Canada and the United States share a special relationship that is built on common values based on a long history of cooperation, family ties, and friendship. In addition to this strong friendship, our shared border facilitates the largest bilateral trading relationship in the world, with $1.6 billion1 in two-way trade and 300,000 travelers crossing the border on a daily basis. Thirty-seven of the 50 U.S. states rely on Canada as their largest export market. Canada’s greatest trade partner is the United States, and for the United States, it is Canada. Major benefits flow from this relationship, including 7.1 million jobs in the United States and 3 million jobs in Canada. This unparalleled cooperation has the potential to move our economies back in the right direction.
Unfortunately, the Canadian and U.S. business communities express growing concern over ominous trends referred to as the “thickening” of the border. A “thick” border–which is associated with new or increasing fees and inspections, uncertainty over onerous wait times, layers of rules and regulations from different departments, more stringent requirements once compliance is achieved, and infrastructure impediments–is an expensive border. While Europe moves toward a more integrated border environment, our borders are moving in the opposite direction–the competitive advantage created by the Canada-U.S. free trade agreement of 1989 and the North American Free Trade Agreement (NAFTA) of 1994 is eroding. A sense of frustration exists within the Canadian and U.S. business communities regarding the fact that many practical measures that could reduce border-related costs have yet to be taken.
The current economic downturn magnifies the structural problems in our economies–one of them is the Canada-U.S. border. Inventories and transportation costs are growing, and businesses are cutting back on spending. Increasing border costs add more pressure to businesses’ bottom line, discourage cross-border tourism, and threaten more than 10 million jobs that rely on the Canada-U.S. partnership. With one-third of our twoway trade being the intracompany delivery of input materials, we need a coordinated approach from both our governments. Cross-border businesses work together; therefore, the governments should as well. After all, we build things together, so the only way to come out of this economic downturn stronger and more competitive is by working together.
In February 2008, the Canadian Chamber of Commerce and the U.S. Chamber of Commerce, in partnership with 43 business associations, launched a report to improve the 49th parallel. Finding the Balance: Reducing Border Costs While Strengthening Security put forth short-term, practical recommendations to make the border more secure and friendly to low-risk goods and people. Many of the recommendations were put in place and we commend both governments for this action. While progress has been made, much more needs to be done.
Once again, the Canadian Chamber and the U.S. Chamber have come together to provide both governments with short-term, practical recommendations to reduce border costs. The recommendations in this new report, Finding the Balance: Shared Border of the Future, build on the ones given to our governments in February 2008 and continue to fully embrace a post 9/11 security reality. The focus of this paper is to identify areas to reduce border costs in the short term and to increase the competitiveness of our industries. While not addressed in this report, we recognize that there is a pressing need for governments and industry to come together to rethink how we achieve our joint needs for a secure and trade-efficient border in the mid- to long-term as well.
The recommendations included in this report take into account three major political goals. First, they would make both countries more secure by increasing participation in trusted shipper and trusted traveler programs, allowing border agencies to focus their limited resources on protecting against unlawful trade and travel. Second, they would improve business predictability as it pertains to the border. Third, they would make our integrated economies stronger by facilitating the movement of low-risk goods and people across the border.
This report reinforces the call for action by the Canadian and U.S. governments to act on the practical recommendations collected from industry and outlined here. As businesses seek to tighten supply chains, reduce inventory, increase velocity, and improve product predictability, we must recognize that government plays a critical role in ensuring the efficient and secure movement of goods and people. Improving the supply chains and border access is vital to both the economic recovery as well as our long-term economic health. We view these improvements as an investment in the future of global trade and prosperity. The current economic climate amplifies the urgent need for action–action that delivers a big win for Canadian and U.S. jobs, businesses, and a more secure North America.