The Canadian federal government, the provincial governments, and private industry coalitions are moving toward strengthening this core pillar of the economy. These improvements should strengthen the overall Canadian economy, and could provide some interesting opportunities for companies seeking more efficient linkages to global markets.
Security and Pre-Screening Programs
The United States is
Canada's largest trading
partner, and since 9/11
Canadians have shared
U.S. border security concerns.
As a result, the
Canadian federal government
has positioned itself
as a solid partner to the
United States on security
matters, while also trying
to pave the way for businesses
on both sides of
the border.
The Canadian and U.S.
governments have progressively
established programs that enhance border security for
both countries, and which also ideally facilitate and
encourage cross-border trade. Key among these programs
are Partners in Protection (PIP) and Customs-Trade
Partnership Against Terrorism (C-TPAT).
The Canadian Border Services Agency (CBSA) originally
conceived the PIP program in 1995 as a mechanism
for private industry to play an active role in
improving border security through pre-screening and
voluntary security procedures. CBSA then strengthened
the program following 9/11 as a response to heightened
security requirements.
The U.S. Customs and Border Patrol put its own, similar measures called Customs-Trade Partnership Against Terrorism (or C-TPAT) in place in 2003. Border security became part of the war on terror when Customs and Border Control (CBP) moved into the U.S. Department of Homeland Security following 9/11, and inspection of containers and other cargo took on added significance. The CBP then recognized that the shippers themselves could become an integral part of strengthening this first line of defense.
Both PIP and C-TPAT are voluntary programs that:
• Offer shipper pre-certification after background checks
of both the shippers and their employees
• Reduce the overall number of inspections
at border crossings
• Provide for priority processing for any
remaining inspections
• Assign specialized CBP and CBSA
personnel to assist shippers and carriers
in both validation efforts and in
strengthening overall security
The PIP and C-TPAT efforts are complementary, but are not explicitly tied together.
Free and Secure Trade (FAST)
The American and Canadian governments
next decided to both link the CTPAT
and PIP programs and to establish
new programs to expedite trade
across the border. Key among these is
the Free and Secure Trade or FAST
program.
This joint program between U.S. Customs and the Canadian Border Services Agency provides for risk assessments of drivers, carriers, importers, shippers, and others frequently working across the border. Much like the airport Nexus program for U.S. passport holders, FAST provides pre-cleared drivers and shippers with coded documents that may be presented at the crossing and scanned quickly. This allows the shipments to pass more quickly and also permits the border services to focus their attention on potentially higher risk cargoes. It also allows the shipper to better predict exactly how long the crossing will take.
The border services have dedicated lanes for FAST cargoes at key crossings in Washington State (to British Columbia), two between Ontario and Michigan, and one between Quebec and upstate New York. There are additional FAST sites at another 15 border crossings.
The scope of this cooperation extends to the highest levels of both governments. Prime Minister Harper and President Obama announced new measures in February intended to create a common perimeter around both the United States and Canada. By extension, this denser level of outer security would provide the level of comfort required to allow for some "thinning" of the U.S.- Canadian border itself.
Businesses for a Better Border
Consequently, as a response to the federal efforts and
as a proactive step to establish a better trading environment
going forward, the Canadian Manufacturers and
Exporters (CME) association launched the B3–
Businesses for a Better Border initiative in late 2010.
The CME began the B3 initiative to
augment earlier, government-run
efforts to expedite trade, such as PIP,
C-TPAT, Customs Self-Assessment
(CSA), and FAST. Despite these programs,
the founding members of B3
felt that the compliance hurdles at border
crossings were a continued barrier
to effective and efficient trade.
The American Automotive Policy Council, Canadian Vehicle Manufacturers' Association (CVMA), as well as the U.S. National Association of Manufacturers (NAM) also joined as key founding members of B3 and have vowed to work with border agencies on both sides to establish enhanced security and regulatory compliance measures. In exchange, the program should ensure that trusted shipper members gain expedited passage and other incentives.
Asia-Pacific Gateway Program
Even while Canada has entered into solid arrangements
with the United States for cross-border trade, the
country has created new initiatives for improving its
already strong connections with Asia.
First announced in 2006, Canada's Asia-Pacific Gateway and Corridor Initiative is an integrated set of investment and policy measures focused on the network of transportation assets and corridors across western Canada. By investing in infrastructure, the Canadian federal government plans to strengthen the country's overall trade position, particularly with respect to trade with Asia. Main investments include strengthening road, rail, and air connections between the Pacific ports of Vancouver and Prince Rupert and various production and logistics centers across the country.
The initiative is also aimed at making the Canadian transportation network a more attractive alternative to companies in the U.S. Pacific Northwest and Midwest looking to move materials to and from Asia. The initiative focuses on gateways and corridors, providing fully integrated ways of moving goods between North American and Asian markets. For example, by investing in the Canadian National and Canadian Pacific railroads — as well as in infrastructure at key border crossings — the Canadian transportation network can provide a seamless, one-carrier network to bring materials from Asia to markets such as Memphis, Minneapolis, and Chicago.
Of course, all of this investment may be a defensive response to expansion of the Panama Canal. The canal's third, wider set of locks is due to open in 2014, allowing shipping traffic to more directly bypass the congested ports of the West Coast and directly serve the population centers of the Gulf and East coasts. Through the Asia-Pacific Gateway Initiative, the Canadian government may be attempting to proactively cut off any diversion from its Pacific ports by creating a better, faster, more flexible solution for shippers to move goods from Asian points of origin to the population centers of Ontario, Quebec, and the U.S. Midwest.
A Fully Integrated Market
What does this mean for companies looking to do
business in North America and globally? First, the U.S.-
Canada programs — both those created by the government
and by private business — are creating mechanisms
for the accelerated passage of raw materials and finished
goods across the border. This should create a more efficient
logistics network that will ideally not even recognize
the border as a chokepoint or barrier. This would,
in turn, allow companies to locate key points of sourcing,
logistics, manufacture, assembly, and final distribution
in whatever area of North America makes sense for
labor, cost, access to markets, or other key inputs. In
other words, the continent would act as one cohesive,
fully integrated market.
At the same time, Canada's moves to create an integrated transportation network — efficiently funneling goods between Asian and North American markets — strengthens the country's global linkages. Canadian markets located along this enhanced artery could benefit significantly from increased investment from companies whose desire is to efficiently serve Pacific markets. It may also attract companies that want to quickly accept shipments from Asia and integrate these cargoes into their products.
Christopher Steele is president of CWS Consulting Group, a business consulting firm specializing in location strategy, site selection, industrial development, and business attraction. He previously served as president of the Real Estate Line of Business at TranSystems and as a senior manager in Ernst & Young's Real Estate Advisory Services group. He may be reached at chris.steele@cwsgrp.com or you may follow his tweets at @cwsgroup.
