While free trade with the United States has forced a number of Canadian industries to rejuvenate themselves, sectors that continue to enjoy protection have not fared as well.

A recent study by the Canada West Foundation, for example, found that the western provinces have lagged behind the rest of the country in economic growth in recent years because their timber and forest industry continues to be subject to quotas on imports, exports and access to forests.

And Canadian farmers complain bitterly that they must ship their grain to the Pacific coast on higher-cost Canadian railroads.

Canadian airlines have only recently been freed from price and route restrictions and opened up to competition from U.S. carriers on routes linking the two countries. The result, analysts say, is higher costs and higher fares. "Canadian airlines are off the charts in terms of efficiency -- and I don't mean in the good way," said Jacques Kavafian of Yorkton Securities in Toronto.

Kavafian's observation is confirmed by an analysis done for The Post by Avitas, a consulting firm in Reston. Avitas found that Air Canada, the dominant Canadian airline, has average fares and operating costs that are at least 20 percent higher than major U.S. carriers.

"We're probably at the high end of the range on most cost measures," conceded Robert Peterson, Air Canada's chief financial officer.

Peterson said a cost-reduction program, including the announced elimination of 1,700 jobs from its payroll of 23,000, will help bring its costs closer to industry benchmarks. But he cautioned that the smaller size of the Canadian market prevents Air Canada from realizing economies of scale that would allow it to operate as efficiently as U.S. carriers.

Said James Davis, an airline analyst with Warburg Dillon in Toronto: "If the regulatory border were to open up between the two countries, the Canadians would have to become much more efficient -- they'd have no choice."