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The World's Most Ignored Trading Relationship

Daniel F. Lynch, director of international trade and transportation at Dalhousie University, reveals the importance of two-way trade between the U.S. and Canada - while offering a frank appraisal of the challenges that stand in the way of an ideal relationship.

To the question of which country is the United States' biggest trading partner, most Americans would say China. The correct answer is Canada, which engages in a trading relationship with the U.S. valued at $1.5bn a day. "If we want to be competitive," Lynch says, "we need to be thinking about [who is] right across the border."

For the U.S., the bilateral relationship is one of the very few in which it maintains a significant trade surplus. Canada is highly dependent on American goods, even as it provides vital products and resources to companies south of its border. Bolstering that commerce are similar legal and political systems, even though "we've been throwing in a lot of barriers," says Lynch.

Security continues to be a major hindrance to trade between the two allies. Lynch suggests that U.S. Customs and Border Protection is emphasizing security concerns at the expense of commerce, which is being frustrated by delays and long lines at the border. "That doesn't help us grow the economy," he says.

Excess regulation ends up hampering cross-border business, in Lynch's view. Automotive manufacturers are especially burdened by the need to submit to multiple inspections of parts and finished cars. The average vehicle produced in the U.S. and Canada crosses the border six times, he says, resulting in $1,500 per unit in additional cost. A vehicle imported from Asia, by contrast, is inspected only once.

"We're creating the world's largest economy and we're making it less competitive every day," says Lynch.

The North American Free Trade Agreement has helped to promote U.S.-Canadian commerce to some extent, but government red tape is keeping the pact from realizing its full potential, Lynch says. While some regulators are working to reduce the logjam, "it can't take as long as it's taking, or we're going to be in trouble, in terms of competitiveness."

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Keywords: supply chain, supply chain management, U.S.-Canada trade, NAFTA, international trade, global logistics, logistics management, supply chain risk management

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