Expectations for the Obama presidency are stratospheric, and the world will scrutinize the new President's first weeks in office. But no one needs to do so more than Canadians. When the winds of change blow in the U.S., the impact on Canada can be greater than on any other country.
The extensiveness of our common border, the massive size of our trade, the integrated nature of our energy connections, and our shared ecology - not to speak of the countless family ties and friendships - render the Canada-U.S. relationship of unique importance to both partners.
The degree of interdependence cannot be overstated. As a principal adviser to Barack Obama said in Toronto last week, the decision to make his first presidential trip to Canada was not just a matter of routine. The reality is that no country is more important to the United States than Canada.
So, what are the presidential initiatives our policy-makers should be anticipating as the Obama administration breaks out of the starting gate?
First, our leaders should prepare for the size and direction of the stimulus package, which, at $825-billion, is estimated to represent 3 per cent of U.S. GDP. Infusion of vast amounts of federal funds into the marketplace will be accompanied by decisions favouring selected sectors (such as alternative energy sources) and will seek to impose certain conditions (such as automotive salary caps). The implications for Canada are obvious. Stricter limits on auto emissions will entail Canadian equivalencies; restrictions on auto-sector remuneration will put downward pressure on Canadian salaries. If the administration invests in reforming health care, the comparative advantage to Canadian manufacturing afforded by the Canada Health Act could erode.
Canadian policy-makers must work quickly and co-operatively with their U.S. counterparts to ensure that Canada is not sideswiped by the new massive stimulus proposals. Vigilance will be necessary to ensure that "Buy America" clauses are not surreptitiously inserted by protectionist-minded legislators. We must be ready to push back vigorously if an activist Congress legislates exclusionary product and food-safety regulations.
If the past is a guide, Canadians can expect Congress to cede to protectionist pressures. While it now seems unlikely that the Obama administration will seek to reopen NAFTA, aggressive trade action by Congress in pursuing punitive measures against perceived Canadian subsidies and dumping practices could constitute serious threats to our economic interest. (The recent B.C. decision to lower stumpage fees will soon draw fire from Oregon and Montana.)
A related area for monitoring will be the administration's approach to managing our common border. The question for Canadians is clear: Can a better balance be achieved between effective security required to protect our citizens from terrorist or criminal actions and the need to facilitate the trade flows critical to our countries' competitiveness in the global marketplace?
It is encouraging that there was little mention of border issues during the presidential campaign. This suggests that Americans may be recovering from the trauma of the immediate post-9/11 period. The new Secretary of Homeland Security, Janet Napolitano, has made a welcome distinction between northern and southern borders, acknowledging that different measures may be required to deal with each.
This having been said, the border is becoming an increasingly serious obstacle to the free flow of commerce and people. Many of the benefits of the Smart Border Accord of 2001 have been rolled back as Congress accepted such restrictive measures as passport requirements at Canada-U.S. land borders, 100-per-cent screening by 2011 of containers entering the U.S. (despite prior inspection at Canadian ports of entry) and the Secure Fence Act replicating some of the tighter measures characterizing the U.S.-Mexican border.
Modernizing our borders should stand atop the agenda for Mr. Obama's visit to Ottawa. It is in both our interests to prevent our border from turning into a wall. As with the Smart Border Accord, two senior personal representatives might be mandated to submit recommendations for improving border infrastructure, clearance procedures and advance technologies. They should also examine how we might move toward establishing a common security perimeter. And they could call for a Permanent Joint Border Commission headed by cabinet-level officials to jointly manage the border.
These ambitious projects will require the exercise of political will of both of the President and the Prime Minister. The earlier their engagement, the greater the chance of success.
Signalling the scope of changes to come, Mr. Obama's chief of staff, Rahm Emanuel, has noted that "no good crisis should go to waste." Departing from the Reagan doctrine that "government is part of the problem, rather than part of the solution," the new President will use the power of public financing to radically reshape U.S. public policy, likely bringing it closer to what Canadians have been accustomed to over the years.
But this may well be a mixed blessing, as expenditures to support domestic industry, measures to tighten environmental standards, rules that could prejudice our energy exports such as oil sands, and regulations to protect manufacturers and consumers create challenges for the 80 per cent of all Canadian exports that end up in the United States.
Nevertheless, creative thinking rooted in the experiences of our own traditions, as well as creative diplomacy with the new administration, will help ensure that we can adapt to and benefit from the momentous changes expected to come out of Washington.
Michael Kergin and Allan Gotlieb are senior advisers to the law firm Bennett Jones LLP, and former Canadian ambassadors to the United States.