A Survey of Cross-Border Trade at a Time of Heightened Security: The Case of the Niagara Bi-National Region

Abstract

Introduction In a recent article on the new border security environment facing North America, Ackleson (2003) notes that much work remains to be conducted to evaluate the complex dynamics of post-9/11 tri-national commercial relationships under the North American Free Trade Agreement (NAFTA). Although his article is primarily focused upon the U.S.-Mexico border security environment, his call for more empirical research that includes normative components and expanded coverage of emergent theoretical and policy issues is equally relevant for studies of Canada-U.S. cross-border business transactions. Similarly, Cutter et al. (2003) argue that at a time of increased concern over terrorism, regional and international research priorities must be directed to understanding ... how borders function, especially flows of goods and people, and how borders constrain or enhance trans-jurisdictional responses to issues such as immigration, disaster response, refugee movements, weapons proliferation, narco-terrorism, or environmental degradation (225). Unfortunately, very little research has focused upon the potential impacts of terrorism upon cross-border commerce. This is a surprising neglect, because the short--and long-term impacts of new border security regulations have potentially profound implications for foreign commerce, international direct investments, the location of production, and the growth and development of local and regional economies. It is within the context of this call for more empirical work on the impacts of the post-9/11 security regulations that the following questions are posed. First, are the new anti-terrorism policies for cross-border commerce that have been put in place by the U.S. government since 9/11 serving, in effect, as non-tariff trade barriers and therefore trumping the long-standing objective of maintaining a relatively open international border between the U.S. and Canada? Second, what are the principal costs to those North American companies that must comply with the new security mandates in order to engage in cross-border commerce? Third, what are the likely strategic responses of U.S. and Canadian companies to these new security regulations when it comes to decisions related to supply chain logistics (e.g., shipping routes, transportation modes), direct foreign investments, and the location of production? Finally, and equally important, what are the possible long-term implications of these business decisions for North American patterns of production, direct investments, and regional economic growth and development? Background and Study Area Following the terrorist attacks of 9/11, the U.S. government introduced a number of anti-terrorist regulations that pertain specifically to the flow of goods and services through U.S. seaports and across the nation's international land borders. At least 15 security-based initiatives have been introduced and/or strengthened since 9/11 (see Table 1), and several more are in the pipeline (mentioned later). Most of these new regulations are aimed at reducing the vulnerability of the nation's trade and transportation infrastructure, which facilitates the movement of more than 16 million cargo containers and other shipments that enter the U.S. annually by ocean vessel, truck, rail, and air. For example, the Container Security Initiative (CSI) involves a partnership arrangement between the U.S. and more than 20 countries to place U.S. Customs agents within the gateways of those countries to inspect U.S.-bound cargo. Some of these initiatives are also designed to combine greater security measures with procedures for expediting commerce. Thus, for example, the Free and Secure Trade (FAST) program allows for the pre-approval of truckers for pass-through clearance at the U.S.-Canada border. In this case, however, both the companies and drivers must also qualify for the C-TPAT voluntary program (Customs Trade Partnership Against Terrorism), which means that U. …