Last week U.S. President Barak Obama and Canadian Prime Minister Stephen Harper announced two trade-enhancing partnerships to make it easier to conduct trade and travel between the two countries and remove unjustified regulations and paperwork that retard trade. Part of the restrictions in trade and travel were in response to the terrorist attacks against the U.S. in September of 2001, while many other regulations are leftover from a time when trade was less important and standards on both sides of the border were less uniform than now.

 

The U.S.-Canada Beyond the Borders program providing “a shared vision for perimeter security and economic competitiveness” was first announced in February of 2011 with the action plan presented last week. The areas of cooperation include: addressing threats early; trade facilitation; cross-border law enforcement; critical infrastructure and cyber security. Also announced in February was a Canada-U.S. Regulatory Cooperation Council to “better align our regulatory approaches to protect health, safety and the environment while supporting growth, investment, innovation and market openness.” These two efforts will complement each other.

The two sets of programs look long on bureaucracy, but that has become the new normal with heightened concerns about security. The programs do provide a framework for industries to work within to make the case for more rapid movement of products across the border and less multiple inspections of products. Agriculture and food are seen by the designers of these programs as major beneficiaries.

Under addressing threats early in the Beyond the Borders program, the two countries will conduct joint assessments and audits for plant, animals and food safety systems in third countries. For trade facilitation, a common framework for trusted trader programs will allow applicants to submit one application for multiple programs. Canada will develop a pilot program for processed foods to allow participants to submit transactions data for beyond the border and have expedited clearance processes and lanes at the border. Canada will also explore other product specific pilots for lower inspection rates for industries with good compliance histories. Agencies will develop a “single window” where importers can electronically submit all information for customs and other government regulations.

Under the Regulatory Cooperation Council (RCC) programs each country will maintain its own sovereign regulations and consumer protection, health, safety, security and the environment will not be compromised. New systems will be designed to achieve regulatory alignment to the extent feasible and appropriate. For agriculture and food an underlying fact is that both countries have robust food safety systems. Applying additional inspections or testing just because a product crosses the border should not be necessary.

The action plan specifically mentions veterinary drugs and crop protection products (pesticides) as agricultural products where regulatory requirements and approval processes are already highly aligned, but “further symmetry could promote greater work sharing between the two countries, contributing to more simultaneous access for producers to the most effective production tools. In addition, collaboration in this area would minimize discrepancies between American and Canadian established maximum residue limits/tolerances of pesticides and veterinary drugs when there is no public health need for such differences.” These products are often used in the same ways on both sides of the border and common regulations and labeling are reasonable goals.

The RCC joint action plan includes the creation of a common nomenclature system for meat cuts and regulatory alignment efforts to jointly management the system. This should reduce costs of innovation and inventory for firms serving both markets. Fruit and vegetable producers in both countries will have access to financial risk mitigation tools to provide protection from buyers that default on payment obligations.

The action plan includes a section on transportation including highways, railroads and marine. Two-way trade in agricultural and food products (excluding lumber and sea food) totaled $33.3 billion in 2010 and most of that moved by truck and rails. Increased efficiencies in transportation will directly lead to better financial bottom lines and increased opportunities for trade.

The American Meat Institute and the North American Meat Processors Association (NAMP) quickly voiced support for the programs. The pilot program on meat inspection would increase efficiencies while maintaining food safety. NAMP already has The Meat Buyer’s Guide for use in both countries. In 2010, two-way trade in live animals, meat (including poultry meat) and products totaled $5.6 billion, 16.8 percent of total two-way agricultural and food trade. Fresh fruits and vegetables were the next largest category at $4.2 billion.

The Beyond the Borders program and the Regulatory Cooperation Council effort depend on both countries having robust food safety systems. Companies are often involved on both sides of the border and understand how the two systems can work together to produce equivalent outcomes. Input products like veterinary drugs and crop protection products are the same in the U.S. and Canada and much of the rest of the world. Joint efforts by the U.S. and Canada to monitor food safety in third countries could form the basis for sharing more information among countries and further aligning regulations in additional countries.

President Obama and Prime Minister Harper should be commended for pushing ahead with the two programs. The fact that it took from February to December to roll out action plans may be an indicator of the challenges of moving government agencies in the same direction at the same time. Firms that use border regulations as non-tariff barriers to trade will likely try to continue to work the system to their advantage. If the programs allow firms caught in the current system to appeal for and receive relief, increased efficiencies will benefit producers and consumers in both countries and in the rest of the world.

Ross Korves is an Economic Policy Analyst with Truth About Trade and Technology