Brian Lee Crowley - Chicago

Here in Chicago to talk with numerous US audiences about Canada-US relations in the middle of the snow storm of the last few decades. Perhaps surprisingly, lots of people braved the weather to talk about the issues of border management, national security, continental defence, immigration, free trade and more. The good will toward Canada is palpable, as is the desire to ensure that openness to Canada does not compromise the security of Americans. Therein the lies the challenging balancing act that Prime Minister Harper and President Obama will have to carry out with great skill on Friday, when the PM is in Washington for the planned announcement of new negotiations about border management and the creation of a perimeter border.

I say new negotiations rather than a new agreement on these matters because my information is that the announcement on Friday will be heavy on politics and good intentions and very light on substance. But we should not dismiss anything that involves the Americans committing themselves to work with us in the direction of further openness and security co-operation, because protectionist impulses throughout the US political establishment are still very much a danger to the heightened degree of co-operation that is very much in Canada's interests.

One issue that came up in my discussions with Chicagoans about continental relations was cross border trade in water. Since this inevitably will be one of the bogeymen that will be trotted out by the opponents of closer co-operation with the US, readers of this blog might be interested in what I had to say – an answer, by the way, that surprised Americans but won their assent once we had talked it through.

I started out by underlining that America as a whole does not have a water shortage, but rather regions of surplus and of shortage. Moreover the regions of shortage are not primarily due to a shortage of water overall, but the persistence through time of primitive water rights, first granted when the American west was sparsely populated and farmers were the only interest that mattered.

The result today is that older established interests, such as agriculture, have access to water that they can use but not sell (that is they have use right but often not trading rights). The result: the insanity of growing thirsty crops like cotton in desert areas at a time when burgeoning nearby cities are short of water.  But because the rules make it difficult if not impossible for people with established water rights to sell those rights to others for fair market value, the available water cannot be shifted to where it produces the greatest value for society. This system has needlessly and damagingly made water policy a political battlefield that does not exist in any other natural resource field where resources properly go to the highest bidder.

If water was properly priced and tradeable in the US, then cities would have to price the cost of new water supplies into land development costs, for example, creating more sensible incentives around the building of new urban and suburban developments in water-starved areas. When people pay the true cost of the water they consume, it makes them conserve it, as opposed to the current system where some people are encouraged to waste it, while others who would pay a good price for it are denied access. Thus I told our US friends that if they have water problems they should not look at Canada for the solution, but should look in the mirror.

On the Canadian side of the border, I also pointed out that my good friend Peter Pearse, one of the country's leading natural resource economists, headed a one-man Royal Commission some years ago  into the issue of water policy. His conclusion was pretty telling: he essentially said that under any reasonable set of assumptions, the benefits of the massive cross-border water diversion projects that so frighten many Canadians would never justify the massive costs.

Americans can and must solve their own water distribution problems. Trading water across the border is fine, and indeed there are several water utilities on the border that already supply communities across the line and we already work together, quite successfully, on cross-border water resource management through the International Joint Commission. But such cross border trade in water, where we allow it, will never be the stuff of Americans' dreams or Canadians' nightmares.

MLI would not exist without the support of its donors. Please consider making a small contribution today.