Fraser Institute Warns Not To Drop SPP Despite Opposition

THE FRASER INSTITUTE: SPP AGREEMENT WILL LEAD TO BETTER CANADA-US TRADE AND ECONOMIC OPPORTUNITIES

Canada and the United States must press on with negotiations under the Security and Prosperity Partnership (SPP) and not let the agreement collapse under the weight of ill-founded conspiracy theories, says a new paper released today by independent research organization The Fraser Institute.

"With its focus on setting common product standards, regulations, and border measures that will improve trade and the movement of goods, the SPP agreement has the potential to provide huge benefits for both the Canadian and American economies," said Dr. Alexander Moens, author of Saving the North American Security and Prosperity Partnership and a senior fellow with the Fraser Institute.

Moens, who is also professor of political science at Simon Fraser University, says the SPP is simply an agreement to conduct negotiations in a wide variety of areas related to product standards, government regulations on trade, health and food safety, energy, and the environment as well as a wide variety of security measures related to border crossings. The objective is to gradually achieve more regulatory convergence and product standards compatibility as well as more streamlined border and security measures so that the costs of trade and border crossings can be lowered, while standards and regulations become more continent-wide.

"There is no appetite among the public or governments of Canada and the US for a political union along the lines of Europe and there's in nothing in the SPP that calls for political integration. Yet somehow, a combination of left-wing economic nationalists in Canada and right-wing protectionists in the US has turned the SPP into a supranationalist conspiracy theory," Moens said.

"This confusion around what the SPP stands for has skewed public perception. Governments need to redefine the process and articulate specific goals for the partnership."

He recommends defining the SPP as a means of creating a North American Standards and Regulatory Area (NASRA) that would include further economic integration beyond free trade but not political integration. Moens notes that the goal of the SPP is compatible standards and convergent regulations so that most security and border processing can be accomplished away from the border. A single Canada-United States regulatory and standards zone should be the first goal, with progress toward extending this to Mexico dependent on the pace of market and security developments in that country.

"A NASRA would not require all regulations and product standards to be compatible. There will likely be areas where governments will make the case that national exceptions override trade or security benefits. However, just as in the free trade negotiations, the goal should be to make the area as comprehensive as possible to derive the greatest benefit for consumers and producers," Moens said.

Moens points out that 51 per cent of Canada's total exports to the United States were transported by truck in 2006 with 77 per cent of imports from the United States coming into Canada by truck that same year. Consequently, a low-cost border crossing should be an integral part of both Canadian and American policy. But regulatory differences continue to impede cross-border trade. These differences include the processing of customs manifests, security documents, and procedures. Furthermore, regulatory differences on either side of the border for identical products impose an artificial cost on production that makes North American business less competitive globally.

"Trade between Canada and the United States is still reeling from increased security measures implemented in the post 9-11 environment. Border delays remain all too common for commercial truck traffic, resulting in a real cost to Canadian and American consumers," Moens said.

Moens' study also emphasizes the importance of keeping the SPP as a working agreement between the executive branches of governments, but suggests both governments need to create a better communications strategy to explain the benefits of improved competitiveness and streamlined security regulations to the public.

"The low-key nature of the SPP talks is in part responsible for the conspiracy theories and concerns. Raising the profile of the SPP talks would go a long way to reducing those worries," he said.

Other recommendations from Moens include:

- Building a long term Canada-United States agenda on SPP issues;

- Connecting security and prosperity in the SPP so that the economic cost becomes an essential part of the security calculation;

- Exploring a larger role for the private sector in finding regulatory convergence and standards compatibility;

- Creating a "Vision for a New Border". A vision of a "needs-based" border is founded on the premise that only those features that cannot be done better or more efficiently away from the border should be done at the border.

"With the protectionist noises emanating from the Democrats in the run up to this year's presidential election, now more than ever we need cool heads and thoughtful leaders on both sides of the border who can recognize the mutual importance of trade and the benefits of an open border for both Canada and the US," Moens said.

The Fraser Institute is an independent research and educational organization with offices in Calgary, Montreal, Tampa, Toronto, and Vancouver. Its mission is to measure, study, and communicate the impact of competitive markets and government intervention on the welfare of individuals. To protect the Institute's independence, it does not accept grants from governments or contracts for research. Visit www.fraserinstitute.org.