 983089983097983092983094 (Congressional Budget Office 983090983088983089983091)

Te widening gap between federal government outlays and revenueshas only recently been capped by the Sequester (figure 983089983096) However the

budget Sequester is temporary and final resolution of public spending and

taxation levels remains unclear given repeated gridlock in presidential-con-

gressional policy making High debt levels combined with stalemate over

taxes and budget cuts have produced a case of policy instability or uncer-

tainty in the last five years (Baker Bloom and Davis 983090983088983089983091)

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983090983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

US policy uncertainty is further aggravated by inaction on the large

lsquoentitlementrsquo programsmdashSocial Security Medicare and Medicaidmdashwhich are

the major drivers of the long-term gap in revenues and spending

-4

-2

0

2

4

6

8

201220062000199419881982197619701964

Figure US GDP growth rate ndash ( forecast)

Source The World Bank (2013b) OECD (2013)

-10

-8

-6

-4

-2

0

0

20

40

60

80

100

20122011201020092008200720062005200420032002

Government deficit as a percentage of GDP Government debt as a percentage of GDP

Figure US Government deficit and debt as a percentage of GDP ndash

Source Congressional Budget Office (2013)

D e fi c i t p e r c e n t a g e ( ) D

e b t p er c en t a g e ( )

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The state of Canada-US relations in 983090983088983089983092 983090983097

fraserinstituteorg

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

20122003199319831973

Revenue Outlays

Figure US Government revenue and outlays ndash ( US$ billions)

Source Congressional Budget Office (2013)

1 9 8 3 U S $ b i l l i o n s

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983091983088 fraserinstituteorg

Trade diversification

Given the weakness in near-term US opportunities Canadians are (again)

wondering how to pursue trade diversification away from the United States

Te objective is logical and if achieved will prove advantageous but various

trends in trade and investment show that diversification for Canada is a slow

and arduous journey (table 983089983092)

In terms of overall share exports to China in the last five years have

doubled but the numbersmdashfrom 983090983089983095 percent to 983092983090983094 percentmdashremain rela-

tively low In the same period the US-bound share declined by 983091 percent but

remains a towering 983095983092983093983092 percent Te pattern of small overall impact applies

to all the other top trading partners For example exports to the UK have

increased but exports to Japan and Mexico have essentially stalled When we

consider average export growth rates over the last five years (table 983089983093) we see

a very strong rate for China (983089983093983093 percent) and strong rates for the UK and

South Korea (983096983097 percent and 983094983097 percent) However a 983089983093 percent increase in a

983092 percent overall trade share produces little change Te point we are making

is that at this rate and pattern of trade lsquodiversificationrsquo it will actually take a

very long timemdashwhile relatively small upward trends in trade with the United

States could have a quick and very large impact in the opposite direction

On the import side we notice more trade diversification with the US

share at 983093983088 percent and the Chinese share at 983089983089 percent (table 983089983094) Te Chinese

growth rate on the import side is less than on the export side (table 983089983095) Te

most revealing number may be the high average over five years for Mexico

at 983097 percent Tis could be indicative of a growing supply chain with Mexico

While foreign direct investment (FDI) is not a direct indicator of future

trade trends in investment may harbinger change In terms of outbound

FDI we notice that only a small segment (less than 983089983088 percent) is targeted

for manufacturing (table 983089983096) It is investment in this category in which onewould expect growth in supply chains

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The state of Canada-US relations in 983090983088983089983092 983091983089

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Table 983089983092 Canadarsquos merchandise exports top ten destinations 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 3291 1 777 2361 1 751 2564 1 749

China 92 4 22 97 3 31 114 3 33

UK 114 2 27 105 2 33 141 2 41

Japan 97 3 23 73 4 23 79 4 23

Mexico 51 5 12 42 5 13 43 5 13

Netherlands 32 8 08 24 8 08 28 8 08

South Korea 34 7 08 31 7 10 32 7 09

Germany 39 6 09 33 6 10 34 6 10

France 28 9 07 23 9 07 20 10 06

Brazil 23 10 05 14 10 04 22 9 06

Total 4237 3145 3424

2011 2012Average

shareValue Rank Share Value Rank Share

US 2750 1 737 2783 1 745 752

China 140 3 38 159 2 43 33

UK 157 2 42 154 3 41 37

Japan 89 4 24 85 4 23 23

Mexico 46 5 12 44 5 12 12

Netherlands 40 7 11 37 6 10 09

South Korea 43 6 11 30 7 08 09

Germany 33 8 09 29 8 08 09

France 26 9 07 26 9 07 07

Brazil 24 10 06 21 10 06 06

Total 3732 3734

Source Industry Canada (2013b)

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Table 983089983093 Canadian export growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 56 7 -281 9 106 = 5

China 101 6 65 1 187 3

UK 16 9 -73 2 358 2

Japan 202 3 -250 7 106 = 5

Mexico 179 4 -178 6 43 9

Netherlands -85 10 -255 8 183 4

South Korea 276 2 -80 3 52 8

Germany 160 5 -167 4 54 7

France 36 8 -174 5 -122 10

Brazil 706 1 -380 10 603 1

2011 2012Average

Rank Rank

US 104 8 27 2 02

China 270 4 152 1 155

UK 148 6 -02 4 90

Japan 161 5 -29 6 38

Mexico 94 9 -16 5 24

Netherlands 475 1 -55 7 53

South Korea 374 2 -272 10 70

Germany 05 10 -95 9 -09

France 311 3 23 3 15

Brazil 109 7 -92 8 189

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983091

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Table 983089983094 Canadarsquos merchandise imports top ten sources 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 1992 1 524 1633 1 511 1745 1 504

China 374 2 98 347 2 109 382 2 110

Mexico 157 3 41 145 3 45 190 3 55

Japan 134 4 35 108 4 34 115 4 33

Germany 111 5 29 95 5 30 97 5 28

UK 110 6 29 82 6 26 92 6 27

South Korea 53 9 14 52 7 16 53 7 15

Algeria 67 7 18 33 10 10 31 10 09

Italy 45 10 12 39 9 12 40 9 12

France 53 8 14 49 8 15 47 8 13

Total 3804 3194 3465

2011 2012Average

shareValue Rank Share Value Rank Share

US 1846 1 496 1922 1 506 508

China 402 2 108 417 2 110 107

Mexico 205 3 55 210 3 55 50

Japan 109 4 29 123 4 33 33

Germany 107 5 29 118 5 31 29

UK 86 6 23 70 6 18 25

South Korea 55 7 15 52 7 14 15

Algeria 46 9 12 49 8 13 12

Italy 43 10 11 43 9 11 12

France 46 8 12 41 10 11 13

Total 3723 3796

Source Industry Canada (2013b)

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983091983092 The state of Canada-US relations in 983090983088983089983092

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Table 983089983095 Old and new trade prospectsmdashimport growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 29 8 -178 7 89 5

China 112 4 -70 2 123 3

Mexico 43 7 -77 4 337 1

Japan -11 10 -192 8 89 4

Germany 105 5 -149 6 44 7

UK 95 6 -252 9 141 2

South Korea 120 3 -14 1 36 8

Algeria 518 1 -511 10 -50 10

Italy 11 9 -132 5 48 6

France 191 2 -70 3 -35 9

2011 2012Average

Rank Rank

US 88 5 57 4 17

China 82 6 53 5 60

Mexico 111 3 39 6 91

Japan -29 9 151 1 01

Germany 132 2 117 2 50

UK -36 10 -173 10 -45

South Korea 76 7 -37 8 37

Algeria 533 1 91 3 116

Italy 95 4 23 7 09

France 22 8 -97 9 02

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983093

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In terms of overall Canadian outbound FDI stocks in the US remain

very high despite the recent US recession while growth in stock in Asia is

modest (figure 983089983097) When we examine Canadian FDI in the so-called BRIC

states we notice that investment in both China and India is relatively small

Canadian mining investment in Brazil is much larger (figure 983090983088) In fact when

we examine amounts of FDI we find that Canada is not really a big BRIC

investor other than Brazil Chile Hong Kong and Peru are larger FDI recipi-

ents than China and India (figure 983090983089)

In terms of FDI flowing into Canada we notice the very large share

(983090983096983094983093 percent) in manufacturing which indicates both the predominant

share of US FDI and the extensive integrated supply chains in Canada-US

manufacturing (table 983089983097) Even more than for outbound FDI inflow stocks

show very large US preponderance (figure 983090983090) Such continued concentra-

tion of US FDI in Canada suggests that Canadian trade diversification is not

just a decision to be made by Canadian producers

Like trade growth Chinese FDI growth in Canada is positive but the

overall numbers are small and do not show rapid growth in the last 983091 years

(figure 983090983091)

Table 983089983096 Top industries for outward stocks of FDI 983090983088983089983090

Category Value Share

Mining oil and gas extraction 1099 188

Oil and gas subcategory 542 93

Manufacturing 569 97

Finance and insurance 2334 399

Management of companies and enterprises 757 129

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

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0

1

2

3

4

5

6

7

8

9

10

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n s

Figure Canadian foreign direct investment (stock) BRIC ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Brazil PRC India Russia

0

20

4060

80

100

120

140

160

180

200

220

240

260

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) various regions

ndash

Notes Excluding Mexico Canadian FDI to Mexico in 2012 was $557 billion

Foreign Direct Investment measures the purchase of various forms of capital stock abroad

However tax havens (Barbados Bermuda etc) are frequently found to be some of the highest

recipients of FDI In reality tax havens do not reflect economic growth as FDI figures invested

into tax havens are often reinvested back to the source country in a concept known as

round-tripping (Financial Post 2013) We have accounted for tax havens by removing them from

tables and figures in this section The numbers corresponding to Figure 19 would be Barbados

($593 billion) Bermuda ($118 billion) British Virgin Islands ($21 billion) Cayman Islands ($302

billion)

Source Foreign Affairs Trade and Development Canada (2013c)

US Europe Asia amp Oceania Central amp South America Africa

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The state of Canada-US relations in 983090983088983089983092 983091983095

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Table 983089983097 Top industries for inward stocks of FDI 983090983088983089983090

Category Value Share

Oil and gas extraction 766 147

Manufacturing 1492 287

Petroleum and coal products manufacturing 377 72

Wholesale trade 395 76

Finance and insurance 699 134

Management of companies and enterprises 999 192

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

0

2

4

6

8

10

12

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) Chile Hong Kong

Peru amp Korea ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Chile Hong Kong Peru Korea

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0

40

80

120

160

200

240

280

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Foreign direct investment (stock) in Canada from top three

countries ndash

Source Foreign Affairs Trade and Development Canada (2013c)

US Netherlands UK

0

2

4

6

8

10

12

201220112010200920082007

2 0 0 2 C A $ b

i l l i o n s

Figure Foreign direct investment (stock) in Canada from China

ndash

Source Foreign Affairs Trade and Development Canada (2013c)

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fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

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Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

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References

Abacus Data (983090983088983089983090 November 983090983088) Beyond the Canadian-American Border

lthttpabacusdatacawp-contentuploads983090983088983089983090983089983089Can-AM_Report_CABC_

Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

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983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5862

The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5962

983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6062

The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6162

983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 34: Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983090983095

US policy uncertainty

Canadian economic prospects face their most important challenge in the

United States Te US economic recovery has been modest and real GDP

growth so far has remained below the post-World War II average of post-

recession periods (figure 983089983094) As we noted above the less-than-stellar US

recovery is made even more challenging for Canadian traders in that pro-

ductivity gains in Canada are lagging while the Canadian dollar remains high

On top of that several American-imposed regulatory obstacles to free trade

are depressing trade prospects in crude oil red meat and public works pro-

curement Tese impediments reduce Canadian competitive access to the

US market

A high level of public spending until the January 983090983088983089983091 sequester and

ongoing monetary stimulation have not produced notable US GDP growth

Te seven post-recession periods below show the current average to be well

below the historical average (Young 983090983088983089983091)

983089983097983092983096-983089983097983093983095 983091983096983088

983089983097983093983096-983089983097983094983095 983092983090983096

983089983097983094983096-983089983097983095983095 983091983089983096

983089983097983095983096-983089983097983096983095 983091983089983093

983089983097983096983096-983089983097983097983095 983091983088983093

983089983097983097983096-983090983088983088983095 983090983097983097

983090983088983088983096-983090983088983089983091 983088983095983091

While economic growth has been modest growth in the public debt

has not (figure 983089983095) Publicly held debt in the US is now at 983095983091 percent of GDP

the highest since 983089983097983092983094 (Congressional Budget Office 983090983088983089983091)

Te widening gap between federal government outlays and revenueshas only recently been capped by the Sequester (figure 983089983096) However the

budget Sequester is temporary and final resolution of public spending and

taxation levels remains unclear given repeated gridlock in presidential-con-

gressional policy making High debt levels combined with stalemate over

taxes and budget cuts have produced a case of policy instability or uncer-

tainty in the last five years (Baker Bloom and Davis 983090983088983089983091)

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983090983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

US policy uncertainty is further aggravated by inaction on the large

lsquoentitlementrsquo programsmdashSocial Security Medicare and Medicaidmdashwhich are

the major drivers of the long-term gap in revenues and spending

-4

-2

0

2

4

6

8

201220062000199419881982197619701964

Figure US GDP growth rate ndash ( forecast)

Source The World Bank (2013b) OECD (2013)

-10

-8

-6

-4

-2

0

0

20

40

60

80

100

20122011201020092008200720062005200420032002

Government deficit as a percentage of GDP Government debt as a percentage of GDP

Figure US Government deficit and debt as a percentage of GDP ndash

Source Congressional Budget Office (2013)

D e fi c i t p e r c e n t a g e ( ) D

e b t p er c en t a g e ( )

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The state of Canada-US relations in 983090983088983089983092 983090983097

fraserinstituteorg

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

20122003199319831973

Revenue Outlays

Figure US Government revenue and outlays ndash ( US$ billions)

Source Congressional Budget Office (2013)

1 9 8 3 U S $ b i l l i o n s

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983091983088 fraserinstituteorg

Trade diversification

Given the weakness in near-term US opportunities Canadians are (again)

wondering how to pursue trade diversification away from the United States

Te objective is logical and if achieved will prove advantageous but various

trends in trade and investment show that diversification for Canada is a slow

and arduous journey (table 983089983092)

In terms of overall share exports to China in the last five years have

doubled but the numbersmdashfrom 983090983089983095 percent to 983092983090983094 percentmdashremain rela-

tively low In the same period the US-bound share declined by 983091 percent but

remains a towering 983095983092983093983092 percent Te pattern of small overall impact applies

to all the other top trading partners For example exports to the UK have

increased but exports to Japan and Mexico have essentially stalled When we

consider average export growth rates over the last five years (table 983089983093) we see

a very strong rate for China (983089983093983093 percent) and strong rates for the UK and

South Korea (983096983097 percent and 983094983097 percent) However a 983089983093 percent increase in a

983092 percent overall trade share produces little change Te point we are making

is that at this rate and pattern of trade lsquodiversificationrsquo it will actually take a

very long timemdashwhile relatively small upward trends in trade with the United

States could have a quick and very large impact in the opposite direction

On the import side we notice more trade diversification with the US

share at 983093983088 percent and the Chinese share at 983089983089 percent (table 983089983094) Te Chinese

growth rate on the import side is less than on the export side (table 983089983095) Te

most revealing number may be the high average over five years for Mexico

at 983097 percent Tis could be indicative of a growing supply chain with Mexico

While foreign direct investment (FDI) is not a direct indicator of future

trade trends in investment may harbinger change In terms of outbound

FDI we notice that only a small segment (less than 983089983088 percent) is targeted

for manufacturing (table 983089983096) It is investment in this category in which onewould expect growth in supply chains

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The state of Canada-US relations in 983090983088983089983092 983091983089

fraserinstituteorg

Table 983089983092 Canadarsquos merchandise exports top ten destinations 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 3291 1 777 2361 1 751 2564 1 749

China 92 4 22 97 3 31 114 3 33

UK 114 2 27 105 2 33 141 2 41

Japan 97 3 23 73 4 23 79 4 23

Mexico 51 5 12 42 5 13 43 5 13

Netherlands 32 8 08 24 8 08 28 8 08

South Korea 34 7 08 31 7 10 32 7 09

Germany 39 6 09 33 6 10 34 6 10

France 28 9 07 23 9 07 20 10 06

Brazil 23 10 05 14 10 04 22 9 06

Total 4237 3145 3424

2011 2012Average

shareValue Rank Share Value Rank Share

US 2750 1 737 2783 1 745 752

China 140 3 38 159 2 43 33

UK 157 2 42 154 3 41 37

Japan 89 4 24 85 4 23 23

Mexico 46 5 12 44 5 12 12

Netherlands 40 7 11 37 6 10 09

South Korea 43 6 11 30 7 08 09

Germany 33 8 09 29 8 08 09

France 26 9 07 26 9 07 07

Brazil 24 10 06 21 10 06 06

Total 3732 3734

Source Industry Canada (2013b)

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983091983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983093 Canadian export growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 56 7 -281 9 106 = 5

China 101 6 65 1 187 3

UK 16 9 -73 2 358 2

Japan 202 3 -250 7 106 = 5

Mexico 179 4 -178 6 43 9

Netherlands -85 10 -255 8 183 4

South Korea 276 2 -80 3 52 8

Germany 160 5 -167 4 54 7

France 36 8 -174 5 -122 10

Brazil 706 1 -380 10 603 1

2011 2012Average

Rank Rank

US 104 8 27 2 02

China 270 4 152 1 155

UK 148 6 -02 4 90

Japan 161 5 -29 6 38

Mexico 94 9 -16 5 24

Netherlands 475 1 -55 7 53

South Korea 374 2 -272 10 70

Germany 05 10 -95 9 -09

France 311 3 23 3 15

Brazil 109 7 -92 8 189

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983091

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Table 983089983094 Canadarsquos merchandise imports top ten sources 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 1992 1 524 1633 1 511 1745 1 504

China 374 2 98 347 2 109 382 2 110

Mexico 157 3 41 145 3 45 190 3 55

Japan 134 4 35 108 4 34 115 4 33

Germany 111 5 29 95 5 30 97 5 28

UK 110 6 29 82 6 26 92 6 27

South Korea 53 9 14 52 7 16 53 7 15

Algeria 67 7 18 33 10 10 31 10 09

Italy 45 10 12 39 9 12 40 9 12

France 53 8 14 49 8 15 47 8 13

Total 3804 3194 3465

2011 2012Average

shareValue Rank Share Value Rank Share

US 1846 1 496 1922 1 506 508

China 402 2 108 417 2 110 107

Mexico 205 3 55 210 3 55 50

Japan 109 4 29 123 4 33 33

Germany 107 5 29 118 5 31 29

UK 86 6 23 70 6 18 25

South Korea 55 7 15 52 7 14 15

Algeria 46 9 12 49 8 13 12

Italy 43 10 11 43 9 11 12

France 46 8 12 41 10 11 13

Total 3723 3796

Source Industry Canada (2013b)

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983091983092 The state of Canada-US relations in 983090983088983089983092

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Table 983089983095 Old and new trade prospectsmdashimport growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 29 8 -178 7 89 5

China 112 4 -70 2 123 3

Mexico 43 7 -77 4 337 1

Japan -11 10 -192 8 89 4

Germany 105 5 -149 6 44 7

UK 95 6 -252 9 141 2

South Korea 120 3 -14 1 36 8

Algeria 518 1 -511 10 -50 10

Italy 11 9 -132 5 48 6

France 191 2 -70 3 -35 9

2011 2012Average

Rank Rank

US 88 5 57 4 17

China 82 6 53 5 60

Mexico 111 3 39 6 91

Japan -29 9 151 1 01

Germany 132 2 117 2 50

UK -36 10 -173 10 -45

South Korea 76 7 -37 8 37

Algeria 533 1 91 3 116

Italy 95 4 23 7 09

France 22 8 -97 9 02

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983093

fraserinstituteorg

In terms of overall Canadian outbound FDI stocks in the US remain

very high despite the recent US recession while growth in stock in Asia is

modest (figure 983089983097) When we examine Canadian FDI in the so-called BRIC

states we notice that investment in both China and India is relatively small

Canadian mining investment in Brazil is much larger (figure 983090983088) In fact when

we examine amounts of FDI we find that Canada is not really a big BRIC

investor other than Brazil Chile Hong Kong and Peru are larger FDI recipi-

ents than China and India (figure 983090983089)

In terms of FDI flowing into Canada we notice the very large share

(983090983096983094983093 percent) in manufacturing which indicates both the predominant

share of US FDI and the extensive integrated supply chains in Canada-US

manufacturing (table 983089983097) Even more than for outbound FDI inflow stocks

show very large US preponderance (figure 983090983090) Such continued concentra-

tion of US FDI in Canada suggests that Canadian trade diversification is not

just a decision to be made by Canadian producers

Like trade growth Chinese FDI growth in Canada is positive but the

overall numbers are small and do not show rapid growth in the last 983091 years

(figure 983090983091)

Table 983089983096 Top industries for outward stocks of FDI 983090983088983089983090

Category Value Share

Mining oil and gas extraction 1099 188

Oil and gas subcategory 542 93

Manufacturing 569 97

Finance and insurance 2334 399

Management of companies and enterprises 757 129

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

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983091983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

1

2

3

4

5

6

7

8

9

10

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n s

Figure Canadian foreign direct investment (stock) BRIC ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Brazil PRC India Russia

0

20

4060

80

100

120

140

160

180

200

220

240

260

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) various regions

ndash

Notes Excluding Mexico Canadian FDI to Mexico in 2012 was $557 billion

Foreign Direct Investment measures the purchase of various forms of capital stock abroad

However tax havens (Barbados Bermuda etc) are frequently found to be some of the highest

recipients of FDI In reality tax havens do not reflect economic growth as FDI figures invested

into tax havens are often reinvested back to the source country in a concept known as

round-tripping (Financial Post 2013) We have accounted for tax havens by removing them from

tables and figures in this section The numbers corresponding to Figure 19 would be Barbados

($593 billion) Bermuda ($118 billion) British Virgin Islands ($21 billion) Cayman Islands ($302

billion)

Source Foreign Affairs Trade and Development Canada (2013c)

US Europe Asia amp Oceania Central amp South America Africa

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The state of Canada-US relations in 983090983088983089983092 983091983095

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Table 983089983097 Top industries for inward stocks of FDI 983090983088983089983090

Category Value Share

Oil and gas extraction 766 147

Manufacturing 1492 287

Petroleum and coal products manufacturing 377 72

Wholesale trade 395 76

Finance and insurance 699 134

Management of companies and enterprises 999 192

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

0

2

4

6

8

10

12

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) Chile Hong Kong

Peru amp Korea ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Chile Hong Kong Peru Korea

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0

40

80

120

160

200

240

280

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Foreign direct investment (stock) in Canada from top three

countries ndash

Source Foreign Affairs Trade and Development Canada (2013c)

US Netherlands UK

0

2

4

6

8

10

12

201220112010200920082007

2 0 0 2 C A $ b

i l l i o n s

Figure Foreign direct investment (stock) in Canada from China

ndash

Source Foreign Affairs Trade and Development Canada (2013c)

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fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

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Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

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References

Abacus Data (983090983088983089983090 November 983090983088) Beyond the Canadian-American Border

lthttpabacusdatacawp-contentuploads983090983088983089983090983089983089Can-AM_Report_CABC_

Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5662

The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

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983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5862

The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5962

983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6062

The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6162

983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 35: Canadas Catch 22 State of Canada Us Relations in 2014

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983090983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

US policy uncertainty is further aggravated by inaction on the large

lsquoentitlementrsquo programsmdashSocial Security Medicare and Medicaidmdashwhich are

the major drivers of the long-term gap in revenues and spending

-4

-2

0

2

4

6

8

201220062000199419881982197619701964

Figure US GDP growth rate ndash ( forecast)

Source The World Bank (2013b) OECD (2013)

-10

-8

-6

-4

-2

0

0

20

40

60

80

100

20122011201020092008200720062005200420032002

Government deficit as a percentage of GDP Government debt as a percentage of GDP

Figure US Government deficit and debt as a percentage of GDP ndash

Source Congressional Budget Office (2013)

D e fi c i t p e r c e n t a g e ( ) D

e b t p er c en t a g e ( )

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983097

fraserinstituteorg

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

20122003199319831973

Revenue Outlays

Figure US Government revenue and outlays ndash ( US$ billions)

Source Congressional Budget Office (2013)

1 9 8 3 U S $ b i l l i o n s

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983091983088 fraserinstituteorg

Trade diversification

Given the weakness in near-term US opportunities Canadians are (again)

wondering how to pursue trade diversification away from the United States

Te objective is logical and if achieved will prove advantageous but various

trends in trade and investment show that diversification for Canada is a slow

and arduous journey (table 983089983092)

In terms of overall share exports to China in the last five years have

doubled but the numbersmdashfrom 983090983089983095 percent to 983092983090983094 percentmdashremain rela-

tively low In the same period the US-bound share declined by 983091 percent but

remains a towering 983095983092983093983092 percent Te pattern of small overall impact applies

to all the other top trading partners For example exports to the UK have

increased but exports to Japan and Mexico have essentially stalled When we

consider average export growth rates over the last five years (table 983089983093) we see

a very strong rate for China (983089983093983093 percent) and strong rates for the UK and

South Korea (983096983097 percent and 983094983097 percent) However a 983089983093 percent increase in a

983092 percent overall trade share produces little change Te point we are making

is that at this rate and pattern of trade lsquodiversificationrsquo it will actually take a

very long timemdashwhile relatively small upward trends in trade with the United

States could have a quick and very large impact in the opposite direction

On the import side we notice more trade diversification with the US

share at 983093983088 percent and the Chinese share at 983089983089 percent (table 983089983094) Te Chinese

growth rate on the import side is less than on the export side (table 983089983095) Te

most revealing number may be the high average over five years for Mexico

at 983097 percent Tis could be indicative of a growing supply chain with Mexico

While foreign direct investment (FDI) is not a direct indicator of future

trade trends in investment may harbinger change In terms of outbound

FDI we notice that only a small segment (less than 983089983088 percent) is targeted

for manufacturing (table 983089983096) It is investment in this category in which onewould expect growth in supply chains

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983089

fraserinstituteorg

Table 983089983092 Canadarsquos merchandise exports top ten destinations 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 3291 1 777 2361 1 751 2564 1 749

China 92 4 22 97 3 31 114 3 33

UK 114 2 27 105 2 33 141 2 41

Japan 97 3 23 73 4 23 79 4 23

Mexico 51 5 12 42 5 13 43 5 13

Netherlands 32 8 08 24 8 08 28 8 08

South Korea 34 7 08 31 7 10 32 7 09

Germany 39 6 09 33 6 10 34 6 10

France 28 9 07 23 9 07 20 10 06

Brazil 23 10 05 14 10 04 22 9 06

Total 4237 3145 3424

2011 2012Average

shareValue Rank Share Value Rank Share

US 2750 1 737 2783 1 745 752

China 140 3 38 159 2 43 33

UK 157 2 42 154 3 41 37

Japan 89 4 24 85 4 23 23

Mexico 46 5 12 44 5 12 12

Netherlands 40 7 11 37 6 10 09

South Korea 43 6 11 30 7 08 09

Germany 33 8 09 29 8 08 09

France 26 9 07 26 9 07 07

Brazil 24 10 06 21 10 06 06

Total 3732 3734

Source Industry Canada (2013b)

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983091983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983093 Canadian export growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 56 7 -281 9 106 = 5

China 101 6 65 1 187 3

UK 16 9 -73 2 358 2

Japan 202 3 -250 7 106 = 5

Mexico 179 4 -178 6 43 9

Netherlands -85 10 -255 8 183 4

South Korea 276 2 -80 3 52 8

Germany 160 5 -167 4 54 7

France 36 8 -174 5 -122 10

Brazil 706 1 -380 10 603 1

2011 2012Average

Rank Rank

US 104 8 27 2 02

China 270 4 152 1 155

UK 148 6 -02 4 90

Japan 161 5 -29 6 38

Mexico 94 9 -16 5 24

Netherlands 475 1 -55 7 53

South Korea 374 2 -272 10 70

Germany 05 10 -95 9 -09

France 311 3 23 3 15

Brazil 109 7 -92 8 189

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983091

fraserinstituteorg

Table 983089983094 Canadarsquos merchandise imports top ten sources 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 1992 1 524 1633 1 511 1745 1 504

China 374 2 98 347 2 109 382 2 110

Mexico 157 3 41 145 3 45 190 3 55

Japan 134 4 35 108 4 34 115 4 33

Germany 111 5 29 95 5 30 97 5 28

UK 110 6 29 82 6 26 92 6 27

South Korea 53 9 14 52 7 16 53 7 15

Algeria 67 7 18 33 10 10 31 10 09

Italy 45 10 12 39 9 12 40 9 12

France 53 8 14 49 8 15 47 8 13

Total 3804 3194 3465

2011 2012Average

shareValue Rank Share Value Rank Share

US 1846 1 496 1922 1 506 508

China 402 2 108 417 2 110 107

Mexico 205 3 55 210 3 55 50

Japan 109 4 29 123 4 33 33

Germany 107 5 29 118 5 31 29

UK 86 6 23 70 6 18 25

South Korea 55 7 15 52 7 14 15

Algeria 46 9 12 49 8 13 12

Italy 43 10 11 43 9 11 12

France 46 8 12 41 10 11 13

Total 3723 3796

Source Industry Canada (2013b)

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983091983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983095 Old and new trade prospectsmdashimport growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 29 8 -178 7 89 5

China 112 4 -70 2 123 3

Mexico 43 7 -77 4 337 1

Japan -11 10 -192 8 89 4

Germany 105 5 -149 6 44 7

UK 95 6 -252 9 141 2

South Korea 120 3 -14 1 36 8

Algeria 518 1 -511 10 -50 10

Italy 11 9 -132 5 48 6

France 191 2 -70 3 -35 9

2011 2012Average

Rank Rank

US 88 5 57 4 17

China 82 6 53 5 60

Mexico 111 3 39 6 91

Japan -29 9 151 1 01

Germany 132 2 117 2 50

UK -36 10 -173 10 -45

South Korea 76 7 -37 8 37

Algeria 533 1 91 3 116

Italy 95 4 23 7 09

France 22 8 -97 9 02

Source Industry Canada (2013b) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983093

fraserinstituteorg

In terms of overall Canadian outbound FDI stocks in the US remain

very high despite the recent US recession while growth in stock in Asia is

modest (figure 983089983097) When we examine Canadian FDI in the so-called BRIC

states we notice that investment in both China and India is relatively small

Canadian mining investment in Brazil is much larger (figure 983090983088) In fact when

we examine amounts of FDI we find that Canada is not really a big BRIC

investor other than Brazil Chile Hong Kong and Peru are larger FDI recipi-

ents than China and India (figure 983090983089)

In terms of FDI flowing into Canada we notice the very large share

(983090983096983094983093 percent) in manufacturing which indicates both the predominant

share of US FDI and the extensive integrated supply chains in Canada-US

manufacturing (table 983089983097) Even more than for outbound FDI inflow stocks

show very large US preponderance (figure 983090983090) Such continued concentra-

tion of US FDI in Canada suggests that Canadian trade diversification is not

just a decision to be made by Canadian producers

Like trade growth Chinese FDI growth in Canada is positive but the

overall numbers are small and do not show rapid growth in the last 983091 years

(figure 983090983091)

Table 983089983096 Top industries for outward stocks of FDI 983090983088983089983090

Category Value Share

Mining oil and gas extraction 1099 188

Oil and gas subcategory 542 93

Manufacturing 569 97

Finance and insurance 2334 399

Management of companies and enterprises 757 129

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

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983091983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

1

2

3

4

5

6

7

8

9

10

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n s

Figure Canadian foreign direct investment (stock) BRIC ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Brazil PRC India Russia

0

20

4060

80

100

120

140

160

180

200

220

240

260

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) various regions

ndash

Notes Excluding Mexico Canadian FDI to Mexico in 2012 was $557 billion

Foreign Direct Investment measures the purchase of various forms of capital stock abroad

However tax havens (Barbados Bermuda etc) are frequently found to be some of the highest

recipients of FDI In reality tax havens do not reflect economic growth as FDI figures invested

into tax havens are often reinvested back to the source country in a concept known as

round-tripping (Financial Post 2013) We have accounted for tax havens by removing them from

tables and figures in this section The numbers corresponding to Figure 19 would be Barbados

($593 billion) Bermuda ($118 billion) British Virgin Islands ($21 billion) Cayman Islands ($302

billion)

Source Foreign Affairs Trade and Development Canada (2013c)

US Europe Asia amp Oceania Central amp South America Africa

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The state of Canada-US relations in 983090983088983089983092 983091983095

fraserinstituteorg

Table 983089983097 Top industries for inward stocks of FDI 983090983088983089983090

Category Value Share

Oil and gas extraction 766 147

Manufacturing 1492 287

Petroleum and coal products manufacturing 377 72

Wholesale trade 395 76

Finance and insurance 699 134

Management of companies and enterprises 999 192

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

0

2

4

6

8

10

12

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) Chile Hong Kong

Peru amp Korea ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Chile Hong Kong Peru Korea

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fraserinstituteorg

0

40

80

120

160

200

240

280

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Foreign direct investment (stock) in Canada from top three

countries ndash

Source Foreign Affairs Trade and Development Canada (2013c)

US Netherlands UK

0

2

4

6

8

10

12

201220112010200920082007

2 0 0 2 C A $ b

i l l i o n s

Figure Foreign direct investment (stock) in Canada from China

ndash

Source Foreign Affairs Trade and Development Canada (2013c)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

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fraserinstituteorg

Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

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References

Abacus Data (983090983088983089983090 November 983090983088) Beyond the Canadian-American Border

lthttpabacusdatacawp-contentuploads983090983088983089983090983089983089Can-AM_Report_CABC_

Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

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Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

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fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5962

983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 36: Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983090983097

fraserinstituteorg

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

20122003199319831973

Revenue Outlays

Figure US Government revenue and outlays ndash ( US$ billions)

Source Congressional Budget Office (2013)

1 9 8 3 U S $ b i l l i o n s

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 3762

983091983088 fraserinstituteorg

Trade diversification

Given the weakness in near-term US opportunities Canadians are (again)

wondering how to pursue trade diversification away from the United States

Te objective is logical and if achieved will prove advantageous but various

trends in trade and investment show that diversification for Canada is a slow

and arduous journey (table 983089983092)

In terms of overall share exports to China in the last five years have

doubled but the numbersmdashfrom 983090983089983095 percent to 983092983090983094 percentmdashremain rela-

tively low In the same period the US-bound share declined by 983091 percent but

remains a towering 983095983092983093983092 percent Te pattern of small overall impact applies

to all the other top trading partners For example exports to the UK have

increased but exports to Japan and Mexico have essentially stalled When we

consider average export growth rates over the last five years (table 983089983093) we see

a very strong rate for China (983089983093983093 percent) and strong rates for the UK and

South Korea (983096983097 percent and 983094983097 percent) However a 983089983093 percent increase in a

983092 percent overall trade share produces little change Te point we are making

is that at this rate and pattern of trade lsquodiversificationrsquo it will actually take a

very long timemdashwhile relatively small upward trends in trade with the United

States could have a quick and very large impact in the opposite direction

On the import side we notice more trade diversification with the US

share at 983093983088 percent and the Chinese share at 983089983089 percent (table 983089983094) Te Chinese

growth rate on the import side is less than on the export side (table 983089983095) Te

most revealing number may be the high average over five years for Mexico

at 983097 percent Tis could be indicative of a growing supply chain with Mexico

While foreign direct investment (FDI) is not a direct indicator of future

trade trends in investment may harbinger change In terms of outbound

FDI we notice that only a small segment (less than 983089983088 percent) is targeted

for manufacturing (table 983089983096) It is investment in this category in which onewould expect growth in supply chains

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg

Table 983089983092 Canadarsquos merchandise exports top ten destinations 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 3291 1 777 2361 1 751 2564 1 749

China 92 4 22 97 3 31 114 3 33

UK 114 2 27 105 2 33 141 2 41

Japan 97 3 23 73 4 23 79 4 23

Mexico 51 5 12 42 5 13 43 5 13

Netherlands 32 8 08 24 8 08 28 8 08

South Korea 34 7 08 31 7 10 32 7 09

Germany 39 6 09 33 6 10 34 6 10

France 28 9 07 23 9 07 20 10 06

Brazil 23 10 05 14 10 04 22 9 06

Total 4237 3145 3424

2011 2012Average

shareValue Rank Share Value Rank Share

US 2750 1 737 2783 1 745 752

China 140 3 38 159 2 43 33

UK 157 2 42 154 3 41 37

Japan 89 4 24 85 4 23 23

Mexico 46 5 12 44 5 12 12

Netherlands 40 7 11 37 6 10 09

South Korea 43 6 11 30 7 08 09

Germany 33 8 09 29 8 08 09

France 26 9 07 26 9 07 07

Brazil 24 10 06 21 10 06 06

Total 3732 3734

Source Industry Canada (2013b)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983091983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983093 Canadian export growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 56 7 -281 9 106 = 5

China 101 6 65 1 187 3

UK 16 9 -73 2 358 2

Japan 202 3 -250 7 106 = 5

Mexico 179 4 -178 6 43 9

Netherlands -85 10 -255 8 183 4

South Korea 276 2 -80 3 52 8

Germany 160 5 -167 4 54 7

France 36 8 -174 5 -122 10

Brazil 706 1 -380 10 603 1

2011 2012Average

Rank Rank

US 104 8 27 2 02

China 270 4 152 1 155

UK 148 6 -02 4 90

Japan 161 5 -29 6 38

Mexico 94 9 -16 5 24

Netherlands 475 1 -55 7 53

South Korea 374 2 -272 10 70

Germany 05 10 -95 9 -09

France 311 3 23 3 15

Brazil 109 7 -92 8 189

Source Industry Canada (2013b) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983091

fraserinstituteorg

Table 983089983094 Canadarsquos merchandise imports top ten sources 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 1992 1 524 1633 1 511 1745 1 504

China 374 2 98 347 2 109 382 2 110

Mexico 157 3 41 145 3 45 190 3 55

Japan 134 4 35 108 4 34 115 4 33

Germany 111 5 29 95 5 30 97 5 28

UK 110 6 29 82 6 26 92 6 27

South Korea 53 9 14 52 7 16 53 7 15

Algeria 67 7 18 33 10 10 31 10 09

Italy 45 10 12 39 9 12 40 9 12

France 53 8 14 49 8 15 47 8 13

Total 3804 3194 3465

2011 2012Average

shareValue Rank Share Value Rank Share

US 1846 1 496 1922 1 506 508

China 402 2 108 417 2 110 107

Mexico 205 3 55 210 3 55 50

Japan 109 4 29 123 4 33 33

Germany 107 5 29 118 5 31 29

UK 86 6 23 70 6 18 25

South Korea 55 7 15 52 7 14 15

Algeria 46 9 12 49 8 13 12

Italy 43 10 11 43 9 11 12

France 46 8 12 41 10 11 13

Total 3723 3796

Source Industry Canada (2013b)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983091983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983095 Old and new trade prospectsmdashimport growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 29 8 -178 7 89 5

China 112 4 -70 2 123 3

Mexico 43 7 -77 4 337 1

Japan -11 10 -192 8 89 4

Germany 105 5 -149 6 44 7

UK 95 6 -252 9 141 2

South Korea 120 3 -14 1 36 8

Algeria 518 1 -511 10 -50 10

Italy 11 9 -132 5 48 6

France 191 2 -70 3 -35 9

2011 2012Average

Rank Rank

US 88 5 57 4 17

China 82 6 53 5 60

Mexico 111 3 39 6 91

Japan -29 9 151 1 01

Germany 132 2 117 2 50

UK -36 10 -173 10 -45

South Korea 76 7 -37 8 37

Algeria 533 1 91 3 116

Italy 95 4 23 7 09

France 22 8 -97 9 02

Source Industry Canada (2013b) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983093

fraserinstituteorg

In terms of overall Canadian outbound FDI stocks in the US remain

very high despite the recent US recession while growth in stock in Asia is

modest (figure 983089983097) When we examine Canadian FDI in the so-called BRIC

states we notice that investment in both China and India is relatively small

Canadian mining investment in Brazil is much larger (figure 983090983088) In fact when

we examine amounts of FDI we find that Canada is not really a big BRIC

investor other than Brazil Chile Hong Kong and Peru are larger FDI recipi-

ents than China and India (figure 983090983089)

In terms of FDI flowing into Canada we notice the very large share

(983090983096983094983093 percent) in manufacturing which indicates both the predominant

share of US FDI and the extensive integrated supply chains in Canada-US

manufacturing (table 983089983097) Even more than for outbound FDI inflow stocks

show very large US preponderance (figure 983090983090) Such continued concentra-

tion of US FDI in Canada suggests that Canadian trade diversification is not

just a decision to be made by Canadian producers

Like trade growth Chinese FDI growth in Canada is positive but the

overall numbers are small and do not show rapid growth in the last 983091 years

(figure 983090983091)

Table 983089983096 Top industries for outward stocks of FDI 983090983088983089983090

Category Value Share

Mining oil and gas extraction 1099 188

Oil and gas subcategory 542 93

Manufacturing 569 97

Finance and insurance 2334 399

Management of companies and enterprises 757 129

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983091983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

1

2

3

4

5

6

7

8

9

10

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n s

Figure Canadian foreign direct investment (stock) BRIC ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Brazil PRC India Russia

0

20

4060

80

100

120

140

160

180

200

220

240

260

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) various regions

ndash

Notes Excluding Mexico Canadian FDI to Mexico in 2012 was $557 billion

Foreign Direct Investment measures the purchase of various forms of capital stock abroad

However tax havens (Barbados Bermuda etc) are frequently found to be some of the highest

recipients of FDI In reality tax havens do not reflect economic growth as FDI figures invested

into tax havens are often reinvested back to the source country in a concept known as

round-tripping (Financial Post 2013) We have accounted for tax havens by removing them from

tables and figures in this section The numbers corresponding to Figure 19 would be Barbados

($593 billion) Bermuda ($118 billion) British Virgin Islands ($21 billion) Cayman Islands ($302

billion)

Source Foreign Affairs Trade and Development Canada (2013c)

US Europe Asia amp Oceania Central amp South America Africa

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983095

fraserinstituteorg

Table 983089983097 Top industries for inward stocks of FDI 983090983088983089983090

Category Value Share

Oil and gas extraction 766 147

Manufacturing 1492 287

Petroleum and coal products manufacturing 377 72

Wholesale trade 395 76

Finance and insurance 699 134

Management of companies and enterprises 999 192

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

0

2

4

6

8

10

12

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) Chile Hong Kong

Peru amp Korea ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Chile Hong Kong Peru Korea

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983091983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

40

80

120

160

200

240

280

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Foreign direct investment (stock) in Canada from top three

countries ndash

Source Foreign Affairs Trade and Development Canada (2013c)

US Netherlands UK

0

2

4

6

8

10

12

201220112010200920082007

2 0 0 2 C A $ b

i l l i o n s

Figure Foreign direct investment (stock) in Canada from China

ndash

Source Foreign Affairs Trade and Development Canada (2013c)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983092983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4862

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References

Abacus Data (983090983088983089983090 November 983090983088) Beyond the Canadian-American Border

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Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

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983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

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983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 37: Canadas Catch 22 State of Canada Us Relations in 2014

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983091983088 fraserinstituteorg

Trade diversification

Given the weakness in near-term US opportunities Canadians are (again)

wondering how to pursue trade diversification away from the United States

Te objective is logical and if achieved will prove advantageous but various

trends in trade and investment show that diversification for Canada is a slow

and arduous journey (table 983089983092)

In terms of overall share exports to China in the last five years have

doubled but the numbersmdashfrom 983090983089983095 percent to 983092983090983094 percentmdashremain rela-

tively low In the same period the US-bound share declined by 983091 percent but

remains a towering 983095983092983093983092 percent Te pattern of small overall impact applies

to all the other top trading partners For example exports to the UK have

increased but exports to Japan and Mexico have essentially stalled When we

consider average export growth rates over the last five years (table 983089983093) we see

a very strong rate for China (983089983093983093 percent) and strong rates for the UK and

South Korea (983096983097 percent and 983094983097 percent) However a 983089983093 percent increase in a

983092 percent overall trade share produces little change Te point we are making

is that at this rate and pattern of trade lsquodiversificationrsquo it will actually take a

very long timemdashwhile relatively small upward trends in trade with the United

States could have a quick and very large impact in the opposite direction

On the import side we notice more trade diversification with the US

share at 983093983088 percent and the Chinese share at 983089983089 percent (table 983089983094) Te Chinese

growth rate on the import side is less than on the export side (table 983089983095) Te

most revealing number may be the high average over five years for Mexico

at 983097 percent Tis could be indicative of a growing supply chain with Mexico

While foreign direct investment (FDI) is not a direct indicator of future

trade trends in investment may harbinger change In terms of outbound

FDI we notice that only a small segment (less than 983089983088 percent) is targeted

for manufacturing (table 983089983096) It is investment in this category in which onewould expect growth in supply chains

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Table 983089983092 Canadarsquos merchandise exports top ten destinations 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 3291 1 777 2361 1 751 2564 1 749

China 92 4 22 97 3 31 114 3 33

UK 114 2 27 105 2 33 141 2 41

Japan 97 3 23 73 4 23 79 4 23

Mexico 51 5 12 42 5 13 43 5 13

Netherlands 32 8 08 24 8 08 28 8 08

South Korea 34 7 08 31 7 10 32 7 09

Germany 39 6 09 33 6 10 34 6 10

France 28 9 07 23 9 07 20 10 06

Brazil 23 10 05 14 10 04 22 9 06

Total 4237 3145 3424

2011 2012Average

shareValue Rank Share Value Rank Share

US 2750 1 737 2783 1 745 752

China 140 3 38 159 2 43 33

UK 157 2 42 154 3 41 37

Japan 89 4 24 85 4 23 23

Mexico 46 5 12 44 5 12 12

Netherlands 40 7 11 37 6 10 09

South Korea 43 6 11 30 7 08 09

Germany 33 8 09 29 8 08 09

France 26 9 07 26 9 07 07

Brazil 24 10 06 21 10 06 06

Total 3732 3734

Source Industry Canada (2013b)

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fraserinstituteorg

Table 983089983093 Canadian export growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 56 7 -281 9 106 = 5

China 101 6 65 1 187 3

UK 16 9 -73 2 358 2

Japan 202 3 -250 7 106 = 5

Mexico 179 4 -178 6 43 9

Netherlands -85 10 -255 8 183 4

South Korea 276 2 -80 3 52 8

Germany 160 5 -167 4 54 7

France 36 8 -174 5 -122 10

Brazil 706 1 -380 10 603 1

2011 2012Average

Rank Rank

US 104 8 27 2 02

China 270 4 152 1 155

UK 148 6 -02 4 90

Japan 161 5 -29 6 38

Mexico 94 9 -16 5 24

Netherlands 475 1 -55 7 53

South Korea 374 2 -272 10 70

Germany 05 10 -95 9 -09

France 311 3 23 3 15

Brazil 109 7 -92 8 189

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983091

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Table 983089983094 Canadarsquos merchandise imports top ten sources 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 1992 1 524 1633 1 511 1745 1 504

China 374 2 98 347 2 109 382 2 110

Mexico 157 3 41 145 3 45 190 3 55

Japan 134 4 35 108 4 34 115 4 33

Germany 111 5 29 95 5 30 97 5 28

UK 110 6 29 82 6 26 92 6 27

South Korea 53 9 14 52 7 16 53 7 15

Algeria 67 7 18 33 10 10 31 10 09

Italy 45 10 12 39 9 12 40 9 12

France 53 8 14 49 8 15 47 8 13

Total 3804 3194 3465

2011 2012Average

shareValue Rank Share Value Rank Share

US 1846 1 496 1922 1 506 508

China 402 2 108 417 2 110 107

Mexico 205 3 55 210 3 55 50

Japan 109 4 29 123 4 33 33

Germany 107 5 29 118 5 31 29

UK 86 6 23 70 6 18 25

South Korea 55 7 15 52 7 14 15

Algeria 46 9 12 49 8 13 12

Italy 43 10 11 43 9 11 12

France 46 8 12 41 10 11 13

Total 3723 3796

Source Industry Canada (2013b)

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fraserinstituteorg

Table 983089983095 Old and new trade prospectsmdashimport growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 29 8 -178 7 89 5

China 112 4 -70 2 123 3

Mexico 43 7 -77 4 337 1

Japan -11 10 -192 8 89 4

Germany 105 5 -149 6 44 7

UK 95 6 -252 9 141 2

South Korea 120 3 -14 1 36 8

Algeria 518 1 -511 10 -50 10

Italy 11 9 -132 5 48 6

France 191 2 -70 3 -35 9

2011 2012Average

Rank Rank

US 88 5 57 4 17

China 82 6 53 5 60

Mexico 111 3 39 6 91

Japan -29 9 151 1 01

Germany 132 2 117 2 50

UK -36 10 -173 10 -45

South Korea 76 7 -37 8 37

Algeria 533 1 91 3 116

Italy 95 4 23 7 09

France 22 8 -97 9 02

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983093

fraserinstituteorg

In terms of overall Canadian outbound FDI stocks in the US remain

very high despite the recent US recession while growth in stock in Asia is

modest (figure 983089983097) When we examine Canadian FDI in the so-called BRIC

states we notice that investment in both China and India is relatively small

Canadian mining investment in Brazil is much larger (figure 983090983088) In fact when

we examine amounts of FDI we find that Canada is not really a big BRIC

investor other than Brazil Chile Hong Kong and Peru are larger FDI recipi-

ents than China and India (figure 983090983089)

In terms of FDI flowing into Canada we notice the very large share

(983090983096983094983093 percent) in manufacturing which indicates both the predominant

share of US FDI and the extensive integrated supply chains in Canada-US

manufacturing (table 983089983097) Even more than for outbound FDI inflow stocks

show very large US preponderance (figure 983090983090) Such continued concentra-

tion of US FDI in Canada suggests that Canadian trade diversification is not

just a decision to be made by Canadian producers

Like trade growth Chinese FDI growth in Canada is positive but the

overall numbers are small and do not show rapid growth in the last 983091 years

(figure 983090983091)

Table 983089983096 Top industries for outward stocks of FDI 983090983088983089983090

Category Value Share

Mining oil and gas extraction 1099 188

Oil and gas subcategory 542 93

Manufacturing 569 97

Finance and insurance 2334 399

Management of companies and enterprises 757 129

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

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983091983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

1

2

3

4

5

6

7

8

9

10

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n s

Figure Canadian foreign direct investment (stock) BRIC ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Brazil PRC India Russia

0

20

4060

80

100

120

140

160

180

200

220

240

260

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) various regions

ndash

Notes Excluding Mexico Canadian FDI to Mexico in 2012 was $557 billion

Foreign Direct Investment measures the purchase of various forms of capital stock abroad

However tax havens (Barbados Bermuda etc) are frequently found to be some of the highest

recipients of FDI In reality tax havens do not reflect economic growth as FDI figures invested

into tax havens are often reinvested back to the source country in a concept known as

round-tripping (Financial Post 2013) We have accounted for tax havens by removing them from

tables and figures in this section The numbers corresponding to Figure 19 would be Barbados

($593 billion) Bermuda ($118 billion) British Virgin Islands ($21 billion) Cayman Islands ($302

billion)

Source Foreign Affairs Trade and Development Canada (2013c)

US Europe Asia amp Oceania Central amp South America Africa

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983095

fraserinstituteorg

Table 983089983097 Top industries for inward stocks of FDI 983090983088983089983090

Category Value Share

Oil and gas extraction 766 147

Manufacturing 1492 287

Petroleum and coal products manufacturing 377 72

Wholesale trade 395 76

Finance and insurance 699 134

Management of companies and enterprises 999 192

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

0

2

4

6

8

10

12

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) Chile Hong Kong

Peru amp Korea ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Chile Hong Kong Peru Korea

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983091983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

40

80

120

160

200

240

280

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Foreign direct investment (stock) in Canada from top three

countries ndash

Source Foreign Affairs Trade and Development Canada (2013c)

US Netherlands UK

0

2

4

6

8

10

12

201220112010200920082007

2 0 0 2 C A $ b

i l l i o n s

Figure Foreign direct investment (stock) in Canada from China

ndash

Source Foreign Affairs Trade and Development Canada (2013c)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4762

983092983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4862

fraserinstituteorg 983092983089

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Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5662

The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

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The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 38: Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983089

fraserinstituteorg

Table 983089983092 Canadarsquos merchandise exports top ten destinations 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 3291 1 777 2361 1 751 2564 1 749

China 92 4 22 97 3 31 114 3 33

UK 114 2 27 105 2 33 141 2 41

Japan 97 3 23 73 4 23 79 4 23

Mexico 51 5 12 42 5 13 43 5 13

Netherlands 32 8 08 24 8 08 28 8 08

South Korea 34 7 08 31 7 10 32 7 09

Germany 39 6 09 33 6 10 34 6 10

France 28 9 07 23 9 07 20 10 06

Brazil 23 10 05 14 10 04 22 9 06

Total 4237 3145 3424

2011 2012Average

shareValue Rank Share Value Rank Share

US 2750 1 737 2783 1 745 752

China 140 3 38 159 2 43 33

UK 157 2 42 154 3 41 37

Japan 89 4 24 85 4 23 23

Mexico 46 5 12 44 5 12 12

Netherlands 40 7 11 37 6 10 09

South Korea 43 6 11 30 7 08 09

Germany 33 8 09 29 8 08 09

France 26 9 07 26 9 07 07

Brazil 24 10 06 21 10 06 06

Total 3732 3734

Source Industry Canada (2013b)

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983091983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983093 Canadian export growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 56 7 -281 9 106 = 5

China 101 6 65 1 187 3

UK 16 9 -73 2 358 2

Japan 202 3 -250 7 106 = 5

Mexico 179 4 -178 6 43 9

Netherlands -85 10 -255 8 183 4

South Korea 276 2 -80 3 52 8

Germany 160 5 -167 4 54 7

France 36 8 -174 5 -122 10

Brazil 706 1 -380 10 603 1

2011 2012Average

Rank Rank

US 104 8 27 2 02

China 270 4 152 1 155

UK 148 6 -02 4 90

Japan 161 5 -29 6 38

Mexico 94 9 -16 5 24

Netherlands 475 1 -55 7 53

South Korea 374 2 -272 10 70

Germany 05 10 -95 9 -09

France 311 3 23 3 15

Brazil 109 7 -92 8 189

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983091

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Table 983089983094 Canadarsquos merchandise imports top ten sources 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 1992 1 524 1633 1 511 1745 1 504

China 374 2 98 347 2 109 382 2 110

Mexico 157 3 41 145 3 45 190 3 55

Japan 134 4 35 108 4 34 115 4 33

Germany 111 5 29 95 5 30 97 5 28

UK 110 6 29 82 6 26 92 6 27

South Korea 53 9 14 52 7 16 53 7 15

Algeria 67 7 18 33 10 10 31 10 09

Italy 45 10 12 39 9 12 40 9 12

France 53 8 14 49 8 15 47 8 13

Total 3804 3194 3465

2011 2012Average

shareValue Rank Share Value Rank Share

US 1846 1 496 1922 1 506 508

China 402 2 108 417 2 110 107

Mexico 205 3 55 210 3 55 50

Japan 109 4 29 123 4 33 33

Germany 107 5 29 118 5 31 29

UK 86 6 23 70 6 18 25

South Korea 55 7 15 52 7 14 15

Algeria 46 9 12 49 8 13 12

Italy 43 10 11 43 9 11 12

France 46 8 12 41 10 11 13

Total 3723 3796

Source Industry Canada (2013b)

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983091983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983095 Old and new trade prospectsmdashimport growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 29 8 -178 7 89 5

China 112 4 -70 2 123 3

Mexico 43 7 -77 4 337 1

Japan -11 10 -192 8 89 4

Germany 105 5 -149 6 44 7

UK 95 6 -252 9 141 2

South Korea 120 3 -14 1 36 8

Algeria 518 1 -511 10 -50 10

Italy 11 9 -132 5 48 6

France 191 2 -70 3 -35 9

2011 2012Average

Rank Rank

US 88 5 57 4 17

China 82 6 53 5 60

Mexico 111 3 39 6 91

Japan -29 9 151 1 01

Germany 132 2 117 2 50

UK -36 10 -173 10 -45

South Korea 76 7 -37 8 37

Algeria 533 1 91 3 116

Italy 95 4 23 7 09

France 22 8 -97 9 02

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983093

fraserinstituteorg

In terms of overall Canadian outbound FDI stocks in the US remain

very high despite the recent US recession while growth in stock in Asia is

modest (figure 983089983097) When we examine Canadian FDI in the so-called BRIC

states we notice that investment in both China and India is relatively small

Canadian mining investment in Brazil is much larger (figure 983090983088) In fact when

we examine amounts of FDI we find that Canada is not really a big BRIC

investor other than Brazil Chile Hong Kong and Peru are larger FDI recipi-

ents than China and India (figure 983090983089)

In terms of FDI flowing into Canada we notice the very large share

(983090983096983094983093 percent) in manufacturing which indicates both the predominant

share of US FDI and the extensive integrated supply chains in Canada-US

manufacturing (table 983089983097) Even more than for outbound FDI inflow stocks

show very large US preponderance (figure 983090983090) Such continued concentra-

tion of US FDI in Canada suggests that Canadian trade diversification is not

just a decision to be made by Canadian producers

Like trade growth Chinese FDI growth in Canada is positive but the

overall numbers are small and do not show rapid growth in the last 983091 years

(figure 983090983091)

Table 983089983096 Top industries for outward stocks of FDI 983090983088983089983090

Category Value Share

Mining oil and gas extraction 1099 188

Oil and gas subcategory 542 93

Manufacturing 569 97

Finance and insurance 2334 399

Management of companies and enterprises 757 129

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

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983091983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

1

2

3

4

5

6

7

8

9

10

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n s

Figure Canadian foreign direct investment (stock) BRIC ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Brazil PRC India Russia

0

20

4060

80

100

120

140

160

180

200

220

240

260

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) various regions

ndash

Notes Excluding Mexico Canadian FDI to Mexico in 2012 was $557 billion

Foreign Direct Investment measures the purchase of various forms of capital stock abroad

However tax havens (Barbados Bermuda etc) are frequently found to be some of the highest

recipients of FDI In reality tax havens do not reflect economic growth as FDI figures invested

into tax havens are often reinvested back to the source country in a concept known as

round-tripping (Financial Post 2013) We have accounted for tax havens by removing them from

tables and figures in this section The numbers corresponding to Figure 19 would be Barbados

($593 billion) Bermuda ($118 billion) British Virgin Islands ($21 billion) Cayman Islands ($302

billion)

Source Foreign Affairs Trade and Development Canada (2013c)

US Europe Asia amp Oceania Central amp South America Africa

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983095

fraserinstituteorg

Table 983089983097 Top industries for inward stocks of FDI 983090983088983089983090

Category Value Share

Oil and gas extraction 766 147

Manufacturing 1492 287

Petroleum and coal products manufacturing 377 72

Wholesale trade 395 76

Finance and insurance 699 134

Management of companies and enterprises 999 192

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

0

2

4

6

8

10

12

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) Chile Hong Kong

Peru amp Korea ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Chile Hong Kong Peru Korea

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983091983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

40

80

120

160

200

240

280

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Foreign direct investment (stock) in Canada from top three

countries ndash

Source Foreign Affairs Trade and Development Canada (2013c)

US Netherlands UK

0

2

4

6

8

10

12

201220112010200920082007

2 0 0 2 C A $ b

i l l i o n s

Figure Foreign direct investment (stock) in Canada from China

ndash

Source Foreign Affairs Trade and Development Canada (2013c)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

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983092983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983092983089

References

Abacus Data (983090983088983089983090 November 983090983088) Beyond the Canadian-American Border

lthttpabacusdatacawp-contentuploads983090983088983089983090983089983089Can-AM_Report_CABC_

Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5662

The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5862

The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5962

983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6062

The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6162

983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 39: Canadas Catch 22 State of Canada Us Relations in 2014

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983091983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983093 Canadian export growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 56 7 -281 9 106 = 5

China 101 6 65 1 187 3

UK 16 9 -73 2 358 2

Japan 202 3 -250 7 106 = 5

Mexico 179 4 -178 6 43 9

Netherlands -85 10 -255 8 183 4

South Korea 276 2 -80 3 52 8

Germany 160 5 -167 4 54 7

France 36 8 -174 5 -122 10

Brazil 706 1 -380 10 603 1

2011 2012Average

Rank Rank

US 104 8 27 2 02

China 270 4 152 1 155

UK 148 6 -02 4 90

Japan 161 5 -29 6 38

Mexico 94 9 -16 5 24

Netherlands 475 1 -55 7 53

South Korea 374 2 -272 10 70

Germany 05 10 -95 9 -09

France 311 3 23 3 15

Brazil 109 7 -92 8 189

Source Industry Canada (2013b) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983091

fraserinstituteorg

Table 983089983094 Canadarsquos merchandise imports top ten sources 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 1992 1 524 1633 1 511 1745 1 504

China 374 2 98 347 2 109 382 2 110

Mexico 157 3 41 145 3 45 190 3 55

Japan 134 4 35 108 4 34 115 4 33

Germany 111 5 29 95 5 30 97 5 28

UK 110 6 29 82 6 26 92 6 27

South Korea 53 9 14 52 7 16 53 7 15

Algeria 67 7 18 33 10 10 31 10 09

Italy 45 10 12 39 9 12 40 9 12

France 53 8 14 49 8 15 47 8 13

Total 3804 3194 3465

2011 2012Average

shareValue Rank Share Value Rank Share

US 1846 1 496 1922 1 506 508

China 402 2 108 417 2 110 107

Mexico 205 3 55 210 3 55 50

Japan 109 4 29 123 4 33 33

Germany 107 5 29 118 5 31 29

UK 86 6 23 70 6 18 25

South Korea 55 7 15 52 7 14 15

Algeria 46 9 12 49 8 13 12

Italy 43 10 11 43 9 11 12

France 46 8 12 41 10 11 13

Total 3723 3796

Source Industry Canada (2013b)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983091983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983095 Old and new trade prospectsmdashimport growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 29 8 -178 7 89 5

China 112 4 -70 2 123 3

Mexico 43 7 -77 4 337 1

Japan -11 10 -192 8 89 4

Germany 105 5 -149 6 44 7

UK 95 6 -252 9 141 2

South Korea 120 3 -14 1 36 8

Algeria 518 1 -511 10 -50 10

Italy 11 9 -132 5 48 6

France 191 2 -70 3 -35 9

2011 2012Average

Rank Rank

US 88 5 57 4 17

China 82 6 53 5 60

Mexico 111 3 39 6 91

Japan -29 9 151 1 01

Germany 132 2 117 2 50

UK -36 10 -173 10 -45

South Korea 76 7 -37 8 37

Algeria 533 1 91 3 116

Italy 95 4 23 7 09

France 22 8 -97 9 02

Source Industry Canada (2013b) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4262

The state of Canada-US relations in 983090983088983089983092 983091983093

fraserinstituteorg

In terms of overall Canadian outbound FDI stocks in the US remain

very high despite the recent US recession while growth in stock in Asia is

modest (figure 983089983097) When we examine Canadian FDI in the so-called BRIC

states we notice that investment in both China and India is relatively small

Canadian mining investment in Brazil is much larger (figure 983090983088) In fact when

we examine amounts of FDI we find that Canada is not really a big BRIC

investor other than Brazil Chile Hong Kong and Peru are larger FDI recipi-

ents than China and India (figure 983090983089)

In terms of FDI flowing into Canada we notice the very large share

(983090983096983094983093 percent) in manufacturing which indicates both the predominant

share of US FDI and the extensive integrated supply chains in Canada-US

manufacturing (table 983089983097) Even more than for outbound FDI inflow stocks

show very large US preponderance (figure 983090983090) Such continued concentra-

tion of US FDI in Canada suggests that Canadian trade diversification is not

just a decision to be made by Canadian producers

Like trade growth Chinese FDI growth in Canada is positive but the

overall numbers are small and do not show rapid growth in the last 983091 years

(figure 983090983091)

Table 983089983096 Top industries for outward stocks of FDI 983090983088983089983090

Category Value Share

Mining oil and gas extraction 1099 188

Oil and gas subcategory 542 93

Manufacturing 569 97

Finance and insurance 2334 399

Management of companies and enterprises 757 129

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983091983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

1

2

3

4

5

6

7

8

9

10

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n s

Figure Canadian foreign direct investment (stock) BRIC ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Brazil PRC India Russia

0

20

4060

80

100

120

140

160

180

200

220

240

260

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) various regions

ndash

Notes Excluding Mexico Canadian FDI to Mexico in 2012 was $557 billion

Foreign Direct Investment measures the purchase of various forms of capital stock abroad

However tax havens (Barbados Bermuda etc) are frequently found to be some of the highest

recipients of FDI In reality tax havens do not reflect economic growth as FDI figures invested

into tax havens are often reinvested back to the source country in a concept known as

round-tripping (Financial Post 2013) We have accounted for tax havens by removing them from

tables and figures in this section The numbers corresponding to Figure 19 would be Barbados

($593 billion) Bermuda ($118 billion) British Virgin Islands ($21 billion) Cayman Islands ($302

billion)

Source Foreign Affairs Trade and Development Canada (2013c)

US Europe Asia amp Oceania Central amp South America Africa

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4462

The state of Canada-US relations in 983090983088983089983092 983091983095

fraserinstituteorg

Table 983089983097 Top industries for inward stocks of FDI 983090983088983089983090

Category Value Share

Oil and gas extraction 766 147

Manufacturing 1492 287

Petroleum and coal products manufacturing 377 72

Wholesale trade 395 76

Finance and insurance 699 134

Management of companies and enterprises 999 192

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

0

2

4

6

8

10

12

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) Chile Hong Kong

Peru amp Korea ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Chile Hong Kong Peru Korea

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4562

983091983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

40

80

120

160

200

240

280

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Foreign direct investment (stock) in Canada from top three

countries ndash

Source Foreign Affairs Trade and Development Canada (2013c)

US Netherlands UK

0

2

4

6

8

10

12

201220112010200920082007

2 0 0 2 C A $ b

i l l i o n s

Figure Foreign direct investment (stock) in Canada from China

ndash

Source Foreign Affairs Trade and Development Canada (2013c)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4662

fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983092983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4862

fraserinstituteorg 983092983089

References

Abacus Data (983090983088983089983090 November 983090983088) Beyond the Canadian-American Border

lthttpabacusdatacawp-contentuploads983090983088983089983090983089983089Can-AM_Report_CABC_

Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5662

The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

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983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5862

The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5962

983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6062

The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 40: Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983091

fraserinstituteorg

Table 983089983094 Canadarsquos merchandise imports top ten sources 983090983088983088983096ndash983090983088983089983090 (983090983088983088983090 CA$ billions)

2008 2009 2010

Value Rank Share Value Rank Share Value Rank Share

US 1992 1 524 1633 1 511 1745 1 504

China 374 2 98 347 2 109 382 2 110

Mexico 157 3 41 145 3 45 190 3 55

Japan 134 4 35 108 4 34 115 4 33

Germany 111 5 29 95 5 30 97 5 28

UK 110 6 29 82 6 26 92 6 27

South Korea 53 9 14 52 7 16 53 7 15

Algeria 67 7 18 33 10 10 31 10 09

Italy 45 10 12 39 9 12 40 9 12

France 53 8 14 49 8 15 47 8 13

Total 3804 3194 3465

2011 2012Average

shareValue Rank Share Value Rank Share

US 1846 1 496 1922 1 506 508

China 402 2 108 417 2 110 107

Mexico 205 3 55 210 3 55 50

Japan 109 4 29 123 4 33 33

Germany 107 5 29 118 5 31 29

UK 86 6 23 70 6 18 25

South Korea 55 7 15 52 7 14 15

Algeria 46 9 12 49 8 13 12

Italy 43 10 11 43 9 11 12

France 46 8 12 41 10 11 13

Total 3723 3796

Source Industry Canada (2013b)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983091983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Table 983089983095 Old and new trade prospectsmdashimport growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 29 8 -178 7 89 5

China 112 4 -70 2 123 3

Mexico 43 7 -77 4 337 1

Japan -11 10 -192 8 89 4

Germany 105 5 -149 6 44 7

UK 95 6 -252 9 141 2

South Korea 120 3 -14 1 36 8

Algeria 518 1 -511 10 -50 10

Italy 11 9 -132 5 48 6

France 191 2 -70 3 -35 9

2011 2012Average

Rank Rank

US 88 5 57 4 17

China 82 6 53 5 60

Mexico 111 3 39 6 91

Japan -29 9 151 1 01

Germany 132 2 117 2 50

UK -36 10 -173 10 -45

South Korea 76 7 -37 8 37

Algeria 533 1 91 3 116

Italy 95 4 23 7 09

France 22 8 -97 9 02

Source Industry Canada (2013b) calculations by authors

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983093

fraserinstituteorg

In terms of overall Canadian outbound FDI stocks in the US remain

very high despite the recent US recession while growth in stock in Asia is

modest (figure 983089983097) When we examine Canadian FDI in the so-called BRIC

states we notice that investment in both China and India is relatively small

Canadian mining investment in Brazil is much larger (figure 983090983088) In fact when

we examine amounts of FDI we find that Canada is not really a big BRIC

investor other than Brazil Chile Hong Kong and Peru are larger FDI recipi-

ents than China and India (figure 983090983089)

In terms of FDI flowing into Canada we notice the very large share

(983090983096983094983093 percent) in manufacturing which indicates both the predominant

share of US FDI and the extensive integrated supply chains in Canada-US

manufacturing (table 983089983097) Even more than for outbound FDI inflow stocks

show very large US preponderance (figure 983090983090) Such continued concentra-

tion of US FDI in Canada suggests that Canadian trade diversification is not

just a decision to be made by Canadian producers

Like trade growth Chinese FDI growth in Canada is positive but the

overall numbers are small and do not show rapid growth in the last 983091 years

(figure 983090983091)

Table 983089983096 Top industries for outward stocks of FDI 983090983088983089983090

Category Value Share

Mining oil and gas extraction 1099 188

Oil and gas subcategory 542 93

Manufacturing 569 97

Finance and insurance 2334 399

Management of companies and enterprises 757 129

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983091983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

1

2

3

4

5

6

7

8

9

10

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n s

Figure Canadian foreign direct investment (stock) BRIC ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Brazil PRC India Russia

0

20

4060

80

100

120

140

160

180

200

220

240

260

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) various regions

ndash

Notes Excluding Mexico Canadian FDI to Mexico in 2012 was $557 billion

Foreign Direct Investment measures the purchase of various forms of capital stock abroad

However tax havens (Barbados Bermuda etc) are frequently found to be some of the highest

recipients of FDI In reality tax havens do not reflect economic growth as FDI figures invested

into tax havens are often reinvested back to the source country in a concept known as

round-tripping (Financial Post 2013) We have accounted for tax havens by removing them from

tables and figures in this section The numbers corresponding to Figure 19 would be Barbados

($593 billion) Bermuda ($118 billion) British Virgin Islands ($21 billion) Cayman Islands ($302

billion)

Source Foreign Affairs Trade and Development Canada (2013c)

US Europe Asia amp Oceania Central amp South America Africa

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4462

The state of Canada-US relations in 983090983088983089983092 983091983095

fraserinstituteorg

Table 983089983097 Top industries for inward stocks of FDI 983090983088983089983090

Category Value Share

Oil and gas extraction 766 147

Manufacturing 1492 287

Petroleum and coal products manufacturing 377 72

Wholesale trade 395 76

Finance and insurance 699 134

Management of companies and enterprises 999 192

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

0

2

4

6

8

10

12

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) Chile Hong Kong

Peru amp Korea ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Chile Hong Kong Peru Korea

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4562

983091983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

40

80

120

160

200

240

280

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Foreign direct investment (stock) in Canada from top three

countries ndash

Source Foreign Affairs Trade and Development Canada (2013c)

US Netherlands UK

0

2

4

6

8

10

12

201220112010200920082007

2 0 0 2 C A $ b

i l l i o n s

Figure Foreign direct investment (stock) in Canada from China

ndash

Source Foreign Affairs Trade and Development Canada (2013c)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4662

fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4762

983092983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4862

fraserinstituteorg 983092983089

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lthttpabacusdatacawp-contentuploads983090983088983089983090983089983089Can-AM_Report_CABC_

Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5662

The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5762

983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5862

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reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

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The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

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and we offer evidence-based research and education about policy options

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Te opinions expressed by the authors are those of the individuals

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As a healthy part of public discussion among fellow citizens who de-

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About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 41: Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg

Table 983089983095 Old and new trade prospectsmdashimport growth rates 983090983088983088983096ndash983090983088983089983090

2008 2009 2010

Rank Rank Rank

US 29 8 -178 7 89 5

China 112 4 -70 2 123 3

Mexico 43 7 -77 4 337 1

Japan -11 10 -192 8 89 4

Germany 105 5 -149 6 44 7

UK 95 6 -252 9 141 2

South Korea 120 3 -14 1 36 8

Algeria 518 1 -511 10 -50 10

Italy 11 9 -132 5 48 6

France 191 2 -70 3 -35 9

2011 2012Average

Rank Rank

US 88 5 57 4 17

China 82 6 53 5 60

Mexico 111 3 39 6 91

Japan -29 9 151 1 01

Germany 132 2 117 2 50

UK -36 10 -173 10 -45

South Korea 76 7 -37 8 37

Algeria 533 1 91 3 116

Italy 95 4 23 7 09

France 22 8 -97 9 02

Source Industry Canada (2013b) calculations by authors

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The state of Canada-US relations in 983090983088983089983092 983091983093

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In terms of overall Canadian outbound FDI stocks in the US remain

very high despite the recent US recession while growth in stock in Asia is

modest (figure 983089983097) When we examine Canadian FDI in the so-called BRIC

states we notice that investment in both China and India is relatively small

Canadian mining investment in Brazil is much larger (figure 983090983088) In fact when

we examine amounts of FDI we find that Canada is not really a big BRIC

investor other than Brazil Chile Hong Kong and Peru are larger FDI recipi-

ents than China and India (figure 983090983089)

In terms of FDI flowing into Canada we notice the very large share

(983090983096983094983093 percent) in manufacturing which indicates both the predominant

share of US FDI and the extensive integrated supply chains in Canada-US

manufacturing (table 983089983097) Even more than for outbound FDI inflow stocks

show very large US preponderance (figure 983090983090) Such continued concentra-

tion of US FDI in Canada suggests that Canadian trade diversification is not

just a decision to be made by Canadian producers

Like trade growth Chinese FDI growth in Canada is positive but the

overall numbers are small and do not show rapid growth in the last 983091 years

(figure 983090983091)

Table 983089983096 Top industries for outward stocks of FDI 983090983088983089983090

Category Value Share

Mining oil and gas extraction 1099 188

Oil and gas subcategory 542 93

Manufacturing 569 97

Finance and insurance 2334 399

Management of companies and enterprises 757 129

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

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0

1

2

3

4

5

6

7

8

9

10

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n s

Figure Canadian foreign direct investment (stock) BRIC ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Brazil PRC India Russia

0

20

4060

80

100

120

140

160

180

200

220

240

260

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) various regions

ndash

Notes Excluding Mexico Canadian FDI to Mexico in 2012 was $557 billion

Foreign Direct Investment measures the purchase of various forms of capital stock abroad

However tax havens (Barbados Bermuda etc) are frequently found to be some of the highest

recipients of FDI In reality tax havens do not reflect economic growth as FDI figures invested

into tax havens are often reinvested back to the source country in a concept known as

round-tripping (Financial Post 2013) We have accounted for tax havens by removing them from

tables and figures in this section The numbers corresponding to Figure 19 would be Barbados

($593 billion) Bermuda ($118 billion) British Virgin Islands ($21 billion) Cayman Islands ($302

billion)

Source Foreign Affairs Trade and Development Canada (2013c)

US Europe Asia amp Oceania Central amp South America Africa

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The state of Canada-US relations in 983090983088983089983092 983091983095

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Table 983089983097 Top industries for inward stocks of FDI 983090983088983089983090

Category Value Share

Oil and gas extraction 766 147

Manufacturing 1492 287

Petroleum and coal products manufacturing 377 72

Wholesale trade 395 76

Finance and insurance 699 134

Management of companies and enterprises 999 192

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

0

2

4

6

8

10

12

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) Chile Hong Kong

Peru amp Korea ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Chile Hong Kong Peru Korea

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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0

40

80

120

160

200

240

280

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Foreign direct investment (stock) in Canada from top three

countries ndash

Source Foreign Affairs Trade and Development Canada (2013c)

US Netherlands UK

0

2

4

6

8

10

12

201220112010200920082007

2 0 0 2 C A $ b

i l l i o n s

Figure Foreign direct investment (stock) in Canada from China

ndash

Source Foreign Affairs Trade and Development Canada (2013c)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

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Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

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References

Abacus Data (983090983088983089983090 November 983090983088) Beyond the Canadian-American Border

lthttpabacusdatacawp-contentuploads983090983088983089983090983089983089Can-AM_Report_CABC_

Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5662

The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

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983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5962

983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6062

The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 42: Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983093

fraserinstituteorg

In terms of overall Canadian outbound FDI stocks in the US remain

very high despite the recent US recession while growth in stock in Asia is

modest (figure 983089983097) When we examine Canadian FDI in the so-called BRIC

states we notice that investment in both China and India is relatively small

Canadian mining investment in Brazil is much larger (figure 983090983088) In fact when

we examine amounts of FDI we find that Canada is not really a big BRIC

investor other than Brazil Chile Hong Kong and Peru are larger FDI recipi-

ents than China and India (figure 983090983089)

In terms of FDI flowing into Canada we notice the very large share

(983090983096983094983093 percent) in manufacturing which indicates both the predominant

share of US FDI and the extensive integrated supply chains in Canada-US

manufacturing (table 983089983097) Even more than for outbound FDI inflow stocks

show very large US preponderance (figure 983090983090) Such continued concentra-

tion of US FDI in Canada suggests that Canadian trade diversification is not

just a decision to be made by Canadian producers

Like trade growth Chinese FDI growth in Canada is positive but the

overall numbers are small and do not show rapid growth in the last 983091 years

(figure 983090983091)

Table 983089983096 Top industries for outward stocks of FDI 983090983088983089983090

Category Value Share

Mining oil and gas extraction 1099 188

Oil and gas subcategory 542 93

Manufacturing 569 97

Finance and insurance 2334 399

Management of companies and enterprises 757 129

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983091983094 The state of Canada-US relations in 983090983088983089983092

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0

1

2

3

4

5

6

7

8

9

10

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n s

Figure Canadian foreign direct investment (stock) BRIC ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Brazil PRC India Russia

0

20

4060

80

100

120

140

160

180

200

220

240

260

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) various regions

ndash

Notes Excluding Mexico Canadian FDI to Mexico in 2012 was $557 billion

Foreign Direct Investment measures the purchase of various forms of capital stock abroad

However tax havens (Barbados Bermuda etc) are frequently found to be some of the highest

recipients of FDI In reality tax havens do not reflect economic growth as FDI figures invested

into tax havens are often reinvested back to the source country in a concept known as

round-tripping (Financial Post 2013) We have accounted for tax havens by removing them from

tables and figures in this section The numbers corresponding to Figure 19 would be Barbados

($593 billion) Bermuda ($118 billion) British Virgin Islands ($21 billion) Cayman Islands ($302

billion)

Source Foreign Affairs Trade and Development Canada (2013c)

US Europe Asia amp Oceania Central amp South America Africa

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983095

fraserinstituteorg

Table 983089983097 Top industries for inward stocks of FDI 983090983088983089983090

Category Value Share

Oil and gas extraction 766 147

Manufacturing 1492 287

Petroleum and coal products manufacturing 377 72

Wholesale trade 395 76

Finance and insurance 699 134

Management of companies and enterprises 999 192

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

0

2

4

6

8

10

12

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) Chile Hong Kong

Peru amp Korea ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Chile Hong Kong Peru Korea

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983091983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

40

80

120

160

200

240

280

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Foreign direct investment (stock) in Canada from top three

countries ndash

Source Foreign Affairs Trade and Development Canada (2013c)

US Netherlands UK

0

2

4

6

8

10

12

201220112010200920082007

2 0 0 2 C A $ b

i l l i o n s

Figure Foreign direct investment (stock) in Canada from China

ndash

Source Foreign Affairs Trade and Development Canada (2013c)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4762

983092983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4862

fraserinstituteorg 983092983089

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Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5662

The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 43: Canadas Catch 22 State of Canada Us Relations in 2014

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983091983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

1

2

3

4

5

6

7

8

9

10

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n s

Figure Canadian foreign direct investment (stock) BRIC ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Brazil PRC India Russia

0

20

4060

80

100

120

140

160

180

200

220

240

260

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) various regions

ndash

Notes Excluding Mexico Canadian FDI to Mexico in 2012 was $557 billion

Foreign Direct Investment measures the purchase of various forms of capital stock abroad

However tax havens (Barbados Bermuda etc) are frequently found to be some of the highest

recipients of FDI In reality tax havens do not reflect economic growth as FDI figures invested

into tax havens are often reinvested back to the source country in a concept known as

round-tripping (Financial Post 2013) We have accounted for tax havens by removing them from

tables and figures in this section The numbers corresponding to Figure 19 would be Barbados

($593 billion) Bermuda ($118 billion) British Virgin Islands ($21 billion) Cayman Islands ($302

billion)

Source Foreign Affairs Trade and Development Canada (2013c)

US Europe Asia amp Oceania Central amp South America Africa

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983095

fraserinstituteorg

Table 983089983097 Top industries for inward stocks of FDI 983090983088983089983090

Category Value Share

Oil and gas extraction 766 147

Manufacturing 1492 287

Petroleum and coal products manufacturing 377 72

Wholesale trade 395 76

Finance and insurance 699 134

Management of companies and enterprises 999 192

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

0

2

4

6

8

10

12

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) Chile Hong Kong

Peru amp Korea ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Chile Hong Kong Peru Korea

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983091983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

40

80

120

160

200

240

280

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Foreign direct investment (stock) in Canada from top three

countries ndash

Source Foreign Affairs Trade and Development Canada (2013c)

US Netherlands UK

0

2

4

6

8

10

12

201220112010200920082007

2 0 0 2 C A $ b

i l l i o n s

Figure Foreign direct investment (stock) in Canada from China

ndash

Source Foreign Affairs Trade and Development Canada (2013c)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983092983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983092983089

References

Abacus Data (983090983088983089983090 November 983090983088) Beyond the Canadian-American Border

lthttpabacusdatacawp-contentuploads983090983088983089983090983089983089Can-AM_Report_CABC_

Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5662

The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5862

The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5962

983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6062

The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6162

983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 44: Canadas Catch 22 State of Canada Us Relations in 2014

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983091983095

fraserinstituteorg

Table 983089983097 Top industries for inward stocks of FDI 983090983088983089983090

Category Value Share

Oil and gas extraction 766 147

Manufacturing 1492 287

Petroleum and coal products manufacturing 377 72

Wholesale trade 395 76

Finance and insurance 699 134

Management of companies and enterprises 999 192

Note Value in 2002 CA$ billions Categories in North American Industry Classification System

Source Foreign Affairs Trade and Development Canada (2013c)

0

2

4

6

8

10

12

2012201120102009200820072006

2 0 0 2 C A $ b i l l i o n

s

Figure Canadian foreign direct investment (stock) Chile Hong Kong

Peru amp Korea ndash

Source Foreign Affairs Trade and Development Canada (2013c)

Chile Hong Kong Peru Korea

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983091983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

40

80

120

160

200

240

280

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Foreign direct investment (stock) in Canada from top three

countries ndash

Source Foreign Affairs Trade and Development Canada (2013c)

US Netherlands UK

0

2

4

6

8

10

12

201220112010200920082007

2 0 0 2 C A $ b

i l l i o n s

Figure Foreign direct investment (stock) in Canada from China

ndash

Source Foreign Affairs Trade and Development Canada (2013c)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983092983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg 983092983089

References

Abacus Data (983090983088983089983090 November 983090983088) Beyond the Canadian-American Border

lthttpabacusdatacawp-contentuploads983090983088983089983090983089983089Can-AM_Report_CABC_

Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5662

The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5762

983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5862

The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5962

983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6062

The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 45: Canadas Catch 22 State of Canada Us Relations in 2014

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983091983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

0

40

80

120

160

200

240

280

20122011201020092008200720062005

2 0 0 2 C A $ b i l l i o n

s

Figure Foreign direct investment (stock) in Canada from top three

countries ndash

Source Foreign Affairs Trade and Development Canada (2013c)

US Netherlands UK

0

2

4

6

8

10

12

201220112010200920082007

2 0 0 2 C A $ b

i l l i o n s

Figure Foreign direct investment (stock) in Canada from China

ndash

Source Foreign Affairs Trade and Development Canada (2013c)

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4662

fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4762

983092983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4862

fraserinstituteorg 983092983089

References

Abacus Data (983090983088983089983090 November 983090983088) Beyond the Canadian-American Border

lthttpabacusdatacawp-contentuploads983090983088983089983090983089983089Can-AM_Report_CABC_

Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5662

The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5862

The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5962

983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6062

The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6162

983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 46: Canadas Catch 22 State of Canada Us Relations in 2014

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4662

fraserinstituteorg 983091983097

Conclusion the bilateral anddiversification agenda

China was Canadarsquos second largest trading partner in 983090983088983089983090 with net merchan-

dise totaling $983095983088 billion but this was far behind US net merchandise trade at

$983093983095983090983093983097 billion (Industry Canada 983090983088983089983091b) Both trade and investment patterns

suggest that change will be slow Canadarsquos foreign investment review process

has signaled its concern with Chinarsquos State-Owned Enterprisesrsquo predominant

involvement in energy projects Until China proceeds with more privatization

of this sector or Canadarsquos changes its criteria Chinese FDI levels in Canada

will remain small Te flattening of FDI flows in the 983090983088983089983088ndash983090983088983089983090 period show

this pattern (figure 983090983091)

European economies remain among Canadarsquos top export destinations

and import sources with at least four European countries consistently rank-

ing in the top ten Te successful completion of the Comprehensive Economic

rade Agreement (CEA) with the European Union in 983090983088983089983091 bodes well for

stronger trade growth with these countries A joint report between Canada

and the European Union issued in 983090983088983088983097 predicts the gains from trade over

seven years to be 991404983096983090 billion and 991404983089983089983094 billion respectively (Foreign Affairs

rade and Development Canada 983090983088983089983090b) rade liberalization in services and

the elimination of tariffs on goods contribute the most to these GDP gains

Most recent estimates predict that Canadian exports to the EU will increase

by 983090983088983094 percent and that EU exports to Canada will increase by 983090983092983091 percent

(Foreign Affairs rade and Development Canada 983090983088983089983090b)

Te boost CEA offers in terms of Canadarsquos trade diversification is not

so much in volume as it is in perception confidence and possibly in terms

of strategic trade position in North America As both Mexico and Canada

now have EU trade agreements they may be in a better position to leveragethis advantage within NAFA as the US is pursuing a ransatlantic rade

and Investment Partnership (IP) with the EU Another boost offered by

CEA is that the agreement calls for lowering regulatory barriers in several

sectors It is both inside NAFA in IP and in a potential rans Pacific

Partnership trade agreement that such mutual recognition on regulations or

common standards can boost trade

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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fraserinstituteorg

Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4862

fraserinstituteorg 983092983089

References

Abacus Data (983090983088983089983090 November 983090983088) Beyond the Canadian-American Border

lthttpabacusdatacawp-contentuploads983090983088983089983090983089983089Can-AM_Report_CABC_

Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5662

The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

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983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5862

The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5962

983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6062

The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6162

983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 47: Canadas Catch 22 State of Canada Us Relations in 2014

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4762

983092983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Ultimately Canadarsquos objectives intersect at the point where frustration

with the US meets the limits of diversification Te most optimal short-term

outcome for Canada remains a vibrant US economy coupled with lower trade

barriers in North America Helping to create a strategic focus at the highest

levels in Washington for lowering regulatory barriers inside North America

must remain a priority for Canadian officials as progress on this file benefits

Canadian consumers and producers most

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4862

fraserinstituteorg 983092983089

References

Abacus Data (983090983088983089983090 November 983090983088) Beyond the Canadian-American Border

lthttpabacusdatacawp-contentuploads983090983088983089983090983089983089Can-AM_Report_CABC_

Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5662

The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5862

The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5962

983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6062

The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6162

983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6262

The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 48: Canadas Catch 22 State of Canada Us Relations in 2014

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4862

fraserinstituteorg 983092983089

References

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lthttpabacusdatacawp-contentuploads983090983088983089983090983089983089Can-AM_Report_CABC_

Nov983090983088983089983090_FINALpdfgt

Angus Reid (983090983088983089983090 May 983089983095) Americans and Canadians Feel Tey Have Lost

Out with NAFA Press Releaselthttpvcuvisioncriticalcomwp-contentuploads983090983088983089983090983088983093Americans-and-

Canadians-Feel-They-Have-Lost-Out-with-NAFTApdfgt

Baker J S and M Byers (983090983088983089983090) Crossed Lines Te Curious Case of

the Beaufort Sea Maritime Boundary Dispute Ocean Development amp

International Law 983092983091 983089 983095983088ndash983097983093

Baker S R N Bloom and S J Davis (983090983088983089983091) Measuring Economic Policy

Uncertainty Center for Economic Performance

Bank of Canada (983090983088983089983091a) Consumer Price Index 983090983088983088983088 to Present

lthttpwwwbankofcanadacaratesprice-indexescpigt

Bank of Canada (983090983088983089983091b) Monthly and annual average exchange rates

lthttpwwwbankofcanadacaratesexchangeexchange-rates-in-pdfgt

Bank of Canada (983090983088983089983091c) Monthly Average Exchange Rates 983089983088-Year Lookup

lthttpwwwbankofcanadacaratesexchangemonthly-average-lookupgt

Barua B and N Esmail (983090983088983089983091) Te Case for Mutual Recognition of Drug

Approvals Studies in Health Policy Fraser Institute

Blanchfield M (983090983088983089983091 November 983089983094) Prescription drug costs to rise due to

EU deal Te Vancouver Sun lthttpwwwvancouversuncombusinessPrescrip

tion+drug+costs+rise+deal983097983089983095983092983090983096983090storyhtmlgt

Websites retrievable as of January 10486251048626 104862698308810486251048627

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 4962

983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5662

The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5762

983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983089

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Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

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CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983090 The state of Canada-US relations in 983090983088983089983092

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Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

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Jack Pirie

Con Riley

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8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

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As a healthy part of public discussion among fellow citizens who de-

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8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 49: Canadas Catch 22 State of Canada Us Relations in 2014

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983092983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Brown M W and W P Anderson (983090983088983089983090 November 983089983097) rucking Across

the Border Te Relative Cost of Cross-border and Domestic rucking 983090983088983088983092

to 983090983088983088983097 Statistics Canadalthttpwww983093statcangccabsolcolc-celolc-celcat

no=983089983089F983088983088983090983095MWE983090983088983089983090983088983096983089amplang=enggt

Bureau of ransportation Statistics (983090983088983089983091) North American ransborder

Freight Data Indexed Data lthttptransborderbtsgovprograms

internationaltransborderindexIndex_Interfacehtmlgt

Canada Border Services Agency (983090983088983089983091 September 983092) Integrated Cargo

Security Strategy (ICSS) Overview

lthttpwwwcbsa-asfcgccatrade-commerceicss-sisficss-sisf-menu-enghtmlgt

Te Canadian Press (983090983088983089983090 July 983089983096) Canada Claims Victory in Softwood

Dispute lthttpmetronewscanewscanada983091983088983090983089983092983091canada-claims-victory-in-

softwood-disputegt

Te Canadian Press (983090983088983089983091a June 983095) Canada Treatens to Impose ariffs on

US Foods Furniture in Meat-Labelling Dispute

lthttpbusinessfinancialpostcom983090983088983089983091983088983094983088983095canada-threatens-to-impose-tariffs-

on-u-s-foods-furniture-in-meat-labelling-disputegt

Te Canadian Press (983090983088983089983091b July 983089983095) Canada-EU rade Deal May Come in

983090983088983089983092 But Will be Worth the Wait Says Envoy

lthttpwwwmontrealgazettecombusinessCanadaEU+trade+deal+come+983090983088983089983092+

will+worth+wait+says+envoy983096983094983095983090983095983095983089storyhtmlgt

Te Canadian Press (983090983088983089983091c July 983091) EU Envoy Prods Canada to Finalize

Free rade Deal lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983095983088983091pol-cp-

canada-eu-trade-talks-pushhtmlgt

Te Canadian Press (983090983088983089983091d February 983090983095) US Program Cuts Treaten

Border Pact with Canada lthttpwwwcbccanewspoliticsstory983090983088983089983091983088983090983090983095

canada-us-beyond-the-border-pact-federal-programshtmlgt

Cascade Gateway Data (983090983088983089983091) Border Data Warehouse

lthttpwwwcascadegatewaydatacomCustomQuerygt

CBC News (983090983088983088983096 October 983091983089) Wheat Board Wins ariff Dispute with US

lthttpwwwcbccanewscanadamanitobastory983090983088983088983096983089983088983091983089wheat-tariffshtmlgt

CBC News (983090983088983089983090 January 983090983091) Softwood Lumber Agreement with US

Extended lthttpwwwcbccanewspoliticsstory983090983088983089983090983088983089983090983091pol-canada-us-

trade-softwood-lumberhtmlgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5062

The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5662

The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5862

The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5962

983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6062

The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 50: Canadas Catch 22 State of Canada Us Relations in 2014

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983092983091

fraserinstituteorg

Congressional Budget Office (983090983088983089983091 August 983089983090) Historical Budget Datamdash

August 983090983088983089983091 lthttpwwwcbogovpublication983092983092983093983088983095gt

Consumer Energy Alliance (983090983088983089983091 June 983090983088) Keystone XL By Te Numbers

lthttpwwwtheenergyvoicecom983096983095983092gt

Embassy of the United States Ottawa Canada (983090983088983089983091) Special 983091983088983089 Report

(Intellectual Property Rights) lthttpcanadausembassygovkey-reports

special-983091983088983089-report-intellectual-property-rightshtmlgt

Financial Post (983090983088983089983091 June 983090983094) ax Havens Triving as Efforts to Stop Flow

of Money Offshore Fail UN lthttpbusinessfinancialpostcom983090983088983089983091983088983094983090983094tax-

havens-thriving-as-efforts-to-stop-flow-of-money-offshore-fail-ungt

Food Marketing Institute (983090983088983089983091 May 983090983091) FMI Statement on US

Department of Agriculturersquos New Rule Regarding Mandatory Country of

Origin Labeling Requirements for Meat lthttpwwwfmiorgnews-roomnews-archiveview983090983088983089983091983088983093983090983091fmi-statement-

on-us-department-of-agriculture-s-new-rule-regarding-mandatory-country-of-

origin-labeling-requirements-for-meatgt

Foreign Affairs rade and Development Canada (983090983088983089983090a July 983089983097) Canada

Applauds Softwood Lumber Ruling on British Columbiarsquos imber-Pricing

System News Release lthttpwwwinternationalgccamedia_commerce

commnews-communiques983090983088983089983090983088983095983089983096aaspxgt

Foreign Affairs rade and Development Canada (983090983088983089983090b April 983089983091)

Canada-European Union Joint Report owards a Comprehensive Economic

Agreement lthttpwwwinternationalgccatrade-agreements-accords-

commerciauxagr-acceu-uecan-eu-report-can-ue-rapportaspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091a June 983094) Canadarsquos

International rade in Services lthttpwwwinternationalgccaeconomist-

economisteassetspdfsDatafacts-fichesPfact_ENG_Servicespdfgt

Foreign Affairs rade and Development Canada (983090983088983089983091b April 983089983093) Dispute

Settlement Cases Related to NAFA Chapter 983089983097

lthttpwwwinternationalgccatrade-agreements-accords-commerciauxtopics-domainesdisp-diffwheataspxlang=enggt

Foreign Affairs rade and Development Canada (983090983088983089983091c July 983089983095) Foreign

Direct Investment Statistics lthttpwwwinternationalgccaeconomist-

economistestatistics-statistiquesinvestments-investissementsaspxgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5662

The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5762

983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5862

The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5962

983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6062

The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 51: Canadas Catch 22 State of Canada Us Relations in 2014

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5162

983092983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Gallup Poll (983090983088983089983090 February 983089983094) Americans Give Record-High Ratings to

Several US Allies lthttpwwwgallupcompoll983089983093983090983095983091983093americans-give-record-

high-ratings-several-alliesaspxgt

Gallup Poll (983090983088983089983091 June 983094) In US More See China as Friend Tan Foe

lthttpwwwgallupcompoll983089983094983090983097983091983093us-more-see-china-friend-foeaspxgt

Government of Canada (983090983088983089983091a July 983089983094) Canada-US Agreement on

Government Procurement lthttpwwwcanadainternationalgccasell983090usgov-

vendreaugouvusaprocurement-marchesagreement-accordaspxlang=enggt

Government of Canada (983090983088983089983091b) Canadarsquos Economic Action Plan

lthttpwwwactionplangccagt

Government of Canada (983090983088983089983091c) Beyond the Border Action Plan News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsbtb_news_october_983090983088983089983091pdfgt

Government of Canada (983090983088983089983091d) Regulatory Cooperation Council News

October 983090983088983089983091

lthttpactionplangccasitesdefaultfilespdfsrcc_news_october_983090983088983089983091pdfgt

Graves F R Pastor and M Basaacutentildeez (983090983088983089983091) Te NAFA Promise and the

North American Reality Te Gap and How to Narrow It Center for North

American Studies

Green K P and D Furchtgott-Roth (983090983088983089983091) Intermodal Safety in the

ransport of Oil Studies in Energy ransportation Fraser InstitutelthttpswwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsintermodal-safety-in-the-transport-of-oilpdfgt

Harris Decima (983090983088983089983090 July) Obama Remains Extremely Popular in Canada

lthttpwwwharrisdecimacomnewsreleases983090983088983089983090983088983095983089983092983092983094-obama-remains-

extremely-popular-canadagt

Holden M (983090983088983089983088 July 983090983090) Canadian rade and Investment Activity

CanadandashAlgeria Library of Parliament

lthttpwwwparlgccaContentLOPResearchPublications983090983088983089983088-983092983093-epdfgt

Hussain Y (983090983088983089983091 August 983090983097) Investments in Western Canada Oil Rail

erminals op USD983089B Report Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983096983090983097investments-in-western-canada-oil-

rail-terminals-top-usd983089b-report__lsa=983091dab-983088983093eagt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5662

The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5762

983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5862

The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5962

983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6062

The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6162

983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6262

The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 52: Canadas Catch 22 State of Canada Us Relations in 2014

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5262

The state of Canada-US relations in 983090983088983089983092 983092983093

fraserinstituteorg

Industry Canada (983090983088983089983091a January 983090983091) Capital Investment Oil and Gas

Extraction (NAICS 983090983089983089)

lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983089983089invehtmlgt

Industry Canada (983090983088983089983091b February 983095) International rade Utilities (NAICS

983090983090) lthttpwwwicgccacis-siccis-sicnsfIDEcis-sic983090983090intehtmlgt

Kappler M H Reisen M Schularick and E urkisch (983090983088983089983089) Te

Macroeconomic Effects of Large Exchange Rate Appreciations Organisation

for Economic Co-operation and Development

lthttpwwwoecd-ilibraryorgfrdevelopmentthe-macroeconomic-effects-of-

large-exchange-rate-appreciations_983093kgglsnbscbs-engt

Komarow S and E Martin (983090983088983089983091 March 983090983090) Mexico Envisions Nafta-EU

rade Agreement Foreign Minister Says Bloomberg News

lthttpwwwbloombergcomnews983090983088983089983091-983088983091-983090983091mexico-envisions-nafta-eu-trade-

agreement-foreign-minister-sayshtmlgt

Lexchin J and M-A Gagnon (983090983088983089983091) CEA and Intellectual Property

Te Debate over Pharmaceutical Patents Canada-Europe ransatlantic

Dialogue 983095

Lewis J (983090983088983089983091b September 983097) Keystone XL lsquoNo Longer a Necessityrsquo For

Canadian Producers Analyst Financial Post

lthttpbusinessfinancialpostcom983090983088983089983091983088983097983088983097keystone-xl-no-longer-a-necessity-

for-canadian-producers-analyst__lsa=983091dab-983088983093eagt

Matthiesen B (983090983088983089983089 November 983097) Recent Buy American Provisions What you need to know Canadian Manufacturers and Exporters

lthttpwwwcme-meccalid=JCKNC-E983095983092983090G-

983089W983094JAampcomaction=showampcid=983094C983093CK-983090G983093983093Y-WIB983096Rgt

Millington D and C A Murillo (983090983088983089983091) Canadian Oil Sands Supply

Costs and Development Projects (983090983088983089983090-983090983088983092983094) Canadian Energy Research

Institute lthttpwwwcericaimagesstories983090983088983089983091-983088983094-983089983088_CERI_Study_983089983091983091_-_Oil_

Sands_Update_983090983088983089983090-983090983088983092983094pdfgt

Moens A (983090983088983089983088) Skating on Tin Ice Canadian-American Relations in983090983088983089983088 and 983090983088983089983089 Studies in Canada-US Relations Fraser Institute

Moens A and J Clemens (eds) (983090983088983089983091) Te US Election 983090983088983089983090 Implications

for Canada Fraser Institute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5662

The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5762

983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5862

The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5962

983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6062

The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6162

983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6262

The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 53: Canadas Catch 22 State of Canada Us Relations in 2014

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5362

983092983094 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Moens A and N Gabler (983090983088983089983089) What Congress Tinks of Canada Studies

in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationswhatcongressthinksofcanadapdfgt

Moens A and N Gabler (983090983088983089983090) Measuring the Costs of the Canada-US

Border Studies in Canada-US Relations Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researchpublicationsmeasuring-the-costs-of-the-canada-us-borderpdfgt

Moens A and A V Leon (983090983088983089983090) Mandatory Country of Origin Labeling

Te Case For a Harmonized Canada-US Beef and Pork Regulatory Regime

Fraser Forum (JulyAugust) Fraser Institute

lthttpwwwfraserinstituteorguploadedFilesfraser-caContentresearch-news

researcharticlesmandatory-country-of-origin-labeling-ff983088983095983089983090pdfgt

Murse (983090983088983089983091) Hillary Clinton on the Keystone XL Pipeline lthttpuspoliticsaboutcomodCampaignsElectionsaHillary-Clinton-On-The-

Keystone-Xl-Pipelinehtmgt

Te New York imes (983090983088983089983091 July 983090983096) Interview With President Obama

lthttpwwwnytimescom983090983088983089983091983088983095983090983096uspoliticsinterview-with-president-obama

htmlref=politicsgt

Office of the United States rade Representative (983090983088983089983091 May 983089) USR

Releases Annual Special 983091983088983089 Report on Intellectual Property Rights

lthttpwwwustrgovabout-uspress-officepress-releases983090983088983089983091mayustr-releases-

annual-special-983091983088983089-reportgt

Organisation for Economic Co-operation and Development [OECD]

(983090983088983089983091) Economics Key ables from OECD

lthttpwwwoecd-ilibraryorgeconomicseconomics-key-tables-from-oecd_983090983088983095983092983091

983096983092xjsessionid=983095b983089983088tnihdk983088983089qx-oecd-live-983088983089gt

Pew Global (983090983088983089983091) Opinion of the United States

lthttpwwwpewglobalorgdatabaseindicator983089country983091983097gt

Robertson C (983090983088983089983091 April 983091) North Korearsquos Treats Show that CanadaNeeds to be Part of US Missile Defence Pact Te Globe and Mail

lthttpwwwtheglobeandmailcomcommentarynorth-koreas-threats-show-that-

canada-needs-to-be-part-of-us-missile-defence-pactarticle983089983088983095983089983091983094983089983090gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5662

The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5762

983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5862

The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5962

983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6062

The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6162

983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6262

The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 54: Canadas Catch 22 State of Canada Us Relations in 2014

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5462

The state of Canada-US relations in 983090983088983089983092 983092983095

fraserinstituteorg

Statistics Canada (983090983088983089983089 February 983090983093) ravellers to Canada by Country of

Origin op 983089983093 Countries of Origin

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983096a-enghtmgt

Statistics Canada (983090983088983089983091a November 983095) Canadian International

Merchandise rade Database lthttpwww983093statcangccacimt-cicmsection-se

ctionlang=engampdataTransformation=983088amprefYr=983090983088983089983090amprefMonth=983096ampfreq=983089983090ampcountry

Id=983088ampusaState=983097ampprovId=983089ampretrieve=Retrieveampsave=nullamptrade=nullgt

Statistics Canada (983090983088983089983091b April 983093) Canadian International Merchandise

rade February 983090983088983089983091 Te Daily

lthttpwwwstatcangccadaily-quotidien983089983091983088983092983088983093dq983089983091983088983092983088983093b-enghtmgt

Statistics Canada (983090983088983089983091c) Merchandise Imports and Exports Customs and

Balance of Payments Basis CANSIM able 983090983090983096-983088983088983093983096

lthttpwww983093statcangccacansima983090983094lang=engampretrLang=engampid=983090983090983096983088983088983093983096ampta

bMode=dataTableampsrchLan=-983089ampp983089=-983089ampp983090=983097gt

Statistics Canada (983090983088983089983091d August 983094) Imports Exports and rade Balance

of Goods on a Balance-of-Payments Basis by Country or Country Grouping

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089gblec983088983090a-enghtmgt

Statistics Canada (983090983088983089983091e July 983089983096) Non-Resident ravellers Entering

Canada

lthttpwwwstatcangccatables-tableauxsum-soml983088983089cst983088983089arts983091983092-enghtmgt

Statistics Canada (983090983088983089983091f February 983090983095) Private and Public Investment 983090983088983089983091

Te Dailylthttpwwwstatcangccadaily-quotidien983089983091983088983090983090983095dq983089983091983088983090983090983095a-enghtmgt

Statistics Canada (983090983088983089983091g June 983095) Business Sector Labour Productivity and

Related Variables for Canada and the United States

lthttpwwwstatcangccadaily-quotidien983089983091983088983094983088983095t983089983091983088983094983088983095b983088983088983089-enghtmgt

D Economics (983090983088983089983090 February 983090983092) Strong Canadian Dollar Ahead But

Mind the Potholes

lthttpwwwtdcomdocumentPDFeconomicsspeciallp983088983090983089983090_can_dollarpdfgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091a October 983091983088)

Consumer Price Index ltftpftpblsgovpubspecialrequestscpicpiaitxtgt

US Department of Labor Bureau of Labor Statistics (983090983088983089983091b November 983090)

Labor Force Statistics from the Current Population Survey

lthttpdatablsgovtimeseriesLNS983089983092983088983088983088983088983088983088gt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5662

The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5762

983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5862

The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5962

983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6062

The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6162

983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6262

The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 55: Canadas Catch 22 State of Canada Us Relations in 2014

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5562

983092983096 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Waldie P (983090983088983089983091 October 983089983096) Canada EU Unveil lsquoHistoricrsquo Free-trade

Agreement Te Globe and Mail

lthttpwwwtheglobeandmailcomnewspoliticseu-harperarticle983089983092983097983090983092983097983089983093gt

Te World Bank (983090983088983089983091a) Merchandise trade ( of GDP)

lthttpdataworldbankorgindicatorTGVALTOTLGDZSgt

Te World Bank (983090983088983089983091b) United States

lthttpdataworldbankorgcountryunited-statesgt

Young J (983090983088983089983091 April 983089983090) Te Worst Four Years Of GDP Growth In

History Yes We Should Be Worried Forbes

lthttpwwwforbescomsitesrealspin983090983088983089983091983088983092983089983090the-worst-four-years-of-gdp-

growth-in-history-yes-we-should-be-worriedgt

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5662

The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5762

983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5862

The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5962

983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6062

The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6162

983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6262

The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 56: Canadas Catch 22 State of Canada Us Relations in 2014

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5662

The state of Canada-US relations in 983090983088983089983092 983092983097

fraserinstituteorg

About the authors

Alexander MoensAlexander Moens (wwwalexandermoenscom) is a professor of Political

Science at Simon Fraser University in Vancouver Canada and a Senior Fellow

in American Policy at the Fraser Institute Moens is the author of Te Foreign

Policy of George W Bush Values Strategy Loyalty (983090983088983088983092) and Foreign Policy

Under Carter (983089983097983097983088) as well as editor or co-editor of Disconcerted Europe Te

Search for a New Security Architecture (983089983097983097983092) NAO and European Security

Alliance Politics from the Cold Warrsquos End to the Age of errorism (983090983088983088983091) and

Immigration Policy and the errorist Treat in Canada and the United States

(983090983088983088983096) Moens has published in numerous journals and newspapers His

most recent publications include ldquoObamarsquos Foreign Policy Change Without

Convictionrdquo in Nikolaos zifakis (ed) International Politics in imes of

Change (Berlin and Heidelberg 983090983088983089983090) ldquoNAO and the EU Canadarsquos Security

Interests in Europe and Beyondrdquo in David S McDonough (ed) Canadarsquos

National Security in the Post-983097983089983089 World (oronto University Press 983090983088983089983090)

ldquoCanadian Interests in Building Cooperation Between NAO and the African

Unionrdquo with Jimmy Peterson in Brooke Smith-Windsor (ed) AUndashNAO

Collaboration Implications and Prospects (NAO Defence College 983090983088983089983091)

and ldquoGeorge W Bush Decision Maker ake wordquo Chapter 983094 in Donald R

Kelley and odd G Shields (eds) aking the Measure Te Presidency of

George W Bush (exas AampM University Press 983090983088983089983091)

Alex BartosAlex Bartos holds a BSS degree in Economics from the University of Ottawa

and a BA in Political Science from Simon Fraser University He has worked

for both federal and provincial elected representatives founded and was

president of the SFU Conservative Club and acted in an executive capacity

for the BC Conservative Youth Association His specific research interests

include Canada-US trade policy and international trade relations Mr Bartos

is the recipient of several honours for both his academic and extracurricular

volunteer activities

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5762

983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5862

The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5962

983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6062

The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6162

983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6262

The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 57: Canadas Catch 22 State of Canada Us Relations in 2014

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5762

983093983088 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Acknowledgments

Te authors are indebted to the anonymous reviewers for their comments

suggestions and insights Any remaining errors or oversights are the sole

responsibility of the authors As the researchers worked independently the

views and conclusions expressed in this paper do not necessarily reflect those

of the Board of rustees of the Fraser Institute the staff or supporters

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5862

The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5962

983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6062

The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6162

983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6262

The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 58: Canadas Catch 22 State of Canada Us Relations in 2014

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5862

The state of Canada-US relations in 983090983088983089983092 983093983089

fraserinstituteorg

Publishing information

DistributionTese publications are available from lthttpwwwfraserinstituteorggt in

Portable Document Format (PDF) and can be read with Adobe Acrobatreg or

Adobe Readerreg versions 983095 or later Adobe Readerreg XI the most recent ver-

sion is available free of charge from Adobe Systems Inc at lthttpgetadobe

comreadergt Readers having trouble viewing or printing our PDF files us-

ing applications from other manufacturers (eg Applersquos Preview) should use

Readerreg or Acrobatreg

Ordering publicationso order printed publications from the Fraser Institute please contact the

publications coordinator

bull e-mail salesfraserinstituteorg bull telephone 983094983088983092983094983096983096983088983090983090983089 ext 983093983096983088 or toll free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983088

bull fax 983094983088983092983094983096983096983096983093983091983097

MediaFor media enquiries please contact our Communications Department

bull 983094983088983092983095983089983092983092983093983096983090

bull e-mail communicationsfraserinstituteorg

CopyrightCopyright copy 983090983088983089983092 by the Fraser Institute All rights reserved No part of this

publication may be reproduced in any manner whatsoever without writtenpermission except in the case of brief passages quoted in critical articles and

reviews

Date of issueJanuary 983090983088983089983092

ISBN983097983095983096-983088-983096983096983097983095983093-983090983096983092-983097

CitationMoens Alexander and Alex Bartos (983090983088983089983092) Canada`s Catch-983090983090 Te State of

Canada-US Relations in 983090983088983089983092 Fraser Institute lthttpwwwfraserinstituteorggt

Cover designBill Ray

Cover imagesUS and Canada Flag Portions copy aliced Bigstock

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5962

983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6062

The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6162

983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6262

The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 59: Canadas Catch 22 State of Canada Us Relations in 2014

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 5962

983093983090 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

Supporting the Fraser Institute

o learn how to support the Fraser Institute please contact

bull Development Department Fraser Institute

Fourth Floor 983089983095983095983088 Burrard Street

Vancouver British Columbia V983094J 983091G983095 Canada

bull telephone toll-free 983089983096983088983088983094983094983093983091983093983093983096 ext 983093983096983094

bull e-mail developmentfraserinstituteorg

Lifetime patronsFor their long-standing and valuable support contributing to the success of

the Fraser Institute the following people have been recognized and inducted

as Lifetime Patrons of the Fraser Institute

Sonja Bata

Charles Barlow

Ev Berg

Art Grunder

Jim Chaplin

Serge Darkazanli

John Dobson

Raymond Heung

Bill Korol

Bill Mackness

Fred Mannix

Jack Pirie

Con Riley

Catherine Windels

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6062

The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6162

983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6262

The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 60: Canadas Catch 22 State of Canada Us Relations in 2014

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6062

The state of Canada-US relations in 983090983088983089983092 983093983091

fraserinstituteorg

Purpose funding amp independence

Te Fraser Institute provides a useful public service We report objective

information about the economic and social effects of current public policies

and we offer evidence-based research and education about policy options

that can improve the quality of life

Te Institute is a non-profit organization Our activities are funded

by charitable donations unrestricted grants ticket sales and sponsorships

from events the licensing of products for public distribution and the sale

of publications

All research is subject to rigorous review by external experts and is

conducted and published separately from the Institutersquos Board of rustees

and its donors

Te opinions expressed by the authors are those of the individuals

themselves and do not necessarily reflect those of the Institute its Board of

rustees its donors and supporters or its staff Tis publication in no way

implies that the Fraser Institute its trustees or staff are in favour of or op-

pose the passage of any bill or that they support or oppose any particular

political party or candidate

As a healthy part of public discussion among fellow citizens who de-

sire to improve the lives of people through better public policy the Institute

welcomes evidence-focused scrutiny of the research we publish including

verification of data sources replication of analytical methods and intelligent

debate about the practical effects of policy recommendations

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6162

983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6262

The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 61: Canadas Catch 22 State of Canada Us Relations in 2014

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6162

983093983092 The state of Canada-US relations in 983090983088983089983092

fraserinstituteorg

About the Fraser Institute

Our vision is a free and prosperous world where individuals benefit from

greater choice competitive markets and personal responsibility Our mission

is to measure study and communicate the impact of competitive markets

and government interventions on the welfare of individuals

Founded in 983089983097983095983092 we are an independent Canadian research and edu-

cational organization with locations throughout North America and interna-

tional partners in over 983096983093 countries Our work is financed by tax-deductible

contributions from thousands of individuals organizations and foundations

In order to protect its independence the Institute does not accept grants from

government or contracts for research

Nous envisageons un monde libre et prospegravere ougrave chaque personne beacuteneacutefi-

cie drsquoun plus grand choix de marcheacutes concurrentiels et de responsabiliteacutes

individuelles Notre mission consiste agrave mesurer agrave eacutetudier et agrave communiquer

lrsquoeffet des marcheacutes concurrentiels et des interventions gouvernementales sur

le bien-ecirctre des individus

Peer reviewmdashvalidating the accuracy of our researchTe Fraser Institute maintains a rigorous peer review process for its research

New research major research projects and substantively modified research

conducted by the Fraser Institute are reviewed by experts with a recognized

expertise in the topic area being addressed Whenever possible external

review is a blind process Updates to previously reviewed research or new

editions of previously reviewed research are not reviewed unless the update

includes substantive or material changes in the methodology

Te review process is overseen by the directors of the Institutersquos re-

search departments who are responsible for ensuring all research published

by the Institute passes through the appropriate peer review If a dispute about

the recommendations of the reviewers should arise during the Institutersquos

peer review process the Institute has an Editorial Advisory Board a panel

of scholars from Canada the United States and Europe to whom it can turn

for help in resolving the dispute

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

httpslidepdfcomreaderfullcanadas-catch-22-state-of-canada-us-relations-in-2014 6262

The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West

Page 62: Canadas Catch 22 State of Canada Us Relations in 2014

8132019 Canadas Catch 22 State of Canada Us Relations in 2014

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The state of Canada-US relations in 983090983088983089983092 983093983093

Members

Past members

Editorial Advisory Board

Prof erry L Anderson

Prof Robert Barro

Prof Michael Bliss

Prof Jean-Pierre Centi

Prof John Chant

Prof Bev Dahlby

Prof Erwin Diewert

Prof Stephen Easton

Prof JC Herbert Emery

Prof Jack L Granatstein

Prof Herbert G Grubel

Prof James Gwartney

Prof Ronald W Jones

Dr Jerry Jordan

Prof Ross McKitrick

Prof Michael Parkin

Prof Friedrich Schneider

Prof Lawrence B Smith

Dr Vito anzi

Prof Armen Alchian

Prof James M Buchanan dagger

Prof Friedrich A Hayek dagger

Prof HG Johnson

Prof FG Pennance

Prof George Stigler dagger

Sir Alan Walters

Prof Edwin G West