The number one issue confronting the Canadian economy is to ensure that we maintain open and efficient access to the U.S. market.
Most other countries envy the access Canada has enjoyed. That access has surely been our greatest economic asset. But, it is also perhaps our greatest vulnerability.
No major industrialized country in the world is as reliant upon trade with one other partner as much as Canada has been dependent upon trade with the U.S.
Anything that impedes, disrupts or otherwise impairs trade with the United States could have a profound impact on our economy and ultimately upon the standard of living which we enjoy.
Fully one-third of Canada’s GDP is dependent upon exports to the U.S. Every $1 billion in trade creates 10,000 jobs in Canada. With our small market, we must generate wealth externally through trade.
But, it’s not solely a one-way street either. Canada and the United States form the world’s largest trading partnership. Current trade between the two countries adds up to about $1.5 billion a day.
Moreover, the U.S. does 50 per cent and 75 per cent more trade with Canada than Japan and the UK, respectively.
The U.S. sells three times more to Canada than Japan and more to Canada than the EU and Latin America combined.
The U.S. sells half of its automotive exports to Canada. And the trade relationship between the two countries is not just a border state phenomenon.
Canada is the leading export market for 37 of the individual U.S. states.
Most of this trade is shipped by truck. Currently, 65 per cent (by value) of Canada-U.S. trade moves by truck.
There are more than 14 million border crossings by truck every year.
This means that on average a truck crosses the Canada-U.S. border once every 2.5 seconds, 24 hours a day, 365 days a year.
The reason trucks dominate in the transborder market comes down to service. So much of what is imported and exported to and from the two countries is time-sensitive, high value-added manufactured goods.
Trucking is ideally suited to meet the demands of the continental Just-In-Time inventory systems. Our flexible, efficient and reliable door-to-door service is what sets the trucking industry apart from other modes.
That, and the fact that the major industrialized centres in both countries are, to a large extent, within less than one-day’s truck drive from each other.
So, like it or not, we need to trade. And we need trucks.
I said at the outset that access to the U.S. market is the number one economic issue facing Canada. Since that tragic day of September 11, 2001, we have seen how vulnerable we are.
We have seen how quickly the supply chain can be disrupted.
We have seen the line-ups at the border, frequently stretching into several hours and kilometers.
Anything that affects the security, the predictability and the efficiency of the supply chain could, if not resolved, have a significant impact on direct investment in Canada.
To put it bluntly, if we cannot ensure the reliability of supply, U.S. manufacturers, retailers, etc., will look for other, domestic sources. Some have prophesized that the events of September 11th would lead to the death of Just-In-Time.
Nothing could be further from the truth. If anything, the reliance on JIT has increased as manufacturers seek additional efficiencies. But we should have no doubt that trans-border JIT could be under review. Want to avoid problems at the border?
Wondering where to build that next plant to produce goods for the U.S. market? If you want to avoid problems at the border, set up in the U.S.
So, it is imperative, to borrow an oft-used expression these days, that we “fix the border.”
Over 70 per cent of Canada-U.S. trade crosses the border at a small handful of border crossings.
The need to “fix the border” was apparent in those locations before September 11th.
While Canada did a good job in implementing automated customs systems, it ignored the infrastructure requirements on the approaches to and at the major border crossings.
NAFTA appeared to be an unfunded policy.
In the U.S., border agencies seemed pre-occupied with the southern border.
Inspection resources were shifted from the northern border to the southern border.
Congress would not provide the U.S. Customs Service with the funding necessary to update its antiquated, 70s/80s vintage computer systems.
September 11th brought the situation at the borders home. Awareness of the problems at the border became stark as delays were measured in those horrible first weeks after the terrorist attacks in terms of days, not minutes or hours.
Business, government, the media and the public started to come to the realization that the problems were no longer just “the truckers’ problems” or “the border towns’ problems.”
So, how do we “fix the border?”
One idea is that the U.S. and Canada should negotiate a security perimeter agreement, a Fortress North America approach, if you will.
Many times I have heard people say over the past few years that what we need is a situation like that in Europe where people and goods move freely across international borders, where the border inspection booths have been torn down. Clearly, from a trucking perspective, this would be Utopia.
But the horse is already out of the barn. And we tend to over-simplify the European experience and situation.
The European Union is a complex relationship built over a couple of decades that involved the establishment of a joint European Parliament, a common currency, etc.
The rhetoric coming out of Ottawa – e.g., concerns over sovereignty, cultural integration, etc. made perimeter security a political non-starter from the get-go. (Even though some of the measures introduced jointly by the Canadian and U.S. federal governments are indeed reflective of a perimeter approach).
Moreover, the concept is not one which curries much political support in Washington.
Could you really see the U.S. supporting the establishment of a North American parliament where it would have to share power with Canada and Mexico?
So, we are stuck with the border. Indeed, it is viewed by many in the U.S. as the first line of defence against terrorism.
However, there are things that can be done to fix the border. What’s needed is:
Investment in the appropriate infrastructure (approaches, crossings, ITS);
Bilateral security and border management systems; and finally,
Good relations between the two major trading partners.
Next month I will discuss in greater detail these three action items.
– David Bradley is president of the Ontario Trucking Association and chief executive officer of the Canadian Trucking Alliance.
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