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.

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