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Border issues pose threat to economic growth

Fraser Institute says annual costs since 9-11 top $19.1 billion.


October 9, 2012
by PLANT STAFF

Canada-US border maintenance costs Canadians up to $19.1 billion annually, says a report from the Fraser Institute.

Measuring the Costs of the Canada-US Border looks at expenditures since 9-11 plus reductions in trade and tourism and calculates the annual cost at $19.1 billion, or about 1.5% of Canada’s GDP.

“The current system of border thickening constitutes a serious threat to long-term economic growth in Canada. Moreover, the time has come to link specific border improvement proposals to cost estimates so that the public can obtain performance-based data.” said Alexander Moens, Fraser Institute senior fellow and co-author of the report.

Since 2001, Canadian exports destined for the US fell to 74.9%, down from 86% in 2000. US-bound merchandise exports fell to 17.2% as of 2010, down from 31% in 2000.

The Vancouver think-tank notes even when adjusted for fluctuations in economic activity, border costs appear to impede trade.

Tourism has also been affected. Statistics Canada reports the number of overnight trips by US residents fell 23% over the past decade, from 15.2 million in 2000 to 11.7 million in 2009, the lowest number since 1985. Same-day return trips fell from 28.8 million to 8.8 million, a decline of 69%. The combined decline is 53%.

Boosting border flow
The report suggests that the 2011 Beyond the Border Declaration between Canada and the US, in which both governments agreed on creating an “integrated, multi-modal customs and transportation security regime,” could strengthen North American trade and reduce border costs. A one- to three-year timeframe for most initiatives is possible, but at a potential cost to Canada of $1 billion.

Harmonized border programs would involve criteria outlining how goods are to enter or leave the trade zone. For example, offshore cargo bound for either the US or Canada would be inspected and cleared once for both countries; more cooperation on passenger pre-screening for visitors to either country; updated technology for a complete arrival and departure regime for travellers; updated baggage-inspection technology to harmonize Canada’s screening with US standards; and use of radio frequency identification technology on the Canada side to speed vehicle crossings at border points.

Harmonized regulations would include various “trusted traders” programs such as the Canadian supply-chain security program, Partners in Protection (PIP), and its American equivalent, Customs-Trade Partnership Against Terrorism (C-TPAT).

One important proposal is the construction of a new bridge between Windsor and Detroit. The report notes frictionless flow of commercial traffic between Southern Ontario and Michigan is vital for an integrated and thriving North American automotive industry.

Since 9-11, long wait times at border crossings in the Windsor-Detroit corridor have threatened the integrity of “just-in-time” manufacturing processes and have added extra production costs to automobile manufacturing.

“Canadians and Americans are at a crossroads: either we continue with incremental and uncoordinated border programs as we have often done since 9-11, or we begin to create a new border regime,” said Moens.

Comments? E-mail jterrett@plant.ca
This article appears in the September 2012 issue of PLANT