The Challenges of a Thickening U.S.-Canada Border

(Metropolitan Corporate Counsel – Jesse Goldman and Milos Barutciski, Bennett Jones LLP)

Each and every day, $1.6 billion in trade crosses the U.S.-Canada border, making it the largest and closest bilateral economic relationship in the world. Bilateral trade between the two countries accounts for approximately 18 percent of U.S. trade, more than trade with China and Japan combined. Moreover, at a time when the U.S. economy is slowing down, where there is continuing concern about the loss of jobs to foreign locations, and 24/7 coverage of a presidential election focuses increasingly on a wobbly economy, there is no general commotion among the U.S. public about the extent of bilateral trade between the two countries. Even the persistent softwood lumber dispute seems to be relatively quiescent.

Much of this is easily explained by the nature of U.S.-Canada trade. Many North American companies, American as well as Canadian, have operations on both sides of the border. Bilateral trade is increasingly comprised of intermediate supply chain goods as the two countries’ business communities become more integrated in each others’ supply chains. This close relationship is hardly new. It dates back to various Defence Production Agreements in the post-WWII period, the 1965 Auto Pact that implemented free trade in the automobile sector, the 1989 U.S.-Canada Free Trade Agreement and the NAFTA in 1995. Each of these developments brought about a closer integration between businesses in the two countries. In short, trade with Canada is generally perceived in the U.S. as a mundane – even boring – matter. It is just part of the natural economic environment.

The benefits of this close relationship for both countries, however, are significant and well known in trade policy, business and political circles. Canada is the largest foreign trading partner for 37 of 50 states, and U.S.-Canada trade is directly responsible for 7 million American jobs. Go here for the complete article.