Securing Border Perimeter Sets Obama-Harper Plan for Faster Trade, Travel

President Barack Obama and Canadian Prime Minister Stephen Harper’s plan to speed the flow of goods across the border aims to counter concerns trade ties between the two countries are weakening.

Obama and Harper will meet tomorrow in Washington to announce details of a security “perimeter” agreement aimed at making it easier for goods and people to cross the border, an official familiar with the matter said, after almost 10 years of talks to ease border congestion fueled by tighter U.S. security.

“We’ve had over a decade of principles and processes now,” said John Kirton, political science professor and head of the G-8 Research Group at the University of Toronto. “The time is for some decisive action.”

The new border accord comes after Obama announced last month he would delay until 2013 a decision on the $7 billion, 1,661-mile (2,673-kilometer) Keystone XL pipeline, proposed by TransCanada Corp. (TRP) Approval of the pipeline, which would carry Canadian oil-sands crude through the Great Plains to the Gulf of Mexico, is a “no-brainer,” Harper said in a Sept. 21 interview with Bloomberg.

The U.S. State Department, which had been expected to decide on the project by the end of the year, said Nov. 10 it was postponing the ruling to consider alternative routes. TransCanada has reached agreement with Nebraska officials to move the pipeline from environmentally sensitive areas.

Harper has said the decision underscores the needs to find new buyers for Canada’s energy. Canada sends 99 percent of its petroleum exports to the U.S.

‘Captive Supplier’

“It is not in this country’s interests that we are a captive supplier of the United States of energy products, especially when we see some of the politics that are going on south of the border,” Harper told reporters Dec. 2.

The Keystone delay is the latest of several U.S. moves that have irked Canada. Canada objected to “Buy American” provisions in the Obama administration’s $447 billion jobs bill that was blocked by Republicans in Congress, as well as the restoration of a $5.50 fee on Canadian travelers arriving in the U.S. by plane or ship.

The Canada-U.S. trade relationship has struggled under the impact of tighter border security following the Sept. 11 terrorist attacks, as well as the emergence of China as a competitor and slowing global growth.

The share of Canada’s exports to the U.S. has been declining since 2000, a trend that accelerated as the global recession curbed demand for Canadian exports. The value of goods shipped to the U.S. in the final quarter of 2010 fell to 71 percent of total Canadian exports, the lowest level since 1982. The share of Canadian imports coming from the U.S. has fallen to 61 percent this year, its lowest since at least 1971, after rising to as high as 78 percent in 1998.

Pilot Projects

The agreement will likely include pilot projects to test ways of accelerating the flow of goods and people at the border, said Colin Robertson, a former Canadian diplomat who works as a senior adviser on U.S.-Canada relations to Washington-based law firm McKenna, Long and Aldridge LLP.

The two countries will likely expand programs that enable companies to have shipments “pre-cleared,” he said. Benefits to industry may be initially modest, until such measures are permanently implemented, Robertson added.

“When you cross the border today, the attitude on both sides of the border is really, ‘What do you want to cross for?’ instead of trying to expedite,” he said by phone. “If this is to be successful, you’ll have to see an attitudinal change.”

Harmonizing Regulations

The border agreement may also include harmonizing regulations on goods crossing the border, said Jay Myers, chief executive officer of the Ottawa-based Canadian Manufacturers & Exporters. His group has been lobbying jointly with the U.S. National Association of Manufacturers to ease border delays.

Myers said he expects many of the coalition’s recommendations, including the harmonization of health and safety regulations and reduced restrictions on business travelers, will be adopted by the two nations.

Another topic that may come up is the European debt crisis and whether countries like Canada and the U.S. should provide more funding through the International Monetary Fund. IMF chief Christine Lagarde has indicated that the $390 billion the IMF currently has available for lending may not suffice should the global outlook worsen.

“It won’t really matter how open the border between the two countries is if aggregate demand for Canadian products in the United States disappears due to the global financial crisis,” said Kirton.

To contact the reporters on this story: Theophilos Argitis in Ottawa at targitis@bloomberg.net, Andrew Mayeda in Ottawa at amayeda@bloomberg.net.

To contact the editors responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net; David Scanlan at dscanlan@bloomberg.net.

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