The Canadian and U.S. governments are trying to reconcile border issues to balance security with prosperity, and stakeholders are waiting for answers. But the dynamic between security and prosperity is anything but predictable, said Glenn Rice, president of UPS Canada, during a Cross Border Trade Summit hosted by UPS Canada last month. The challenge is to lessen the impact of new custom regulations, he said, without compromising security.

The business connections between Canada and the U.S. are greater than any other two countries in the world. Some US$1.5 billion of goods cross our common border daily — in fact, more goods pass over the Peace Bridge between Detroit and Windsor than all trade between Canada and Japan.

What makes this relationship even more unique is that Canada and the U.S. work together to co-produce products, so it’s not limited to importing and exporting, said Elizabeth Whitaker, U.S. deputy assistant secretary of state of Western hemisphere affairs. “In areas like automobiles,” she said, “we’re working together to co-produce products.”

Unfortunately, criminals also use this open trading system, she added, so there has to be a way of balancing security with prosperity in cross-border trade. This includes having a common approach to emergency management, developing smart and secure borders and establishing a high-tech screening standard for goods and people.

In January 2007, every person entering the U.S. by air or sea must have a passport or other secure ID. By January 2008, this will also apply at land borders. The objective is to standardize documentary requirements, said Whitaker, but the concern is this will damage trade. Currently, 1.1 million people cross the border daily, and border officials see 8,000 different types of documents over the course of a year, from driver’s licences to birth certificates. As a result, work is being done on a “car” version of the passport.

This has all added up to extra costs, according to Danielle La Pierre, who oversees operations and business development for New Balance Athletic Shoes. The company has manufacturing sites in the U.S. and Mexico, and has just introduced its Warrior brand into Canada. “Although we have free trade, it does not equate to free movement of products,” she said.

The company has had to hire a new employee whose sole responsibility is dealing with compliance issues. “I no longer share truckloads with anybody because I cannot trust anybody else’s paperwork,” she said. “So that’s increased my cost of goods — my freight has probably increased by 15 per cent because I can’t trust another consignee’s paperwork and that could result in delays at the border.”

According to a 2005 Canadian trucking survey, security-induced delays increased the time to cross the border an average of 32 minutes, costing companies $239 million.

“Who’s absorbing it?” said La Pierre. “It’s industry.”

To absorb these additional costs, New Balance has had to work smarter through the use of supply chain technology.

“If you don’t, then you’re out of business,” she said. “So either we reinvent ourselves or we die.”

Tremco Canada, which manufactures sealants, weatherproofing and passive fire control solutions, has also had to reinvent itself. “We have tremendous amounts of goods flowing in both directions across the border,” said Kevin Riddell, traffic manager with Tremco Canada. The company manufactures its lines in Toronto and the U.S.; the lines are combined and sold to customers throughout North America.

While the company has had great success with this cross-border system, since 9/11 it’s been affected by the costs and effort to comply with new policies to demonstrate to customs officials that Tremco is a known importer/exporter.

“It hasn’t so much affected our shipments in terms of delays ”“ it has more so affected us internally, meaning a new staff member here, new software there,” he said. “We have had to spend more time with the back-end of the business.”

The company is looking into a global trade module from software vendor SAP, for example.

Some 40 per cent of trade is intra-company and another 30 per cent is done through supply chain companies like UPS and Purolator, said Jim Phillips, president of the Canadian/American Border Trade Alliance. “It’s interesting that there is no small package system for a real efficient movement of goods,” he said. “The reality to solve the U.S.-Canada border [problem] is to go to perimeter clearance — we should get people involved offshore at their origin.”

Also, governments should identify low-risk people, provide them with a special identity and give them the ability to cross the border almost without query ”“ as opposed to just going after the bad guys. “We’re looking at it from the wrong direction,” he said. “And we know it’s going to be a disaster if done wrong, but on the other hand, if we were able to identify the low-risk [people] and really facilitate the economic movement of goods and people, we could be ahead of the game.”