10/24/2011 06:03 EDT | Updated 12/24/2011 05:12 EST

U.S. Travel Tax Irks Canadian Officials


WASHINGTON - A trip to the United States just got more expensive for Canadians travelling stateside by air or water thanks to the passage on Capitol Hill of a free-trade agreement between the United States and Colombia.

A provision in the new pact, signed into law on Friday by U.S. President Barack Obama, contains a clause that does away with an exemption of a $5.50 "passenger inspection levy" on visitors to the United States from Canada, Mexico and the Caribbean.

The exemption had been in place since 1997 under the North American Free Trade Agreement. But that was before the cash-strapped United States found itself in dire financial straits; now it's attempting to slash its $14 trillion national debt.

Lifting the exemption could mean tens of millions of dollars for U.S. coffers, but that didn't mollify Canadian politicians railing about the removal of the exemption.

"Raising taxes at the border just raises costs on consumers," International Trade Minister Ed Fast said in a statement. "Canadian officials have raised concerns about the removal of this exemption at the highest level. We will continue to raise Canada's concerns with U.S. lawmakers."

That wasn't good enough for opposition members on Parliament Hill.

"When it comes to defending the interests of Canadians, Conservatives have shown they cannot be trusted," said Robert Chisholm, the NDP's international trade critic.

As many as seven million Canadians fly to the U.S. every year, while tens of thousands travel by boat. When the idea of doing away with the exemption first surfaced in Obama's 2012 budget proposals earlier this year, Prime Minister Stephen Harper was harshly critical.

Chisholm wondered, then, why the government seemed caught by surprise by the provision in the U.S.-Colombia trade pact.

"I would suggest they're not paying attention ... they're not negotiating hard, they're not standing up for Canadians," he said.

It's the latest trade irritant percolating between the U.S. and Canada in recent weeks.

The U.S. Federal Maritime Commission is holding an inquiry following complaints from American ports that Canada is unfairly subsidizing the diversion of cargo ships away from its U.S. competitors.

The agency will deliver its findings to U.S. Congress after it completes the inquiry amid concerns that American lawmakers are mulling over a US$143-per-container levy on cargo entering the United States from B.C. ports as a retaliatory measure.

Protectionist Buy American provisions have also been resurrected in Obama's $447 billion jobs legislation even as Canada and the U.S. prepare to officially announce a sweeping agreement on border co-operation that will see Canada spend $1 billion for new border facilities and programs.

David Jacobson, the U.S. ambassador to Canada, defended the Obama administration in a statement on Monday, telling Canadians not to take the removal of the surcharge exemption personally.

"The elimination of the exemption was necessitated by the budget situation in my country," he said.

"It is paid by American citizens and foreign nationals alike just like Canadian citizens and non-Canadian citizens pay fees at Canadian airports .... This fee is not in any way an action against Canada and will not have any effect on the progress of the ongoing discussions surrounding the Beyond the Border initiative.”

In a speech in Ottawa last week, Jacobson said a Buy American clause in the jobs bill wouldn't be as harmful to Canadian businesses as a sickly U.S. economy is.