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Canadian companies bearing the costs of post-9/11 border policies

Ottawa, ON -- Contrary to the images of trucks lined up at the border, new border security policies introduced sinc...


Ottawa, ON — Contrary to the images of trucks lined up at the border, new border security policies introduced since 9/11 have not reduced Canadian export volumes to the United States. The new border security environment, however, has raised the cost of access to the U.S. market for many companies, according to the findings of two new Conference Board studies.

Trade volumes have not changed because companies appear to be doing whatever they must to get goods to market. But Canadian companies are bearing higher costs as a result. And even small cost increases could cause companies to reach a tipping point at which it is less advantageous for production to locate here in Canada, said Danielle Goldfarb, principal research associate.

In addition to direct costs of complying with new border policies, companies are dealing with indirect costs (such as higher cross-border shipping costs or increased uncertainty about new border policies). In the highly competitive global operating environment, even small new border costs can have important negative economic consequences, and could prompt companies to locate their production in the larger U.S. market and avoid border-crossing entirely. Some companies said that they are not yet getting the full benefits of fast-crossing lanes for pre-approved traffic, even though they made significant up-front investments to become pre-approved.

With the right approach, however, Canada could be positioned as a preferred place for companies to serve the U.S. market. Programs to separate pre-approved and trusted cargo from unknown-risk cargo — if implemented more effectively — could get goods to market efficiently and securely.

According to the Conference Board, to minimize the costs and maximize the security and efficiency benefits of the post-9/11 border, governments need to:

– Keep new rules simple and predictable and provide better, one-stop information access to companies;
– Provide adequate infrastructure, including a new crossing at Windsor-Detroit, possibly dedicated only to Free and Secure Trade (FAST)-approved traffic; and
-Move towards greater alignment between Canadian and U.S. programs to pre-approve cargo for border fast-tracking.

Businesses need to view upfront security program costs as an opportunity to improve efficiency and ensure they are viewed as a trusted security partner at the border.

Reaching a Tipping Point? Effects of Post-9/11 Border Security on Canadas Trade and Investment is a joint project of the Boards International Trade and Investment Centre (www.conferenceboard.ca/ITIC) and the Centre for National Security (www.conferenceboard.ca/CNS). The research combines the results of a unique, extensive statistical analysis of Canadas exports from 1988 to 2005 with the results of 60 interviews of border-crossing companies and associations in late 2006. A separate companion report, Tighter Border Security and Its Effect on Canadian Exports, describes the statistical analysis in greater detail.

For more information, visit www.conferenceboard.ca.