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A 7-step strategy for a new Canada-U.S. partnership.

Article Excerpt
Canada's impaired relationship with the United States and the potential economic consequences, are a top concern of Canadians, who are said to overwhelmingly approve closer U.S. ties. A seven-step strategy to build a new partnership is proposed. Such incremental measures are seen as more likely to succeed, and entail less risk for Canada, than a "big deal" that links improved Canadian access to U.S. markets with a multi-faceted, continent-wide security arrangement. Speech to the Great Lakes Security Summit, Toronto, April 8.

Could I have chosen a more timely moment to be invited to talk about Canada's relationship with the U.S.? I don't think so. The current international situation with the war on Iraq, Canada's handling of its decision not to participate (or what many describe as a mishandling), and Operation Liberty Shield -- the U.S. government effort to improve border security while maintaining economic efficiency -- makes the Great Lakes Security Summit an especially well-timed event. Having reviewed your agenda, I see that you have a lot of ground to cover.

A recent opinion poll shows that Canada-U.S. relations have replaced health care, a perennial national preoccupation in this country, as our citizens' top concern. This survey, done by Pollara last month -- and before SARS -- found that 90% of Canadians want to see improved relations with the United States. Forty percent said that there is a need for a lot of improvement, 40 % said that there is a need for some improvement, and only 10% found the status quo acceptable. The poll also found that 65% of Canadians strongly or somewhat support closer economic ties with the United States, and 61% favour closer cultural and social links.

At the Conference Board, we agree with the importance the average Canadian is placing on this issue. Canadians overwhelmingly want us to make the most of our relationship with the United States, the world's most lucrative and dynamic market.

The question I would like to address this afternoon is: how do we do this, especially in today's complex and difficult environment?

Background: economic relationship

Firstly, we need to take stock of the extent of our partnership with the United States before developing a strategy to move forward. The Conference Board has been closely tracking Canada's integration with the North American economy through out flagship annual report, Performance and Potential, or what we like to call "P&P." We've found that Canada's economic links with the United States since the Free Trade Agreement and NAFTA have deepened beyond what most Canadians realize.

In P&P 2001-02, for example, we observed that in the 10-year period following the Canada-U.S. FTA, Canadian exports to the U.S. increased 140%, far greater than the GDP growth over the same period. Exports rose from slightly more than one quarter of GDP in the late 1980s to more than 43% at the end of the 1990s. Also in the same time frame, exports to the United States increased from approximately 70% to more than 87% of total Canadian exports.

Accompanying the reorientation of Canada's economy from east-west to north-south is the decline in interprovincial trade as a proportion of GDP. Using constant 1992 dollars, interprovincial trade was 21% of GDP in 1986, falling to 19% in 1999. Interprovincial trade...

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