Dead End for Free Trade

(Globe & Mail — Barrie McKenna)

Peter Durant is getting edgy. The 41-year-old Ontario trucker should be on his way to Toledo, Ohio, to pick up a load of Oreo cookies for Kraft Canada.

Instead, he’s stuck at a truck stop outside Windsor, Ont. The U.S. Customs computer system that handles freight has crashed and can’t read his electronic manifest.

By the time the all-clear sign comes from his dispatcher an hour later, about 100 trucks are lined up on the U.S. side of the Ambassador Bridge. It will take him another 11/2 hours to navigate the 13-kilometre drive through Windsor and clear customs on the U.S. side.

It’s another day at the busiest trade gateway on the planet – not a bad day; not a particularly good day. Just thick. Dense layers of security, designed to shield Americans from a world full of threats, have conspired to make life enduringly less predictable for everyone else.

“I can’t see this is an efficient way to move things across the border,” observed Mr. Durant, who has hauled cargo across the border once or twice a week for the past 14 years. “This isn’t it,” he said as he guided his rig through winding, rutted lanes beneath the bridge.

Call it thick, sticky or whatever you like. For the people and companies who ply the border trade, the new reality is an increasingly complex, time-consuming and costly experience. And we’re all paying the price.

The long-ago promise of the Canada-U.S. free-trade deal was about dismantling barriers – tariff and otherwise – along the world’s longest undefended border. But those benefits are being slowly eroded as companies absorb ever greater costs – anything and everything to keep trade moving.

Just-in-time inventory management has evolved into just-in-case.

Companies are stockpiling inventory in both countries to cope with the increasingly unpredictable border, wiping out many of the efficiencies of integrated supply chains, according to recent studies by the Conference Board of Canada as well as the Canadian and U.S. Chambers of Commerce.

Stockpiling isn’t the only coping mechanism seeping into everyday business. Disturbingly, businesses are reverting to behaviour that was common before free trade, a trend that is eroding the benefits of Canada’s open access to the U.S. market, the Conference Board concluded.

Companies now routinely preship orders, cross at night or on weekends, send empty trucks to make pick-ups or ship duplicate orders – anything to make sure a delivery arrives on time. All at a cost.

A load that doesn’t get to a customer can shut down a manufacturing plant, explained Robert Kee, managing director of Casco Inc., a Canadian-based maker of corn-based sweeteners.

“It’s a big deal,” he explained. “A customer isn’t going to shut down their plant just because they feel bad for us. They are not going to tolerate that.”

So when a shipment occasionally gets hung up en route by an inspection or some other glitch, Casco sends a second one, while eating the extra cost.

Casco was an early poster child of free trade. The U.S.-owned maker of corn-based feed, starch and sweeteners saw its tariffs go from nearly 20 per cent in the late 1980s to zero. During the 1990s, the company expanded from one to three plants in Ontario – in Brockville, Port Colborne and London – to tap burgeoning opportunities in the U.S. Northeast. Exports soared and the company prospered.

But the dream for Casco, and many others, may be silently slipping away. Longer and more frequent inspections, duplication, border congestion, mounting fees and rising shipping costs are chipping away at the company’s once impressive competitive edge (and that was before the Canadian dollar rocketed to parity). It’s U.S. Homeland Security, the U.S. Food and Drug Administration, the U.S. Department of Agriculture – part of a mushrooming security and safety bureaucracy at the border. Read the complete article.