WASHINGTON – Americans traveling to Canada and Mexico would need passports to come home to the United States under guidelines proposed Tuesday in the latest effort to deter terrorists from entering the country.

The new rules, which would be phased in by 2008, apply to Americans traveling from Canada, Mexico, Bermuda, the Caribbean and Panama.

They also apply to citizens from those countries who want to enter the United States – prompting Canadian officials to announce that they might reciprocate.

The regulations mark a dramatic shift from a policy that allows Americans to return home from neighboring countries without a passport. They also raise the potential of hampering tourism and commercial traffic with the United States’ two immediate neighbors.

An estimated 60 million Americans – about 20 percent of the national population – have passports.

Secretary of State Condoleezza Rice said U.S. officials have been working with their international counterparts “for some time” to shore up security measures without crimping the flow of commerce across borders. The new rules were called for in intelligence legislation Congress passed last year.

“There’s a very strong awareness that these are tremendous commercial borders and that you don’t want to hinder the commercial activity,” Rice said in an interview with The Associated Press. “But at the same time, you’ve got to have some controls that help you prevent people who are trying to come in and hurt us.”

She added: “It’s part of the recognition that in 2001, when September 11 happened – and frankly before that, when you think about the millennium plot in 1999 – these were borders that I think no one could call secure.”

Canada was deeply embarrassed by the millennium terrorist plot, when U.S. customs caught a man with explosives trying to enter Washington state from Canada in December 1999.

Canadian Public Safety Minister Anne McLellan said American citizens may need passports to cross the northern border if the U.S. follows through with its regulations.

“Our system has really always worked on the basis of reciprocity,” McLellan told reporters outside the House of Commons in Ottawa. “And therefore we will review our requirements for American citizens and we’re going to do that in collaboration with the United States.”

“There’s no point in either of us going off in a direction without working together to determine how best we can facilitate the flow – a free flow – and movement of low-risk individuals,” she said.

Canada is the United States’ largest trading partner, with $1.2 billion worth of goods crossing the border every day.

Nearly 16 million Canadians entered the United States last year, generating an estimated $7.9 billion in travel-related revenues, according to data provided by the Travel Industry Association in Washington.

“With Canada being our biggest market, obviously we have some concerns about the impact potentially about inbound Canadian travel to the U.S.,” said association spokesman Rick Webster. “But we have some lead time to work with our Canadian travel partners to get this information out to them.”

A spokesman for the Mexican Embassy in Washington said the regulations “won’t affect the tourism flow or people who trade and do business between the three countries in North America.”

The new requirements would take effect on Dec. 31, 2007, for travelers entering the United States from Mexico and Canada by land, and on Dec. 31, 2006, by air or sea.

The deadline is a year earlier – Dec. 31, 2005 – for travel from Bermuda, the Caribbean and Panama.

The proposed rules are scheduled to be made final this fall. Until then, the government will solicit comments from the public.

Currently, Americans generally need to show a driver’s license or other government-issued photo identification to cross the border from Canada.

Customs officials usually require more proof from Americans returning from the other countries affected by the new rules, including both government-issued photo IDs such as a driver’s license plus proof of citizenship such as a birth certificate.

On occasion, Americans returning from these countries are allowed back after only verbally declaring their citizenship, said Homeland Security Deputy Assistant Secretary Elaine K. Dezenski.

Once the new system takes effect, people entering the United States from Mexico will continue to be able to use a border crossing card or SENTRI card instead of passports. These cards are obtained after background checks and other security measures.

On the northern border, the NEXUS card for preapproved, low-risk travelers and the FAST card for commercial workers will be acceptable instead of a passport.