1. Economic Significance of the Border: A Perspective at the Regional and National Levels for both Passenger and Freight Movements Bruno Penet HDR | Decision Economics Canada - United States Transportation Border Working Group (TBWG) Meeting

2. 2  Recognizing the economic significance of the northern border  Understanding the changes in freight movements caused by border delays and their economic impacts at the regional and national levels  Understanding the changes in passenger crossings caused by border delays and their impacts on the cross-border economy Discussion Points

3. 3 Source: North American Transborder Freight Data, U.S. Department of Transportation, Research and Innovative Technology Administration Top Trading Partners of the U.S. Year MeasureCanadaChinaGermanyJapanMexicoWorld 1993 Imports ($ Billions)$111,216.4$31,539.9$28,562.1$107,246.4$39,917.4$580,659.4 Exports ($ Billions)$100,443.7$8,762.8$18,932.2$47,891.5$41,581.1$465,091.0 Total Trade ($ Billions)$211,660.1$40,302.8$47,494.3$155,137.9$81,498.5$1,045,750.3 % of World Total20.2%3.9%4.5%14.8%7.8%100.0% Rank17523- 2000 Imports ($ Billions)$230,838.3$100,018.4$58,512.8$146,479.4$135,926.4$1,218,022.0 Exports ($ Billions)$178,941.0$16,185.3$29,448.4$64,924.4$111,349.0$781,917.7 Total Trade ($ Billions)$409,779.4$116,203.7$87,961.2$211,403.8$247,275.4$1,999,939.7 % of World Total20.5%5.8%4.4%10.6%12.4%100.0% Rank14532- Annual Growth Rate9.90%16.30%9.20%4.50%17.20%9.70% 2010 Imports ($ Billions)$276,477.8$364,943.8$82,679.7$120,347.8$229,654.6$1,912,091.6 Exports ($ Billions)$248,194.1$91,878.3$48,201.2$60,545.5$163,320.8$1,277,503.9 Total Trade ($ Billions)$524,671.8$456,822.1$130,880.9$180,893.3$392,975.4$3,189,595.6 % of World Total16.4%14.3%4.1%5.7%12.3%100.0% Rank12543- Annual Growth Rate2.5%14.7%4.1%-1.5%4.7%4.8%

4. 4 U.S.-Canada Trade by Transportation Mode (2010) Source: North American Transborder Freight Data, U.S. Department of Transportation, Research and Innovative Technology Administration

5. 5 U.S.-Canada Trade by Truck, by Commodity Group (2010) Source: North American Transborder Freight Data, U.S. Department of Transportation, Research and Innovative Technology Administration

6. 6 U.S. Exports to Canada by Truck, for Selected POEs Source: North American Transborder Freight Data, U.S. Department of Transportation, Research and Innovative Technology Administration

7. 7 U.S. Imports from Canada by Truck, for Selected POEs Source: North American Transborder Freight Data, U.S. Department of Transportation, Research and Innovative Technology Administration

8. 8 Incoming Trucks for Selected POEs Source: Border Crossing/Entry Data, U.S. Department of Transportation, Research and Innovative Technology Administration

9. 9 Wait Times at the Canada-U.S. Border Source: Border Wait Time Measurement Project, Transport Canada, 2006

10. 10 HDR Study: Key Steps  Comprehensive review of existing studies  Assessment of existing traffic and trade data  Interview of border’s stakeholders such as metropolitan planning agencies, U.S. Customs and Border Protection, trucking industry and major industries in the region  Estimated incremental impacts on both sides of the border  Risk analysis framework  Continuous involvement of panel of experts and stakeholders

11. 11 Economic Analysis Framework

12. 12 Speed and Travel Cost per Mile for Trucks and Passenger Cars

13. Annual Economic Impact Year Impact Metric Direct Impact Indirect Impact Induced Impact Total Impact 2020 Output ($649) ($185) ($135) ($970) Earnings ($236) ($93) ($84) ($413) 2030 Output($3,317) ($911) ($696)($4,924) Earnings ($1,229) ($463) ($431) ($2,123) Cumulative Employment Impact Year Direct Impact Indirect Impact Induced Impact Total Impact 2020-3,292-1,415-1,698-6,406 2030-18,148-7,104-8,725-33,977 Annual Tax Impact Year Employee Compensation Proprietary Income Household Expenditure Enterprises (Corporations) Indirect Business Taxes Total Tax Impact 2020 ($29) ($1) ($38) ($13) ($23) ($104) 2030 ($149) ($4) ($197) ($65) ($121)($536) 13 Impact on Michigan (Freight)

14. Annual Economic Impact Year Impact Metric Direct Impact Indirect Impact Induced Impact Total Impact 2020 Output ($828) ($720) ($672) ($2,219) Earnings ($307) ($351) ($401) ($1,058) 2030 Output ($4,288) ($3,644) ($3,504) ($11,436) Earnings ($1,626) ($1,790) ($2,089) ($5,504) Year Direct Impact Indirect Impact Induced Impact Total Impact 2020-5,166-5,149-7,029-17,345 2030-28,096-26,456-36,642-91,194 Year Employee Compensation Proprietary Income Household Expenditure Enterprises (Corporations) Indirect Business Taxes Total Tax Impact 2020($71)($4)($96)($28)($73)($272) 2030($369)($19)($500)($146)($381)($1,415) 14 Impact on the United States (Freight) Cumulative Employment Impact Annual Tax Impact

15. 20202030 OUTPUT (ANNUAL) Final Domestic Expenditure ($883) ($4,461) Indirect Taxes on Final Demand ($17) ($91) Direct Foreign Imports $501 $2,434 Indirect Foreign Imports $109 $530 Inventories and Other Leakages $8 $41 Inter-provincial Imports $68 $396 Inter-provincial Exports ($6) ($33) Total ($220) ($1,184) EMPLOYMENT (CUMULATIVE) Direct-2,429-13,634 Indirect-1,190-6,454 Total-3,619-20,088 15 Impact on Ontario (Freight)

16. 20202030 OUTPUT (ANNUAL) Final Domestic Expenditure ($1,293) ($6,576) Indirect Taxes on Final Demand ($25) ($134) Direct Foreign Imports $733 $3,589 Indirect Foreign Imports $183 $912 Inventories and Other Leakages $16 $82 Inter-provincial Imports $115 $671 Inter-provincial Exports ($115) ($671) Total ($387) ($2,127) EMPLOYMENT (CUMULATIVE) Direct-3,870-22,013 Indirect-2,336-12,913 Total-6,206-34,926 16 Impact on Canada (Freight)

17. 17 Freight Stakeholders’ Inputs  Trade, truck volumes & congestion have grown significantly over the years  Physical infrastructure constraints at various POEs  For some industries, modern rail is key to lower transportation costs  Delays mean higher logistics costs and therefore lost economic opportunities  There is willingness to pay (toll road) if there is a significant travel time saving  Extremely sensitive supply chain  No inventories  Parts go back and forth across the border several times  Companies must build buffers in production cycles due to transportation delays

18. 1.Obtained crossing projections for passenger cars (in both directions) 2.Estimated the annual percentage change in travel costs (travel time and vehicle operating costs) associated with increased congestion 3.Applied demand elasticity coefficients to the estimated changes in travel costs and derive the potential annual loss of crossings, by trip purpose, due to increased congestion 4.Estimated the expected loss of revenue (spending from vacationers, shoppers and other travelers) associated with the foregone trips 5.Adjusted for changes in local demand (e.g., vacation money spent in Canada instead of the U.S., and vice versa) 6.Derived the net direct impacts of foregone spending on national and regional output, earnings and employment 18 Economic Impact Estimation Process for Personal Trips

19. 19 Lost Cross-Border Trips, Personal Trips

20. YearImpactLost TripsDirectIndirectInducedTotal 2020 Output Recreation & Shopping$37.3$19.2$36.6$93.1 Vacation$25.1$14.4$24.2$63.7 Total$62.4$33.5$60.9$156.8 Earnings Recreation & Shopping$25.0$11.2$21.8$58.0 Vacation$15.7$8.7$14.4$38.8 Total$40.6$19.9$36.3$96.8 Employment Recreation & Shopping8591993831,441 Vacation440143253836 Total1,2993416362,277 2030 Output Recreation & Shopping$194.5$99.8$190.8$485.1 Vacation$130.7$74.9$126.2$331.7 Total$325.2$174.6$317.0$816.8 Earnings Recreation & Shopping$130.0$58.4$113.7$302.2 Vacation$81.7$45.1$75.2$202.0 Total$211.7$103.5$188.9$504.1 Employment Recreation & Shopping4,4761,0361,9957,507 Vacation2,2927431,3194,354 Total6,7681,7793,31511,861 Impact on the United States (Personal Trips) 20

21. YearImpactLost TripsDirectIndirectTotal 2020 Output Recreation & Shopping($103.0)($50.2)($153.2) Vacation($196.8)($107.1)($303.8) Total($299.8)($157.3)($457.1) Earnings Recreation & Shopping($68.8)($27.9)($96.7) Vacation($123.0)($61.1)($184.0) Total($191.8)($88.9)($280.7) Employment Recreation & Shopping-2,134-494-2,627 Vacation-3,105-1,006-4,111 Total-5,239-1,500-6,739 2030 Output Recreation & Shopping($536.7)($261.4)($798.1) Vacation($1,024.9)($557.7)($1,582.6) Total($1,561.6)($819.1)($2,380.8) Earnings Recreation & Shopping($358.6)($145.1)($503.7) Vacation($640.5)($318.2)($958.6) Total($999.1)($463.3)($1,462.3) Employment Recreation & Shopping-11,113-2,573-13,686 Vacation-16,174-5,240-21,414 Total-27,287-7,813-35,100 Impact on Canada (Personal Trips) 21

22. Year Impact on the State of Michigan and the Province of Ontario (Values are in millions of 2000 Dollars) Impact on the United States and Canada (Values are in millions of 2000 Dollars) US$CAN$US$CAN$ 2020($1,234)($1,898)($2,611)($4,017) 2030($6,323)($9,728)($13,549)($20,845) Year Impact on the State of Michigan and the Province of Ontario (Jobs) Impact on the United States and Canada (Jobs) 2020-14,355-28,012 2030-76,621-149,359 Annual Foregone Production Cumulative Foregone Employment Combined Economic Impacts (Personal Trips) 22

23. 23 Concluding Remarks  Trade is a key contributor to regional and national economic growth  Border delays impact the competitiveness of both the region and the nation as a whole  Border delays are responsible for significant economic losses on both sides of the border  Economic assessment should take into consideration both sides of the border as the supply chain tend to be well integrated across the border  Economic assessment must be conducted with the involvement of various stakeholders to scrutinize assumptions and account for uncertainty  Economic assessment allows policy makers to assess the implications of policies, infrastructure, and technology on the regional and national economy