1. “Intermestic” Policies and NAFTA: Navigating Uncertainty in Cross-Border Trade, Regulation
Geoffrey Hale
Presentation to 22nd Field on Wheels Conference
University of Manitoba
December 15, 2017

2. Managing Political and Economic Uncertainty: What’s the Same, What’s Different?
Geography: North America hasn’t moved. Neither has Canada.
Continuing dependence on U.S. markets
Proximity + Culture + Established Business Relationships
Diversification of markets often useful, but takes scarce management time (familiarization, building relationships)
Substantial interdependence of U.S.-Canadian markets, policies  “intermestic politics”
Each country’s biggest agri-food customer – highly diversified, but asymmetrical
Building, maintaining business relationships: still a matter of providing, expecting value

3. Continued Interdependence . . . but asymmetrical

4. Regulatory Cooperation: Multiple channels, no guarantees
Government to government processes
Depend on shared regulatory goals, broadly shared interests across national borders
Department / Agency specific
Transport Canada / Federal Hazardous Materials Safety Administration (US)  cooperation on rail safety standards post- Lac Megantic tragedy
Agriculture Canada-USDA/FSIS/APHIS – Fresh food safety standards
Limited by periodic incidents Jurisdictional issues
Industry to industry processes
International Standards (ISO) some industry-specific
Regulatory Cooperation Council (since 2011)
Forward-looking only (not current irritants) – agency dominated with stakeholder input  Transportation, Agri-Food key priorities

5. Managing Political and Economic Uncertainty: What’s the Same, What’s Different?
Technological change: independent of, but sometimes reinforced by political challenges (e.g. US vs. EU GMO policies)
Agri-Food: highly competitive markets, maximizing efficiency, growing consumer pressures (incl. health / safety of production systems).
Reinforces challenges of regulatory, consumer trust
BUT – practical limits on regulatory cooperation
Technical differences in regulations
Different legal requirements, processes between countries
Incentives for political risk avoidance

6. Regulatory Cooperation: Bilateral Progress … but S..l..o..w..l..y
Persistent trilateral collaboration on livestock health issues after BSE outbreak of
Parallel, but separate overhaul of national food safety systems (2010
“Food Safety Modernization Act” (US)
“Safe Food for Canadians Act” (Cda.)
Agri-food key element in ongoing regulatory cooperation processes
Development of formal mutual recognition processes  bilateral agreements (US FDA / Health / CFIA) in

7. Managing Political and Economic Uncertainty: What’s the Same, What’s Different?
Border policies may change, but most domestic policies change more slowly.
Still necessary to understand legal, policy (and often political) environments for dealing with U.S., other international markets.
U.S. policies towards Canada usually subsets of U.S. (or state-level) domestic policies.
Influencing U.S. policies towards Canada largely depends on influencing, activating U.S. domestic interests which benefit from existing cross-border economic relationships.

8. Managing Political and Economic Uncertainty: What’s Different
Managing Political and Economic Uncertainty: What’s Different? Unpredictable Borders
Risks of NAFTA Disruption
Food products most geographically extensive, diverse export sector
Potential for reversion to WTO tariff scales – vary by sub-sector
Key areas of risk, opportunity:
Potential“work to rule” in processing exports CBP/CBSA personnel likely to be working in unfamiliar environment in which rules are changing, uncertain.
Technical standards – sub-sector specific crop exports more diversified than processed foods.
Sectoral issues (e.g. wheat grading) hostage to NAFTA negotiations
Border delays (esp. seasonal) for fresh produce.
Vulnerability to “High Risk” Sectors by Province
(X – High risk industries (proj. tariffs > 1% of sales) with US Exports > 10% of provincial US exports)
Food Chemicals Transp. Machinery Equip. BC
AB X
SK X X
MB X X X X
ON X X XXX X X
QC X X X X
NB X
NS X X
PE X X X
Source: BMO Economics (11/2017)

9. Managing Political and Economic Uncertainty: What’s Different?
Unpredictable border environment
Risks of NAFTA Disruption
Having capacity for rapid diffusion of accurate information will be necessary, but challenging given sector- and product-specific variations.
Will place premium on building clear information channels within industries, with governments, with U.S. suppliers, customers, counterparts  need awareness of shared, overlapping, but also competing interests.
Challenges for Trade Diversification
International trade / domestic production practices heavily influenced by national regulatory practices, standards in other national export markets
Meat (Asia-Pacific): SRM restrictions; hormones, antibiotics (esp. EU; market-driven in N. America)
Crops: GMO (esp. EU), dockage (esp. China)

10. What can we learn from past experience?
North American economic, policy relations are decentralized, intermestic
Most cross-border policy relationships managed at departmental, agency-level among functional specialists  premium on knowing counterparts.
Environment for sector level of policies driven by interaction of U.S. executive branch (political appointments + civil servants), relevant committees of Congress, U.S. domestic interest groups
System designed to work slowly, respond to relevant stakeholder interests.
Key challenge for Canadian interests is to identify relevant context of self-interest in practical, action-oriented terms
Information + Access + Persuasion
Absolutely necessary to have U.S. echo; helpful to have Canadian government reinforcement (parallel communications).
Trade diversification possible, BUT
Requires familiarity with national regulatory practices, standards in other export markets
Negotiating rule changes requires prolonged effort by industries, government may depend on exercise of linkage, leverage in providing access to Cdn. markets.