The Canada-U.S. cross-border relations chill might get frostier

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The Keystone XL pipeline proposal has been the issue that famously sent a chill through Canada-U.S. relations. But several others now threaten to deepen the frost.

Beef and pork labelling laws could lead to a little trade war. The United States could force Canada to the sidelines over differences on Trans-Pacific Partnership trade talks. That classic cross-border trade irritant, softwood lumber, could even return. And politics, on both sides of the border, might make it all harder to avoid.

Those things are on the horizon at a time when reserves of goodwill appear depleted. There's the hissing over Keystone, the disappointment over the lack of any U.S. funds for even the customs post at a new bridge to Detroit and the cool political mood. U.S. Ambassador Bruce Heyman, as The Globe and Mail reported on Wednesday, had a troubled first year in Canada, for months unable to meet with senior cabinet ministers amid the Canada-U.S. chill.

Of course, cross-border relations have been littered with trade irritants, from softwood to mad cow disease to Pacific salmon to split-run editions of magazines – at times, one piled on another.

Sometimes it's just that: a pile-up of irritants. Sometimes they colour the relationship, as Ottawa feels Washington neglects Canada, and the United States feels beset by a laundry list of little things. "Here come the Canadians with their condominium issues," Condoleezza Rice, then president George W. Bush's national security adviser, reportedly said once. At least now, Stephen Harper's government can say it has worked with Washington on big global security issues – except it probably feels some resentment the effort did not pay benefits closer to home.

Now, we seem to be at a different juncture. Irritants have already irritated. Approval of the Keystone XL pipeline to carry Alberta crude to the U.S. gulf coast has become high-stakes politics in the United States. And a new list of irritants could be coming.

Start with COOL, the country-of-origin-labelling regulation in the United States that requires meat from other countries, including Canada, to be packed separately from U.S. products. Canadian producers say it has meant $1-billion in lost business. And World Trade Organization panels have repeatedly found that the U.S. regulations violate trade rules.

So Canada is threatening to retaliate against U.S. products once a U.S. appeal is completed this spring. U.S. industry is pushing Washington, and politicians there worry backing off could hurt their re-election campaigns. But if the U.S. government doesn't back away, Mr. Harper will be in a similar position. In an election year, can he afford to do less than go to the wall for beef and pork farmers?

Then there's softwood lumber. The Canada-U.S. deal that has since 2006 given Canadian producers assured, but limited, access to the U.S. market runs out in October. It's not clear the United States will renew it.

Toronto trade lawyer Lawrence Herman figures if that happens, the U.S. industry will immediately file trade petitions against Canadian producers – even the destabilizing effect of a losing trade suit might reduce Canadian market share enough to make it worthwhile.

The biggest is the Trans-Pacific Partnership, a 12-country trade negotiation, and concerns that the United States, the key power in the talks, might set conditions that force Canada out. Washington wants Ottawa to put supply management protections for dairy and poultry on the table. But that would be politically risky for Mr. Harper in an election year.

The TPP process is not all up to the Obama administration, either. Mr. Obama wants Congress to grant him trade promotion authority, the power to negotiate an agreement that Congress can only vote for or against – rather than pick it apart line by line. In practice, that's crucial.

Mr. Herman said it looks as if Congress wants to impose conditions on what is to be negotiated before granting the authority – in other words, it might say going in that the deal must include concessions from certain countries, such as asking Canada to give on supply management.

Those things might just be bumps in the road, Mr. Herman said. "But in this case, we've got a kind of political overlay." The chill makes it more likely irritants colour the government-to-government relationship anew, he said, and that in turn makes it harder to smooth away disputes that can hurt.