SPP IN CANADA: THE PROSPERITY AGENDA

UNCLAS SECTION 01 OF 05 OTTAWA 001385 SIPDIS STATE FOR WHA/CAN:TBREESE, AHOLST; WHA/MEX: EMRICH; EB/PDAS DONNELLY WHITE HOUSE/NSC FOR FARYAR SHIRZAD, DEL RENIGAR WHITE HOUSE/OMB/OIRA FOR JOHN MORRALL III STATE PASS USTR FOR SAGE CHANDLER TREASURY FOR WILBUR MONROE EPA FOR PETE CHRISTICH HOMELAND SECURITY OFFICE OF THE SECRETARY (MARMAUD, MARTINEZ- FONTS) USDOC FOR 4320/ITA/MAC/WH/ONIA (WBASTIAN, ARUDMAN, GWORD) E.O. 12958: N/A TAGS: ECON ECIN EFIN CA SUBJECT: SPP IN CANADA: THE PROSPERITY AGENDA REF: A. OTTAWA 1364 (SPP MID-TERM UPDATE) ¶B. OTTAWA 1315 (SPP: CANADIAN CHEMICAL PRODUCERS) ¶C. OTTAWA 1201 (SPP: CANADIAN-AMERICAN BUSINESS COUNCIL) ¶D. OTTAWA 1199 (SPP PMO-OMB INSTITUTION) ¶E. OTTAWA 1104 (SCENESETTER: CANADA AND THE SPP) ¶F. TORONTO 1053 (INTERPROVINCIAL TRADE BARRIERS) ¶1. Summary: Following are Mission's general comments on the areas covered in the SPP declaration. Mission Canada recommends that Washington agencies focus on the following overarching elements for progress in SPP: -- a permanent dialogue between the two executive bodies charged with regulatory oversight, OMB in the United States and Canada's Privy Council Office (PCO). -- an independent business-driven mechanism to identify key regulatory barriers (ref Ottawa 1199). -- expansion of the North American Steel Trade Committee (NASTC) and extension to other sectors, with the objective of creating a forum where producers on both sides of the border would eventually be willing to address trade disputes early. -- a broader approach to infrastructure investment to include the possibility of private investment, and consideration of various modes of border crossing, in particular an increase in short-sea shipping across the Great Lakes. These ideas and other comments below are keyed to the outline of the Prosperity Agenda that was publicly released on March 23, 2005. We will continue to provide comment and status reports as the SPP evolves. End Summary. Regulatory Cooperation to Generate Growth -------------- ¶2. We are very pleased to see the SPP build upon existing partnerships such as the Four Corners Agreement in the chemical substance domain, NORAMET in the area of measurement standards, and the NAFTA automotive and trucking committees. In order to reduce regulatory barriers between Canada and the United States, we also strongly recommend that we create an enduring linkage between government regulatory oversight bodies in OMB and Canada's Privy Council Office (PCO). In the medium to long term, the two bodies could work together to review new regulatory initiatives, review existing regulations to identify areas for revision or revocation, and identify emerging areas for regulatory cooperation, e.g. in new technologies. ¶3. We also recommend that we encourage business on both sides to cooperate to set regulatory priorities. One model might be a North American equivalent of the "Transatlantic Business Dialogue (TABD)" which effectively articulated business priorities for US-EU regulatory cooperation in the 1990s. Under this model, governments would ask business on both sides of the border to work together to come up with a consolidated list of high-priority standards barriers and other regulatory issues, thus eliminating the impression that addressing certain regulatory barriers is a "win" for one side or the other rather than broadly beneficial to both economies. Some Canadian stakeholders, such as the Canadian Manufacturers and Exporters Association and the Canadian Council of Chief Executives, are already reaching out to their U.S. counterparts (ref Ottawa 1315),but our experience suggests that this process is uneven across industries and could benefit from a push by the two governments. Sectoral Collaboration to Facilitate Business -------------- ¶4. Some SPP suggestions include reference to building on the North American Steel Trade Committee (NASTC) as a forum to address common issues on a North American basis. We support the SPP proposals to expand this model to other sectors, including autos, with the hope that industry councils could help resolve some of the issues that currently lead to dumping and subsidy cases as well as address regulatory issues. Strengthen North America's energy markets -------------- ¶5. We continue to have reservations about including certain issues in the area of energy. Although there has been a recommendation that, under SPP, we should work to facilitate greater production of the Canadian oil sands, we do not see an advantage in government involvement in this area. Some of the world's best energy companies have invested and continue to invest heavily in achieving these goals, and they are doing so under relatively free market conditions without barriers to the transfer of technology and while complying with Canadian environmental requirements. Inclusion as an SPP goal seems to imply that this situation is inadequate, whereas in fact the situation currently is a model of private industry achievement. For the same reason, the previously stated goal that SPP should enhance oil production from mature fields by encouraging oil and natural gas technology partnership is unnecessary, particularly at a time when high oil prices are driving private firms to make even further refinements in these already sophisticated techniques. Also in the energy section, we would like to point out that any inclusion of a goal to increase electric power distribution and transmission system efficiency and reliability is already a high-level issue (it was a core concern of the National Energy Policy Report of May 2001),and during the past four years all of our interlocutors have repeatedly stressed that a key obstacle to progress has been the need to await anticipated U.S. federal energy legislation. The goal of increasing electric power distribution and transmission system efficiency and reliability is an important one; however, it may not be the best fit under the SPP program, which is intended to focus on solutions that do not require legislation. Improve the safety and efficiency of North America's transportation system -------------- -------------- ¶6. Certainly the most consistent message we hear from our industry contacts is that, on the Canadian side, border infrastructure is the major bottleneck. Thus building new border infrastructure is critical, and the involvement of private sector players is crucial; but this involvement must include not only private infrastructure owners (e.g. Ambassador Bridge) but also the private sector users of border infrastructure who might be inclined or induced to invest their own funds into specific border infrastructure such as FAST approach lanes (such a private sector-funded approach lane has been built on the Mexican-United States border). (Comment: Industry analysts have explained, however, that private ownership of major infrastructure can be problematic when it creates monopoly-like situations and complicates expansion. Careful agreements between private and public stakeholders would be critical to take full advantage of private-public partnerships. End comment.) In addition, the use of alternative modes of transport should be given a higher profile as a means to expand cross-border capacity. For example, existing rail crossings can provide significant extra capacity for cross-border movement of goods at much less cost than building new bridges and highways. In addition, the use of short-sea shipping has been given short shrift as a legitimate alternative that could alleviate border congestion, and it deserves full scrutiny. We should consider how to bring together CBP, Border Patrol, USDOT (including MARAD),USCG, Treasury, State, and to draw on input from the private sector. Such a grouping could identify obstacles to investment and activity in this sector (whether legislative, financial, or other obstacles); it will be necessary to consider the Great Lakes separately from coastwise trade as a distinct area of operations with potentially unique problems. Canada and Mexico could also do a similar internal assessment: the analysis would feed into a trilateral short sea shipping working group. This effort builds on the existing trilateral MOU (August 2003) on short-sea shipping to have each of the three partners identify obstacles to more effective use of marine transportation and undertake an effort to remove these obstacles. Efficient provision of financial services throughout North America -------------- -------------- ¶7. The already-effective trilateral financial services coordination is being folded into the SPP umbrella. Public outreach is underway. Efficient Movement of Goods -------------- ¶8. The existing NAFTA Working Group on Rules of Origin is making good progress on reducing rules of origin costs on goods traded between our countries. No new group is needed to address this item, as the NAFTA Working Group has ample experience and an already-strong mandate. Efficient Movement of People -------------- ¶9. Unfortunately, the timing of the Western Hemisphere Travel Initiative (WHTI) has not been conducive to progress in this area. Canadians in general feel that the WHTI, which could require passports for all people entering into the United States, including American and Canadian citizens, will impede free travel across the border. While waiting for a final decision on the WHTI, Mission posts are engaging Canadian interlocutors to explain the security implications of the WHTI and to solicit comment on various options that would both ensure security and encourage efficient movement of people. Although the efficiency benefits of having a single document for border officials to check (such as passport) are obvious, many Canadians and Americans who regularly cross the border do not have a passport. Moreover, Canadian observers inform us that the Canadian passport system is unwieldy: a Canadian passport is good for only 5 years, costs about 100 CND, and requires substantial documentation to renew. If an alternative secure document is chosen under WHTI, it should be more convenient and valid for a longer period of time. Canadian industry interlocutors have suggested that the ideal identification would not be a bulky and expensive passport but instead some form of expanded NEXUS card system. Expanding FAST and NEXUS would benefit frequent border crossers as well as occasional travelers. Online NEXUS applications would be helpful for people who live far from the border. Joint Stewardship of our Environment -------------- ¶10. Cross-border environmental disputes such as Devils Lake and Teck Cominco's pollution of the Upper Columbia River have been among the most difficult and intractable issues between Canada and the United States in recent years. While the International Joint Commission (IJC) remains a respected institution and credible arbiter in both countries, parties to some disputes have been unwilling for various reasons to refer disputes to the IJC for study and recommendations. While it is undoubtedly useful to maintain some flexibility in how to deal with particularly sensitive disputes, we believe both countries would benefit from a more structured bilateral forum or mechanism for raising such issues, determining the facts and establishing an appropriate venue and method for resolution. Rather than continue to deal with these cross border disputes on an ad hoc basis, we should explore with the Canadians the creation of a means that would provide not a certainty of outcome, but rather a certainty that disputes would be dealt with in a timely, transparent and scientific manner, with an IJC reference being one of several possible outcomes. The Boundary Waters Treaty is almost 100 years old and may well need an overhaul to make it more relevant in the current policy and political environment. This would not be a short-term deliverable and may raise concerns among those who are frustrated by lack of progress in the above issues, but it could be a way forward to better manage our bilateral relations over the longer term. ¶11. In the same vein, we believe that the establishment by both countries of contingency funds for IJC references would make the IJC a more attractive option for resolution of disputes, speeding the process and reducing uncertainties about how to pay for references on priority issues. ¶12. Air Quality: The United States and Canada have been very successful in efforts to improve air quality. Reductions in SOx and NOx have been particularly important in that effort. Based on the last bilateral air quality meeting, we believe the time is right to move ahead rapidly on an annex for the reduction of particulate matter. ¶13. Water Quality: The Great Lakes Water Quality Agreement is arguably the most important agreement we have on water quality. It covers the world's largest bodies of fresh water. Both the United States and Canada have had problems getting adequate funding for the agreement review that is supposed to be conducted this year. There should be a strong push to fund and conduct the review and provide for aggressive measures to address water quality problems in the Great Lakes. ¶14. Invasive Species: There has been good progress on invasive species cooperation with Canada. Bilateral meetings have improved communication between U.S. and Canadian officials and given them a better understanding of the mechanisms available in each country to address invasive species problems. While there are many areas in which further progress could be made, we recommend particular focus on addressing the introduction of invasive species in the Great Lakes and coastal waters through ballast water. Neither country was satisfied with the standards on ballast water adopted by the International Maritime Organization's (IMO) agreement. The United States and Canada should move quickly to begin talks on establishing "regional" ballast water standards that better reflect our concerns. ¶15. Biodiversity: Canada has proposed the reactivation of the International Porcupine Caribou Board, something the Canadian goverment has been pushing for several months. Their interest in this body is no doubt the result of their well-known objections to U.S. drilling for oil and gas in the Arctic National Wildlife Refuge. Consideration of this proposal should be coordinated with the energy working group. ¶16. Oceans: The United States and Canada have both proposed goals related to Global Earth Observations. We heartily endorse this issue for priority attention, particularly given its connection to climate change issues and the potential for improving weather forecasting. Create a Safer and More Reliable Food Supply while Facilitating Agricultural Trade -------------- -------------- ¶17. We believe that the objective of pursuing enhanced food safety and dealing with foodborne, animal and plant disease hazards are presently addressed to some degree between the partner governments utilizing various fora established in treaties, MOU'S, trade agreements, and participation in international standard setting bodies. Key to meeting timeframes established for the multiple objectives is a strong buy-in by targeted federal/state/provincial agencies to meet objectives. The groundwork for many of the objectives has already been laid, and now it is up to government leaders to provide the leadership and resources to accomplish the task. Protect Our People from Disease -------------- ¶18. We are strongly supportive of the entire agenda laid out for the Health Working Group; indeed, harmonization of regulatory requirements for pharmaceuticals is a promising area to achieve significant economic benefits for North America, and addressing the health needs of indigenous peoples is laudatory. With respect to enhancing public health cross-border coordination we point out that it will be essential to determine if the current Canada-United States agreement on "Comprehensive Civil Emergency Planning and Management" needs any amendment or annexes to facilitate cross-border coordination on public health emergencies. It must be noted also that provincial and state and even local public health authorities have significant, often even principal, roles in managing public health and animal health crises. The objectives should explicitly recognize that provincial and state stakeholders must be engaged as well as federal players. Visit Canada's Classified Web Site at http://www.state.sgov.gov/p/wha/ottawa DICKSON