The Lakes and the St Lawrence Seaway system, which feeds out of the Atlantic Ocean and separates eastern Canada and the United States, are the "soft underbelly of Canadian coast defense," the report said.

Panel chairman Colin Kenny said smugglers were already known to use the waterway, pointing to potentially dangerous security lapses.

"We don't know who's out there or where they are going; if a smuggler can function there, so can a terrorist," he said.

The report, the first "Canada Security Guidebook" was the work of the Senate National Security and Defence Committee, published on the anniversary of Prime Minister Paul Martin's assumption of power.

Kenny praised the government's decision to streamline national security under Deputy Prime Minister Anne McLellan but lambasted the lack of progress in increasing defence budgets and recruiting more military personnel.

The committee demanded tighter air and sea port security and expanded surveillance with aircraft and unmanned drones, along Canada's coastlines.

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