The Impact of US Border Policy with Canada - Trade

American’s would do well to consider the economic impact that further stringent border policy will cause, especially in light of a brief published by the Border Policy Research Institute of Western Washington University. The BPRI has been around since 2005 and “examines processes and policies related to the Canada – US border”. This is the first of two posts highlighting information published in the brief and how border policy plays a role.

Canada – The Main Exporter for the US

Many Americans may not realize how Canada ranks as an export partner of the US. Consider the image below (from the brief):

Canada is the primary export partner for 36 of the 48 states shown on the map, and is the secondary partner for all other states except for New Mexico and Louisiana. There are five states that had over 50% of all exports head to Canada in October 2007.

For Americans thinking that Canada is a country that relies heavily on the US, the bi-lateral reliance may come as a surprise. Both country’s economies are tightly linked and are very reliant on each other. In its winter brief and associated with the above diagram, the BPRI states under the heading Policy Implications:

From a viewpoint of economic self-interest, the US – Canadian relationship should be of paramount importance to both countries’ governments and citizenry.

And yet all we’ve heard form the Department of Homeland Security is how the border between Canada and the US needs to have parity with the Mexico/US border. In addition to Canadians being outraged at the obvious social disparity between the two borders, we can now point to the trade disparity as well.

According to the US Census Bureau numbers (last updated May 12, 2009), the US has exported $47 billion YTD to Canada compared to only $29.1 billion YTD to Mexico. Some may point out that Canada also has the second highest imports to the US YTD as well.
However, most of those imports are energy resources. The US Energy Information Administration’s website points out that…

In 2007, Canada exported 2.4 million bbl/d of crude oil and refined products to the US, the single-largest source of US oil imports.

In fact, Canada outpaced Mexico by almost one thousand barrels of oil a day that the US imported in 2007. So while Canada may benefit from being the second largest importer into the US, realize that a significant percentage of those imports are energy resources the US depends on.

The brief goes on to talk about how trade is affected by border security practices, and points out that after 9/11 trade slowed across the border. The biggest impact: US imports from Canada. They go on to state that:

The increased cost of cross-border trade, likely associated with higher costs of security compliance, is thought to be the problem.

So while Canada has continued to be a strong trading partner with the US, Canada has lost export dollars due potentially, according to the brief, to the higher cost of security compliance. Regardless of the fact that we supply key resources to the US, regardless that we have a peaceful border compared to Mexico, and regardless of the export/import relationships Canada has built with the majority of the states, the DHS continues to speak of increased security and scrutiny at the border.

There is a growing movement for Canada to re-assess their participation in NAFTA and the clauses around exporting our natural resources. There are active negotiations with other countries and Canada to open new trade agreements. And there is a growing frustration with what people are seeing at the border.

Canada and the US can have a safe, secure border without hindering bi-lateral trade. Unfortunately, the US seems to see trade as secondary to perceived security.