12/07/2011 03:20 EST | Updated 02/06/2012 05:12 EST

Canada-U.S. move to harmonize trade regulations, eliminate small differences

OTTAWA - If it all goes according to plan, it might even make David Jacobson's Cheerios box look the same in Ottawa as it used to back home in Chicago.

The story of the U.S. ambassador to Canada's favourite breakfast cereal is often used to illustrate what has been called the "tyranny of small differences" between Canada and U.S. trade regulations, a problem that Wednesday's Action Plan on Regulatory Co-operation hopes to finally do away with.

The pact lays out 29 initiatives that attempt to streamline operations for businesses on both sides of the border, in areas such as food, the auto industry, personal health products and the environment.

The government says inefficiencies at the border cost Canada $16 billion a year, or one per cent of GDP. For a decade, businesses have been lobbying for an end to the distinct regulatory requirements on both sides of the border, which they say has cut into the two-way trade between the Canada and the U.S. that now stands at $500 billion year.

"No loss of sovereignty is contemplated by either of our governments," Harper said in Washington in announcing the plan.

"However, every rule needs a reason."

The plan proposes to align inspection and certification for meat and poultry, and reduce red tape.

"For example, in the U.S., terms such as 'peameal bacon', 'chicken tenderloin' and 'flatiron steak' are widely used, however these terms are not permitted in Canada," says a government backgrounder.

"Such variations, even when slight, create costly problems for Canadian and U.S. importers and exporters," which lowers competitiveness and confuses consumers.

In the North American auto industry, cars may look the same, but small differences in the specifications for frames, for example, creates added headaches for manufacturers.

Production lines in the same plants have to produce two versions of the same vehicle depending on where they are to be sold.

The plan would also get rid of regulatory differences in rail transport to increase the flow of rail containers between the two countries.

In health care, the deal proposes a new electronic system that would allow applications for approvals to be filed to Health Canada and the U.S. Food and Drug Administration.

On the environmental front, greater technical co-operation is being promised on monitoring emissions from new cars and light trucks built between 2017 and 2025.

The two countries will also expand the 1991 Canada-U.S. Air Quality Agreement to seek ways to reduce greenhouse-gas emissions from vehicles.

These are the sorts of steps that businesses on both sides of the border have been clamouring for, for more than a decade.

"Each country will maintain its own sovereign regulation