Can a better fence make for better neighbors? A new trade agreement between with the result of the U.S. and Canada aims to harmonize standards easier commerce between the two.

• Author: Kranc, Joel
• Position: GLOBAL GLANCE

Just prior to the end of last year, Canada and the United States signed one of the most important trade pacts since the North American Free Trade Agreement, known as NAFTA, went into effect in 1994. The two countries agreed to implement joint cargo inspection and clearance of goods that arrive by land, rail and sea by December 2012. Food safety and agricultural regulators of both countries will work on similar joint efforts.

The security-focused plan calls for harmonization of the U.S. Customs-Trade Partnership Against Terrorism and Canada's Partners in Protection program by December 2013.

But it comes at an interesting time for both countries. With the U.S. in an election year, jobs, economic strength and national and international border security will be a top-of-mind issue for both President Barack Obama as well as his opponent. In Canada, the accord strengthens the government's position as an essential ally to the U.S. and re-positions trade high on the North American political agenda.

THE LEAD UP

North American trade and relations in general have been on cruise control since the late 1990s or early 2000s. Some refer to it as a "thickening of the border." Companies had to constantly deal with issues such as building security into their supply chain strategies, a run up in commodity prices, a loss of price advantages in Canada as the dollar gained strength, the effects of September 11, the financial crisis of 2008-09 and the list goes on.

But one issue not related to tariffs or pricing has caused major strains in the trade relationship, and this is part of what this new accord is seeking to eliminate. The issue involves the more subtle barriers that exist between Canada and the U.S.

Glen Hodgson, chief economist of The Conference Board of Canada, says, "They are called non-tariff barriers (and represent the! misalignment of regulation. [They arel little picky things like having slightly different specifications of a car made in Canada or in the U.S., the growing challenge of Canadian business people to travel to the U.S., etc."

He adds that while the barriers haven't grown higher, they've become more obvious and prominent. This is what the two governments are trying to settle with the new agreement. And there certainly have been other global and economic issues at play leading up to the signing of the accord.

GLOBAL COMPETITIVENESS

Competitiveness for the North American continent, as a whole, has indeed diminished over the years. In...