Caruso’s Cross-Border Passion

My passion for Canada–U.S. relations is easily understood and exemplified through my background and experience. Born in the U.S. to parents living in Canada (Canadian Citizens who had emmigrated from Italy), I became a dual citizen. This duality would serve to provide me with a consciousness that would underlie and inspire my education, career, family and residency choices.

Raised in Toronto, I remained and attended York University where I earned a specialized honours Bachelor Degree in Economics and Business, concentrating on Public Policy. I next moved to Windsor, Ontario, where the only two universities that provided for the simultaneous study of Canadian and American law, the Universities of Windsor and Detroit, allowed me to earn Canadian and American law degrees; this joint program also included studying international law in London, England. Throughout my legal studies, I was also able to work as a law clerk in Ontario, Michigan and England.

Initially practicing law in Toronto with one of Canada’s largest law firms, I eventually found my way to working in Windsor while living in Michigan. During this time, I was constantly besieged with questions and opinions about the border and cross-border business issues. The North American Free Trade Act (“NAFTA”) had just supplanted the Free Trade Agreement (“FTA”) and my interest in the business environment was the inspiration to further my education and earn a Masters of Business Administration degree; less than one year after graduation, I was asked and teach business management, marketing, organizational behavior, business and international business law and strategy at the University of Detroit Mercy.

As a lawyer licensed to practice law in both Ontario and Michigan, I have always appreciated the similarities and differences of the Canadian and American legal systems. Having counseled clients on both sides of the border, I understand the anxiety and apprehension caused by unfamiliar territory. What is unknown represents a risk, and business will strive to eliminate or minimize this risk; if cross-border business is unfamiliar, then it presents risks that should be avoided. The corollary opportunities, unfortunately, are lost.

Having experienced the dynamics of both in-house and private practice counsel in Canada and the U.S., I am better able to appreciate the trepidations of business leaders. While Canada and the U.S. may speak the same language, the intended message is often missed. It is precisely this communication that creates perceptions that manifest themselves into business practices that fail to capitalize on the greatest trading relationship in the world. It is these perceptions, whether or not warranted, that impact a company’s decision to do business with its neighbor.

It has long been recognized that the lifeline of Canada’s economic prosperity has a direct nexus to its ability to trade internationally. Despite having one-tenth of its population, Canada is the U.S.’s biggest trading partner and Michigan is at the heart of this relationship; Canadian export trade to Michigan is almost fives times that of all of Europe combined.[1]

Many people, especially American small and medium-sized business executives, are surprised at the data. While most are aware that NAFTA is 10 years old and has been a source of significant growth between U.S. and Canada trading, they are surprised with the shear magnitude of this relationship. The facts, however, speak for themselves: Canada is the largest exporting country in the world, with 35% of its gross domestic product exported, and of those exports, 87% goes to the United States. The U.S., on the other hand, ships 25% of its exports to Canada, its largest export market and just as importantly, Canada is also the largest export market for 39 of 50 U.S. states.[2]

The promotion and facilitation of the world’s largest trading relationship requires complex and substantial government infrastructure investments. The continual effort to foster a healthy commercial trade relationship rests with Canada’s Department of Foreign Affairs and International Trade. Through its network of fifteen Canadian offices in the U.S., including the Detroit Consulate General’s office in Michigan, services are provided in trade and investment, public affairs, consular affairs and passports, and immigration and visas.[3] More than two million jobs in each country are supported by the efforts of these government offices through the U.S. Business Development Program.[4]

While the advantages of cross-border business may appear obvious or credible to large businesses, this outlook is not shared by most small and medium-sized enterprises. Entertaining the idea of doing business across the border brings a level of apprehension to small and medium-sized businesses primarily as a result of limited information and understanding. The prospect of investing in another state is daunting enough for these enterprises, let alone investing in a foreign land. While large corporations have numerous resources dedicated to investigating, developing and executing multinational initiatives, their small and medium-sized counterparts do not. The opportunities that await these unknowing business leaders are lost. Developing strategic plans to address this segment of the business sector is the key to sustaining and growing cross-border business in Canada.

The exchange rate between Canada and the United States is crucial to the decision of businesses locating or purchasing in Canada. While trade and investment in Canada has grown during the past few decades, this growth has been partially fueled by the favorable Canadian dollar exchange rate relative to that of the U.S. As the Canadian dollar continues its strong climb relative to the American dollar – Canadian products and industry become less attractive to Americans and it is precisely during these times that efforts need to be strengthened to inform and educate as necessary to maintain and grow Canada’s current favorable balance of trade. While the Department of Foreign Affairs and International Trade is implementing an ambitious trade development strategy that focuses on the United States, the European Union and Asian-Pacific markets through government liaison initiatives, including “Team Canada,”[5] a grassroots strategy focused on meeting the informational needs of the small and medium-sized business leaders is also needed.

Information is power and U.S. businesses need to be empowered with the knowledge of the benefits and opportunities available through investment across the 49^th parallel. The familiarity and similarity of these two business cultures and economic climates alone will not foster cross-border business. While the opportunities possible through interstate commerce is embraced by many U.S. businesses, the same is not true for international trade. It is precisely this understanding that should serve as the basis for promoting, through informational initiatives, cross-border investment. Confidence in international trade by small and medium-sized businesses will increase as their understanding and appreciation of the risks and opportunities increases. If U.S. businesses perceive their investment in Canada as another form of interstate commerce trade, the notion of a borderless border will have been created. From this vision, the normal barriers to foreign trade will be greatly diminished.

Creating a climate that lessens the normal apprehensions associated with foreign trade requires more than a familiarity of business, legal and cultural environments. It must also address issues of patriotism and nationally security. Through initiatives started in 1996, Canada and the U.S. implemented a comprehensive Shared Border Accord to deepen cooperation on border management issues. Since the September 11^th attacks on the U.S., Canada and the U.S. have accelerated those efforts to protect the security and enhance the prosperity of their citizens. The two governments continue to expand threat information sharing, upgrade their crisis response abilities and ensure that the Canada–U.S. border remains secure with an efficient flow of trade. The 30-point Smart Border Action Plan, enacted in December 2001, takes aggressive steps toward building a smart border for the 21st century — a border open for business but closed to terrorists.[6] However, despite these efforts, there appears to be a continuing impression by Americans that the Canadian border is porous and that Canada represents a threat to U.S. security.[7]

While we may feel confident in our actions and fully committed to maintaining a safe and secure border, any misguided perceptions that linger south of the border will need to be reversed. An initiative that promotes and perpetuates a new perception, that the cooperative efforts of the U.S. and Canada on border security are unprecedented, is required. The perception that American trade and investment in Canada is unpatriotic is further exacerbated when homeland security is folded into the mix. Promotional efforts that provide Americans with information to make knowledgeable decisions will not only curb misperceptions but will encourage educated decision-making – with a goal being that Canada’s business landscape is viewed as another state venue from which to expand U.S. business operations.

Advancing confidence in cross-border business and trade relationships requires the commitment of considerable government initiatives[8] – both at the grass roots level and through executive and legislative levels of government. Understanding and conveying this knowledge through experience rather than talk alone goes a long way to instilling confidence in the message. Engaging the testimony and services of seasoned executives to promote and encourage cross-border business brings a level of confidence in the message that could not otherwise be conveyed without the expertise and experience of the messenger.

As a business and legal executive that has lived, practiced law and operated businesses on both sides of the 49^th parallel, I am acutely aware of the apprehension of businesses in entertaining the possibility of foreign business development – both interstate and international.  The benefits and opportunities otherwise available are generally overshadowed, missed, or dismissed entirely as a result of misperception and/or misinformation. Attitudes born and nurtured through years of miscommunication require a steady effort of education by trusted and respected experts able to promote and speak to audiences at both government and grassroots levels. Building strong mutual relationships between Canadians and Americans through effective public policies requires strategies that convey this information to those that will most benefit.

Enrico A. Caruso