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Canada - Relations with U.S. (Notes)

The relationship between the United States and Canada is probably the closest and most extensive in the world. It is reflected in the staggering volume of bilateral trade--the equivalent of $1.5 billion a day in goods--as well as in people-to-people contact. About 300,000 people cross the shared border every day. Since January 23, 2007, all U.S. citizens traveling by air to and from Canada must have a valid passport to enter or re-enter the United States, or through September 30, 2007, government-issued photo identification and official proof of a passport application. The Departments of Homeland Security and State have proposed that as of January 31, 2008, U.S. citizens traveling between the United States and Canada by land or sea (including ferries) should be required to present a valid passport or government-issued photo identification such as a driver's license and proof of citizenship such as a birth certificate. Children 15 years and under would need to provide certified copies of their birth certificates. Full implementation of the requirement that passports or other documents as determined by the Department of Homeland Security be presented at land and sea crossings could be in place as early as mid-2008, but the exact date will be announced with at least 60 days' notice.

In fields ranging from law enforcement cooperation to environmental cooperation to free trade, the two countries work closely on multiple levels from federal to local. In addition to their close bilateral ties, Canada and the U.S. work closely through multilateral fora. Canada--a charter signatory to the United Nations and the North Atlantic Treaty Organization (NATO) and a member of the G8--takes an active role in the United Nations, including peacekeeping operations, and participates in the Organization for Security and Cooperation in Europe (OSCE). Canada joined the Organization of American States (OAS) in 1990 and hosted the OAS General Assembly in Windsor in June 2000, and the third Summit of the Americas in Quebec City in April 2001. Canada seeks to expand its ties to Pacific Rim economies through membership in the Asia-Pacific Economic Cooperation forum (APEC), and will host the winter Olympic Games in Vancouver-Whistler, British Columbia in 2010.

Canada views good relations with the United States as crucial to a wide range of interests, and often looks to the U.S. as a common cause partner promoting democracy, transparency, and good government around the world. That said, it has pursued policies at odds with our own. Canada decided in 2003 not to contribute troops to the U.S.-led military coalition in Iraq (although it later contributed financially to Iraq's reconstruction and provided electoral advice). Other recent examples are Canada's leadership in the creation of the UN-created International Criminal Court (ICC) for war crimes, which the U.S. opposes due to fundamental flaws in the treaty that leave the ICC vulnerable to exploitation and politically motivated prosecutions; its decision in early 2005 not to participate directly in the U.S. missile defense program; and its strong support for the Ottawa Convention to ban anti-personnel mines. The United States, while the world's leading supporter of demining initiatives, declined to sign the treaty due to unmet concerns regarding the protection of its forces and allies, particularly those serving on the Korean Peninsula, as well as the lack of exemptions for mixed munitions.

U.S. defense arrangements with Canada are more extensive than with any other country. The Permanent Joint Board on Defense, established in 1940, provides policy-level consultation on bilateral defense matters and the United States and Canada share NATO mutual security commitments. In addition, U.S. and Canadian military forces have cooperated since 1958 on continental air defense within the framework of the North American Aerospace Defense Command (NORAD). The military response to the terrorist attacks of September 11, 2001 both tested and strengthened military cooperation between the United States and Canada. The new NORAD Agreement that entered into force on May 12, 2006 added a maritime domain awareness component and is of 'indefinite duration,' albeit subject to periodic review. Since 2002, Canada has participated in diplomatic, foreign assistance, and joint military actions in Afghanistan. Approximately 2,300 Canadian Forces personnel are deployed in southern Afghanistan under a battle group based at Kandahar airfield and the Canadian-led Multi National Brigade for Regional Command South in Kandahar and as members of the Canadian-led Provincial Reconstruction Team (PRT) at Camp Nathan Smith in Kandahar. Canada has committed to remain active in Afghanistan until at least 2009. Canada has also contributed to stabilization efforts in Haiti, initially with troops and later with civilian police and electoral assistance, and humanitarian and developmental aid.

The U.S. and Canada also work closely to resolve transboundary environmental issues, an area of increasing importance in the bilateral relationship. A principal instrument of this cooperation is the International Joint Commission (IJC), established as part of the Boundary Waters Treaty of 1909 to resolve differences and promote international cooperation on boundary waters. The Great Lakes Water Quality Agreement of 1972 is another historic example of joint cooperation in controlling transboundary water pollution. The two governments also consult regularly on transboundary air pollution. Under the Air Quality Agreement of 1991, both countries have made substantial progress in coordinating and implementing their acid rain control programs and signed an annex on ground level ozone in 2000. In April 2007, Canada and the U.S. announced their intention to negotiate a new annex to the Air Quality Agreement designed to increase cooperation in combating cross-border air pollution, particularly on particulate matter. Three regional projects have already been completed under the agreement.

Canada ratified the Kyoto Accord in 2002, despite concern among business groups and others that compliance would place Canada's economy at a lasting competitive disadvantage vis-à-vis the United States. However, Prime Minister Stephen Harper's government announced in 2006 that Canada would not be able to meet its original Kyoto Protocol commitments. In April 2007, the government announced a new regulatory framework for air emissions that, when implemented, should lead to significant decreases in emissions of greenhouse gases and air pollutants as early as 2010. Canada participates in the U.S.-led International Carbon Sequestration Leadership Forum, which researches effective ways to capture and store carbon dioxide. Canada is also a founding member of the International Partnership for the Hydrogen Economy and the Global Earth Observation System of Systems, both of which are designed to address climate change and are supported by the U.S. In early 2005, Canada joined the U.S.-led Methane to Markets initiative, which focuses on transferring technology to developing countries for the capture and use of methane from pipelines, landfills and other sources. Canada is seeking membership in the Asia Pacific Partnership on Clean Development and Climate, which now links the U.S., Japan, Australia, South Korea, China, and India in a broad effort to accelerate the development and deployment of clean energy technologies in major industrial sectors.

While bilateral law enforcement cooperation and coordination was excellent prior to the September 11, 2001 terrorist attacks on the United States, they have since become even closer through such mechanisms as the Cross Border Crime Forum. Canada, like the United States, has strengthened its laws and realigned resources to fight terrorism. U.S.-Canada security cooperation to create a safe and secure border is exemplary. Canadian and U.S. federal and local law enforcement personnel fight cross-border crime through cooperation on joint International Border Enforcement Teams (IBETs). Companies on both sides of the border have joined governments in highly successful partnerships and made massive investments to secure their own facilities and internal supply chains. Over 70% of Canada-U.S. trade is transported by truck. Commercial drivers crossing the border have volunteered to undergo background security checks under the bilateral Free and Secure Trade (FAST) program and many companies participate in the Customs-Trade Partnership Against Terrorism (C-TPAT). These initiatives have helped secure trade while speeding border processing.

Canada is a significant source for the United States of marijuana, as well as precursor chemicals and over-the-counter drugs that are used to produce illicit synthetic drugs. Implementation and strengthening of regulations in Canada and increased U.S.-Canadian law enforcement cooperation have had a substantial impact in reducing trafficking of precursor chemicals and synthetic drugs, but cannabis cultivation, because of its profitability and relatively low risk of penalty, remains a thriving industry. Canada increased maximum penalties for methamphetamine offenses in August 2005 and implemented new controls over various precursors in November 2005. Canada is active in international efforts to combat terrorist financing and money laundering.

Canada is a major foreign aid donor and targets its annual assistance of almost $4 billion toward priority sectors such as good governance; health (including HIV/AIDS); basic education; private-sector development; and environmental sustainability.

Prime Minister Harper, who entered office stating he intended to bring a new, more positive tone to bilateral relations while still defending Canadian interests, held his first meeting with President Bush at the March 30-31, 2006 Security and Prosperity Partnership of North America (SPP) meeting in Cancun, Mexico. Prime Minister Harper later met with President Bush in Washington, DC in July 2006, and the two leaders saw each other again when President Bush attended a North American leaders meeting in Montebello, Quebec in August 2007.

Trade and Investment
The United States and Canada enjoy an economic partnership unique in the world. The two nations share the world's largest and most comprehensive trading relationship, which supports millions of jobs in each country. In 2006, total trade between the two countries exceeded $500 billion. The two-way trade that crosses the Ambassador Bridge between Detroit, Michigan and Windsor, Ontario equals all U.S. exports to Japan. Canada's importance to the United States is not just a border-state phenomenon: Canada is the leading export market for 39 of the 50 U.S. States, and ranked in the top three for another 8 States. In fact, Canada is a larger market for U.S. goods than all 25 countries of the European Community combined, whose population is more than 15 times that of Canada. The comprehensive U.S.-Canada Free Trade Agreement (FTA), which went into effect in 1989, was superseded by the North American Free Trade Agreement among the United States, Canada and Mexico (NAFTA) in 1994. NAFTA, which embraces the 443 million people of the three North American countries, expanded upon FTA commitments to move toward reducing trade barriers and establishing agreed upon trade rules. It has also resolved long-standing bilateral irritants and liberalized rules in several areas, including agriculture, services, energy, financial services, investment, and government procurement. Since the implementation of NAFTA in 1994, total two-way merchandise trade between the United States and Canada has grown by 250%, creating many new challenges for the bilateral relationship. The Security and Prosperity Partnership of North America, launched by the three NAFTA countries in March 2005, represents an effort to address these challenges and others on a continental basis.

Canada is an urban services-dependent economy with a large manufacturing base. Since Canada is the largest export market for most states, the U.S.-Canada border is extremely important to the well-being and livelihood of millions of Americans.

The U.S. is Canada's leading agricultural market, taking 58% of its agri-food exports in 2006. However, U.S. imports of Canadian livestock products, particularly ruminants, fell drastically after the discovery of a single case of bovine spongiform encephalopathy (BSE, mad cow disease) in early 2003. Shipments of most Canadian beef to the U.S. were resumed in late 2003, and trade in live cattle under 30 months resumed in July 2005. Canada is the largest U.S. agricultural market, primarily importing fresh fruits and vegetables and livestock products.

The U.S. and Canada enjoy the largest energy trade relationship in the world. Canada is the single largest foreign supplier of energy to the United States--providing 17% of U.S. oil imports and 18% of U.S. natural gas demand. Recognition of the commercial viability of Canada's oil sands in Alberta has raised Canada's proven petroleum reserves to 175 billion barrels, making it the world's second-largest holder of reserves after Saudi Arabia. Canada is planning Arctic pipelines and liquefied natural gas terminals to provide more natural gas to the North American market. Canada and the U.S. operate an integrated electricity grid which meets jointly developed reliability standards and provide almost all of each other's electricity imports. Canada is a major supplier of electricity (mostly clean and renewable hydroelectric power) to New England, New York, the Upper Midwest, the Pacific Northwest, and California. Canadian uranium helps fuel U.S. nuclear power plants.

While 98% of U.S.-Canada trade flows smoothly, there are occasional trade disputes affecting the remaining 2%. Usually these issues are managed amicably through bilateral consultative forums or referral to World Trade Organization (WTO) or NAFTA dispute resolution procedures. For example, in response to WTO challenges by the United States, the U.S. and Canadian Governments negotiated an agreement on magazines providing increased access for the U.S. publishing industry to the Canadian market, and Canada amended its patent laws to extend patent protection to 20 years. Canada has challenged U.S. trade remedy law in NAFTA and WTO dispute settlement mechanisms. Some of these cases involved actions taken by the U.S. Government on softwood lumber imports from Canada. However, the two countries implemented a comprehensive settlement on softwood lumber in late 2006 and these cases were dropped. The U.S. is pressing Canada to strengthen its intellectual property laws and enforcement. The U.S. and Canada resolved a WTO dispute over dairy products in 2003. The United States and Canada also have resolved several major issues involving fisheries. By common agreement, the two countries submitted a Gulf of Maine boundary dispute to the International Court of Justice in 1981; both accepted the Court's October 12, 1984 ruling that delineated much of the boundary between the two countries' Exclusive Economic Zones (EEZs).

The United States and Canada signed a Pacific Salmon Agreement in June 1999 that settled differences over implementation of the 1985 Pacific Salmon Treaty. In 2001, the two countries reached agreement on Yukon River Salmon, implementing a new abundance-based resource management regime and effectively realizing coordinated management over all West Coast salmon fisheries. The United States and Canada recently reached agreement on sharing another transboundary marine resource, Pacific Hake. The two countries also have a treaty on the joint management of Albacore Tuna in the Pacific, and closely cooperate on a range of bilateral fisheries issues and international high seas governance initiatives.

U.S. immigration and customs inspectors provide preclearance services at eight airports in Canada, allowing air travelers direct connections in the United States. In 2005, about 16.5 million passengers flew between the U.S. and Canada on scheduled flights. Air traffic should increase further after the bilateral Open Skies agreement signed in March 2007 removed all economic restrictions on civil aviation services between Canada and the U.S. The two countries also share in operating the St. Lawrence Seaway, connecting the Great Lakes to the Atlantic Ocean.

Canada and the U.S. have one of the world's largest investment relationships. The U.S. is Canada's largest foreign investor. Statistics Canada reports that at the end of 2006, the stock of U.S. foreign direct investment in Canada was $241 billion, or about 61% of total foreign direct investment in Canada. U.S. investment is primarily in Canada's mining and smelting industries, petroleum, chemicals, the manufacture of machinery and transportation equipment, and finance.

Canada is the sixth-largest foreign investor in the United States. At the end of 2005, the U.S. Commerce Department estimates that Canadian investment in the United States, including investments from Canadian holding companies in the Netherlands, was $235 billion at historical cost basis. Canadian investment in the United States is concentrated in finance and insurance, manufacturing, banking, information and retail trade and other services.

Principal U.S. Embassy Officials
Ambassador--David H. Wilkins
Deputy Chief of Mission--Terry Breese
Minister-Counselor for Political Affairs--Scott Bellard
Minister-Counselor for Economic Affairs--Brian Mohler
Minister-Counselor for Public Affairs--Linda Cheatham
Minister-Counselor for Commercial Affairs--Stephan Wasylko
Minister-Counselor for Consular Affairs--Keith Powell
Counselor for Environment, Science, Technology, and Health--James Steele
Defense Attaché--Col. Joseph Breen

Consul General Vancouver--Lewis Lukens
Consul General Calgary--Tom Huffaker
Consul General Toronto--John Nay
Consul General Montreal--Mary Marshall
Consul General Quebec--David Fetter
Consul General Halifax--Harold Foster
Consul Winnipeg--Mary Speer

The U.S. Embassy in Canada is located at 490 Sussex Drive, Ottawa, Ontario. The mailing address is P.O. Box 866, Station B, Ottawa, Ontario, K1P 5T1 (tel. 613-238-5335).

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Notes and Commentary: Government and Political Conditions - Relations with U.S.

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