People are using borders to claim they have a right to do what they are doing completely forgetting about the International copyright laws
What is being demanded by the RIAA and MPAA are far in excess of the requirements of international copyright law. Many of the services and behaviors they reject to are perfectly legal in other countries. The current laws on the books in the United States are much stricter than required under international copyright law, so many countries will be far more lenient.
but you know that all someone has to do is take the CD, cross the border into Canada, and it can be put on the net and passed around without violating Canadian law
This is incorrect. Even ignoring the copyright reform legislation pending, distributing copywritten works over the internet is currently illegal in Canada and there are well-defined legal channels to shut them down.
The only significant legal loophole we have currently is that you can loan a physical disk to someone else, they can make a copy of it, and then return the disk to you while retaining the copy. This loophole will be closed shortly, and because it only applies to loaning original physical media it's mostly symbolic anyways since it's utterly unenforceable.
Someone could take it to Australia and make 'back up' copies even though the copyrights specifically state you cannot because Australian law says it's okay.
Also incorrect; once sold, copyright is exhausted. You can create copies for personal use as much as you like, so long as you don't distribute them to other people. In recent years, there has been the claim that rightsholders can "license" a work to restrict end-user rights, but this interpretation has not been upheld in all instances and jurisdictions, and remains an area of legal uncertainty. It also will be heavily influenced by contract law, which can vary dramatically.
All of a sudden, your sales start to drop off
Also wrong; music sales are up despite piracy. Sales of albums are down, but this is due to people moving towards services like iTunes where they're more likely to buy individual tracks than an entire album. This is a statistical sleight of hand, pointing to the one area where music sales are down to paint the current situation as catastrophic, ignoring the fact that music sales overall are up.
Sometimes that's true, but only for the popular artists. What about the not so popular ones
They're actually doing way better than ever. Digital distribution has lowered costs and increased competition, so they can access wider markets that were formerly unavailable to them and take a bigger share of revenues. It's never been a better time to be a little guy. The only segment of the music industry that is down is albums, everything else is at an all-time high.
What if you had to buy special players that will automatically detect when their internal software or hardware has been modified and automatically permanently shut down?
This has nothing to do with stopping piracy and everything to do with shutting down innovative competitors. DRM has been an abysmal failure at controlling distribution, but has proven very useful as a legal tool for attacking new inventions that technically bypass digital locks. This is about creating legal barriers to new and innovative technologies that could compete with older business models. Rather than fostering innovation, protecting intellectual property through legally-enforced technical protection measures is hindering it.
Implementing protections that are too strong has the potential to shut down new and innovative services. The goal of copyright law is to strike a balance between the rightholders, consumers, and intermediaries that offer services. Every country will strike a different balance, and I think there's a wide range of policies with different strengths and drawbacks. We need to accept that different jurisdictions will have different policies, and international law should set bare minimum standards that leave a wide range for individual national policies.
The United States currently has very stringent laws on the books. I'd argue that they're much too strong, and are choking out new and innovative services and treating legitimate consumers like criminals. If the sky really were falling and the music industry was on the brink of collapse and no one was making music anymore, then you'd have grounds to argue for stronger protections. But this isn't the case; music is prospering around the globe in spite of rampant piracy. If anything, what we're seeing right now indicates that these draconian "protections" are completely unnecessary and may be counter-productive by discouraging innovation in other fields.