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Border deal aims to reduce 'tyranny of small differences' in regulation

The United States border crossing is shown Wednesday, December 7, 2011 in Lacolle, Que., south of Montreal.

Ryan Remiorz/Ryan Remiorz/THE CANADIAN PRESS

When Campbell Soup Co. makes canned vegetable soup, it has to run separate production lines, with different can sizes, for the Canadian and U.S. markets.

That's because Canadian regulations specify that only 19-ounce cans of certain processed fruits and vegetable products can be sold in Canadian stores. The company would like to sell 16-ounce cans – the preferred size for U.S. consumers – but it is not allowed to sell them in Canada. In the United States, any can size is permitted.

That's just one of a "tyranny of small differences" in regulation that drives up manufacturing costs and makes cross-border commerce incredibly complex, said Kelly Johnston, vice-president of government affairs at Campbell Soup Co.

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The new U.S.-Canada border deal, announced in Washington Wednesday by Prime Minister Stephen Harper and President Barack Obama, is trying to eliminate some of those regulatory hurdles, as part of its broader effort to smooth trade across the border while making both countries more secure.

A key component of the border plan is to co-ordinate and harmonize some of the vast array of regulations that affect companies operating on both sides of the boundary – to get rid of unnecessary differences and duplications that can add huge costs to a wide range of organizations.

Businesses shouldn't hold their breath, however. While a Regulatory Co-operation Council has been working since February to narrow the areas of most serious concern, it could be months or years before many of the changes are implemented.

Among the key sectors that have been pegged for reform are food and agriculture, transportation (including clearing up conflicting vehicle safety standards), and health and personal care products.

The food businesses is a crucial target for regulatory reform because of the complex inspection and safety systems in place on both sides of the border. Some discrepancies seem bizarre, such as the different names used in each country for the same cuts of meat. In Canada, producers are not allowed to use the terms "peameal bacon" or "chicken tenderloin," for example.

Mr. Johnston cited a number of regulatory differences that make Campbell Soup's business more complex and add to its costs. For example, Canada does not allow vitamins and minerals to be added to many food products, while the U.S. does. In the United States there are two different food safety regulators, depending on whether a product contains meat, while Canada has just one. And he said it is rare for the Canadian Food Inspection Agency to accept the word of the U.S. agencies, or vice versa, when products are moving between countries.

"This complicates our ability to move products over the border, and it ties up food safety resources [that could be]dispatched elsewhere, where there is higher risk," Mr. Johnston said.

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For the veterinary drug business, better regulatory harmonization "will make a huge difference," said Graeme McRae, president of Bioniche Life Sciences Inc. of Belleville, Ont. One of the company's key products is a cattle vaccine that helps prevent E. coli infections, but "when we went with [it]to the U.S., the [regulatory]requirements were totally different than what was required for Canada," Mr. McRae said. "It is going to cost several million dollars to do again [for the U.S.]what we had to do for Canada."

However, Bioniche recently noticed an improvement in the cross-border attitude when it went to the U.S. to register one of its new animal drug products. Mr. McRae said he hopes this new approach, where U.S. regulators accepted Canadian regulatory data, will become common practice.

Reducing the high costs – and long wait times – in getting veterinary products accepted south of the border is crucially important, he said, because of the size of the U.S. market.

In the transportation sector, Canada's truckers believe the cross-border agreement delivers on promises made by the government. The industry's trade association said that it had been consulting with Ottawa for months, and was most impressed by the plan for harmonizing data requirements for goods in transit.

Canadians were virtually shut out of transporting domestic loads through the United States after Sept. 11, 2001, because they'd have to fill in full customs documentation. This will be changed, making it easier to shorten delivery distances between parts of Canada by crossing through the United States.

"Restoring carriers' ability to move in-transit means more efficient trade, lower costs and faster truck transit times for Canadian carriers moving domestic goods through the U.S.," the association said.

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With files from reporter Steve Ladurantaye

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About the Author
Reporter, Report on Business

Richard Blackwell has reported on Canadian business for more than three decades. At the Financial Post and the Globe and Mail he has covered technology, transportation, investing, banking, securities and media, among many other subjects. Currently, his focus is on green technology and the economy. More

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