Border Delays Cost US and Canadian Businesses

A study by the departments of economics at Ontario’s University of Waterloo and Wilfrid Laurier University found that border delays cost the U.S. and Canadian economies as much as C$30 billion each year.  The study, “Border Delays Re-Emerging Priority:  Within-Country Dimensions for Canada,” presents a stark reminder that, as successful as U.S.-Canada trade may be, there are serious potential roadblocks to future growth and success.

This most recent study supports a report issued in 2009 by the U.S. and Canadian Chambers of Commerce, “Finding the Balance:  Shared Border of the Future,” which concluded that increased government regulation – regulation that is often redundant has resulted in onerous delays and increased costs for businesses.  The study is also consistent with an August 2012 by Canada’s Fraser Institute, “Measuring the Costs of the Canada-US Border,” which found that post 9/11 security requirements and other border costs account for nearly 1.5 percent of Canada’s GDP.

In the Waterloo/Wilfrid Laurier study, the authors found that while every industry was affected by border delays, the automotive industry was especially hard hit:

“The automotive industry is so integrated that the production of 4,000 vehicles in North America may involved over 28,200 customs transactions.  With car components crossing the border 5 to 7 times during assembly, delays can easily add an extra $800 to the cost of production per vehicle, costing the automotive industry millions of dollars each year.”  By way of comparison, a shipment of automobiles arriving from Asia is only required to give a 24-hour advance notice and go through a single security check before rolling off a ship and on to car dealerships.

The studies’ authors cite three main areas of concern:

• Increased security mandates, especially since 9/11
• Infrastructure that has failed to keep pace with increased volume
• Increased random inspections and additional regulatory requirements

As an example of the poor condition of much of the border-area infrastructure, consider the Detroit-Ontario Ambassador Bridge.  The bridge was opened in 1929 as a five-lane link between the two countries.  Today, it is the busiest international gateway, with roughly 6.4 million cars and trucks crossing annually.  But now it is only a four-lane bridge, with one of the original lanes having been edged out in deference to today’s wider cars and trucks.  Some relief is in sight though, as a long-stalled effort to construct a new bridge was finally given the green light in late 2012.  However, like all major infrastructure projects, progress will be slow, with construction of the new bridge expected to take seven years.

The issue of border delays has become so serious, that a Conference Board of Canada survey found that a growing number of businesses were reverting to pre-USMCA practices of stockpiling inventory as a way to guard against late shipments due to border delays.

In fact, the Waterloo/Wilfrid Laurier paper notes, “The benefits of USMCA may have evaporated, or at least have been negated, by the reemerging priority of new security-drive barriers to trade at the border.”