Renewing the Canada-U.S. Relationship
Amid a global pandemic and economic uncertainty, Canada and the United States each face a time of transition given we are each other’s most important trading partner. This period of transition in turn creates additional uncertainty – and opportunity – for businesses on both sides of the border. In this time, a renewed focus on building trade security and resiliency are of vital interest for Canadians and Americans alike.
In the U.S., despite a change in Administration, the protectionism remains. As America’s international relationships are rebooted with a new Administration, the importance of trade to businesses, consumers and decision makers in Canada and the U.S. is critical, as is the importance of renewed collaboration on shared global challenges. Unfortunately protectionism remains economically harmful, and yet is popular for many American politicians on both sides of the aisle. For the Canadian government, there is a long list of bilateral issues that are taken up with the Americans, and it is critical that economic matters remain a priority.
Given both countries reliance on trade and maintaining as agile a border as possible, business needs to ensure they have a voice and this has taken on a new imperative in the context of our economic recovery from COVID-19. This is a critical year to ensure the foundations of the commercial relationships are strong to deliver business-friendly and citizen-friendly outcomes. Our Canada-U.S. trading future depends on getting this right.
Key Focus Areas
In order to renew the Canada-U.S. relationship, promote growth, and improve our shared security and resiliency, there are several key areas that demand attention. They are:
Reinvigorating regulatory dialogues to move forward priority areas will benefit business communities on both sides of the border. Closer cooperation with an eye to eliminating duplication of processes will reduce red tape for business and help people access products consistently and with less delay.
A key foundational pillar is to revitalize the Regulatory Cooperation Council (RCC). With regulatory cooperation being the nuts and bolts of trade that allow companies to sell goods and services across borders, the Canadian and American governments must strengthen regulatory cooperation mechanisms as a key part of the economic recovery from the pandemic.
The Canadian and U.S. governments should:
- Hold a stakeholder call for input before the end of 2021 to reinvigorate the RCC and ensure workplans remain aligned with business priorities. This should be accompanied by a summary publication of stakeholder feedback received and proposed workplans, within 60 days.
To help begin the process, the Canadian Chamber proposes several initial ideas for consideration by the renewed council:
- Appliance energy efficiency
- Introduce a new regulatory plan that will make Energy Star energy efficiency levels mandatory for products sold in Canada that will no longer be available as of July 1, 2023 (refrigerators, freezers, washing machines, dryers, and dishwashers).
- Cyber certification
- Provide clarity about what standards for Canadian cyber products and solutions will be applied in Canada or how Canadian companies can comply with the Cybersecurity Maturity Model Certification (CMMC). This clarity is important to ensure Canadian businesses can access American supply chains, as well as benefit from U.S. government procurement contracts.
- Given the integration of cross-border supply chains, it is important for Canada and the US to work closely together on the regulations to ensure both countries are prioritizing environmental sustainability while developing a joint circular economy approach that supports trade.
- Green procurement
- The Canadian and American governments have signalled intent to ensure procurement practices leverage lower carbon materials and processes to support lowered greenhouse gas emissions. It is important to ensure these practices do not create difficulties for companies that do business on either side of the border.
- Small Modular Reactors
- As the small modular reactor industry develops, it is critical for the two governments to proactively develop standards around nuclear technology usage, building on the framework created by the MOU. Using this technology is critical to reaching climate targets.
The Canada-U.S. economic relationship is one of, if not the most, integrated relationships on the planet. Buy American policies that include critical Canadian supply chains therefore produce negative results for Americans and Canadians alike. It is in the best interests of ordinary people on both sides of the border to ensure a strong, integrated partnership continues.
Both Canada and the U.S. need to work together to ensure mutual resiliency, industrial development, and security. Despite longstanding defence cooperation between Canada and the US, there is significant work needed to strengthen the continental industrial base. Given shared geography and security interests, Canada and the United States have a mutual interest in a strong defence industrial base that meets the realities of the current security environment.
At a macro level, both governments should deliver a strategic statement of intent that sets out the framework for the continental defence industrial base, which fits the current environment and modernizes existing binational arrangements. Government procurement and regulatory practices in the defence sector should be used to enhance cross-border supply chains. This should be accompanied by tactical considerations such as leveraging procurement opportunities like NORAD modernization, certification regimes, and export permits to ensure a competitive industry.
The Canadian and U.S. governments should:
- Develop a Modernized Strategic Framework
- Develop a strategic statement of intent by leaders setting out the broad binational framework for a continental defence industrial base fit for the emerging international security environment. This framework should address emerging continental security challenges such as the Artic, and the environment and an advantage in key emerging and disruptive technologies that can contribute to the continental security (e.g., cyber, space, quantum) – particularly where Canada has a comparative and competitive advantage.
- Leverage procurement opportunities
- The Government of Canada should work with the United States Government to include an industrial element to NORAD modernization. This could include a binational NORAD technology road-mapping exercise to better position industry to meet the capability requirements of a modernized NORAD. The Government of Canada should also consider how it can keep Canadian firms as competitive and trusted members of cross-border supply chains through the adoption of a common cybersecurity certification like the Department of Defense’s Cybersecurity Maturity Model Certification (CMMC).
- Enhance third market opportunities
- Cross-border defence supply chains should be recognized for their value in exporting to third countries. The Government of Canada should ensure export permits meet service standards so that Canadian companies can remain competitive members of American defence companies’ supply chains.
- Supply chain security
- The Government of Canada should actively engage with the U.S. Secretary of Defense’s one-year supply chain review to ensure Canada’s contributions to the American defence industrial base are well understood. This is an opportunity to showcase Canada’s importance as a reliable supplier, as well as highlight binational defence arrangements for more collaborative opportunities, such as raw material availability.
As Canada and the United States orient our energy and climate policies towards Net Zero 2050, it is essential for strong cross-border collaboration that reflects the realities of our economies. Given the integration of the Canadian and American economies, our pathway to reach Net Zero by 2050 must be aligned to ensure our businesses can compete and succeed. This alignment includes the technologies that will reduce carbon emissions, rules for carbon offsets, and the financing that enables companies to invest. Strategic considerations such as continental energy security, as well as collaboration on tactical issues such as offset markets, sustainable finance, and the operationalization of the Paris Agreement’s Article Six, are all important realities both countries need to be aligned on.
The Canadian and U.S. governments should:
- Align Pathways to Net Zero
- Canada and the U.S. should seek alignment on their shared issues and concerns, leveraging the enhanced collaboration created under the Roadmap Partnership announced by the Prime Minister and President earlier this year.
- It is important to ensure North America’s pathway to net zero recognizes the existing energy assets and resource-intensive nature of both our economies. Therefore, policy and finance should be framed around a progressive transition rather than a binary between fossil fuels and renewables. It will be important that both countries seek pathways to decarbonize that leverage existing assets to realize net zero, which will require close collaboration on the exchange of non-emitting and responsibly produced energy commodities across our border, and the recognition that energy security remains fundamental to climate action.
- Add value with Sustainable Finance
- Canada and the U.S. need to collaborate to ensure that sustainable finance can play an added-value role in decarbonisation and investment in clean technologies. This will require efforts to further harmonize sustainable taxonomy finance and, where possible, work towards best practices of environmental, social and corporate governance (ESG) principles, such as the Taskforce on Climate-related Financial Disclosures (TCFD).
- The Office of the Superintendent of Financial Institutions (OSFI) and the Bank of Canada have started work to integrate climate risks and liabilities as measures included in systemic risk assessments of the financial system. These systemic risk assessments should be coordinated so that there is a common framework to evaluate and assess climate risk in North America’s financial system.
- Canada and the U.S. should develop harmonized approach towards ESG, and a framework based on the needs of stakeholders and financial institutions.
- Support Offset Markets
- As Canada continues to pursue its carbon pricing system, it would be beneficial to seek a common framework allowing offsets to be freely exchanged and received. The two governments should establish a robust and accessible global offset market and policy arrangements that ensures a common protocol to what constitutes an offset opportunity in North America.
- Close coordination is required to define the conditions of creating common approaches to technologies that are eligible for offset creation. Canada and the U.S. should work to include other nations in an international offset framework, create opportunities for clean technology exports, and grow a global offset market recognized by governments and financial markets in North America.
- Coordinate Paris Agreement Article Six efforts
- Given cross-border supply chains, Canada and the U.S. should coordinate efforts to achieve a speedy resolution to Article Six that will ensure clear rules to coordinate the most efficient transition to net-zero as possible.
- There also needs to be a resolution to Article Six that will ensure robust Internationally Transferred Mitigation Outcome (ITMO) opportunities. Efforts should be made towards a common accounting framework for national carbon budgets so that ITMO opportunities can be identified with confidence and avoid issues of double counting.
The COVID-19 Pandemic has provided a stark reminder of the importance of the Canada-U.S. relationship, including the critical nature of an open border between the two countries. As the pandemic moves towards a conclusion, establishing clear and predictable rules that will enable a resumption of business and leisure travel is critical to provide predictability for businesses and citizens alike.
Canada has significant potential with our critical mineral supply to become a reliable supplier to the United States that adheres to high labour standards. Getting our critical minerals industry to where it needs to be involves bolstering demand for our products and ensuring the tools are in place to increase production.
The growing importance of strengthening trusted, responsible and sustainable critical mineral supply chains is creating a need for greater government-industry collaboration with the objective of bolstering Canada’s domestic capacity as a secure source of critical minerals for Canada, the U.S., and key allies. By building our domestic production, our cross-border supply chains and our national security will be strengthened. Therefore, Canada and the U.S. should work jointly on several specific measures to strengthen Canadian and American national security by (i) identifying and securing trusted, sustainable and predictable sources of North American-sourced and refined critical minerals, including identifying bottlenecks and dependencies, (ii) coordinating this work on a binational basis with the U.S., and (iii) creating effective an effective forum for collaboration with allies and trusted security partners.
The Canadian and American governments should:
- Build downstream demand
- Critical to incentivizing the investments needed in the extraction and refinement processes is building manufacturers and end-users’ demand for North American sourced products. Leveraging government procurement contracts can be done by building in requirements for North American sourced critical minerals, which will help develop a common North American approach to purchasing and stockpiling these resources.
- Support processing
- Processing is a weak link in the Canadian supply chain. This can be addressed by coordinating supports binationally for intermediary processing. As the Canadian and American governments implement ways to support our processing capacity, they should coordinate, and publicize, how strategic investments are being made to ensure the fullest possible spectrum of products are available from secure sources.
- Enable extraction
- Sharing information on support for extraction activities and projected outputs, where possible, will facilitate the ability of companies to extract minerals in a financially viable way. Having this information on a continental basis would ensure coordination for support measures and provide better information for companies to make decisions.
- Work with third countries
- Canada and the U.S. are members of numerous global bodies that have been exploring how to reduce reliance on unstable sources of critical minerals. By establishing common approaches on forced labour, this will incentivize greater production in industrialized markets, like North America, as markets with lower risk levels of forced labour compared to other countries.
On November 15, the Canadian Chamber’s Our Trading Future campaign submitted a letter to the Ambassador of Canada in Washington, urging her to oppose U.S. Section 834. Read more.
On October 12, the Canadian Chamber of Commerce submitted responses to the U.S. Federal Register Notice of Request for Written Comments in Support of the Department of Defense’s One-Year Response to Executive Order 14017, “America’s Supply Chains”. Read more.
On October 4, David Jacobson, Vice Chair of BMO Financial Group and former U.S. Ambassador to Canada, writes that Canada and the U.S. have a shared interest in securing self-sufficiency in critical minerals. Read more.
On September 13, Canadian Chamber Sr. VP Policy and Government Relations Mark Agnew writes for the Canadian Global Affairs Institute on Canada’s role in supplying critical minerals to the Western Alliance. Read more.
On August 30, Canadian Chamber President & CEO Hon. Perrin Beatty and Sr. VP Policy and Government Relations Mark Agnew write in Policy Magazine on how to make Canada relevant inside the beltway. Read more.
On June 8, business groups in Canada and the U.S. issued a joint statement on facilitating safe cross-border travel between the United States and Canada. Read more.
On May 11, Chambers of Commerce filed Amicus Brief in U.S. court regarding the Line 5 pipeline. Read more.
On April 22, the Canadian Chamber’s Vice President, Policy and International, Mark Agnew, appeared at the House Special Committee on the Economic Relationship between Canada and the United States. Read more.
On April 13, the Canadian Chamber of Commerce announced a determined effort to renew the Canada-U.S. relationship as businesses weigh their growth opportunities post-pandemic. Read more.
On March 16, Mark Agnew, Vice-President of Policy and International, and Aaron Henry, Senior Director, Natural Resources and Sustainability, appeared before the Special Committee on the Economic Relationship between Canada and the United States. They addressed the critical importance of Line 5 for continental energy security and the need for all parties to work towards a mutually agreeable outcome. Read more.