THE BORDER AND THE ONTARIO
ECONOMY
Bill Anderson (bander@uwindsor.ca)
Ontario Research Chair in Cross-Border Transportation Policy,
University of Windsor
Presentation for Canada-United States Transportation Border
Working Group
Ottawa, November 7, 2012
Ontario’s cross-border economy
5 points about the Ontario Economy
1. Ontario has an trade-oriented economy
(Imports and exports as % of GDP, 2010 data)
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
imports
exports
2. Exports are focused on the US market
(2010 data)
China, 1%
Norway,
1.3%
Mexico,
1.4%
United
Kingdom,
6.9%
Rest of
World,
9.5%
United
States,
79.9%
2a Ontario exports 2010 ($million)
$180,000
$160,000
$140,000
$120,000
$100,000
$80,000
$60,000
$40,000
$20,000
$0
Interprovincial
US
Other International
2c Highway distance (km) from
Toronto
2500
2000
1500
1000
500
0
3. Most Ontario merchandise exports are
of manufactured goods (2010 data)
All other
12.7%
Automotive
Mfg, 35.6%
Other Mfg,
51.7%
Source: Industry Canada International Trade Database, adapted from Statistics Canada
4. Most exports to the US move by truck
Rail
17%
Other
10%
Truck
73%
Ontario's Exports to the US by mode, 2007-2008
Source: Transport Canada (2008): Transportation in Canada 2008
5. Truck movements are concentrated at a
few crossings
Ontario’s prosperity is highly dependent on the
performance of a few border crossings
Cross-Border Supply Chains




More than just exchange of finished goods, an
intermingling of production systems
Windsor, Ontario’s largest automotive plants
 Vans assembled from US parts
 Engines for US-assembled trucks and cars
Just-in-Time: little tolerance for delays, disruptions
and high transfer costs
Border costs make firms engaging in cross-border
supply chains less efficient and competitive
The Cost of the Border
Border crossing costs for goods
•
•
•
•
•
•
•
Duties, fees, tolls
Document prep, broker fees (rules of origin)
Empty backhauls
Average Delay
Delay Uncertainty
Compliance with trusted trader programs
Cross-border business trips
Ambassador Bridge to US Planning Time
(minutes)
90
80
70
60
Mean
50
PT90
40
PT95
30
PT99
20
10
0
2006
2007
2008
2009
Strategies to mitigate crossing time
uncertainty in supply chains
•
•
Excess Plan Time
– Costly because it ties up trucks, reduces the
number of turns per day
Inventory stockpile
– A “just in case” strategy, but it increases
inventory carrying costs
Border cost estimates

Taylor et al (2004) study found that border costs
are equivalent to 2.7% ad valorem tariff (4% for
trucks)
 Carrier
costs only about 25% of total
 Customs administration is a major component

Recent study from Fraser Institute makes total cost of
pot 9/11 border impacts (lost trade and tourism,
government expenditures) at 1.2% of Canadian
GDP
Trucking costs as percentage of goods value
(Mark Brown, Statistics Canada)
Percent
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
2004
2005
Domestic
2006
2007
Export
2008
Import
2009
Why are cross-border shipments more
expensive?
Cross-border trucking costs 8% to 40% higher
than comparable domestic (.4 -.9% of value)
 Border delays and uncertainty
 Cost of compliance with trusted trader
programs

 Common

queue problem
Empty backhaul
 Lack
of cabotage rights under NAFTA
Trends in cross-border movement of
goods and people
Canada-US trade stagnating in 21st century
 Ontario Trade values still below 2001 level
 At national level, Ontario’s decline offset by
oil exports
 Rapid reduction in personal crossings by
automobile

Canadian Exports to the US: total and
Ontario
400
350
300
250
200
150
100
50
-
Total
Ontario
Canadian exports to the US: Total and
Oil and Gas
400
350
300
250
200
150
100
50
-
Oil and Gas
All others
Factors that retard trade
High and volatile Canadian dollar
 Slowdown in automotive and other key
manufacturing industries
 Increased competition from China and others
 Costs of the border

Automobiles entering Canada at
Ontario Crossings 1972-2010
16,000,000
14,000,000
12,000,000
10,000,000
Total United States
vehicles entering Canada
at Ontario crossings
8,000,000
Total Canadian vehicles
returning to Canada at
Ontario Crossings
6,000,000
4,000,000
2,000,000
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
2005
2008
0
Policy
Policy Options

Make the border more efficient
Infrastructure, personnel
 Technology (RFID, biometrics, databases)


Move functions away from the border
Trusted trader (FAST), traveler (NEXUS)
 IBETs, intelligence


The perimeter approach
Eliminate border functions through harmonization
 Problems: no customs union, major policy differences
(immigration/refugee, firearms, tax structure)

Perimeter Security and Economic
Competitiveness Action Plan
Practical steps, short timelines, little legislative
requirement
 Responds well to business interests
 Greater coordination and cooperation

 Information
sharing (entry-exit)
 CBP and CBSA operation on foreign soil
Joint plans on infrastructure, resilience
 Not much for the occasional traveler

Directions for Policy Development
Aggressive incrementalism
 Infrastructure where needed
 Perform border functions jointly
 Customs administration and data requirements,
 Plan for border resilience
 World’s most technologically advanced border
 Privacy and human rights issues
 Don’t neglect the occasional border crosser
 Don’t get complacent because of oil and gas
