When Stephen Harper and Barack Obama unveiled the Beyond the Border initiative, the Prime Minister said that what threatens the security and well-being of the United States threatens the security and well-being of Canada.

Three years on, the reality is that Canada will do whatever it takes to ensure the security and well-being of the United States — as long as it doesn’t cost too much.

The most recent threat to progress on “thinning” the border is a clause in a bill currently before the House of Commons that removes the requirement for Canadian customs agents to search for counterfeit goods in transshipment — for example, arriving in Vancouver from China and bound for the U.S.

Bruce Heyman, the new U.S. Ambassador in Ottawa, raised the issue of bill C8, the Counterfeit Products Act, in a speech to the Canada-America Border Trade Alliance Monday.

The bill, which is at an advanced stage in the House, cracks down on copyright infringement but makes the explicit point of exempting its provisions for goods that are in transshipment. In his speech, Mr. Heyman said the problem is easily solved – simply remove the exemption clause. “In an integrated supply chain, the clause opens both American and Canadian consumers to risk,” said Steve Pike, spokesman at the U.S. embassy.

Sources suggest that the reason for the exemption is money: Industry Canada, which is taking the lead because it is viewed as an intellectual property (rather than a border security) file, does not want to commit to paying overtime to customs officials. No one from the departments of Industry or Public Safety returned calls or emails seeking comment.

It’s the perfect example of government by silo. It may save the Canada Border Security Agency’s overtime bill but how much is it going to cost the Canadian economy? One senior American official called the exemption sub-section, “the border thickening clause.”

Beyond the Border was launched to great fanfare. High hopes were expressed for a pilot project in Prince Rupert, B.C., where goods that landed were checked and loaded at the port, before being shipped by rail to Chicago, without being re-inspected in Minnesota. The idea was that this initiative would be rolled out to include the ports of Vancouver, Halifax and Montreal.

That will simply not happen if the transshipment exemption remains in place. For the Americans, this is a public safety issue — they’re not worried about fake watches, rather it’s things like counterfeit airbags that may or may not work.

“This is just us being stupid — penny-wise and pound-foolish,” said Colin Robertson, a former Canadian diplomat who now writes on trade issues. “It doesn’t make any sense and flies in the face of us trying to create a secure perimeter.”

He pointed out that there has been considerable public investment in building the gateway policy to give the ports of Vancouver and Prince Rupert a competitive advantage in the transshipment business. “We don’t want to lose this over security concerns. This allowance for non-inspection is short-sighted and contrary to our commitment to the perimeter.”

Eric Miller, vice president at the Canadian Council of Chief Executives, said that the pilot project in Prince Rupert has achieved good results, with re-inspections in Minnesota much reduced. “The bottom line is the Americans are doing what they said they would do,” he said.

The impact of the counterfeit bill passing as drafted could be that, “You’re not going to get the same degree of expedited clearance at the border as the Americans say ‘We’re going to have to add inspections,’” he said. “It’s potentially destructive.”

The whole idea behind the Beyond the Border initiative was to reduce congestion, particularly for just-in-time delivery manufacturers on both sides of the 49th parallel such as in the auto industry.

To bring in legislation that actively works counter to that goal must be preposterous for anyone who hasn’t read Milton Friedman. The rest of us are already resigned to the fact that if government were put in charge of the Sahara Desert, within five years they would be a shortage of sand.

National Post