The Canada-United States customs transaction the invisible border?

Author:LeCroy, Jessica
Position:PROCEEDINGS OF THE CANADA-UNITED STATES LAW INSTITUTE HENRY T. KING, Jr. ANNUAL CONFERENCE on THE CANADA-UNITED STATES REGULATORY REGIME: REVIEW, REFORM, RECOVERY: Cleveland, Ohio: April 8-10, 2010
 
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Session Chair--Jessica Lecroy

United State Speaker--Kathryn Friedman

Canadian Speaker--Cyndee Todgham Cherniak

United States Speaker--Laurie Tannous

INTRODUCTION

MS. LECROY: Good morning, everybody. I am Jessica LeCroy, and I am the senior advisor at Bennett Jones in the Toronto office. (1) I will be the chair of this, the penultimate session of this wonderful conference.

We will be talking today about United States-Canada customs transactions, as indicated on the agenda. While the agenda shows the title of this session is The Invisible Border?, with a question mark, I believe it should more properly read The Invisible Border!, to indicate the imperative nature of this issue.

Speaking first will be Kathryn Friedman, director of Law and Policy Research at the University of Buffalo Regional Institute. (2) She will be reviewing her research conducted in collaboration with the Border Policy Research Institute, The Border Barometer. Cyndee Todgham Chemiak of Lang Michener (3) will be discussing ten distractions from border transactions. (4) Laurie Tannous, vice president at Sandler Travis Trade Advisory Services, (5) will then respond to Cyndee's presentation.

After each of the panelists' presentations, I will allow a few quick questions before the start of the next presentation. We will reserve longer questions for the full panel and discussion for the end of this session, as time allows. Kathryn, the time is yours.

UNITED STATES SPEAKER

Kathryn Friedman

MS. FRIEDMAN: Thank you very much. I would also like to thank Dan Ujczo for asking me to speak to you this morning to frame the panel conversation on border-related regulatory barriers. To do so, I refer you to the 2010 edition of The Border Barometer.

The Border Barometer is a collaborative initiative undertaken between the Border Policy Research Institute at Western Washington University and the Regional Institute at the University of Buffalo School of Law. The Border Barometer is a tool that provides a United States perspective on the performance of the Canada-United States border. (6)

In 2009, we published the first edition of The Border Barometer, wherein we looked at three ports of entry along the northern border: the Buffalo-Niagara region, the Detroit-Windsor region, and the Pacific Gateway region. (7)

We also developed indicators of border performance based on data collected at each region.

In particular, we constructed and examined porosity and infrastructure indicators, and mined data sets that illustrated how the border was performing with respect to each indicator.

The 2010 edition is updated, and has been expanded to examine eight ports of entry along the northern border, stretching from Blaine, Washington to Champlain, New York, and virtually every major port of entry in between. (8) The 2010 edition also features the same indicators of porosity and infrastructure, however, we have created three new sections. (9)

First, we have a section looking at the northern border trends. This section highlights trends across the entire border. From these trends, we were able to identify individual port variations. (10)

Second, we included a section on comparative perspectives. In this section, we describe four distinct metrics for measuring performance, and we compare and rank performance of each port according to each metric. (11)

Third, each port of entry in The Border Barometer has its own one-page snapshot summary that details performance. Detailed information on each port of entry is found in this section.

This morning, I cannot go through all of the data contained in this publication; however, I can use some of this data to provide a broader framework for our conversation. First, with respect to northern border trends, it should come as no surprise that trucking dominates commercial exchange between Canada and the United States. Despite its dominance, however, those familiar with this industry would not be surprised to learn that border data analyzed suggest that the value of truck exports declined slightly between 2007 and 2008, decreasing from $156 billion to $150.8 billion during that time period. (12)

What is most interesting about these data is that this declining trend is actually driven solely by two ports of entry: Detroit and Buffalo. At the six other ports of entry that we examined, trucking exports actually increased slightly, as reported in The Border Barometer. (13) This disparity is most likely due to the economic recession and, in particular, the heavy reliance that these two ports of entry have on auto industry trade.

Second, another data set analyzed was the composition of traded commodities. We thought knowing which goods were crossing the border was as important as understanding how these goods were crossing the border. The results here were also not particularly surprising: in 2008, manufactured goods dominated trade flows, comprising fifty-four percent of exports and forty-one percent of imports. (14) This finding demonstrates how manufacturing trade serves as the foundation of our interdependent economies.

Third, we looked at both seasonal truck traffic and auto traffic in order to determine whether there was any variation throughout the year in terms of these modes of transportation. Our findings indicated that although there was not much variation in truck traffic throughout the year, there was indeed more seasonal variation in auto traffic. When you think about it, this makes sense. For example, the Buffalo-Niagara port, as the corresponding individual port page in The Border Barometer indicates, has the highest auto traffic entering the United States each month between 2007 and 2008. (15) This is due, in large part, to the fact that there exists a very strong binational tourism industry in the region, with, for example, individuals owning summer homes on each side of the border.

These data sets also suggest that in 2007 and 2008, auto traffic entering the United States peaked at approximately 3.2 and 3.3 million cars, respectively. (16) It is notable that in the last quarter of 2008, from September to December, both truck and auto traffic declined. In particular, there is a very steep decline of autos entering the United States in the latter half of 2008. (17)

In addition to these highlights, as I mentioned earlier, we developed four metrics to provide a comparative perspective on border performance. These metrics are: (1) the percentage change in total trade value from 2007 to 2008; (2) the dependency on manufacturing commodities in 2008; (3) the degree of seasonal variation in car traffic in 2008; and (4) the percentage decrease of car traffic in the time period from July to December in 2007 and 2008. The perspective section provides rankings for certain positions, with lower rankings indicating more desirable positions. I am going to highlight three of the metrics used in calculation of these perspectives.

First, with regard to the percent change in total trade value, the northern border average was negative nine percent. (18) This means that there was a nine percent decrease in total trade value across the northern border. Five out of the eight ports along the border examined actually experienced declines in total trade value, (19) and are thus representative of the declining trend of total trade value along the northern border.

Second, dependency that a certain port has on manufacturing commodities was measured. Dependence on manufacturing is not necessarily a good attribute, so we viewed a more diversified commodity flow across the border as being better in terms of resilience, particularly in economically rough times. Detroit clearly has the strongest dependency on manufacturing commodities, particularly because of its dependence on the auto industry. (20) The Buffalo Niagara port had the second-greatest dependence on manufacturing commodities. (21)

Third, we observed the percent change of car traffic from July through December 2008. Detroit, ranked eighth, experienced the greatest decline in traffic during this period between 2007 and 2008. Auto traffic declined 16.2% compared to the same time frame in 2007 as in 2008. (22) Champlain had the next highest decline, suffering a 12.7% decline. (23) The border-wide average of car traffic crossing the border during this time was a 7.3% decline. (24) Port Huron ranked highest, suffering only a 3.5% decline. (25)

Though these are simply a lot of data and statistics, I hope you can appreciate the declines in both the value of trade and auto and truck traffic across the border.

Determining drivers of these trends is an interesting question raised by the Border Barometer findings. Unfortunately, we cannot pinpoint the exact reasons for these trends across the border.

However, we could argue that the economic recession has certainly had an impact on border flows. In addition, inadequate governance mechanisms have had an impact on some of the trends in northern border trade.

Also, the regulatory environment plays a critical role affecting these trends. If policymakers and stakeholders are interested in reversing these trends, then action needs to be taken and thought given to the various regulations in place that create the very transaction costs that actually inhibit trade flows along the northern border. I now turn it over to my colleagues for discussion.

MS. LECROY: Are there any questions for Dr. Friedman?

MR. MCILROY: My name is Jim McIlroy, and I would like to commend you on The Border Barometer. It has a lot of data, and I think it is very, very helpful data, and it is very easy to read.

MS. FRIEDMAN: Thanks for that should go to our staff. We have a terrific staff that produced this.

MR. MCILROY: One thing that struck me was that some of your presentation referred to imports, but these are what we would call exports. My question, though, is about Canada's modes of transportation. Why does Canada use more rail and less truck? I found this striking because I...

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