Economic Development

Wanted: More Trade in the NE US-Canada Corridor

November 27, 2012
Trans

The United States and Canada have the largest trade relationship in the world. As such, it is a relationship that is mutually beneficial.

For every dollar that Canadians earn by selling product in the United States, they turn around and buy 78 cents worth of U.S. products. (By contrast, for every dollar the Chinese earns by the same method, they buy only 20 cents worth of U.S. products.)

“The U.S. and Canada have a very positive trade relationship,” says Christopher Sands, a senior fellow with the Hudson Institute, specializing in U.S.-Canadian relations. “It is a relationship that can continue to grow. If we could open up just a little more trade, both [countries] would quickly see dividends.”

Within the wider scope of U.S.-Canada trade, individual regions have established bi-national relationships based on their economic strengths. The Pacific Northwest region is focused heavily on high-tech and exports to Asia. The Great Lakes region has a manufacturing-centric economy, fueled largely by the automotive industry. Despite fundamental changes in the economy during the past several decades, as well as intraregional rivalries that occasionally occur, the relationships between states and provinces in these regions remain strong, Sands says.

“Officials tend to work together [in the Pacific Northwest and Great Lakes],” he notes. “They are always interacting.”

At one time, the Northeast region — comprising the New England states and Atlantic Canada (including all or part of the provinces of Quebec, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador) — had a strong economic relationship, connected by the marine, pulp and paper, and seafood industries. Along the U.S.-Canadian border, no region has a longer history of cultural and personal exchanges, according to Sands. Workers, for example, crossed daily into New Hampshire from Canada to work in the paper mills.

“There is a long history of trusted relationships,” says Bob Good, president of the New England-Canada Business Council, an organization dedicated to increasing trade in the Northeast region.

As those industries substantially downsized in recent decades, the Northeast splintered economically. Eventually, there was hardly any interaction between states and provinces.

“Bilateral trade is a major contributor to the economy of [Northeast] states and provinces,” Sands says. “But Atlantic Canada trades less with the United States than any other Canadian region, except for the northern territories.”

 

A Common Future

Both sides of the border, however, have begun to see the benefits of working together to increase cross-border trade, focusing on industries such as advanced manufacturing, life sciences, energy, information technology and service. Private-sector, industry-specific trade events are growing in number, as are state- or provincial-sponsored trade missions. Both sides of the border are well-represented at these events.

“There are a lot of initiatives that try to hone in on the strengths of each state and province,” Good says. “We realize our economic futures are tied to each other.”

Energy is an area where there is ongoing cross-border interaction. “Clearly, energy ties between the United States and Canada remain significant and mutually beneficial, nowhere more so than in the Northeast,” Good points out.

Canadian utilities are building energy infrastructure connections, whether it is hydro-electricity in Quebec or oil, gas or electricity in Nova Scotia or New Brunswick. Several large-scale hydro-electric dams in Labrador ship electricity through Quebec and into the United States.

The idea is to boost Canada’s ability to sell energy in New England, Sands says.

On the U.S. side of the border, the Portland Natural Gas Transmission System (PNGTS), a high-capacity, high-pressure interstate natural gas pipeline, connects with the TransQuebec and Maritimes Pipeline at the Canadian border and the Maritimes and Northeast Pipeline in Westbrook, Maine. Officials in New England use the system as part of the effort to lure manufacturing expansion projects, saying companies can tap into PNGTS as a source of energy for production. “PNGTS is a gem of an asset that clearly can be utilized much more,” Good says.

 

Improving the Transportation Infrastructure

But to foster an environment for increased cross-border interaction, the region first has to strengthen its transportation infrastructure, especially highway.

“There is no cross-border region with weaker transportation infrastructure connections,” Sands stresses. “Highway, rail links and regular air service between the metro areas of New England and Eastern Canada exist, but are limited.”

The logistical strength of the Northeast is the number of deepwater ports in both the United States and Canada. These ports have the capacity to handle growing trade with Europe and shifting production trends in Asia, says Steve Fitzroy, senior vice president and director of operations for research and trade for Economic Development Research Group.

And they can grow in importance in the coming years. As production shifts from the coastal areas of China to other lower-cost Asian countries, companies may find that routing cargo through the Suez Canal will be more economical than through the Panama Canal, Fitzroy says. Under this scenario, the first port of call in North America would be a Northeast port, such as Halifax (Nova Scotia), which is used extensively by U.S. companies; the Maine ports of Eastport, Portland or Searsport; or other ports north of New York. Halifax is the nearest deepwater port to Rotterdam and Antwerp in Northern Europe, two of the largest ports in the world.

But for this strategy to succeed, the Northeast needs better inland highway connections to Eastern and Midwest markets in Canada and the United States, Fitzroy stresses.

A 2009 study, “Northeast CanAm Connections: Integrating the Economy & Transportation,” recommended examining how the flow of goods might move if there was a new transportation infrastructure, specifically between the Midwest U.S. and international markets. The study found that more east-west routes are needed, as these routes would facilitate an increase in global trade (as opposed to north-south routes, which tend to be more intraregional).

The study has spurred Maine to re-explore a decades-old idea of an east-west highway in the northern portion of the state that would connect Atlantic Canada with Quebec and destinations west in Canada and the United States. The proposed 220-mile toll highway, stretching from Calais to Coburn Gore, would be built and maintained with private funds, important because Maine faces a difficult highway funding situation, says Maria Fuentes, executive director of Maine Better Transportation Association. “We are a big state with many miles of highways and very few people to pay for them,” she notes.

The state of Maine is establishing the parameters of a financial feasibility study to assess the impact of the highway. There is no timetable yet as to when the study might begin, according to a spokesman for the Maine Department of Transportation.

Fuentes believes the east-west highway would reduce travel time and transportation costs for shippers by being a critical link in a more direct route between the Northeast Atlantic ports and markets in Canada and the Midwest U.S.

The highway terminus in Calais would be near the international border crossing with New Brunswick. The crossing, which opened in 2009, has the most modern security measures, including state-of-the-art equipment that X-rays cargo and sensors at all entries to measure radiation.

This is important because concerns over security since 2001 have made it harder to cross the border in an efficient, timely manner, Sands says. “We have to get back to a pre-2001 economic environment with [post-2001] security,” he points out.

Maine and New Brunswick have jointly developed a framework to coordinate an integrated technology system at each of their 17 land-border crossings. The technology will promote data sharing and the development of mutually beneficial border monitoring systems. This will allow commercial traffic to transit the border in a more efficient and secure manner, says Kelly James, a spokeswoman for Transport Canada, the federal department responsible for transportation.

Across the border, an upgrade is underway on the main highway that connects Saint John, New Brunswick, to Calais. When complete, the highway will offer a faster, safer route the U.S. border, ensuring more efficient vehicle movement, James says.

The Maine east-west highway project, though years away from completion, would dovetail nicely with the New Brunswick infrastructure project, Fuentes says. “It would help both countries,” she notes.

Also in Canada, national, provincial and local governments and the private sector have implemented the Atlantic Gateway and Trade Corridor Strategy, which includes efficient cross-border movement to support North American shipping, James says.

Many of the infrastructure projects from the strategy contribute directly or indirectly to U.S.-Canada border connections. For example:

Expansion plans are being finalized for Smart Bay, a state-of-the-art marine traffic management system in Newfoundland and Labrador.

The Canadian government is contributing more than $50 million on upgrades and expansions to Port of Halifax. The port has extended one of its piers, allowing for the simultaneous berthing of two post-Panamax ships. A second terminal project will upgrade and expand the value-added and break bulk cargo handling services of the port.

Other projects, such as runway, terminal and navigation improvements at several airports, will improve air cargo connections, including stops on routes that connect the United States with Europe.

 

It’s up To the Governments

The governors of New England states and premiers of Eastern Canada provinces appear committed to joining their counterparts in the Pacific Northwest and Great Lakes to contribute significantly to the growth of economic ties between Canada and the United States within their region, Sands says. They realize that increasing the volume of goods that transit in the Northeast region is critical to the economies on both sides of the border.

“We have a constant positive back-and-forth trade flow,” Sands says. “Containers go back to China empty. That’s not the case with Canada.”

While the region has begun the process that will eventually lead to increased cross-border trade, more work needs to be done. Aside from improving the transportation infrastructure, the public and private sector in the Northeast needs to invest in non-highway landside infrastructure and job training programs; assemble parcels of land to build intermodal hubs, logistics parks and freight villages; and create opportunities such as free trade zones.

“We need a comprehensive strategy that leverages transportation investments into investments in human capital and improving logistic supply chain services,” Fitzroy says.

Sands puts the onus on state and provincial governments to create an environment that will increase cross-border trade.

“If a company needs access, it won’t build a new road — it will build a new plant in a new location,” he stresses. “A government is tied to a region. Governments have to set the conditions that allow for more interaction, which in turn will allow the region to grow.” wt

The Port of Halifax, heavily utilized by U.S. companies, is an important link in a strategy to grow the economy in the Northeast region of the United States and Canada.

Photo courtesy of The Port of Halifax

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