Pacific Views

Fighting terror or protecting the balance of payments?

One of the stories that this magpie would have blogged about last week had we not been slaving away over a hot (Web-less) computer in Seattle was another upcoming change to travel across the northern borders of the US.

A bit of history is needed here. It used to be that the rules governing the transit of US and Canadian citizens across the border were some of the most relaxed on the planet. All that was needed to cross was a driver's license or similar photo ID. After 9/11, US paranoia about the terrorists lurking in the Great White North led to a new requirement: Canadians now had to show a birth certificate or other proof of nationality to come to the States. The Canadian government quickly added similar requirements for US citizens going north. Whether either of these actions did anything other than slow border crossings to a crawl is up to serious discussion.

Now, however, the US government plans to up the paranoia level in 2008 by requiring passports for Canadian citizens wanting to enter the US, and for US citizens returning from Canada. As with the earlier rule change, Ottawa says that it will probably impose similar conditions on US citizens enterning Canada.

This magpie's initial take on the upcoming changes was that they are just another example of how Dubya's administration is making it more difficult for US citizens to come and go from their own country, under the guise of protecting them from terrorism. And that it's also another way of keeping 'pernicious' foreign influences out of the US. (The number of cases involving academics, artists, musicians, parliamentarians and others who, since 9/11, have had serious problems at the US border or been denied entry altogether are too numerous to cite here.)

However, there may be another reason why the US has decided that its border with Canada is entirely too free-and-easy. Ian Welsh suggests that it's the (US) economy, stupid:

[This] sort of stealth protectionism is the sort of protectionism Washington can get away with. They?ve got a big problem with trade, and Canada runs a trade surplus with the US. More than that, Canada is one of the big net winners from outsourcing and offshoring ? the cost of business is lower, universal health care relieves a huge burden from companies moving here, it?s easy to ship to the US and Canadian culture is close enough to US culture that it isn?t a huge shock to management?s sensibilities ? the sort of misunderstandings that cost huge amounts of money are less likely to happen between Americans and Canadians than between Americans and Indians or Chinese.

Canada exports, broadly, four classes of goods to the US. Energy, meaning oil and natural gas from the West and electricity from Quebec. Food ? both agricultural products and seafood. Commodities other than oil such as minerals and wood. And manufactured goods, primarily from the Golden Horseshoe. These manufactured goods are often not finished goods, but parts for companies which straddle the border, including the big three automakers.

You aren?t going to see stealth protectionism against energy imports any time soon. The US needs our oil, natural gas and electricity. Badly. But we?ve already seen outright protectionism against both wood products and agricultural products (beef) ? because we compete against US producers. And the fact that goods will take longer to get across the border, leading some US manufacturers to consider moving branch operations back to the US, isn?t something that Washington is going to see as a bad thing.

But Canada needs to decide how it?s going to handle this. Pressure on Federal governments to engage in protectionism is going to get stronger, not weaker because there?s no end in sight to increasing US trade deficits, and we?ve got a lot of eggs in the US basket. Way too many.

This is, really, about leverage. We?ve got energy, which they need to buy. They must have it. And we?ve got other goods they can mostly live without, or which significant internal interests wouldn?t mind reduced competition in.

The negotiation which needs to take place, quietly, is that we don?t have to sell them oil and natural gas. There are plenty of other people who want it. If they want it, they should stop trying to restrict the flow of manufactured goods into the US and stop trying to stop tourism and day tripping between the two countries.

You can read the rest of the post here.

Via BOPnews.

Posted by Magpie at April 10, 2005 01:34 PM | Canada | Technorati links |