GLOBAL ECONOMICS
Patrick Grady
The Change We Need is a More Open and Secure Border
December 17, 2008
An abbreviated version of this article, which was prepared as part of the Carleton Canada-U.S. Project, appeared as an op ed in the National Post on February 20, 2009.
Now that Barack Obama has been elected President, the Canadian Government needs to engage the new Administration at the highest level to ensure that our border is made more open and secure. It’s the time to accept the President-elect at his word and put behind his campaign rhetoric on renegotiating NAFTA. The best way to do this is to present a concrete package of proposals for a more open and secure border that will benefit both countries and help to put the North American economy back on the road to recovery from our current economic crisis.
And 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.’s focus is on illegal immigration, with Canada on security.
The 1989 Canada-U.S. Free Trade Agreement was a bold initiative followed by a tripling of Canadian exports to the United States. But since September 11, 2001, when security came to trump trade because of U.S. fears of another terrorist attack, there has been a thickening of the border. 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 per cent in 2000 to 21.6 per cent in 2007.
The December 2001 Smart Border Declaration is another example of a proactive Canadian initiative. It was championed by John Manley, newly appointed as Canada’s first Public Safety Minister, in the crisis atmosphere characterized by long line-ups of trucks at the border. Its cooperative framework helped to unclog the border and shield Canada from the full brunt of the tightening. However, over time, it has not lived up to its initial promise in the face of aggressive U.S. action to tighten security at the Canada-U.S. border.
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 agents in May 2008 and is scheduled to rise further to 1,845 by the end of October 2009. This almost six-fold increase in agents inevitably means a commensurate increase in the number of inspections and border delays. Fees have also gone up.
Econometric analysis supports the Canadian business’s many complaints that there has been a “thickening of the border” after September 11. My own estimate is that Canadian exports of goods to the United States, excluding energy and forestry products which have been affected by other factors than the border tightening, were 12.5 per cent or $30.6 billion (2007$) lower after September 11 than would have been expected based on estimated relationships. In addition, my estimate is that exports of services to the United States were reduced by 8 per cent or $3.1 billion.
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 reducing bottlenecks. Unless, Canadians and Americans are willing to grant some extraterritoriality and to 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 pre-clearance without sacrificing security.
There’ve 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 September 11 and has only recently returned to pre-September 11 levels. The number of American residents travelling to Canada was down by 42 per cent in 2007 compared to 2000. The Western Hemisphere Travel Initiative (WHTI), which is 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.
There are things that Canada can do to allay U.S. concerns about the security of the border. After September 11, there was some discussion of the possibility of establishing a Security Perimeter, which was quickly dropped because of Canadian political sensitivities.
Canada still maintains a different visa exemption lists that can cause problems at the border. While Canada requires visas for nationals of 27 states that also require visas to enter the United States, it allows nationals of another 25 states that need visas for the U.S. to enter visa free. This includes Mexico as well as Hong Kong and a number of Commonwealth countries. It provides an opportunity for potential illegal immigrants and threats to national security to take advantage of the lower level of scrutiny at the Canada-U.S. land border to enter the U.S. through Canada. U.S. officials have often voiced their concerns that Canada needs to scrutinize more carefully those people allowed into the country. And the Auditor General confirmed in his 2007 report that the United States has legitimate grounds for questioning the security of its northern border.
The increasing number of immigrants coming from countries with terrorist problems is an obvious concern to Americans. Since 2001, and up to 2007, Canada took in 270 thousand immigrants from countries with terrorism problems, (by 2008 the number should be over 310 thousand based on a continuation of recent trends). These countries include: the Republic of Pakistan, Iran, Algeria, the United Arab Emirate, Lebanon, Morocco, Afghanistan, Saudi Arabia, Turkey, Egypt, Iraq, Kuwait, Somalia, and the Democratic Republic of Sudan. The immigrants themselves are not screened adequately for security because of their large numbers and the relative scarcity of security personnel. Once these immigrants become Canadian citizens, they gain visa-free access to the United States. It would only take a few “Canadian terrorists” to cause big problems for bilateral Canada-U.S. relations.
Canada should prepare an ambitious proposal for an open and secure border that addresses legitimate U.S. security concerns, but eliminates the unnecessary redtape that has been bottlenecking the border. It should include: making the NEXUS and FAST cards work as they were intended for low risk cross border traffic and shipments; the speedy introduction of drivers’ licenses that qualify as WHTI-compliant real IDs; the establishment of adequate border infrastructure with effective pre-clearance; substantial reductions in inspections of pre-vetted low-risk shippers.
The proposed new border arrangements should be integrated with the Secure Border Initiative (SBI), which was announced on November 2, 2005. The SBI is a comprehensive multi-year plan to secure America’s borders and reduce illegal migration that is the cornerstone of the U.S. border control strategy. SBInet is the new border surveillance system launched in late 2006 with Boeing as the prime contractor. It seeks to meet the security needs at the border through technology and tactical infrastructure, including the application of sophisticated defence technologies. This includes radar, sensors, cameras, biometric information and radiation detectors that are being introduced at the border to prevent criminals and terrorists from entering the United States.
Canada has to boldly take the initiative to make sure it becomes an integral part of a new 21st border control system designed to protect North America. Otherwise there is a risk that, under President Obama as under President Bush, the border could continue to thicken, leaving exports stagnating and the economy floundering.