Michael Hart¹

Summary, conclusions, and recommendations

Canada has much to gain, and little to lose, from an aggressive program of regulatory cooperation. The principal focus of a such program should be the United States because of already high levels of trade and investment integration, high levels of compatibility and similarity in goals and approach, and high levels of existing networks of cooperation. Working closely with the United States can also provide a direct route to piggy-backing on US programs of regulatory cooperation, such as the EU-US Transatlantic Dialogue.

The operating goal of such a program should be to seek greater compatibility and complementarity in goals, design, and outcomes rather than detail, through sharing of information, joint decision-making, strengthened networks, agreed safety valves, greater use of MRAs and analogous instruments, development of appropriate machinery and institutions to enhance mutual confidence and facilitate information sharing, and, ultimately, joint decision-making.

Such a program should be anchored in contractual commitments to and continued participation in multilateral fora such as the ISO and WTO. Such a program is best pursued within the broader framework of reaching a new bilateral accommodation with the United States across the full range of cross-border interaction. As we have argued elsewhere,

Overwhelmingly, Canada's leading trade and foreign policy partner is the United States, surpassing all other partnerships combined in the breadth, depth, and intensity of the relationship. Cross-border trade and investment drive our economy. US innovation and entrepreneurship provide both opportunities and competition. US popular culture dominates, not because it is forced on Canadians but because Canadians choose it. The US military provides a blanket of security. US warm weather cossets millions of Canadians each winter. The US presence pervades every aspect of Canadian life, including, as Foreign Minister Bill Graham recognizes, foreign policy. Virtually every aspect of Canada's political, economic, cultural, and social life is measured by Canadians in terms of the US yardstick. ... The first and virtually only priority for Canadian diplomacy over the next few years is to reach a new accommodation with the United States. Canada and the United States need to take deliberate steps to bring the architecture of their relationship into line with the challenge and fact of deepening integration as well as with the political and security realities ushered in by the events of September 11.²

More generally, continued improvement in the disciplines and procedures of the WTO's "standards-setting" agreements will be an important part of the Doha agenda. In addition to the review provisions built into the TBT, SPS, GATS, TRIPS, and other agreements, many of the issues related to making markets more contestable and more fair, revolve around establishing international norms or standards and the necessary procedures for their implementation and enforcement. In pursuing this agenda, the fundamental issue will be to find common ground between two competing sets of social values and priorities: those espoused by the trade culture premised on the benefits of liberalism and open competition and involving open markets and freedom of choice and those advanced in the regulatory culture premised on the benefits of order involving constraints on competition, efforts to promote social responsibility, and steps to mitigate the potentially harmful effects of the market. The challenge is to find a balance between these competing values.

Risks and Rewards: New Frontiers in International Regulatory Cooperation

One of the characteristics of the new global marketplace is the apparent precedence of economics over politics. ... This is not the end of the nation-state, and even less the end of government, [but it] leaves government with a daunting challenge: to figure ways to reduce their intervention in some areas, and to retool and refocus their intervention in others, while preserving the public trust.
Daniel Yergin and Joseph Stanislaw, Commanding Heights

The nation-state ... is not going to disappear any day soon; indeed, in most of the world, government has continued to expand. Globalization undoubtedly punishes arbitrary state actions and brings closer scrutiny of economic policies. ... In essence, globalization has raised the cost of bad government.
John Micklethwait and Adrian Wooldridge, A Future Perfect

Scope and context

Advances in transportation and communications technologies - the principal drivers of globalization - have opened up vast new opportunities for international transactions, exposing a new array of regulatory issues to international scrutiny, while progress in reducing border barriers has increased the relative importance of behind-the-border barriers, including those related to standards and regulations. Despite the success of international bodies in developing globally applicable standards and regulations, governments continue to promote or set unique national and sub-national requirements. At the same time, governments are considering ways to promote intergovernmental co-operation, both to reduce the impact of marginal regulatory differences and to reinforce desirable regulatory outcomes. Thus, as the globalization of economic life continues, the role of regulations and standards in either limiting or facilitating the contestability of markets has become an increasingly important issue.³

• The growing nexus between deepening globalization and the internationalization of rule making can be better appreciated if we look upon the world of regulation as made up of a four-tiered set of inter-locking regimes:

• The immediate regime of the sectoral regulator, such as the specific safety regime that governs the provision of passenger air services, the environmental protection requirements that condition certain manufacturing processes, or the food safety regime administered by the Canadian Food Inspection Service.

• The horizontal framework of laws, regulations, institutions, and procedures within which a specific or immediate regulatory regime is situated, such as the framework of laws governing competition, company law, consumer protection, and more.

• The overall national or sub-national governance scheme for managing regulation within the state, including the relationship between legislative, executive, and judicial functions, and the setting of national or sub-national priorities.

• The international regime including the rules, institutions, and procedures for coordinating national priorities, determining international and supra-national standards, and settling disputes.⁴

Since the Second World War, the role and influence of the fourth tier has increased exponentially. The current edition of the Yearbook of International Organizations, for example, lists more than 5,000 intergovernmental and over 25,000 international non-governmental organizations.⁵ Many of these organizations are actively engaged in the design, development, implementation, and administration of the fourth tier of regulation. Additionally, Canada, like many other countries, has forged an increasing number of formal and informal ties with other countries, either bilaterally, or through international associations, organizations, and arrangements. Government and private-sector officials, for example, have built extensive linkages with like-minded officials in other countries to discuss similar problems and common approaches. Canadians are active players in many such epistemic communities, further strengthening the two-way nature of the relationships between the first three tiers in Canada and the fourth tier.

The last fifty years have similarly seen an explosion in the growth of international trade and investment. The relative value of world trade has increased roughly three and a half-fold over this period. The latest World Investment Report notes that the value of world exports of goods and non-factor services reached $7.43 trillion in 2001, representing 23 percent of global GDP of $31.9 trillion. In addition, sales by foreign affiliates were valued at $18.5 trillion or 58 percent of global GDP.⁶

The full extent of this increasing interconnectedness and interdependence is probably not captured by these bare statistics. A rising proportion of commerce is now taking place on an intra-industry and intra-firm basis, involving intermediate inputs and services, and fuelled by two-way foreign direct investment. With the increase in international trade in services and the disaggregation of production, trade, investment, and technology transfers have become complementary economic activities. The most important but most difficult-to-measure indicator of this deepening integration is the flow of information and technology. An unknown but large quantity of information and technology is now exchanged within private and proprietary networks. Only some of this exchange can be measured, suggesting that official trade and investment statistics may be underestimating the true value and intensity of international commerce and not capturing the full richness of new patterns of international economic interaction and integration.

These emerging patterns of integration are market responses to opportunities created by technological developments. Liberalization embedded in intergovernmental agreements, however, helped to create the environment within which these opportunities proved profitable, and public policy will continue to play an important role in facilitating market-led growth and development. The benefits of classic liberalization have by now been largely realized among OECD countries. The issues that currently influence much more varied trade and investment patterns are less traditional market segmenting policies such as tariffs and quotas, and more subtle regulatory differences. Border administration remains important to the enforcement of these differences, but the key to addressing them is less a matter of liberalization and more a matter of designing cooperative or coordinated approaches to governance of the market. The focus of liberalization agreements was largely static rule making centered on the cross-border movement of goods; the focus of governance agreements revolves around much more dynamic institutions and procedures affecting a much more varied range of cross-border transactions, including the movement of all the factors of production. Regulatory cooperation is a critical component of this emerging agenda.

The combined impact of technological and policy developments are pushing not only the acceleration of global trade but even more the deepening of regional trade linkages. Increasingly, cross-border trade is the driver of regional linkages, while foreign direct investment has become the motor of inter-regional ties. Canadian firms are participating in these developments, increasing their market shares in North America through trade and investment, while building a presence in Europe and Asia more on the basis of investment than trade. As business economist Allan Rugman argues: "far from taking place in a single global market, most business activity ... takes place in regional blocks. ... The drivers of globalization are the network managers of just 500 companies. ... [T]hese triad-based companies are scrambling to carve out a presence in heavily competitive regional marketplaces."⁷ This reality will need increasingly to inform Canada's approach to regulatory cooperation.

The depth and extent of this interconnectedness is having a profound impact on the regulatory state. Up to a generation ago, the divide between the domestic and the international was relatively clear and the extent of national obligations to govern consistently with international norms was relatively small and well defined. This is no longer the case. The international trade regime - as enshrined in the World Trade Organization (WTO) and its hundreds of ancillary regional and bilateral arrangements, arguably the most advanced and thus demanding of intergovernmental regimes - has over the past twenty years greatly expanded its reach. It has also witnessed a profound shift in its centre of gravity from negative prescription to positive rule-making. Its rules now not only require governments to live up to earlier liberalization commitments, but in addition to adopt and implement specific policies, practices, and procedures. These additional rules reach well behind national borders and engage a much broader range of public policy issues. The object and purpose of trade policy has thus been transformed from trade liberalization through trade-barrier reductions to positive rule-making aimed at ensuring the capacity of producers around the globe to fully contest the markets of member states, and for governments to govern ever deepening integration.⁸

For Canada, a medium-sized, prosperous economy heavily dependent on trade with the rest of the world, particularly the world's only hyperpower, the penetration of the external into domestic decision-making has grown rapidly, largely to the benefit of Canadians, but not without growing pains and not without creating new pressures to adapt and conform to international norms. As a recent OECD report indicated, "Canada has a mature and well-functioning system of regulatory governance. It is not just a regulatory pioneer but has been a consistent leader and a vigorous innovator across a wide range of topics."⁹

For most Canadians, the idea of turning their back on these developments and isolating the Canadian economy from the international is not an option. There is, of course, an alternative to policy efforts to facilitate further economic integration. Governments can introduce significant new barriers to the forces of silent integration and seek to create distance. In Canada's case, such a policy would mark a major departure from nearly seventy years of efforts gradually to smooth the process of international integration, particularly with the United States, and would mean a poorer Canada. Fortunately, there is no serious support for such a policy stance in Canada.¹⁰

The real challenge Canadian governments face, at both the federal and provincial level, is determining how much more Canada can gain from adapting to international norms and how best to pursue and adopt such norms. This paper examines some of the issues raised by this challenge from a trade and investment perspective. International cooperation among governments on regulatory issues, of course, covers a much wider spectrum than trade and investment. For our purposes, however, the trade and investment dimension provides more than enough food for thought; other dimensions will be touched on only insofar as they help to illuminate the main focus of the analysis.

The negotiation of international rules and procedures related to regulatory issues is complicated by the federal structure of government and divided responsibility for economic regulation. As trade negotiations delve deeper into areas of domestic policy, Canadian officials face the additional challenge of negotiating with one voice while still able to implement and enforce the results in ten provinces and three territories. Experience over the past two decades of regional and multilateral negotiations suggests that while this challenge can be met, existing institutions and procedures may not be sufficient. Again, space does not permit full discussion of this dimension of Canadian reality, except to flag its importance in designing and implementing a coherent and effective program of international regulatory cooperation.¹¹

Extent of regulatory differences

Despite rhetorical commitments to freer trade, deregulation, and privatization, markets continue to be governed by a detailed and very dynamic framework of rules and regulations.¹² OECD governments, in particular, may have reduced their efforts to effect specific economic outcomes, but they have increased their roles in addressing risk and enhancing the quality of life. Rising living standards have amplified demand for such social priorities as higher levels of health, safety, reliability, environmental protection, human rights, and access to information, all of which rely on regulations.¹³ Like earlier economic regulation, much of this regulatory activity can have profound effects on international trade and investment, underlining the need for cooperative approaches aimed at reducing the trade distorting impact of differential regulation.

In most OECD countries, legislatures and officials, at national and sub-national levels, are engaged in a continuing process of rule making and adaptation. The vast majority of rules created by this constant process of amendment reflect similar policy objectives but different regulatory styles, histories, legislative practices, institutional assignments, and implementation experiences. In the final analysis, however, many of these differences are marginal in their regulatory outcomes, particularly between Canada and the United States, but annoying and even dysfunctional in their economic impact.¹⁴ The need to produce multiple versions of the same good, for example, can increase design and production costs, and prevent firms from enjoying the economies of scale that would flow from producing to satisfy a single globally accepted standard. For companies exporting to multiple markets, the promise of "one standard, one test, accepted everywhere" has become increasingly more attractive.¹⁵

Twenty years ago, for example, a Canadian exporter of electrical appliances could market products world wide on the strength of a Canadian-issued certificate of safety. Today, similar products typically have to satisfy separate testing and certification procedures for various markets in which they are to be sold. Such conformity assessment procedures, while unavoidable, can constitute a significant additional cost to producers seeking to sell in multiple markets. In cases where mandatory specifications for a product differ from country to country, it is logical that a separate certification of the product's conformity is needed for each country in question. Even where countries rely on internationally harmonized rules or accept another country's standards as equivalent, an exporting country's tests and certificates of conformity may not be sufficient to certify compliance in another market.

Similarly, the requirement that engineers, accountants, management consultants, architects, or other mobile professionals satisfy a multitude of certification bodies to perform essentially the same task in a variety of markets limits their ability to make the most efficient use of specialized knowledge and talents. Access to markets by providers of financial, transportation, or communication services can also be frustrated by different national or sub-national regulatory requirements that go beyond what may be required to ensure fiduciary, safety, liability, or similar obligations.

Not all economic sectors, of course, are affected equally by the international dimension of regulatory diversity. Highly export-oriented firms, such as those in the telecommunications and forestry sectors, have a greater interest in international convergence than import-competing sectors. The nature of products (e.g., undifferentiated commodities versus goods and services with unique attributes) and the basis upon which they compete (e.g., price versus quality or performance) also have important implications for the role different regulations will play. Not surprisingly, therefore, sector-by-sector discussions about regulatory issues often yield the most satisfactory results in reducing unnecessary and costly barriers to trade.

Despite progress in the development of international norms and in the negotiation of multilateral and regional disciplines on the application of standards and related regulations, therefore, regulatory barriers to trade in goods and similar barriers to trade in services remain a serious potential impediment to international trade. An ever-growing range of industrial products - from aircraft, cars, and machinery to chemicals, drugs, and electrical equipment - have to be tested and certified to exacting standards and regulatory requirements before they can be sold.¹⁶ An equally exploding range of services can be supplied by providers from around the world but may face continuing limitations as a result of onerous and often repetitive qualification and certification requirements. Compliance with different national rules, together with the repetition of redundant testing and certification of products and providers for different markets, raises costs for manufacturers and providers operating in a global market-place. Additionally, complex and lengthy product- or provider-approval procedures can slow down innovation, frustrate new products launches, and operate to protect domestic producers and providers from foreign competitors.¹⁷

For suppliers of goods, the proliferation of different standards and regulatory requirements has been accompanied by a growing demand by governments that, as a precondition of sale, compliance with standards be demonstrated through independent inspection, testing, or certification procedures. Such procedures are carried out either by the regulatory authority of the country importing the product or, increasingly, by quasi-public or private bodies operating on their behalf. For service providers, the need to demonstrate competence and reliability to a myriad of national and sub-national regulatory bodies can severely limit their mobility and capacity to specialize and develop innovative products. In some sectors, such as the forestry industry, wholly private agencies have succeeded in developing and enforcing standards on a basis that raises serious questions about legitimacy and accountability.¹⁸

Lack of acceptance of conformity assessments creates a number of potential barriers to international trade. It may necessitate costly and largely redundant repetition of testing and certification for different national markets. Even to export to a single overseas market, a producer may typically need to carry out extensive domestic tests in order to assess the likelihood of a product complying with the requirements of the country or customer of destination. Moreover, the need to submit products or specific individuals for assessment by regulators in often distant overseas markets may mean delays in obtaining approvals which, particularly with respect to innovative technologies, products with a short life-cycle, or time-sensitive services, can severely hamper their marketability. Increased transportation costs may also be incurred if the product is rejected for not complying with the importing country's regulatory requirements.

Approaches to conformity assessment may also vary from market to market, sector to sector, and product to product. In some instances, a manufacturer's declaration of conformity may be sufficient, subject to periodic verification. In others it may require either government or third-party testing and/or verification. Where government regulations depend on third-party assessment and certification, a testing and certification industry may emerge with its own standards and regulations also subject to assessment and certification. The complexity and expense of the required infrastructure for a sophisticated regulatory regime creates, of course, a panoply of vested interests that may complicate any efforts to simplify or harmonize cross-border regulatory requirements or reduce the costs and burdens of compliance.

In those cases where regulatory approval is granted on the basis of inspection and certification of the manufacturer's or provider's quality system rather than simply the product (an increasingly common regulatory approach), such approval necessitates costly and time-consuming inspection visits by the importing country's authorities. In many cases, difficulties in understanding the regulatory regime in a particular foreign market - due to distance, language, or cultural differences - can operate as a de facto discriminatory barrier against imports.

Economic and trade impacts

Little systematic research has been done on the economic costs and harmful trade impacts of differing regulations nor is there prima facie evidence that regulations are necessarily economically harmful or trade distorting. Indeed, there is much evidence that well-conceived regulations can be trade promoting and facilitating.¹⁹ There is also no evidence to suggest that regulatory competition is necessarily harmful, although the costs of duplicative efforts may render such competition less helpful than some of its advocates assert. Unlike efforts to reduce and even eliminate tariffs and quotas, whose harmful effects are well-document, governments' international approach to regulatory-related issues has been to isolate the problems they may raise and address these with measures to reduce or eliminate their trade-distorting effect.²⁰

Problems of trade-inhibiting differences in product standards related to compatibility, for example, are generally well disposed of either as a result of market forces or the work of international standardizing bodies such as the International Standards Organization (ISO), the International Electrotechnical Commission (IEC), or the Codex Alimentarius.²¹ US analyst Alan Sykes notes that "both theory and experience suggests that market incentives to eliminate undesirable incompatibilities are often powerful and that much will be accomplished when the private sector is left to its own devices. Collective action problems and competitive imperfections, however, are a source of potentially important market failures."²² Those that do distort trade tend to fall into two broad categories: those that predate efforts to create international standards (e.g., left- vs. right-hand drive vehicles) and those that were deliberately established to promote proprietary technologies (e.g., VHS vs. Beta videotape technologies or Apple vs. Microsoft computer operating systems). Neither of these are easily susceptible to efforts to eliminate differences.

Problems of trade-inhibiting differences in standards related to quality are a different matter. These often involve matters of social and other preferences, either embedded in law or in national practice. Here it is important to distinguish between differences that are critical and those that can be met on the basis of achieving similar objectives. Three principles can be used to mitigate differences: using the least restrictive means available, applying the standard on a non-discriminatory basis, and promoting use of equivalence and mutual recognition provisions for differing standards or assessment procedures that meet similar or equivalent objectives.²³ As discussed further below, the WTO Agreements on Technical Barriers to Trade (TBT) and Sanitary and Phyto-Sanitary Measures (SPS) have already made significant progress in enshrining these principles into enforceable rules governing trade in goods, but they could be refined further and extended to sub-national authorities and private standards-setting bodies. In the services area, the General Agreement on Trade in Services (GATS) and its annexes provide a good start in creating a framework within which to address problems created by regulatory differences affecting trade in services.

From the firm perspective, the impact of similar but differentiated regulatory regimes can influence investment decisions. These impacts can be divided into two broad categories: those intended to discriminate in favour of local producers, and those that are the incidental result of regulations aimed at other objectives. The first represents the residual elements of traditional trade liberalization negotiations, and includes such measures as remaining tariffs, government procurement restrictions, trade remedy laws, and similar measures. The second involves a wide range of measures that reflect the increasing complexity of modern economies and the response of governments to demands ranging from consumer protection to environmental stewardship and human rights. The trade and investment effects of the first should continue to be addressed with the traditional approach embedded in trade and investment liberalization agreements; the second requires higher levels of cooperation to identify those regulations that no longer serve any useful public purpose, those that can be implemented and administered on a basis that limits or eliminates the impact of differences, and those were differences are profound and important. Only the latter may need to continue to create any substantive barriers to trade, but on a much more limited basis than is often the case today.

For small- or medium-sized firms, which lack subsidiaries or an established presence in foreign markets, the cost of acquiring knowledge of and access to another country's regulatory regime can effectively dissuade them from attempting to develop that market altogether. Furthermore, the imposition of arcane and burdensome standards, testing, and certification requirements can be used effectively to frustrate imports and shelter domestic companies from competition.

Evidence of increasing trade friction arising from discriminatory technical barriers is reflected in the growth of formal disputes brought under the WTO Dispute Settlement Mechanism. Research by the OECD and other institutions indicates that differing standards and technical regulations in different national markets, coupled with the costs of testing and certifying compliance with those requirements, can constitute between 2 and 10 per cent of the overall production costs.²⁴ Similarly, industry surveys and other studies almost unfailingly document conformity testing and certification requirements as a significant, and growing, obstacle to international trade.²⁵ Not surprisingly, conformity assessment has become an important service industry in its own right, as seen in the rapid growth in the number and size of testing laboratories, certification and quality assurance bodies, auditors, and accreditation organizations in industrialized and developing countries alike.

The role of trade agreements

As we have seen, a variety of regulatory requirements can affect economic transactions across borders. Many of these requirements may be established to meet socially or economically important objectives, but the fact that they may also condition cross-border transactions makes them important issues for trade negotiations. Trade agreements can address restrictions affecting the cross-border movement of goods, services, capital, technology, ideas, or people in a variety of ways. The simplest way is to eliminate such restrictions. The progressive reduction and even elimination of tariffs has been one of the most important achievements of modern trade negotiations. Additionally, trade rules can eliminate discrimination in the application of various regulatory requirements. By ensuring that foreign and domestic providers must satisfy the same requirements, traders are assured that they have similar opportunities to contest a market. Even the absence of discrimination, however, cannot guarantee equality of access and opportunity. By establishing basic norms and ensuring reasonable opportunities for all potential suppliers or providers to meet these norms, trade agreements can further advance the principles of fully competitive opportunity or contestability. In each of these instances, governments try to find ways to limit the negative trade effects of legitimate regulatory requirements.

From the outset, the 1947 GATT included rules to restrain the use of regulatory measures to protect domestic producers. Article III requires that regulations and related requirements be applied on a non-discriminatory basis to domestic and imported products alike. This requirement is to some extent circumscribed by the provisions in Article XX allowing for exceptions to achieve environmental or other governmental objectives, so long as these do not operate as disguised restrictions to trade. These principles continue to be the basis for the approach to technical barriers in international trade agreements. All subsequent negotiations have amplified and clarified these fundamental principles.²⁶

During the Tokyo Round of GATT negotiations (1973-79), concern over the growing impact of technical requirements led to the conclusion of a voluntary Code on Technical Barriers to Trade. It clarified such basic disciplines as transparency and non-discrimination in the application of product standards and technical regulations.²⁷ This voluntary code had limited effect and as a result was strengthened and made binding on all WTO members during the Uruguay Round of GATT negotiations (1986-94). Additionally, members negotiated the Agreement on Sanitary and Phyto-Sanitary Measures (SPS) to establish similar principles and procedures in the application of food safety and plant and animal health regulations. Both agreements are part of the single undertaking that constitutes the rules of the 1994 World Trade Organization (WTO).²⁸

The 1994 agreements require member countries to regulate products in the least-trade-restrictive manner possible, make them responsible for the proper application of regulations by local and provincial government authorities, and impose new disciplines on the way in which laboratories and certification bodies carry out conformity assessment of products in an effort to minimize the burden on international trade and reduce the potential for discrimination in this area. The TBT agreement includes a Code of Good Practice to guide standardization activities and enjoins governments to ensure adherence to its provisions by sub-national and non-governmental organizations. Most important, the agreements encourage WTO members to recognize the tests, certificates, and compliance markings issued by other members to the extent that they can be relied on to provide equivalent guarantees of health and safety. The TBT agreement (article 6.3), for example, recognizes that this may only be possible to secure as a result of negotiations:

Members are encouraged, at the request of other Members, to be willing to enter into negotiations for the conclusion of agreements for the mutual recognition of results of each other's conformity assessment procedures. Members may require that such agreements fulfill the criteria of paragraph 1 and give mutual satisfaction regarding their potential for facilitating trade in the products concerned.²⁹

Similarly, the WTO Agreement on Trade in Services (GATS) provides a framework for liberalizing trade in services among members. Like the TBT and SPS agreements, it relies importantly on mutual recognition. Article VI recognizes members' right to regulate, but it requires that in sectors for which members make market-access commitments, measures of general application must be administered in a "reasonable, objective and impartial manner." Additionally, the article provides "good governance" provisions and urges future negotiation to ensure that measures relating to qualification requirements and procedures, technical standards, and licensing requirements do not constitute unnecessary barriers to trade in services. Pending completion of such negotiations, the article provides some temporary disciplines to that end.

The agreement also sets out procedures for members to recognize, in certain conditions and in various ways, the education, certification and/or qualifications of foreign service suppliers, for purposes of their own licensing, authorization, or certification. In annexes to the agreement, members set out specific commitments and undertakings related to access to their markets for specified services, as well as procedures for continued negotiations to strengthen the agreement and the negotiation of further commitments. Sectoral annexes set out more specific rights, obligations, and commitments related to individual sectors, including financial services, transportation services, professional services, telecommunications services, computer and related services, other business services, construction and distribution services, tourism, and cultural services.

The WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) successfully consolidates many of the disciplines set out in various international intellectual property conventions into a single undertaking, backed up with enforceable dispute settlement measures. WTO members remain free to determine the appropriate method of implementing the TRIPS agreement within their own legal system and practice, but the agreement requires members to give to the nationals of other members the national treatment required by various multilateral intellectual property treaties. More specific obligations are set out in the eight sections devoted to individual areas of intellectual property rights and their enforcement:

• patents 
• trademarks
• copyright and related rights industrial designs
• geographical ndications
• integrated circuits
• undisclosed information
• anti-competitive practices

Part III of the agreement sets out members' obligations to enforce intellectual property rights within their territories. The main burden, once again, is that members agree to put in place procedures which recognize and enforce the rights extended by other member governments.

The plurilateral WTO agreement on government procurement establishes reciprocity as a basic principle. Signatory governments must treat products and services from other parties, and suppliers of such products and services, no less favourably than they treat their own domestic products, services, and suppliers for contracts covered by the agreement. It also requires each party to ensure that the purpose and effect of technical specifications should not be to impose unnecessary obstacles to trade.

What made these breakthroughs in new, deeper, broader, and tighter obligations credible were the provisions on dispute settlement. The WTO Understanding on Dispute Settlement embedded a number of critically important principles and procedures into the WTO, ensuring the prospect for a higher level of compliance and enforcement. aken together, these developments amounted to a set of provisions that gave governments, traders, and investors alike a stronger basis for confidence in the rules and procedures of the international trade regime. Governments agreed to a consequential degree of potential intervention in their internal affairs by other member governments through these procedures. In various cases over the last eight years, panels have made it clear that while governments are free to adopt standards that may be more stringent than internationally accepted ones, they must be prepared to justify such standards on the basis of credible scientific evidence. In both the EU beef hormones and the Australian salmon cases, for example, panels made it clear that they were not satisfied with the quality and urgency of the scientific evidence the EU used to justify its ban on the importation of beef treated with hormones and Australia used to keep out fresh, chilled, and frozen salmon from Canada.³⁰

Dispute settlement provisions, of course, are only as useful as the underlying rules they are meant to interpret and enforce. If the rules remain vague or ambiguous, dispute settlement panels cannot fill the void. That can only be achieved through negotiation. Many of the panels adjudicating TBT and SPS issues have stretched the obligations in those agreements as far as possible.Their findings also suggest that there may be better ways to address the problems generated by differential standards, regulations, and conformity assessment procedures.³¹

The North American Free Trade Agreement (NAFTA) and other free-trade area agreements between Canada and various countries build on an expand upon these basic WTO obligations. For trade in goods, for example, they involve the virtual elimination of tariffs. For trade in services, they involve more extensive national treatment obligations. For investment, some agreements introduce extensive additional rights and obligations. In essence, however, the contours of all these agreements follow the pattern established by the WTO agreements. Together, they constitute a significant level of obligations governing the regulation of international trade and investment, including an increasing level of obligations conditioning domestic regulatory regimes.

The further evolution of the trade regime, multilaterally, regionally, and bilaterally, should provide further opportunities to expand and strengthen the rules and deepen liberalization commitments. With the exception of agriculture, there is little left of the traditional liberalization agenda, pointing to the utility of a final push to eliminate industrial tariffs and other traditional methods of segmenting markets. Canada would also benefit from further commitments in the services area and from development of multilateral regimes to govern investment and competition disciplines. Much of this activity (both multilaterally and regionally), however, is on a slow train and unlikely to yield significant results for many years to come. As the issues have become more complex and the players more numerous, the process has become slower and the results of less immediate interest to Canada's trade and economic circumstances. In the immediate future, therefore, as discussed further below, Canada has the most to gain from cooperative strategies with the United States.

Canadian involvement in other forms of international regulatory cooperation

Given the importance of foreign trade and investment to Canada's economic development, it is not surprising that Canadian individuals, firms, associations, institutions, and governments have been among the most active in promoting regulatory cooperation at the international level, from standardization to rule making. Canada's participation in these international activities is very much influenced by the nature and size of the Canadian economy. Canada's economy is dwarfed by those of the United States, the European Union, and Japan, trades extensively with them, relies on substantial levels of foreign direct investment from investors in these countries, and is highly dependent on the technology and standards developed in these larger economies. Norms developed internationally and in other countries are thus critical to Canadian regulatory activity as well as to Canada's ability to compete in foreign markets.

While Canada is, on balance, a rule- and price-taker in international trade and investment, the Canadian economy is large enough and Canadian contributions important enough to place Canada in the forefront of those committed to ensuring a well-functioning international regime. The Canadian economy is also large enough and Canadians are prosperous enough to afford to go their own way on many issues. The delicate choice often facing Canadian regulators, therefore, is whether to default to a made-in-Canada or adopt a cooperative international approach. In an earlier presentation to this committee, DFAIT's deputy minister for international trade, Len Edwards, characterized this as a "false" issue. Perhaps, but too often in the absence of clear guidelines and priorities, the result is an "everything-is-important" approach.³² The Canadian record bears this out: Canadians are joiners of virtually every international activity going and Canadian governments have often found it difficult, formally, to decide among competing priorities. At a more practical level, however, as described below, priorities show up routinely in the day-to-day decisions of most Canadian institutions, associations, and government bodies.

Broadly speaking, Canadians support efforts by their governments, federal and provincial, to reduce regulatory burdens and to cooperate with other governments in order to reduce duplication, overlap, costs, and more. To that end, governments have pursued such efforts on the basis of four basic goals:

• Ensuring high levels of regulatory integrity
• Reducing domestic costs and international conflict
• Enhancing trade and investment opportunities
• Adopting best international regulatory practices

All four goals underpin a broad spectrum of ongoing international cooperative efforts, from the many multilateral channels to various bilateral and regional ones.

Canadians, for example, participate actively in organizations that develop international standards. They have provided the secretariat for standards development for the ISO 9000 and 14000 series and also for several important industries, including paper, board and pulp, nickel and nickel alloys, and timber structures. Although Canada's participation in the International Electrotechnical Commission is more limited than in the ISO, Canada holds the secretariat for four technical committees. Through the Standards Council of Canada (SCC), Canadians are also active in key regional and international accreditation forums, including the International Accreditation Forum, Inc. (IAF), the International Laboratory Accreditation Cooperation (ILAC), the Pacific Accreditation Cooperation (PAC), the Asia Pacific Laboratory Accreditation Cooperation (APLAC), the North American Calibration Cooperation (NACC), and the International Auditor Training and Certification Association (IATCA). These bodies promote the international acceptance of accreditations related to management systems registration, calibration and testing, product certification, and the training and certification of auditors. Canadians also participate in many of the other organizations that develop standards used internationally, including various prominent American standards-development organizations such as the Institute of Electrical and Electronic Engineers (IEEE), the American Society for Testing and Materials (ASTM), the American Society for Mechanical Engineers (ASME) and the Society of Automotive Engineers (SAE), which sets the de facto standards for the North American automotive industry.³³

Canada is also actively involved in mutual recognition agreements. Agreements can be negotiated between governments (e.g., the 1998 Canada-EU MRA covering telecommunications equipment, electro-magnetic compatibility, recreational craft, electrical safety, good manufacturing practices for pharmaceuticals, and medical devices), between accreditation bodies (e.g., the agreement between the SCC and the American National Standards Institute and the Registrar Accreditation Board on quality management systems registration), and between testing and certification organizations (e.g., the agreements the CSA has concerning electrical safety standards with standards bodies in more than 30 countries).³⁴ The WTO TBT Agreement encourages members to accept other members' product tests and approvals as long as they provide equivalent guarantees in terms of quality, health, safety and other requirements.

Because of the inter-connected natures of the Canadian and American economies, Canadian and US officials work closely together to manage and implement a vast array of similar but not identical regulatory regimes from food safety to refugee determinations.³⁵ In effect, they have developed a dense network of informal cooperative arrangements to share information, experience, data, and expertise with a view to improving regulatory outcomes, reducing costs, solving cross-border problems, implementing mutual recognition arrangements, establishing joint testing protocols, and more.³⁶ On any given day, dozens of US and Canadian officials at federal, provincial, and state levels are working together, visiting, meeting, sharing e-mails, taking phone calls, and more. Virtually all of this activity takes place below the political radar screen. Little of it is coordinated or subject to a coherent overall view of priorities or strategic goals. Some of it is mandated by formal agreements ranging from the NAFTA to less formal memorandums of understanding. More importantly, much of this activity is the natural result of officials with similar responsibilities and shared outlooks seeking support and relationships to pursue them. This activity also reinforces, subtly and indirectly, the deepening integration of the two economies. In North America, unlike in Europe, integration has been largely "silent," i.e., flowing from market forces and proximity, rather than from government direction. The NAFTA and similar arrangements mark efforts by governments to catch up with these forces of silent integration and provide appropriate and facilitating governance.

While these informal, cross-border Canada-US activities probably occupy more of the time and energy of officials, particularly of officials in domestic departments and agencies responsible for the bulk of Canadian regulatory activity, they do not enjoy the same political and public profile as various "dialogues" on regulatory cooperation with selected trading partners. Various such dialogues are currently in play, including with the EU, with Japan, and as part of APEC (Asia-Pacific Economic Cooperation).³⁷ Similar activity forms part of the negotiations for a Free Trade Area of the Americas and figures on the agenda of a number of smaller bilateral free-trade negotiations. None of these, however, have the same impact as the largely unseen but vast cooperative networks among Canadian and US officials. We will return to this point below.

Approaches to further regulatory cooperation

The debate about policy responses to regulatory barriers to trade is often couched in terms of regulatory heterogeneity versus harmonization. The issue, of course, is not whether governments should regulate but how they can do so more efficiently and at lower cost. Redundant testing for conformity, for example, can add tremendously to costs without meeting any useful regulatory objective. Denying the prospect of equivalence or mutual recognition may prove unnecessarily duplicative, again without increasing benefits to the regulating society.

Where there are genuine and defensible different national values and objectives reflected in distinct standards or regulations, it is much more difficult to resolve trade inhibiting problems. In many instances, it revolves around the highly emotive issue of risk, about which various societies may make different assessments. Notes the Atlantic Council of the United States:

The consequences of differing regulatory policies are seen most sharply in the acrimonious transatlantic dispute over European regulations governing the approval of genetically modified organisms (GMOs), for use either in animal feeds or in products for human consumption. This dispute has amply demonstrated the difficulties that arise when domestic politics surrounding sensitive regulatory issues collide with international trading obligations. It has also underscored differing US and European experiences with food safety and the credibility of government agencies charged with this responsibility.³⁸

Regulatory diversity is thus often rooted in varying social traditions, in values and preferences, in geography and climate, and in economic conditions. Such existing diversity may not be well-served by harmonization or recognition of rules based in different traditions.³⁹ In these cases, harmonization might increase social or economic costs. Some societies, for example, are more risk averse than others, and want to protect their consumers from products which other societies may not necessarily consider problematic. However, these values can and have been used to impede trade suggesting the desirability of cooperative solutions.

In some instances, differences can be pro-competitive, providing consumers with greater choice. In others, efforts to harmonize or establish common, internationally agreed goals and principles may be necessary but difficult to achieve. Mutual recognition agreements, for example, offer a technique that falls short of the tyranny of harmonization to big-economy standards while meeting the political requirement of democratic governance of the market. Deregulation, allowing market forces to resolve differences, may also be helpful, whether as a result of unilateral action or international agreements to deregulate a discrete sector. Adoption of best international practice is another technique that, over time, can result in both high levels of regulatory integrity as well as international compatibility. More formal information sharing and pre-adoption discussion of regulatory changes with principal trade and economic partners can also facilitate reducing and eliminating unnecessary or inadvertent differences and prevent new or emerging national differences from becoming impediments to trade. Finally, formal joint regulatory activity can eliminate costly duplication and difference.⁴⁰

In order to arrive at cooperative relationships among different regulatory jurisdictions, it is clear that more understanding is needed of the costs and benefits of the various strategies which link regulations across legal and political borders. One broad approach is "regulatory rapprochement" which concentrates on reducing practical differences between regulations in different jurisdictions, so that regulations gradually come to resemble each other or have similar effects, and a more unified regulatory system evolves. Three particular strategies of regulatory rapprochement operate in OECD countries.

The most rigorous strategy is harmonization or the standardization of regulations in identical form. This was intended in the original Treaty of Rome establishing the European common market but proved too difficult to implement. It was also tried in the sanitary and phyto-sanitary area in the Canada-United States Free Trade Agreement (Article 708 and Annex 708.1) but abandoned in the NAFTA following several years of limited success in implementing its requirements. A less structured approach is mutual recognition or the acceptance of regulatory diversity in meeting common goals. It is also sometimes referred to as "reciprocity" or "equivalence." As a result of the implementation of the Single European Act, the EU has had significant success in implementing this approach. It is also the basis of the WTO approach. The softest option is co-ordination or the gradual reduction of differences between regulatory systems, often based on voluntary international codes of practice, such as the ISO, IEC, and similar bodies. It is also useful in this context to distinguish between regulatory requirements per se and the procedures established to determine equivalence and conformity assessment, for which there may be greater scope for cooperation.

If regulatory diversity is accepted as desirable, the question becomes to what extent mutual recognition can and should be introduced. This is an issue that can be addressed at a number of levels: globally, within regional trade areas, bilaterally, and within a federal state. California, for example, sets product and environmental regulations and standards that are usually higher than most other American states and would strongly oppose harmonization of its standards with less rigorous jurisdictions across the United States. Similarly, regulations and standards vary across Canadian provinces, reflecting different historical or current priorities, preferences, or biases in different jurisdictions. The question then becomes one of determining appropriate mechanism for facilitating the movement of goods and services across the common economic space while taking into account the idiosyncrasies of the different jurisdictions involved.

Risks and rewards

Against this background, it is not difficult to conclude that a trading nation like Canada can ill afford to isolate itself from cooperative international efforts to address regulatory differences. Not surprisingly, Canadians have consistently placed themselves at the forefront of such efforts, and this policy stance is unlikely to change in the foreseeable future. The issue facing Canadians today, however, is whether they are prepared to take a major step forward in regulatory convergence, moving from cooperation to joint decision-making and even adopting standards, regulations, and regulatory decisions made in other jurisdictions, and, if so, which jurisdictions. The direct reward of such an approach can be three-fold: 1) higher levels of regulatory outcomes as a result of adopting best international practice; 2) potential major cost savings for both governments and private actors in devising, implementing, and complying with various regulatory regimes; and, 3) depending on the partner, significantly enhanced trade and investment opportunities. More generally, as discussed below, even greater and more formal regulatory convergence with our principal trade, investment, and regulatory partner, the United States, can have major collateral benefits in contributing to a new accommodation with the United States consistent with the depth and extent of cross-border integration and responsive to growing common interests.

The risk of losing control, which may seem inherent in such an approach, can be ameliorated by ensuring Canada is able to exercise sufficient influence in the development and deployment of joint regulatory regimes and can retain safeguards and procedures allowing Canadian officials to remain capable of addressing Canadian liabilities and responsibilities. For a small country such as Costa Rica, for example, the cost of maintaining its own drug approval regime is prohibitive; reliance on the US or EU regime for the preponderance of drugs approved for use in Costa Rica, therefore, is an accepted, "smart" form of regulation. It is for consideration whether Canada could profit from a similar approach, particularly one that include ways to ensure Canadian input into US regulatory decisions and procedures and provides continued scope for Canadian officials to address Canadian political responsibilities.

The combined impact of accelerating globalization, deepening cross-border integration, growing interest in international cooperation, and increasing Canada-US regulatory convergence all point to the desirability of examining the pros and cons of a more active and deliberative program of regulatory cooperation with the United States. Most of such regulatory cooperation would operate at the level of tier one, as described in this paper's introduction. The technical requirements of such an approach will require some careful data gathering, analysis, and discussion to consider potential sectoral candidates and work out the details. The more difficult challenge, however, will be to think through whether such an approach is politically feasible, particularly in light of three specific political concerns: fear of a race to the bottom, erosion of sovereignty, and loss of control.

"Races to the bottom" and similar concerns

A frequently voiced criticism of globalization and of international regulatory cooperation is that it encourages and facilitates a "race to the bottom," i.e., to a relentless effort by governments to attract foreign investors and retain domestic investors by reducing regulatory norms and expectations. There is little evidence to support this charge. Indeed, as the above discussion indicates, there is a preponderance of evidence pointing in exactly the opposite direction. As societies become more prosperous - one of the most important impacts of globalization - the demand for regulations to enhance the quality of life increases. The explosion of government regulatory activity to address environmental, human rights, safety, and other issues provides compelling evidence of the gap between rhetoric and reality. In the other direction, the impact of regulatory convergence and regulatory cooperation has been repeatedly to raise the bar by establishing international benchmarks of minimal performance and best international practice. As the above survey of the many international programs of regulatory cooperation demonstrates, whether pursued multilaterally, regionally, or bilaterally, all are predicated on sustaining high regulatory norms and strengthening regulatory outcomes.

Should Canada embark on a much enhanced program of regulatory cooperation with the United States, it will be important that the public is assured that the object and purpose of such cooperation is to enhance and strengthen norms and outcomes. Despite populist notions to the contrary, US regulatory requirements are often more stringent than those in Canada. More to the point, bilateral regulatory convergence is more likely to involve adoption of best practices than reliance on the most common denominator. Furthermore, as noted earlier, differences between Canada and the United States are less a matter of goals and objectives than of ways and means. The challenge is less a matter of agreeing on goals and desirable outcomes than of finding mutually acceptable ways of achieving such outcomes. As an Industry Canada survey of Canadian regulators notes: "All of those surveyed indicated that their broad policy objectives were similar to those of their US counterparts. However, many stressed that differences in the respective systems of government and authorizing legislation complicate efforts to cooperate, effectively limiting what can be achieved without significant legislative changes." The same survey also indicated that "most cooperation takes place at the operational level."⁴¹ At the same time, as the survey notes: without an external prod such as an international trade negotiation, regulatory cooperation among those operationally responsible quickly grinds to a halt; without the involvement of regulators in the negotiations, however, the required objectives and means may not be well framed, leading to sub-optimal results.

"Erosion" of sovereignty

In considering the pros and cons of various forms of regulatory cooperation, some Canadians will inevitably assert that relying on non-Canadian regulators entails unacceptable sacrifices of Canadian sovereignty. To this charge, there is no better answer than that offered by IRPP President Hugh Segal:

Sovereignty is a vital national instrument. It is not a goal. We use it to shape domestic policy within our own borders; we share and divide sovereignty in the creation and negotiation of federal and confederal constitutions; we protect it through the patrol of our airspace, landmass, sea lanes and coastal waters with our armed forces, and we use it to make agreements with other sovereign nations duly and democratically elected Canadian governments deem to be in our national interest. Sovereignty is not hoarded, it is not locked away, it is there to be used to advance the legitimate social and economic interests of Canadians on a host of fronts.

Precisely, and as business scholar Wendy Dobson reminds Canadians, "sovereignty is not just about what a country gives up but also about what it gains in more efficient production, larger markets, freer flow of investment, swift resolution of disputes, and greater protection of intellectual property, to name but a few of the benefits. ... States are the architects of their own constraints through the decisions they make, ... and through the decisions they avoid by failing to exercise their sovereignty."⁴²

Over the past six decades, Canada has been a pre-eminent leader in promoting, negotiating, and accepting a rules and regime-based system for the conduct of international relations. The drivers of Canadian rule making and institution building are not hard to detect.⁴³ While some observers might argue that Canadian dependence on international trade accounts for Canadian commitment to a rule- and regime-based international system, the primary motivations are more profound, owing their force to Canada's perception of itself as a country whose most intimate foreign relations are with powerful countries that, unrestrained, will take little account of, or even damage, Canadian interests. Hence, the instinct to resolve problems through international rules and regimes has been a constant factor throughout the whole range of Canadian foreign policy endeavours.⁴⁴

An integral component of this activist diplomacy has been a readiness to accept increasingly more stringent limits on the scope for autonomous decision making, particularly in relations with the United States, in return for increased discipline on our foreign partners. The pursuit of more demanding forms of regulatory cooperation flows logically from earlier efforts. Deepening bilateral integration with the United States, in particular, challenges the two governments to take further steps down the mutually beneficial road of exercising their sovereignty to achieve important economic and other objectives.

Liabilities and responsibilities

The security and well-being of its citizens stand at the very pinnacle of any government's responsibilities; regulations affecting everything from food safety to the quality of the environment are central to full-filling these responsibilities. Governments must think carefully, therefore, about any initiatives that may compromise their ability to discharge them. Canadian experience in negotiating international rules and pursuing regulatory cooperation both multilaterally and bilaterally suggests there is no inherent conflict between these responsibilities and such rule-making and cooperation. Nevertheless, vested interests can mount emotional campaigns questioning the extent to which regulations made jointly with others can respond to Canadian responsibilities. Fortunately, it is not difficult to refute such claims. Canadians, for example, routinely travel in the United States, comfortable in the reliability of US safety regulations. They eat and drink in the United States on the same basis as they do at home. If they are sick, they can and do rely, at considerable expense, on US medical advice and US-approved drugs. From almost any perspective, Canadians have few if any qualms about the goals and efficacy of US regulations when in the United States. The reason is simple: as noted earlier, Canadian and US regulatory regimes are, in almost all respects, closely aligned. The differences are matters of detail that may matter to individual regulators, but have little impact on goals and outcomes.

Additionally, regulator rapprochement between Canada and the United States need not mean Canadian abdication of regulatory responsibility. Any success in developing greater convergence will depend importantly on developing procedural safeguards to ensure continuing Canadian capacity to contribute to regulatory decision-making and to monitor the results.

Concrete steps toward deeper cross-border regulatory cooperation

As noted above, within the Canada-US context, there already exists a high level of regulatory convergence, at least at the level of goals and objectives. The differences that do exist are more matters of detail and implementation, rather than of fundamental design.⁴⁵ Nevertheless, these differences impose costs and affect investment decisions. Much, therefore, can be gained by exploring ways and means in which such differences can be bridged or their impact ameliorated.⁴⁶ The extent of regulations in both countries at all levels of jurisdiction suggests that this is a task that would need to be broken down along sectoral and functional lines and include procedural and institutional capacity to address the dynamic character of most regulatory regimes.

Canadian and US experience in forging cooperative regulatory strategies has generally been positive and much more active than is generally recognized. The North American food safety system, for example, in recognition of the highly integrated nature of food production in the two countries, is deeply dependent on cooperative strategies among officials on both sides of the border.⁴⁷ It is also not difficult to find examples of sectors and functions where there is room for more cooperation. Drug approval procedures, for example, would benefit from further efforts to eliminate duplication and overlap. Similarly, regulatory divergence in the financial services, transportation, securities, competition, professional accreditation, and similar sectors would all appear to be candidates for exploratory discussions within an appropriate institutional setting and a shared set of goals. As a first objective, therefore, the goal should be to establish such an institutional setting and shared goals, rather than insist on a joint regulatory regime from the start.⁴⁸

A good place to begin is to involve existing institutions or invest officials in agencies on both sides of the border with new responsibilities. There is no reason, for example, why an appropriate understanding could not be reached requiring the Canadian Department of Transport and the US Department of Transportation to coordinate their efforts to ensure highway safety; before enacting any new rules and regulations, for example, mandatory coordination efforts would focus on ensuring compatible outcomes and mutual recognition of each other's approaches to the same problem. A good basis for this kind of cooperation already exists in both the informal networks among officials, and in the relatively minor differences in regulatory approach. What is missing is an agreed mandate to resolve differences and a more formal institutional framework with authority to ensure mutually beneficial outcomes. Establishing a Joint Canada-US Commission to supervise efforts to establish a more coordinated and convergent set of regulations governing all transportation modes could prove critical to providing the necessary momentum and political will.

Similarly, both governments maintain separate but similar drug approval procedures reaching almost identical conclusions, albeit within different time frames. Adapting these existing procedures to operate to the benefit of both countries could involve commitments to more sharing and mutual recognition strategies, reducing duplication and overlap but maintaining the capacity to address unique circumstances that may arise in one country or the other. Adopting a first-to-approve rule as a default position, for example, would lead to constructive regulatory competition, particularly if it includes a safeguard provision for sensitive issues. Establishing an Joint Commission to supervise the transition to a more integrated regime, and to provide continuing oversight thereafter, would ensure that both governments maintain a voice in the drug approval process.

Food safety is another area already invested with a high degree of cooperation. The Canadian Food Inspection Agency (CFIA) and Health Canada and the US Animal and Plant Health Inspection Service (APHIS), Food Safety Inspection Service (FSIS), and Food and Drug Administration (FDA) work closely together on the basis of hundreds of agreed protocols and understandings. Much of this, however, lacks the status of domestic law or international treaties, and any problems need to be resolved at the level of the Minister and the Secretary of Agriculture. Enshrining current levels of cooperation into a bilateral treaty and assigning supervisory responsibility for the continued adaptation of its implementation to a Joint Commission would greatly enhance both consumer and producer confidence in the two governments' commitment to governing what is, de facto, an integrated market.

In some areas, more formal and independent coordination mechanisms might be required, in some areas on a permanent basis, in others as transitional measures. As discussions proceed in establishing better ways to address the governance of deepening Canada-US integration, officials would identify areas where it would be appropriate to establish bilateral joint commissions charged with responsibility for coordinating and supervising the regulatory activities of the two governments and address any conflict arising out of the regulatory activities of the states and provinces, as well as the two federal governments.

Establishment of such joint commissions could be phased in over time as progress is made in implementing the new commitments, and as confidence develops in the efficacy of such joint decision-making. As with the existing International Joint Commission, ultimate political authority would continue to rest with the two governments, but by appointing high-quality commissioners and pledging to maintain an arms-length relationship with each commission, the two governments would seek to foster a similar, respected status for such new commissions.⁴⁹

The opportunities for pursuing similar strategies with other trading partners are much more limited. Much of current non-US cooperative activity contributes to providing early warning on emerging problems, fostering better trade and investment relations, contributing to technical assistance, and more. None of it, however, has the same impact, now and potentially, as existing and potential cooperative activity with the United States. Given the economic and political weight of the EU and, to a lesser extent, Japan, and their complex and frequently contentious economic relations with the United States, any tilt toward greater Canada-EU or Canada-Japan regulatory cooperation would carry major strategic implications. These implications would go well beyond the possibility of enhanced commercial opportunities for Canadian exporters in EU or Japanese markets and would constitute a reversal of the choice Canada made in the 1980s and 1990s to see its future as a nation of the Americas. Such efforts would be incompatible with the broad move towards cross-border regulatory convergence with the United States evident for more than two generations. The principal Canadian trade objective for more than seventy years has been to remove obstacles to Canadian exports to the United States. Any Canada-EU, Canada-Japan, or other initiatives that undermined US confidence in the readiness of Canada to devise new cooperative arrangements to achieve even higher levels of convergence and cross-border openness, should be weighed with great care.

The entry into force of the Canada-US FTA, and subsequently the NAFTA, amounted to a strategic Canadian decision to accept the American 'acquis'⁵⁰ in the governance of bilateral trade and related domestic economic regulation. Across a broad range of commercial policy, for example, tariffs and related programs including rules of origin, product standards, trade remedies, investment, and intellectual property rights, Canadian policies, practices, and procedures are aligned with those of the United States. To be sure, significant differences remain in a few areas but these are less numerous and less important in commercial terms than those differences that exist between Canada and the EU or Japan. For the most part, the future challenge in addressing the governance of the North American economy lies less in effecting major policy changes and more in making administrative adjustments in the implementation and administration of broadly similar regulatory regimes.

Serious regulatory cooperation with the EU or Japan, on the other hand, would constitute, to all practical purposes, the acceptance by Canada of the acquis communautaire, or an acquis japonais. The more that Canada refused to align with either of these two regulatory regimes, the fewer would be the commercial benefits arising from regulatory cooperation. The more that Canada accepted either the European or Japanese acquis, the greater would be the differences between Canadian and US policies, practices, and procedures, with severe consequences for Canadian access to the US market. It is hard to see why any society would contemplate initiatives that would place 85 percent of its trade at risk in order to enhance prospects for what now amounts to five percent with the EU and even less with Japan.

At first blush, it may seem attractive to explore the possibility of regulatory rapprochement with more than one partner, for example the United States and the EU. Canada could, for example, indicate that Canadian mandatory requirements could be satisfied on the basis of either an EU or a US standard. Such an approach is possible, but would compromise any effort to build a better integrated Canada-US regime, one that ultimately creates the basis for a single North American market no longer divided by an actively administered border as far as trade is concerned. 

Nevertheless, cooperative efforts to better understand and even influence regulatory developments in Europe, Japan, and elsewhere do serve a useful purpose and should continue. Much beneficial information can be gleaned from such exercises. They can contribute importantly to the critical task of working with the United States. Indeed, joint Canada-US efforts to mount regulatory cooperation exercises across the Pacific and the Atlantic can pay additional dividends. The EU-US Transatlantic Dialogues, for example, has paid larger dividends than similar discussions between the EU and Canada.

Similarly, Canada should continue to be an active player in multilateral efforts. As outlined above, both the rules of the world trade regime and the voluntary work of many standardization organizations and associations are critical to informing Canadian regulatory practice and raising the quality of Canadian regulatory outcomes. Again, working closely with the United States, as is already common practice, should enhance the effectiveness of Canada's voice in these fora.

Conclusions and Recommendations

Canada has much to gain, and little to lose, from an aggressive program of regulatory cooperation. The principal focus of such a program should be the United States because of already high levels of trade and investment integration, high levels of compatibility and similarity in goals and approach, and high levels of existing networks of cooperation. Working closely with the United States can also provide a direct route to piggy-backing on US programs of regulatory cooperation, such as the EU-US Transatlantic Dialogue.

The operating goal of such a program should be to seek greater compatibility and complementarity in goals, design, and outcomes rather than detail, through sharing of information, joint decision-making, strengthened networks, agreed safety valves, greater use of MRAs and analogous instruments, development of appropriate machinery and institutions to enhance mutual confidence and facilitate information sharing, and, ultimately, joint decision-making.

Such a program is best pursued within the broader framework of reaching a new bilateral accommodation with the United States across the full range of cross-border interaction. As I have argued elsewhere,

Overwhelmingly, Canada's leading trade and foreign policy partner is the United States, surpassing all other partnerships combined in the breadth, depth, and intensity of the relationship. Cross-border trade and investment drive our economy. US innovation and entrepreneurship provide both opportunities and competition. US popular culture dominates, not because it is forced on Canadians but because Canadians choose it. The US military provides a blanket of security. US warm weather cossets millions of Canadians each winter. The US presence pervades every aspect of Canadian life, including, as Foreign Minister Bill Graham recognizes, foreign policy. Virtually every aspect of Canada's political, economic, cultural, and social life is measured by Canadians in terms of the US yardstick. ... The first and virtually only priority for Canadian diplomacy over the next few years is to reach a new accommodation with the United States. Canada and the United States need to take deliberate steps to bring the architecture of their relationship into line with the challenge and fact of deepening integration as well as with the political and security realities ushered in by the events of September 11.⁵¹

More generally, continued improvement in the disciplines and procedures of the WTO's "standards-setting" agreements is an important part of the Doha agenda. In addition to the review provisions built into the TBT, SPS, GATS, TRIPS, and other agreements, many of the issues related to making markets more contestable and more fair, revolve around establishing international norms or standards and the necessary procedures for their implementation and enforcement. In pursuing this agenda, the fundamental issue will be to find common ground between two competing sets of social values and priorities: those espoused by the trade culture premised on the benefits of liberalism and open competition and involving open markets and freedom of choice and those advanced in the regulatory culture premised on the benefits of order involving constraints on competition, efforts to promote social responsibility, and steps to mitigate the potentially harmful effects of the market. The challenge is to find a balance between these competing values.

Endnotes

¹Hart is a former Canadian trade official and now Simon Reisman Chair in Trade Policy at Carleton's Norman Paterson School of International Affairs and a distinguished fellow of the Centre for Trade Policy and Law at Carleton and the University of Ottawa.

² Michael Hart and Bill Dymond, "Canada and the Global Challenge: Finding a Place to Stand," C.D. Howe Institute Commentary No. 180 (Toronto: C.D. Howe Institute, March 2003), 16 and 20.

³ The contestability of markets in this context involves the embrace of a much broader approach to market access, straddling the continuum of trade, investment, and competition policy. It emphasizes the need to stem anti-competitive practices that may impede the ability of producers to contest a market, whether such practices stem from public policy or private behaviour. It means that effective market access and presence are not unduly impeded by border controls, investment restrictions, regulatory obstacles, or structural barriers, whether public or private in origin. Harvard economist Robert Lawrence concludes: "To achieve contestable markets, therefore, a comprehensive approach is required. This approach should not be confined simply to rules for trade or investment. It must encompass other fields, including competition policy, government regulation, technology policy, government procurement, corporate governance, standard setting and tax policies." "Towards Globally Contestable Markets," in OECD, Market Access After the Uruguay Round: Investment, Competition and Technology Perspectives (Paris, 1996), 32. An agreement dedicated to the attainment of full contestability should thus provide a seamless web of trade and investment disciplines with which to govern both private actions and public policies affecting the ability of internationally active firms to contest markets anywhere on the globe. See Edward M. Graham, International Market Contestability and the New Issues at the World Trade Organization, Industry Canada Discussion Paper Number 6, February 1998 and Michael Hart, "A Multilateral Agreement on Foreign Direct Investment - Why Now?" in Pierre Sauvé and Daniel Schwanen, eds., Investment Rules for the Global Economy: Enhancing Access to Markets (Toronto: C.D. Howe Institute, 1996) for moe complete discussions.

⁴ See G. Bruce Doern, "The Interplay among Regimes: Mapping Regulatory Institutions in the United Kingdom, the United States and Canada," in Doern and Stephen Wilks, Changing Regulatory Institutions in Britain and North America (Toronto: University of Toronto Press, 1998) for a more complete discussion of this typology.

⁵ See the website for the Yearbook at http://www.uia.org/organizations/volall.php.
The Yearbook is now in its 39^th edition for 2002-3.

⁶ See the latest version of UNCTAD, World Investment Report (2002) accessed at
http://r0.unctad.org/wir/pdfs/wir02ove_a4.en.pdf.

⁷ Alan Rugman, The End of Globalization (New York: Amacom, 2000), flyleaf.

⁸ See Michael M. Hart and William A. Dymond, "Post-Modern Trade Policy: Reflections on the Challenges to Multilateral Trade Negotiations After Seattle," Journal of World Trade 34:3 (June 2000) for a more complete discussion of this transformation and its implications.

⁹ OECD, Canada: Maintaining Leadership Through Innovation (OECD Reviews of Regulatory Reform), p. 8, accessed at
http://www1.oecd.org/publications/e-book/4202091E.PDF.

¹⁰ The fact that there is no broad public support for such an approach to the world beyond Canada does not mean that it lacks promoters and defenders. The left in Canada, well-presented in Canadian universities, think-tanks, and interest groups, continues to bemoan the consequences of deepening global and continental integration. The vast majority of Canadians, however, continue to vote for this integration in their daily life-style choices, choices now also being reflected in their responses to public opinion polls.

¹¹ I discuss the issue at some length in Michael Hart with Laura Ritchie Dawson, Developing a Strategy for the Negotiation of Standards Issues in Global Trade. Report prepared for the Provincial-Territorial Committee to the Standards Council of Canada. December 1999.

¹² The effective operation of the market is critically dependent on the existence of a supporting framework of rules, regulations, and institutions such as private property, the courts, and more. There is no basis for the criticism that markets and governments operate in opposition to each other. See, for example, Nathan Rosenberg and L.E. Birdzell, How the West Grew Rich: The Economic Transformation of the Industrialized World (New York: Basic Books, 1986) for a discussion of the critical role of rules and institutions in western economic development.

¹³      Regulations are the means by which governments translate broad social and political goals into manageable tasks to achieve specific outcomes. It is how bureaucracies implement policies by translating the political goals of legislators into manageable tasks for officials. The secret to good regulatory practice thus often lies in appropriate definitions of goals. When goals are poorly defined, regulations become task driven, expensive, and not well received. For an excellent introduction explaining the difference between effective and ineffective regulation, see James Q. Wilson, Bureaucracy: What Government Agencies Do and Why They Do It (New York: Basic Books, 1989).

¹⁴ Transport Canada's proposed new regulations requiring anti-theft devices on all cars manufactured after 2005 provide a telling example. Similar US regulations exempt entry-level cars in an effort to reduce costs and in recognition that few such cars are stolen. Transport Canada has decided not to exempt entry-level cars, thus imposing expensive engineering and manufacturing costs on manufacturers that will need to be recovered on the basis of the relatively small volume of cars sold in Canada. See Tom Blackwell, "Ottawa tries to rein in Joyriders," National Post, 29 July 2003, A1.

¹⁵ The OECD's Philip Wagner indicates how everyone would benefit from achieving this goal: "With harmonised standards and certification procedures, consumers can be confident that products sold throughout the global marketplace meet the same high safety standards everywhere. Manufacturers can avoid costly and unnecessary testing, and their innovative products will gain access to markets more speedily. Regulators can deploy increasingly scarce resources elsewhere, confident that products have been adequately tested and meet exacting requirements." Christopher Wagner, "Safe Products and Global Trade," The OECD Observer, No. 202 (October/November 1996), 16.

¹⁶ A study prepared by the US National Research Council, for example, indicated that already a decade ago, sixty percent of US exports to the EU had to be certified to EU standards, often requiring costly, redundant tests. US National Research Council, Standards, Conformity Assessment and Trade Into the 21st Century (Washington: National Academy Press, 1995), 112. It cites US Department of Commerce studies which suggest that up to 65 percent of US exports are affected by technical regulations; more than half of this amount is subject to non-US certification requirements and another 15 percent requires quality or environmental management system registration. The report also provides a sobering assessment of the cost of wasteful duplication in standardization and related regulatory requirements flowing from the highly decentralized US approach.

¹⁷ It is important to keep in mind that the issues raised here are at their most acute in trade among OECD countries. It takes a sophisticated and well-developed economy to afford the expensive and complex array of institutions and procedures needed to maintain high exacting regulatory requirements. It is even more expensive to maintain differential standards and regulations. For smaller countries, therefore, the most sensible strategy may well be to align much of their regulatory regime with the regime in place in the United States or EU and let US and EU institutions assume the costs of maintaining the system. The US Federal Aviation Regulations (FAR) maintained by the Federal Aviation Agency (FAA) are in most instances the basis for the regulation of air safety and air worthiness in many countries, even in countries which may not have the capacity to enforce them. A problem raised by this approach, of course, is that political liability for a US or EU error in judgement rests at home.

¹⁸ See Ramesh Chaitoo and Michael Hart, The Forest Stewardship Council and Sustainable Forestry Management Standards: Issues and Challenges for the Canadian Forestry Industry (Ottawa: Centre for Trade Policy and Law, 1998).

¹⁹ As has been frequently pointed out by analysts of market economics, the successful operation of markets is critically dependent on the presence of supporting laws and institutions. Proponents of market-based reforms of economic regulation do not seek a retreat of the state but a refocusing of the state's activities to matters that ensure the efficient and beneficial operation of markets. For the critical role of institutions in the rise of modern market-based economies, see Nathan Rosenberg and L.E. Birdzell, How the West Grew Rich: The Economic Transformation of the Industrialized World (New York: Basic Books, 1986).

²⁰ For a fuller discussion of the economics of standardization and regulation, see Alan O. Sykes, Product Standards for Internationally Integrated Goods Markets (Washington: Brookings Institution, 1995), 27-56. Useful discussions on changing regulatory issues can also be found in G. Bruce Doern, Margaret M. Hill, Michael J. Prince, and Richard J. Schultz, Changing the Rules: Canadian Regulatory Regimes and Institutions (Toronto: University of Toronto Press, 1999) and G. Bruce Doern and Ted Reed, Risky Business: Canada's Changing Science-Based Policy and Regulatory Regime (Toronto: University of Toronto Press, 2000).

²¹ The extent and benefit of the activities of these three principal international standardization bodies are well-illustrated by the broad uptake of their standards. Based on their websites, ISO, for example, has published over 13,700 standards, ranging from individual, one-off standards for an individual product, to whole systems for quality management, such as ISO 9000. Codex has established 237 food standards for commodities and 41 codes of hygienic or technological practice, evaluated 185 pesticides and set 3,274 limits for pesticide residues, issued 25 guidelines for contaminants, and evaluated 1,005 food additives and 54 veterinary drugs. The IEC, similarly, is well-established as the leading global organization that prepares and publishes international standards for all electrical, electronic and related technologies.

²² Sykes, Product Standards for Internationally Integrated Goods Markets, 36.

²³ The EU has made the greatest progress in implementing these principles into law. In the EU, uniform minimal requirements for products were first established across borders, followed by mutual recognition agreements (MRAs) to deal with product standards that deviated from these uniform criteria. Elsewhere, MRAs tend to focus more on conformity assessment. In these circumstances, MRAs express mutual confidence in the ability of foreign conformity assessment organizations to test and certify to the requirements of the importing jurisdiction, regardless of whether the applicable product standards are harmonized or deemed equivalent. Recognition by the importing country authority pertains to the exporting country's system of accrediting conformity assessment organizations for a given product or sector. This is more likely to happen when both countries' systems of accreditation, as well as testing and certification procedures, adhere to common quality management or operating guidelines and standards (such as ISO Guides). A key issue arising from this type of recognition is whether such recognition entitles the foreign testing organization to use the certification mark often required in the importing country, since such marks are usually the exclusive property of a domestic organization. Recognition by one country of foreign product standards is usually expressed as "equivalence" and need not be established on a reciprocal basis. In Canada, for example, regulatory authorities often accept US products and certification marks based on differing but equivalent US standards.

²⁴ Organization for Economic Cooperation and Development, Conference on Consumer Product Safety Standards and Conformity Assessment: Their Effect on International Trade Proceedings (Paris, 1996).

²⁵ See Patrick Low, Trading Free: The GATT and US Trade Policy (New York, Twentieth Century Fund Press, 1993), 72-5.

²⁶ Sykes characterizes this approach as "policed decentralization." Governments retain the right to set their own standards and related regulations, but subject to challenge and review by other member governments. A fundamental weakness is that the rules are limited to process and effect rather than substantive provisions, and sub-national governments and private organizations are at best covered on an indirect basis. See Products Standards for Internationally Traded Goods, 63-85

²⁷ For a detailed legal analysis of the Tokyo Round code, see Ivan Bernier, "Product Standards and Non-Tariff Obstacles: The GATT Code on Technical Barriers to Trade," in John Quinn and Philip Slayton, eds., Non-Tariff Barriers After the Tokyo Round (Montreal: Institute for Research on Public Policy, 1982).

²⁸ For another discussion of the WTO agreements, see US National Research Council, Standards, Conformity Assessment and Trade, 112-120.

²⁹ Article 6:1, to which paragraph 3 refers, sets out some of the technical and legal conditions that members may require in order to enter into recognition arrangements.

³⁰ The texts of the decisions can be found at www.wto.org/dispute-settlement.

³¹ Additionally, as Sykes argues, the GATT/WTO system of policed decentralization does not question the underlying values and assumptions of specific standards or regulations adopted by governments. It is a system geared to the needs of sovereign states not prepared to allow a high level of intrusion into their internal affairs. A system based on managed mutual recognition, while still geared to the needs of sovereign states, does allow for a higher level of recognition of equivalence in both standards and conformity assessment. Sykes, Product Standards for Internationally Integrated Markets, 110ff. See also the comments by Kalypso Nicolaides in the same volume, 141ff.

³² "International Regulatory Co-operation," Presentation to the External Advisory Committee on Smart Regulation, July 3, 2003.

³³ See the website of the SCC, http://www.scc.ca., for more detail on these and other activities.

³⁴ Other recent MRAs pursued by Canada include the Asia-Pacific Economic Cooperation (APEC) Mutual Recognition Arrangement for Conformity Assessment of Telecommunications Equipment (signed 8 May 1998); the Pacific Accreditation Cooperation (PAC) and International Accreditation Forum (IAF) MRAs on quality management systems registration accreditation (signed 24 January 1998); the APEC MRA on Food and Food Products Safety (not yet signed). MRAs are also planned under the North American Calibration Cooperation (NACC - Canada, US, and Mexico) for metrology and similar issues.

³⁵ For example, the SCC and the US National Institute for Standards Technology (NIST) manage a 1994 agreement for the mutual recognition of the testing laboratory systems they each administer. For the benefit of an industry that exports $1 billion in fasteners annually to the United States, the SCC has concluded an agreement with relevant American agencies so that assessments for conformity with US regulations on Canadian-made fasteners can be performed in Canada.

³⁶ The Centre for Trade Policy and Law is in the process of developing a data base outlining the extent of such networks. Work is already completed on networks of cooperation governing customs enforcement, food safety and agriculture, energy, transportation, immigration, chemicals and petro-chemicals, and pharmaceuticals and is continuing on environmental regulation, medical technology, electrical equipment, and financial services.

³⁷ Further detail on these activities is available at the following websites:
http://www.dfait-maeci.gc.ca/canadaeuropa/caneu-regulatorycoop-en.asp
for Canada-EU, http://www.mofa.go.jp/region/n-america/canada/p_ship21/annex1.html for Canada-Japan, and
http://www.dfait-maeci.gc.ca/canada-apec/links-en.asp
for Canada-APEC.

³⁸     "Managing Risk Together: US-EU Regulatory Cooperation," Bulletin, XIV:2 (June 2003) accessed at http://www.acus.org/Publications/bulletins/Managing%20Risk%20Together.pdf.

³⁹ See Alan O. Sykes, "Strategies for Increasing Market Access Under Regulatory Heterogeneity." Paper prepared for OECD Trade Committee meeting on February 15, 1996 (TD/TC(96)8) for an explanation of the causes of regulatory heterogeneity.

⁴⁰ The United States and the EU have made substantial progress in considering the parameters of fruitful regulatory cooperation. The agreed Guidelines for Increased Regulatory Cooperation issued in April 2002 provide useful insight into ways and means to pursue "soft" regulatory cooperation. As explained further below, however, their impact is likely to be marginal due to different approaches, values, and decision-making styles. Trying to ride herd on Congress and the Member States will sap the energies of officials on both sides of the Atlantic. The Guidelines are available at
http://europa.eu.int/comm/enterprise/enterprise_policy/gov_relations/regulcoopguidel.htm.

For a fuller discussion of US-EU regulatory cooperation, see David Vogel, Barriers or Benefits? Regulation in Transatlantic Trade (Washington: Brookings Institution, 1997). Canada and the EU have embarked on a similar exercise. A description of the objectives, approaches, and timelines of Canada-EU regualtory cooperation can be found at: http://www.dfait-maeci.gc.ca/canadaeuropa/site/images/caneu_plan-en.doc

⁴¹ Industry Canada, North American Regulatory Cooperation, draft, February 2002.

⁴² "Shaping the Future of North American Economic Space: A Framework for Action," C.D. Howe Institute Commentary No. 162 (Toronto: C.D. Howe Institute, April 2002), 3. Former Canadian diplomat Leonard Legault put it this way: "A wrong-headed notion of sovereignty can actually interfere with one of the most fundamental expressions of sovereignty - the pursuit of national interests." "Canada and the United States: Three Ways to Run a Relationship."

⁴³ Thirty years ago, John Holmes argued that "isolationism is no longer a personal or national alternative for Canadians. We are in the thick of things not because larger powers have dragged us in to them but because our greatest national interest is a world in which we can peacefully trade." Convocation Address, Lakehead University, 26 May 1973, reprinted in Holmes, Canada: A Middle-Aged Power (Toronto: McClelland and Stewart, 1976), 278-93.

⁴⁴ The Government's 1995 foreign policy statement, Canada and the World, is a celebration of Canadian achievements in international rule making and promises to continue along this road.

⁴⁵ A good overview of the extent of convergence and difference can be found by mining the OECD program on regulatory reform, particularly the two country studies on Canada and the United States, available at
http://www1.oecd.org/publications/e-book/4202091E.PDF (Canada)
and http://www.oecd.org/dataoecd/48/19/2478900.pdf (USA).
Both are also available in book format.

⁴⁶ The Canadian Council of Chief Executives and its US and Mexican counterparts have embarked on a tripartite project to explore the scope for regulatory cooperation and for reducing duplication, overlap, and counterproductive differences.

⁴⁷ The system was on full display to address the BSE scare raised by the single instance of one mad cow found in Alberta. Misguided attempts by Japan to require segregation of Canadian and US meat products indicated the extent to which the industry is integrated and the authorities have developed an integrated regulatory regime.

⁴⁸ Canada and the United States already have a wealth of experience to draw on in designing appropriate institutional mechanisms, including the Permanent Joint Board of Defense and the International Joint Commission. One of the lessons to emerge from a study of the operations of these institutions is that their strength often derived from the quality of their appointments and the insistence of these appointees to maintain an arms-length relationship with the government of the day. Committees and task forces of officials, on the other hand, suffer from their lack of independence and are thus easily captured by political agendas.

⁴⁹ Leonard Legault, former Canadian co-chair of the International Joint Commission, ascribes the success of the IJC to "its binational but unitary character; its permanence and independence; its impartiality and commitment to solutions that focus on the common interest of both countries; its emphasis on consensus-building; its comprehensive use of joint fact-finding procedures through the establishment of binational advisory boards; and finally, its accessibility to all persons or bodies who wish to put their views before the Commission. Thus, the Commission generally bypasses the disadvantages of government-to-government negotiations and offers certain advantages that go beyond most dispute-settlement mechanisms. As with all institutions, however, the Commission is only as good as its membership. Much depends upon the quality of appointments by the two governments." "Canada and the United States: Three Ways to Run a Relationship."

⁵⁰ The term is borrowed from the vocabulary of the European Union and refers to the full panoply of rules, regulations, and institutions that give practical effect to the European ideal of a single European market. While the ideal and political motives in North America may be different, the practical reality is that a similar operates to give effect to the emerging North American single market.

⁵¹ Michael Hart and Bill Dymond, "Canada and the Global Challenge: Finding a Place to Stand," C.D. Howe Institute Commentary No. 180 (Toronto: C.D. Howe Institute, March 2003), 16 and 20.