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Peter F. Romero Acting Assistant Secretary of State for Western Hemisphere Affairs Remarks to the Canadian-American Business Council Washington, DC, May 17, 2000

U.S.-Canada Trade

Good afternoon, and welcome to the State Department. I want to start by thanking the CABC for having organized this event and giving me this opportunity to talk with you about the tremendously strong, vibrant partnership we share with Canada. I specifically want to thank Stan Krejci for his kind introduction and for his excellent leadership of the Canadian-American Business Council. It's good to be with you again, Stan, and I look forward to today's discussion.

I want to talk to you today about U.S.-Canada trade, and about efforts by the U.S. Government and the Canadian Government to facilitate that trade. I will also be talking about the broader trade picture for our two countries, including our NAFTA partner Mexico and the rest of the Western Hemisphere. Finally, I will be asking for your organization's support in our efforts to build a better border for the 21st century, a border that both enhances commerce and provides security from cross-border crime.

First, let's review where we are on trade between the U.S. and Canada. Since we last met here in October 1998, bilateral trade has continued to grow at an amazing pace. Total two-way trade in goods and services reached $447 billion in 1999, up from $417 billion in 1998. In other words, there is now over $1.2 billion per day in total trade between our two countries, by far the largest bilateral trading relationship in the world.

The U.S. and Canada do, of course, have occasional trade disputes over specific products. But we work through these challenges as partners, realizing that maintaining free trade is in our common interest. And when a particular company feels that it has been discriminated against in the other country, it can resort to dispute settlement under the North American Free Trade Agreement (NAFTA).

Since NAFTA entered into force in 1994, merchandise trade between the U.S., Canada, and Mexico has grown by 96%, rising from $289 billion in 1993 to $570 billion in 1999. The United States trades more with our NAFTA partners than with all of Europe, more than with all of Asia. And this growth in trade has helped fuel strong, sustained economic growth in all three NAFTA countries.

One of the best testaments to the success of NAFTA in this country is that even during an election season we are hearing fewer calls for protectionism. The American people increasingly recognize the positive impact of freer trade on our economies. Meanwhile, Mexico's greater emphasis on trade has led it from being the 26th-largest exporter in the world in 1993 to the 8th-largest in 1999.

NAFTA has been a tremendous boon to our economies, but we're not satisfied with just removing trade barriers in North America. Instead, the U.S. and Canada are working for establishment of a Free Trade Area of the Americas (FTAA) that will encompass the hemisphere. The FTAA will be the largest free trade zone in the world, a market exceeding $10 trillion with more than 800 million people. Canada provided strong leadership as chair of the FTAA negotiations in 1998 and 1999, and our goal is to conclude a final agreement by 2005.

Shifting back to the domestic front, I would like to update you on some of the efforts the U.S. and Canada are undertaking to ease cross-border movements of people and goods. First of all, let's look at Section 110 of the 1996 Immigration Reform Act. I know you all shared our concern that implementation of this Act would create massive bottlenecks at our land border crossings. But I am pleased to report that this spring there have been intensive discussions between various congressional offices, trade and tourism groups, and U.S., Canadian, and Mexican Government officials on finding a way to accommodate everyone's needs on Section 110.

We are hopeful that the end result will be legislation ensuring computerization and integration of databases at U.S. ports of entry without requiring additional documentation for travelers. We very much appreciate the efforts of CABC members to find a workable solution to this looming problem, and the U.S. and Canadian Governments will continue to work closely with you and Congress to see this through.

A second area in which we are working to facilitate cross-border movements is airport preclearance. Since the 1950s, the U.S. has stationed Customs and INS officers at Canadian airports to pre-clear U.S.-bound passengers. This program has allowed U.S. inspectors to exclude undesirables before they enter the U.S., reduced congestion at major U.S. airports, and allowed airlines to fly non-stop from major Canadian cities to smaller U.S. destinations which are not served by Customs and INS.

Until now, however, Canadian law has not formally authorized our inspectors to apply U.S. law in Canada. In order to remedy this situation, the Canadian Parliament in 1999 passed legislation specifying enforcement powers and immunities for U.S. inspectors. Our governments are now nearing completion of negotiations on a Preclearance Agreement that will bring the Canadian legislation into effect, and that will, over time, allow in-transit preclearance of third-country passengers at seven Canadian airports.

A third area in which our two governments are promoting border facilitation is the Canada-U.S. Partnership Forum, or CUSP, an initiative announced during President Clinton's visit to Ottawa last October. Under CUSP, we are consulting with leaders in border communities on building a better border for the 21st century. The first CUSP meeting was held April 11-12 in Niagara-on-the-Lake, Ontario and Buffalo, New York, where we had an in-depth exchange of views on movement of people, movement of goods, transportation infrastructure, and law enforcement. We also got a first-hand look at the passenger and cargo processing facilities at the Lewiston Bridge border crossing.

I am co-chairing the CUSP Forum along with my Canadian counterpart George Haynal. Mr. Haynal and I were joined in Niagara and Buffalo by senior officials from both countries' customs, immigration, law enforcement, and transportation agencies for meetings with dozens of local private and public sector leaders. I believe this was an unprecedented event for our northern border in terms of the integrated approach we took to cross-border issues and the number of public and private sector leaders we brought together.

We plan to hold the next CUSP meeting on June 22-23 in Vancouver, where we look forward to getting a West Coast perspective on border management. Later this year, we plan to use what we have learned from the CUSP meetings to produce a report to the President and the Prime Minister on building a better border for the 21st century. We would welcome CABC input as we prepare this report, and would ask you to be in touch with us over the next few months so that your views can be incorporated. On the U.S. side, we see this report as a blueprint for the next Administration, an opportunity to focus the new team's attention on our northern border.

One of the basic issues we are grappling with in CUSP is how to meet the conflicting demands of border facilitation and border security. As we were reminded in December with the arrests of 3 suspected terrorists at the border, some criminals seek to exploit our open societies and relatively open border. We have to be vigilant against such threats, while not allowing them to paralyze us.

One of the keys to meeting this challenge is greater resources for our inspection and law enforcement agencies on the northern border. While the volume of cross-border traffic has skyrocketed over the past 11 years under the free trade agreements, our inspection resources on the northern border have been stagnant.

A perfect example is the lack of funding for U.S. Customs' National Customs Automation Prototype, or NCAP. NCAP is the pilot computer system launched by Customs in 1998 in Laredo, Detroit and Port Huron, Michigan, which allows automakers and parts manufacturers to electronically clear cargo between the U.S. and Canada. After Customs Commissioner Kelly announced in February that NCAP would have to be shut down for lack of funding, Treasury found enough money to keep it going until the end of FY2000. But funding beyond that point is anyone's guess, despite the fact that Customs urgently needs to modernize its computers using the NCAP model.

Along with technology improvements, we need more inspection personnel on the northern border. The December terrorist arrests, along with a wave of illegal immigrants from East Asia, led the Canadian Government to significantly increase funding in its current budget proposal for immigration and law enforcement. But on the U.S. side, the attention to inadequate northern border resources was a short-lived blip, and now appears unlikely to lead to greater funding.

We need the CABC and other groups concerned about our northern border to encourage Congress to provide greater resources, so that our inspection agencies can provide just-in-time service for U.S. and Canadian businesses while still ensuring our security. We know this is a hard sell, but if industry and the Administration work together on this issue as we have on Section 110, we can make a difference. As on Section 110, we need to make Congressmen and businesses away from the border realize that they, too, are affected by how well our northern border operates. And since Canada is the number one export destination for 36 American states, we can make a very compelling case.

In closing, I want to reiterate my thanks to Stan Krejci and the Canadian-American Business Council for hosting this event, and for all your good work in promoting the U.S.-Canada partnership. I believe our bilateral cooperation will grow even stronger in the century that has just begun, and that we will all benefit from the efforts we are making to spread open markets throughout the hemisphere. I would now welcome any comments or questions from the floor.

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