Bill Anderson bander@uwindsor Ontario Research Chair in Cross-Border Transportation Policy

1. The Border, Canada-US Trade and the Post-9/11 Security Regimewith implications for Immigration and Diversity Bill Anderson bander@uwindsor.ca Ontario Research Chair in Cross-Border Transportation Policy University of Windsor Prepared for Citizenship and Immigration Canada January 14, 2009

2. 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

4. 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

5. 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

6. 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.

7. 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

8. Mode Share of Canada – US Trade

9. Ontario Border Crossings

10. Border Infrastructure

11. 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

12. 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

13. 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%

15. 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)

16. 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

17. Cross-Border Supply Chains

18. 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

19. Frequency of supply and distance (2002 CAR study)

20. 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

21. 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

22. 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).

23. Policy

24. 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”

25. Addressing the border problem (cont.) • Alternative modes • Road/rail intermodal • Short-sea shipping • The perimeter approach

26. 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.

27. 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

29. 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

30. 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

31. 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

32. “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

33. 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

34. 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

35. 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

36. 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”

37. 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”

38. 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

39. 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

40. 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.