Canada’s exports to the U.S. accounted for $348.4 billion – about 84 per cent – of the $410.7 billion in goods shipped out of the country last year. Conversely, about 71 per cent of Canada’s $356 billion in imports last year arrived from the U.S.

Despite the deeply entwined relationship along the world’s longest undefended border, Canada-U.S. trade has not been without its ups and downs.

Occasionally, political tensions threaten to spill over into trade relations. When U.S. ambassador Paul Cellucci told a Canadian business audience in March there was “disappointment” in Washington that Canada wasn’t supporting the U.S. fully in its war on Iraq, executives from this country hurried to Washington to do damage control.

About 100 executives, along with Deputy Prime Minister John Manley, downplayed any tensions in the state of Canada-U.S. dealings.

Weeks later, Cellucci said the relationship had hit a bump in the road, but added that no serious damage was done.

“There are obviously some frictions at the moment,” Adrienne Warren, a senior economist at Scotiabank, said.

These frictions could be attributed, in part, to political disagreements related to Iraq. A bigger concern than Cellucci’s comments is the possibility of rising protectionist sentiment south of the border, she said.

Protectionist tendencies tend to rise during periods of economic weakness, and the slow U.S. economy has shed jobs over the past two years, Warren said.

“We probably will see some very challenging times for exporters… throughout this year,” she added.

But many exporters are more concerned right now with disputes that have been around longer than issues related to Iraq. Canada’s U.S.-bound exports of softwood lumber and wheat are the more prominent recent sources of trade tension.

In another chapter of a long-running problem area, the U.S. imposed a 27-per-cent duty against Canadian softwood lumber back in May 2001 after an agreement between the two countries expired. The U.S. alleged Canada unfairly subsidizes its industry by charging low fees for the wood.

The tariffs resulted in mill closures and thousands of job losses, especially in British Columbia.

The two sides tried to resolve the problem through negotiations, but talks broke down at the end of February 2003 over a proposed temporary export tax and whether the U.S. will return over $1 billion in duties collected from Canadian companies. International Trade Minister Pierre Pettigrew called the Americans’ demands “excessive.”

The two sides have said they will restart negotiations at a later date, but nothing yet is confirmed.

Wheat is another sore point between the two nations. In late March, the World Trade Organization said it was appointing a panel of experts to examine U.S. claims that Canada illegally subsidizes wheat exports.

On May 2, the U.S. commerce department imposed a new tariff of eight per cent on durum, and six per cent on wheat. The charges are on top of a four per cent tariff that was imposed earlier this year.

The Canadian Wheat Board, which markets grains to the world, says there are no subsidies and points out that 10 similar complaints by the U.S. in as many years were decided in Canada's favour.

Canada sold more than $400 million of wheat and durum in the U.S. last year.

The Canada-U.S. border, where all those thousands of goods-laden vehicles cross every day, is another point of concern. Nervous Canadian exporters fear a U.S. tightening of border security could make it tougher for Canadian goods to get into the country.

In the wake of Sept. 11 and heightened U.S. emphasis on domestic security, Canada needs to establish a seamless border with our neighbour, authors William Dymond and Michael Hart argued in a recent C.D. Howe Institute commentary on Canada’s future role in global affairs.

“The alternative – creating barriers to integration, establishing distance from the United States and seeking other partnerships to replace this vital relationship – is a certain route to a poor and isolated future,” said Dymond and Hart, both of Carleton University’s Centre for Trade Policy and Law.

“The first and only priority for Canadian diplomacy over the next few years is to reach a new accommodation with the United States because it is only when that relationship is comprehensible, predictable and sound that the country can again assume a meaningful world role,” they wrote.