Canada will spend more than $1.2 billion over the next five years to speed the flow of approximately $370 billion in goods annually across the border with the United States. But trade experts warn the investment doesn't guarantee Canada will remain the U.S.'s largest trading partner.

"It is not a case of build it and they will come," says Alfie Morgan, professor emeritus at the Odette School of Business at the University of Windsor. "Trade and infrastructure investments must be seen in the context of U.S.-Canada relations" Since the Sept. 11, 2001, terrorist attacks on the United States, relations with Canada have deteriorated, Morgan says, and spending hundreds of millions of dollars on roads, bridges, security and staff to speed cross-border trade does not guarantee Canada favoured trade-partner status.

Unless some harmony and co-operation between the countries is restored, the trade could go the other way, he says.

Morgan adds that if the United States begins looking for suppliers other than Canada, or if Mexico or China, or both countries, continue to gain, the impact on Canada would be negative.

Garland Chow

The United States imported $243 billion US of Chinese goods in 2005, an increase of 24 per cent from 2004. The increase means China is the second-largest exporter of goods to the United States, behind Canada at $288 billion US, according to the Economic Policy Institute in Washington, D.C.

At the current rate of growth, China will surpass Canada and become the largest supplier of U.S. imports within the next two years, the institute says.

Canada exported a total of $453 billion Cdn worth of goods in 2005, $429 billion in 2004 and $400 billion in 2003, according to Statistics Canada.

Last year, Canada's exports to the U.S. alone stood at $370 billion Cdn, up from $350 billion in 2004. It was $330 billion in 2003.

Morgan says trade between the United States and Canada is projected to increase by 30 per cent by 2013.

The U.S. and Canada are the world's two largest trading partners, moving $627 billion of goods across the border in 2005. The bulk of Canadian economic activity takes place within 320 kilometres of the international border and about 80 per cent of Canada's imports and exports move across the border with the United States, Morgan says.

"The magnitude of Canada's trade with the U.S. is immense. We're really thick and thin with the U.S.," he says. "If Canada were to lose just one per cent of its trade with the United States, we would need to quadruple our trade volume with all of Europe to offset the loss."

Last month, the new federal Conservative government appointed former federal finance minister Michael Wilson as the new ambassador to the United States.

Wilson says the relationship can be improved.

The Ontario Trucking Association, the Ontario Chamber of Commerce and the Automobile Parts Manufacturers' Association have been pressing the federal and Ontario governments to find solutions for inefficient and inadequate border crossings, particularly the Detroit River crossing at Windsor.

About 30 per cent of Canada's total trade with the United States moves through the Windsor crossing.

The groups warned in November that "delays caused by inefficient borders continue to threaten Ontario's well-being" in a response to the announcement of a proposed new crossing at Windsor.

An inadequate border-management system, contradictory trade policies, staff shortages and poor infrastructure plague border crossings, according to a study done in 2003.

The study also said the inadequate systems cost the Canadian and U.S. economies about $10.3 billion annually in lost revenue. The study was prepared for the Michigan Department of Transportation, the U.S. Department of Transportation and the New York State Department of Transportation.

Until Sept. 11, 2001, the commitment to infrastructure improvements made under the North American Free Trade Agreement (NAFTA) "moved at a snail's pace," says Garland Chow, a member of the operations and logistics division of the Sauder School of Business at the University of British Columbia.

"9/11 put a burr under the butt of the players on both sides and got the co-operation that was lacking," he says.

Morgan agrees. "Trade between Canada and the United States wasn't even on the American radar screen.

"It (the U.S.-Canada border crossings) was more a nuisance than anything else," he says. "Then came 9/11, and other incidents put in the mind of Americans that Canada is exporting terrorists to the U.S. and that Canada is a threat.

"And the result was trucks backed up for miles and miles at practically every point from New Brunswick to B.C.," Morgan says.

There are 130 border crossings along the Canada-U.S. border.

To streamline the movement of goods across the U.S.- Canada border, the federal, Ontario and British Columbia governments will spend $1.2 billion to improve crossings at Windsor, Sarnia, Niagara Falls and Fort Erie in Ontario and at Douglas in British Columbia. More than 70 per cent of the Canada-U.S. cross-border truck traffic flows across those points.

More than 60 per cent of the total Canada-U.S. bilateral trade crosses at the Ontario-Michigan border crossing, the busiest of which is Detroit-Windsor. The federal government has earmarked about $300 million for expanding the Windsor corridor.

The Border Transportation Partnership (BTP), which represents the governments of Canada, the United States, Ontario and Michigan, has examined the Detroit-Windsor corridor in a 30-year transportation strategy to speed up traffic.

Windsor is the only border crossing without a direct highway connection, which means truck and passenger traffic must pass through the city.

After Sept. 11, 2001, traffic was backed up by as much as 30 kilometres, Morgan says.

"Trucks are like moving warehouses worth millions and millions of dollars of merchandise. Billions of dollars were sitting in trucks. It was costing everybody," he says.

The BTP warned in November that "unless steps are taken to address capacity at the Detroit-Windsor crossing, mounting congestion and delays will result in lost production and ultimately few jobs in communities throughout both countries. Under high-growth scenarios, cross-border traffic could exceed the capacity of the present border crossings in the Detroit River in less than 10 years."

Chow says that, under new border-security requirements, cargo information must be provided before the trucks even get to the border. "This will make it more efficient and faster to cross the border. The tighter security requirements will make the trade flow at the crossings faster."

The BTP will hold public meetings in Canada and the United States this month to present a final list of river-crossing alternatives. In mid-2007, the partnership is expected to name the location of the new crossing. Construction of the new crossing is expected to begin in 2010 and open in 2013.

But Morgan says it is all still a plan at this point. "By the time you get some facts on the ground it might take 15 years."

Chow says Canada also must improve the cross-border trade system and meet U.S. security requirements in order to discourage companies from serving the Canadian market from U.S. bases.

It is to Canada's benefit to keep the border as open as possible, so products made in Canada move quickly into the United States, Chow says.

Otherwise, he adds, manufacturers might locate in the United States because their products are less likely to be delayed getting into Canada than products going the other way.

Chow says he believes setting up pre-clearance areas in Canada that are operated by U.S. customs agents could also help increase the flow of goods. Airports in Canada already use such a similar system for U.S.-bound passengers.

(Charles Wyatt can be reached at wyatt@businessedge.ca)