20 January 2009

Mr. Obama, tear down that border

The following is excerpted from the Patrick Grady column written for the 20 January 2009 edition of the "National Post". Patrick Grady is an economist with global-economics.ca.

The Canadian government must start to engage the new Barack Obama administration at the highest level to make our border more open and secure via a concrete package of proposals.

The initiative should be done bilaterally, and not trilaterally along with Mexico through the Security and Prosperity Partnership. Our border issues are not the same. With Mexico the U. S. focus is on illegal immigration; with Canada it is on security.

Since Sept. 11, 2001, when security came to trump trade because of U. S. fears of another terrorist attack, the border has thickened. Canada-U. S. trade has stagnated and the growth of Canadian exports of goods to the United States in current dollars declined from $334.1-billion in 2000 to $331.4-billion in 2007. As a share of GDP, the decline was much more dramatic with exports of goods to the United States falling from 31% in 2000 to 21.6% in 2007.

The number of U. S. Customs and Border Patrol agents at the Canada-U. S, border was raised from 340 in 2001 to 1,128 in May 2008 and will reach 1,845 this October. Inspections and border delays have increased, as have fees.

Econometric analysis supports Canadian business's many complaints following Sept. 11. I estimate that Canadian exports of goods, excluding energy and forestry products which have been affected by other factors, were 12.5% or $30.6-billion (2007$) lower after Sept. 11 than would have been expected, and that exports of services were 8% or $3.1-billion lower.

There is no shortage of prescriptions to unplug the border. Reports from the Canadian and U. S. Chambers of Commerce, the North American Competitiveness Council and the Conference Board have documented the growing number of infrastructural and administrative impediments facing Canadian exporters at the border. These include: bottlenecks in border infrastructure at such key places as the Ambassador and Peace Bridges; increased security requirements at the border slowing shipments; increased inspection requirements and fees both slowing shipments and making them more expensive; and longer border wait times.

In addition, Canadian producers have been forced to switch from just-in-time to just-in-case and have had to carry higher inventories and adopt costlier shipping practices such as one-way and duplicate shipping, just to be sure that needed supplies are not held up at the border.

It's particularly discouraging that disagreements over jurisdiction prevented an extension of customs pre-clearance at the Peace Bridge between Fort Erie and Buffalo, which could have served as a model for other border crossings. Unless Canadians and Americans are willing to grant some extraterritoriality and allow the customs and border enforcement officers of the other to operate on the opposite side of the border with full authority, it will be impossible to implement preclearance without sacrificing security.

There have also been increased administrative barriers for personal and business travel that have resulted in striking declines in cross-border travel. The number of Canadians travelling to the United States decreased sharply after Sept. 11 and has only recently returned to pre-Sept. 11 levels. The number of American residents travelling to Canada was down by 42% in 2007 compared to 2000. The Western Hemisphere Travel Initiative, a U. S. law requiring Canadian residents entering the U. S. and returning American residents to present passports at the border to gain entry, was a key factor reducing cross border travel, peculiarly enough, because of the uncertainty it generated even though it will not take full effect until June 1, 2009…

Canada ha