The Border, Canada-US Trade and the Post-9/11 Security Regime with implications for Immigration and Diversity Bill Anderson [email protected] Ontario.

The Border, Canada-US Trade and the Post-9/11 Security Regime

with implications for Immigration and Diversity

Bill Anderson

[email protected] Research Chair in Cross-Border

Transportation Policy

University of Windsor

Prepared for Citizenship and Immigration Canada

January 14, 2009

Canada-US Border• largest bilateral trade relationship in the world

($1.5B per day)• Mostly through Great Lakes crossings• Cross-border supply chains • 150,000 cars per day• Increasing global trade through Canada to

US• Many miles of unfenced, unposted wilderness

Canadian Exports to US 2007

• Fuels(25%)• Cars, trucks and parts (19%)• Electricity generation equipment (7%)• Plastics (3.4%)• Electrical Machinery (3.4%)• All other categories 3% or less

US Exports to Canada 2007

• Cars, trucks and parts (22%)• Electricity generating equipment (16%)• Electrical machinery (7%)• Plastics (5%)• Fuels (3.5%)• All other categories 3% or less

Ontario Economy• Largest manufacturing work force in North

America except California• 1994-2003, manufacturing employment +33%• Exports are 59% of GDP, mostly manufactured

goods• More than ½ of Canadian Exports• Automotives account for 38% of exports• 80-90% of cars manufactured in Ontario sold in

US.

Merchandise Trade Crossing• Oil, iron ore and other resource products

cross by pipeline, water and rail – largest rail crossing by value at Sarnia (by

weight at Fort Frances)• Most manufactured goods cross by truck,

– almost half on two bridges at Windsor/Detroit and Fort Erie/Buffalo

• Rapid movement of goods to support just-in-time production systems, especially in automotive industry

Mode Share of Canada – US Trade

Mode Exports Imports

Road (truck) 49% 75%

Rail 20% 12%

Marine 6% 2%

Air 5% 8%

Other (pipeline) 20% 3%

Ontario Border Crossings

Ambassador Bridge: busiest freight border crossing

• More than 25% of all US-Canada trade, 35% or road trade

• 10,000 commercial vehicles on a typical day• Privately owned, 80 years old, 4 lanes• 6 lane replacement planned• Additional crossing planned down river

Other SW Ontario Crossings• Bluewater Bridge (Sarnia – Port Huron,

12.5% of road trade)• Detroit – Windsor tunnel (#1 passenger

crossing)• CN rail tunnel Sarnia – Port Huron, CPR rail

tunnel Windsor – Detroit• Windsor – Detroit truck ferry for hazardous

materials

Peace Bridge

• Number 2 bridge, handles most of the freight through the Port of Buffalo

• Also 80 years old, owned and managed by an international commission

• Ongoing expansion plans complicated by local and environmental concerns

• 2003-8: truck traffic steady but cars down 11%

Other Niagara Frontier Crossings• Queenston – Lewiston Bridge (#4 road

crossing, freight in transit)• Rainbow Bridge• Whirlpool Bridge• International Railway Bridge (used by CN and

CPR)

Impacts of September 11, 2001 on US-Canada Border

• Near closure of Ambassador bridge, hundreds of factories shut down

• Heightened security leading to long delays at borders for both freight and passengers

• Western Hemisphere Travel Initiative: passport or comparable document required between Canada and US– Land border implementation June 2009– fewer than 30% of Americans and 50% of Canadians had

passports in 2007

• Summer 2007, delays comparable to 2002

Cross-border supply chains

• Value added in both Canada and US• Automotive industry

– 1965 Automotive Products Trade Agreement– Components may cross border more than once

• Agriculture (Livestock)– Pork: piglets raised in Canada, shipped to US for

fattening and slaughter

• Other cross-border supply chains: machinery, mineral energy, forest products, seafood

Frequency of supply and distance (2002 CAR study)

Impacts of border on auto industry

• 1 hour shutdown of assembly plant costs about $60,000 – this could be the cost of a delay in components delivery

• US assembled car contains about $1000 Canadian content, Canada assembled car contains $7500 US content (2002 CAR study)

• Canadian automotive plants more vulnerable to cross-border delivery risk

Current Threats to Ontario’s Automotive Industry

• Credit crisis, low demand• Slow border crossings• High dollar• Changes in relative labour costs• End of Auto Pact protections• Shift of US production away from border• Potential massive subsidization for retooling

US plants

Economic Impacts of Border Delays

• Labor and capital cost of idling trucks• Risk of factory shutdowns due to failure to deliver

components on time• Inventory stockpiling to insure against delays• Reduced tourism• 7.1M jobs in US and 3M jobs in Canada depend on

cross-border trade (US and Canada C of C)• Estimated annual delay cost at over $10B (Ontario C

of C).

Addressing the border problem

• Expand and improve border operations– New and expanded crossing infrastructure– More booths, more personnel– Improved technologies– Better Canada-US coordination

• Move functions away from the border– Risk-based assessment– E-manifest– “reverse inspection”

Addressing the border problem (cont.)

• Alternative modes– Road/rail intermodal– Short-sea shipping

• The perimeter approach

Perimeter approach to North American Security

• Proposed by US Ambassador Gordon Giffen in 2000• Precedent in US/Canada export control perimeter• Shift security from US-Canada border to US-Canada

perimeter• Requires adoption of common security standards and

integration of law enforcement efforts• In the extreme case could lead to “open” border

comparable to EU.

Perimeter approach: practical problems

• Harmonization in some areas may be difficult or controversial: – firearms– refugee and other immigration policies

• NAFTA is not a customs union and does not allow free movement of labor

Average MFN Applied Tariffs 2005, selected commodities Canada US Agriculture 17.3 5.3 -Dairy 248.6 25.0 -Sugars 5.7 20.5 Non-Agriculture 3.7 3.3 -Wood / Paper 1.1 0.4 -Clothing 17.0 11.5 -Non-elec. Mach. 1.5 1.2 -Transport equip. 5.8 3.1 Source: World Tariff Profiles 2006, WTO/UNCTAD

Perimeter approach: political obstacles

• From the US side– Public reluctant to trust officials of a foreign

government to maintain security

• From the Canadian side– Public sees this as a reduction in Canadian

sovereignty (autonomy), because American standards are likely to prevail

Risk-based assessment

• Pre-qualifying some individuals or firms as low-risk – “making the haystack smaller”

• Comparable to basing insurance rates on demographic characteristics

• Exempting low-risk travelers or shippers from some security procedures

• Requires low-risk certification by both countries

Trusted traveler program: NEXUS

• US or Canadians register for program ($50)• Requires background info and interview with border

officials of other country• Biometric identification• Special lanes on bridges and other crossings and at

airports• Chambers of Commerce: goal to enroll one million

people in NEXUS by late 2009

“Trusted shipper” programs(Supply Chain Security)

• Expedited clearance for companies whose supply chain facilities and procedures are inspected and certified by border agencies

• Cooperation from importers, carriers, brokers, warehouse operators, manufacturers etc.

• On-site inspections• Background screening of individuals

Trusted Shipper (cont.)

• PIP (Partners in Protection, Canada) and C-TPAT (Customs-Trade Partnership Against Terrorism, US)

• FAST bilateral program, pre-qualifies drivers, carriers and importers as low risk

• FAST lanes at about 20 crossings• TWIC (Transport Workers Identity

Credentials), needed for access to US port facilities

Practical problems with trusted shipper programs

• Separate lanes are not long enough to avoid backups

• Program participants still subject to secondary search

• Cost of compliance for membership up to $100,000

• Many firms decide its not worth it• Complaints that they discriminate against

smaller firms

Potential issues for immigration and diversity

• In the border regions, a FAST card is a precondition for employment as a truck driver

• Applications must be approved by both US and Canada

• Some criticism based on lack of transparency (Truck News, Feb 2007)

• Anecdotal evidence that immigrant groups may be disadvantaged or be reluctant to apply

Grounds for denial of FAST Card application

• Provide false information on application• Convicted for a criminal offense in any

country• Violate of customs or immigration program• “Fail to meet other requirements of the FAST

Commercial Driver Program”

Issues of special relevance to immigrants

• Information required on– Rehabilitation under Canadian Immigration

laws– Waivers of inadmissibility issued under US

immigration laws• “any personal information you provide will be

shared with other government and law enforcement agencies”

Issues to be addressed

• Are certain groups more likely to have their applications rejected? (no statistical evidence that I know of)

• Do rejected applicants pursue review option and discover reason for rejection?

• Are certain groups reluctant to apply in the first place or reluctant to reapply if they are rejected?

• What help can be provided to immigrant drivers and business people seeking certification?

• Effect on Temporary Foreign Worker Program

Broader political challenges

• Some US interests may benefit from border problems

• “Anti free trade” forces in Canada may favor border delays

• US-Canada border issues often linked with US-Mexico border issues

3 Asymmetries

• Proportional weight: US-Canada trade makes up a larger share of Canada’s economy.

• Vulnerability: abandonment of cross-border supply chains biased against smaller economy.

• Political influence: US preferences likely to prevail in joint decision making.