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Fraser Institute: Trade Barriers and Disputes With the United States Continue to Damage Canadian Interests

VANCOUVER, BRITISH COLUMBIA -- (Marketwired) -- 01/23/14 -- Less than a week before President Obama's fifth State of the Union address, the state of Canada-U.S. relations remains marked by trade barriers that hurt Canadian producers and consumers, and high-profile disputes, notes a new study published today by the Fraser Institute, an independent, non-partisan Canadian public policy think-tank.

"Since 2007, in both merchandise and services trade, Canada has seen a relative decline in competitiveness with the United States, which may surprise many Canadians who believe Canada has been doing better than the U.S. over the past few years," said Alexander Moens, senior fellow in American policy at the Fraser Institute and co-author of Canada's Catch-22: The State of Canada-U.S. Relations in 2014.

For example, Canadian merchandise exports to the U.S. decreased by 27 per cent in 2009, in the midst of the Great Recession, and by 2012 had not fully recovered, totalling $278 billion.

Imports from the U.S., however, did not fall as sharply (16 per cent decline in 2009) and by 2012 bounced back to slightly below 2008 numbers.

The result: Canada's merchandise trade surplus with the U.S. has been nearly cut in half from $77 billion in 2008 to $35 billion in 2012.

Additionally, since 2007 Canada has seen a negative trend in service trade competitiveness. Canadian service imports (i.e. tourism, telecommunications, financial services, etc.) are growing while Canadian service exports are stagnant, resulting in a growing services trade deficit.

"To address these declines in both merchandise and service trade, Canada must push Washington to lower trade barriers inside North America and increase Canadian access to U.S. markets," Moens said.

Moreover, several high-profile disputes around trade, cooperation and joint-policy have soured relations between Ottawa and Washington, chief among them, the Keystone XL pipeline.

Proposed in 2008, the Keystone XL pipeline extension would connect the Alberta oil sands with U.S. mid-West and Gulf region refineries. This private infrastructure proposal promises significant employment opportunities on both sides of the border and guarantees a secure energy source for the United States, but the permit process remains stalled in its sixth year.

"The Keystone proposal is by no means a new feature in Canada-U.S. energy relations, as a dense network of oil and electricity carriers already cross the border at multiple points, but the dragged-out process has chilled relations, and if not resolved in 2014, Keystone may not be decided until after Obama leaves office in 2016," Moens said.

Other disputes between the two countries include the Mandatory Country-of-Origin Labeling (MCOOL) provision, which imposes strict labelling requirements for Canadian cattle and hogs, the contentious Softwood Lumber Agreement, and the American Recovery and Reinvestment Act, which mandates the exclusion of Canadian products and production-sharing in U.S. public works projects.

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The Fraser Institute is an independent Canadian public policy research and educational organization with offices in Vancouver, Calgary, Toronto, and Montreal and ties to a global network of 86 think-tanks. 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.

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