The Impact of U.S. Government Antiterrorism Policies on Canada-U.S. Cross-Border Commerce: An Exploratory Study from Western New York and Southern Ontario

Abstract

This article examines the extant and potential impact of U.S. antiterrorism policies on Canada-U.S. cross-border commerce. Particular attention is focused on the cross-border trade that takes place between southern Ontario (Canada) and western New York (United States). Evidence from a survey of Canadian and U.S. exporters suggests that U.S. antiterrorism measures have inflated the business costs of exporters on both sides of the border. These measures have also created shipment delays that ultimately imply lost revenues for producers, as well as higher prices for consumers. Security-related initiatives motivated by a genuine concern for the well-being of U.S. citizens may nevertheless act as nontariff barriers to bilateral trade. We argue that a potential long-run consequence of these additional costs is trade diversion. The article concludes with a brief discussion of the implications of the empirical findings for the geography of Canada-U.S. bilateral trade.