The relationship between the United States and Canada is the closest and most extensive in the world. It is reflected in the staggering volume of bilateral trade--the equivalent of $1.5 billion a day in goods--as well as in people-to-people contact. About 300,000 people cross the shared border every day.

A 2004 law is phasing in new rules for travel between Canada and the United States. Since January 2007 U.S. citizens traveling by air to and from Canada have needed a valid passport to enter or re-enter the United States. Beginning January 31, 2008, U.S. and Canadian citizens aged 19 and older traveling into the U.S. from Canada by land or sea (including ferries) have had to present documents denoting citizenship and identity. This change primarily affects American and Canadian citizens who have previously been permitted entry into the U.S. by oral declaration alone, and marks the transition toward standard and consistent documents for all travelers entering the U.S. Acceptable documentation includes a valid passport or government-issued photo identification such as a driver's license and proof of citizenship such as a birth certificate. Children aged 18 and under need only to present a birth certificate. A list of acceptable documents is found at http://canada.usembassy.gov. Travelers who do not present acceptable documents may be delayed as U.S. Customs and Border Protection officers at the port of entry attempt to verify identity and citizenship. Beginning in June 2009, all travelers, including U.S. citizens, will have to present a passport or other secure document that denotes identity and citizenship when entering the U.S. from Canada.

In fields ranging from law enforcement to environmental protection to free trade, the two countries work closely on multiple levels from federal to local. In addition to their close bilateral ties, Canada and the U.S. cooperate in multilateral fora. Canada--a charter signatory to the United Nations and the North Atlantic Treaty Organization (NATO) and a member of the G8--takes an active role in the United Nations, including peacekeeping operations, and participates in the Organization for Security and Cooperation in Europe (OSCE). Canada joined the Organization of American States (OAS) in 1990 and hosted the OAS General Assembly in Windsor in June 2000, and the third Summit of the Americas in Quebec City in April 2001. Canada seeks to expand its ties to Pacific Rim economies through membership in the Asia-Pacific Economic Cooperation forum (APEC), and will host the Winter Olympic Games in Vancouver-Whistler, British Columbia in 2010.

Canada views good relations with the U.S. as crucial to a wide range of interests, and often looks to the U.S. as a common cause partner promoting democracy, transparency, and good governance around the world. Nonetheless, it sometimes pursues policies at odds with our own. Canada decided in 2003 not to contribute troops to the U.S.-led military coalition in Iraq (although it later contributed financially to Iraq's reconstruction and provided electoral advice). Other recent examples are: Canada's leadership in the creation of the UN-created International Criminal Court (ICC) for war crimes; its decision in early 2005 not to participate directly in the U.S. missile defense program; and its strong support for the Ottawa Convention to ban anti-personnel mines. The U.S., while the world's leading supporter of demining initiatives, declined to sign the treaty due to unmet concerns regarding the protection of its forces and allies, particularly those serving on the Korean Peninsula, as well as the lack of exemptions for mixed munitions.

U.S. defense arrangements with Canada are more extensive than with any other country. The Permanent Joint Board on Defense, established in 1940, provides policy-level consultation on bilateral defense matters and the U.S. and Canada share NATO mutual security commitments. In addition, U.S. and Canadian military forces have cooperated since 1958 on continental air defense within the framework of the North American Aerospace Defense Command (NORAD). The military response to the terrorist attacks of September 11, 2001 both tested and strengthened military cooperation between the U.S. and Canada. The new NORAD Agreement that entered into force on May 12, 2006 added a maritime domain awareness component and is of "indefinite duration," albeit subject to periodic review. Since 2002, Canada has participated in diplomatic, foreign assistance, and joint military actions in Afghanistan. Approximately 2,500 Canadian Forces personnel are deployed at any given time in southern Afghanistan under a battle group based at Kandahar and as members of the Canadian-led Provincial Reconstruction Team (PRT) at Camp Nathan Smith in Kandahar. The Canadian Parliament has approved the extension of this mission in Kandahar until 2011. Canada has also contributed to stabilization efforts in Haiti, initially with troops and later with civilian police and electoral assistance, and humanitarian and developmental aid.

The U.S. and Canada also work closely to resolve trans-boundary environmental issues, an area of increasing importance in the bilateral relationship. A principal instrument of this cooperation is the International Joint Commission (IJC), established as part of the Boundary Waters Treaty of 1909 to resolve differences and promote international cooperation on boundary waters. The Great Lakes Water Quality Agreement of 1978 (as amended in 1987) is another historic example of joint cooperation in controlling trans-boundary water pollution. The two governments also consult regularly on trans-boundary air pollution. Under the Air Quality Agreement of 1991, both countries have made substantial progress in coordinating and implementing their acid rain control programs and signed an annex on ground level ozone in 2000. In late 2007, Canada and the U.S. began discussions aimed at negotiating a new annex to the Air Quality Agreement which will increase cooperation in combating cross-border air pollution in the form of particulate matter.

Canada ratified the Kyoto Accord in 2002, despite concern among business groups and others that compliance would place Canada's economy at a lasting competitive disadvantage vis-a-vis the U.S. However, Prime Minister Stephen Harper's government announced in 2006 that Canada would not be able to meet its original Kyoto Protocol commitments. In April 2007, the Canadian Government announced a new regulatory framework for air emissions that, when implemented, should lead to significant decreases in emissions of greenhouse gases and air pollutants as early as 2010. Canada participates in the U.S.-led International Carbon Sequestration Leadership Forum, which researches effective ways to capture and store carbon dioxide. Canada is also a founding member of the International Partnership for the Hydrogen Economy and the Global Earth Observation System of Systems, both of which are designed to address climate change and are supported by the U.S. In early 2005, Canada joined the U.S.-led Methane to Markets initiative, which focuses on transferring technology to developing countries for the capture and use of methane from pipelines, landfills, and other sources. In October 2007 Canada gained membership in the Asia Pacific Partnership on Clean Development and Climate, which joins it with the U.S., Japan, Australia, South Korea, China, and India in a broad effort to accelerate the development and deployment of clean energy technologies in major industrial sectors.

While bilateral law enforcement cooperation and coordination were excellent prior to the September 11, 2001 terrorist attacks in the United States, they have since become even closer through such mechanisms as the Cross Border Crime Forum. Canada, like the U.S., has strengthened its laws and realigned resources to fight terrorism. U.S.-Canada security cooperation to create a safe and secure border is exemplary. Canadian and U.S. federal and local law enforcement personnel fight cross-border crime through cooperation on joint Integrated Border Enforcement Teams (IBETs). Companies on both sides of the border have joined governments in highly successful partnerships and made massive investments to secure their own facilities and internal supply chains. Over 70% of Canada-U.S. trade is transported by truck. Some commercial drivers crossing the border have volunteered to undergo background security checks under the bilateral Free and Secure Trade (FAST) program and many companies participate in the Customs-Trade Partnership Against Terrorism (C-TPAT). These initiatives have helped secure trade while speeding border processing.

Canada is a significant source of marijuana and synthetic drugs (methamphetamines, ecstasy) reaching the U.S., as well as precursor chemicals and over-the-counter drugs used to produce illicit synthetic drugs. Implementation and strengthening of regulations in Canada and increased U.S.-Canadian law enforcement cooperation have had a substantial impact in reducing trafficking in precursor chemicals and synthetic drugs, but cannabis cultivation, because of its profitability and relatively low risk of penalty, remains a thriving industry. Canada increased maximum penalties for methamphetamine offenses in August 2005 and implemented new controls over various precursors in November 2005. Canada is active in international efforts to combat terrorist financing and money laundering.

Canada is a large foreign aid donor and targets its annual assistance of C$4.4 billion toward priority sectors such as good governance; health (including HIV/AIDS); basic education; private-sector development; and environmental sustainability. Canada is a major aid donor to Iraq, Haiti, and Afghanistan.

Prime Minister Harper, who entered office stating he intended to bring a new, more positive tone to bilateral relations while still defending Canadian interests, held his first meeting with President Bush at the March 30-31, 2006 Security and Prosperity Partnership of North America (SPP) meeting in Cancun, Mexico. Prime Minister Harper later met with President Bush in Washington, DC in July 2006, and the two leaders met again when President Bush attended a North American leaders' meeting in Montebello, Quebec in August 2007 and in New Orleans in April 2008.

Trade and Investment

The U.S. and Canada enjoy an economic partnership unique in the world. The two nations share the world's largest and most comprehensive trading relationship, which supports millions of jobs in each country. In 2007, total trade between the two countries exceeded $560 billion. The two-way trade that crosses the Ambassador Bridge between Detroit, Michigan and Windsor, Ontario equals all U.S. exports to Japan. Canada's importance to the U.S. is not just a border-state phenomenon: Canada is the leading export market for 36 of the 50 U.S. States, and ranked in the top three for another 10 States. In fact, Canada is a larger market for U.S. goods than all 27 countries of the European Community combined, whose population is more than 15 times that of Canada. The comprehensive U.S.-Canada Free Trade Agreement (FTA), which went into effect in 1989, was superseded by the North American Free Trade Agreement among the United States, Canada and Mexico (NAFTA) in 1994. NAFTA, which embraces more than 450 million people of the three North American countries, expanded upon FTA commitments to move toward reducing trade barriers and establishing agreed upon trade rules. It has also resolved long-standing bilateral irritants and liberalized rules in several areas, including agriculture, services, energy, financial services, investment, and government procurement. Since the implementation of NAFTA in 1994, total two-way merchandise trade between the U.S. and Canada has grown by 265%, creating many new challenges for the bilateral relationship. The Security and Prosperity Partnership of North America, launched by the three NAFTA countries in March 2005, represents an effort to address these challenges and others on a continental basis.

Canada is an urban services-dependent economy with a large manufacturing base. Since Canada is the largest export market for most states, the U.S.-Canada border is extremely important to the well-being and livelihood of millions of Americans.

The U.S. is Canada's leading agricultural market, taking 55% of its agro-food exports in 2007. However, U.S. imports of Canadian livestock products, particularly ruminants, fell drastically after the discovery of bovine spongiform encephalopathy (BSE, mad cow disease) in early 2003. Shipments of most Canadian beef to the U.S. were resumed in late 2003, and trade in live cattle under 30 months resumed in July 2005. All remaining U.S. restrictions affecting bilateral beef trade were lifted in November 2007. Canada is the largest U.S. agricultural market, primarily importing fresh fruits and vegetables and livestock products.

The U.S. and Canada enjoy the largest energy trade relationship in the world. Canada is the single largest foreign supplier of energy to the U.S.--providing 17% of U.S. oil imports and 18% of U.S. natural gas demand. Recognition of the commercial viability of Canada's oil sands in Alberta has raised Canada's proven petroleum reserves to 179 billion barrels, making it the world's second-largest holder of reserves after Saudi Arabia. Canada is planning Arctic pipelines and liquefied natural gas terminals to provide more natural gas to the North American market. Canada and the U.S. operate an integrated electricity grid which meets jointly developed reliability standards and provide almost all of each other's electricity imports. Canada is a major supplier of electricity (mostly clean and renewable hydroelectric power) to New England, New York, the Upper Midwest, the Pacific Northwest, and California. Canadian uranium helps fuel U.S. nuclear power plants.

While 98% of U.S.-Canada trade flows smoothly, there are occasional trade disputes affecting the remaining 2%. Usually these issues are managed amicably through bilateral consultative forums or referral to World Trade Organization (WTO) or NAFTA dispute resolution procedures. For example, in response to WTO challenges by the U.S., the two governments negotiated an agreement on magazines providing increased access for the U.S. publishing industry to the Canadian market, and Canada amended its patent laws to extend patent protection to 20 years. Canada has challenged U.S. trade remedy law in NAFTA and WTO dispute settlement mechanisms. Some of these cases involved actions taken by the U.S. Government on softwood lumber imports from Canada. However, the two countries implemented a comprehensive settlement on softwood lumber in late 2006 and these cases were dropped. The U.S. is pressing Canada to strengthen its intellectual property laws and enforcement. The U.S. and Canada resolved a WTO dispute over dairy products in 2003. The U.S. and Canada also have resolved several major issues involving fisheries. By common agreement, the two countries submitted a Gulf of Maine boundary dispute to the International Court of Justice in 1981; both accepted the Court's October 12, 1984 ruling that delineated much of the boundary between the two countries' Exclusive Economic Zones (EEZs).

The U.S. and Canada signed a Pacific Salmon Agreement in June 1999 that settled differences over implementation of the 1985 Pacific Salmon Treaty. In 2001, the two countries reached agreement on Yukon River salmon, implementing a new abundance-based resource management regime and effectively realizing coordinated management over all West Coast salmon fisheries. The U.S. and Canada recently reached agreement on sharing another trans-boundary marine resource, Pacific hake. The two countries also have a treaty on the joint management of albacore tuna in the Pacific, and closely cooperate on a range of bilateral fisheries issues and international high seas governance initiatives.

U.S. immigration and customs inspectors provide preclearance services at eight airports in Canada, allowing air travelers direct connections in the U.S. During the 12 months ending in June 2007, nearly 21.9 million passengers flew between the U.S. and Canada on scheduled flights. Toronto's Pearson International Airport is the third-largest international passenger gateway to the U.S. after London (Heathrow) and Tokyo (Narita) airports. A bilateral Open Skies agreement signed in March 2007 removed all economic restrictions on civil aviation services between Canada and the U.S. The two countries also share in operating the St. Lawrence Seaway, connecting the Great Lakes to the Atlantic Ocean.

Canada and the U.S. have one of the world's largest investment relationships. The U.S. is Canada's largest foreign investor. Statistics Canada reports that at the end of 2007, the stock of U.S. foreign direct investment in Canada was $289 billion, or about 59% of total foreign direct investment in Canada. U.S. investment is primarily in Canada's mining and smelting industries, petroleum, chemicals, the manufacture of machinery and transportation equipment, and finance.

Canada is the fifth largest foreign investor in the U.S. At the end of 2006, the U.S. Commerce Department estimates that Canadian investment in the United States was $159 billion at historical cost basis. Canadian investment in the U.S. is concentrated in finance and insurance, manufacturing, banking, information and retail trade and other services.