UMaine Researchers Measuring Economic Effects of New Border Security Regulations

Contact: George Manlove at (207) 581-3756

ORONO — Tens of thousands of trucks cross the borders between the United States and Canada annually as international commerce worth more than $1 billion a day moves everything from food, electronics and petroleum to paper and other forest products back and forth.

With 40 percent of Maine’s total exports going to Canada, and 60 percent of the state’s imports coming from Canada, companies engaged in international trade seek to minimize shipping delays and other factors that can affect product costs.

Newly tightened security at the borders, as a result of increasing threats of terrorism, have had a variety of effects on businesses, and two University of Maine professors want to know how much of an effect. They are conducting a survey to find out how much time and money border security regulations are costing U.S. and Canadian companies dependent upon those border crossings.

“Many people say it’s a headache, and everyone says it’s a real concern,” says Marie-Christine Therrien, an assistant professor of management in the UMaine Business School and Canadian Studies.

To their knowledge, no one has studied the increased costs of doing business under a blanket of new regulations adopted in the interest of better national security.

Therrien and co-researcher Georges Tanguay, an assistant professor of economics and Canadian Studies, want to find out what that cost is. So does the Canadian Embassy, which in January awarded Therrien and Tanguay a competitive $7,500 research grant — seed money that Therrien hopes will lead to more grants later to expand their research.

The result of their work will be a report by January, 2005 outlining those effects, plus recommendations on border regulations.

Therrien and Tanguay, with help from an economics graduate student, will survey 150 companies, half in Eastern Canada and half in New England, to find out how changes in border security regulations have affected business. Their research will provide for the first time hard data, which should be of particular interest to both business and policy-making government sectors in the United States and Canada.

The implications of increased security at border crossings are more obvious in terms of lines of cars and trucks taking longer to cross, but there also are less obvious effects that businesses now encounter.

For instance, to allow border inspectors better access to cargo trailers being hauled back and forth between the two countries, transportation companies must leave more open space in the trailers — aisles to allow inspector movement — and no longer can they load the trucks to the roof, Therrien says. That adds up to extra trips with reduced volume, in addition to the extra paperwork necessary to better document what’s being shipped.

They’ll survey a variety of 75 New England companies and 75 Eastern Canadian companies to quantify the effects of new security regulations. It is important research as policy-makers in this country seek to improve the flow of trade between the United States and Canada and still meet current security goals of both countries.

“Not many scholars have looked at the economic implications of tightened security,” Therrien says. “We haven’t found anything that says, yes, it usually costs X percent to the firm. 

With 150 companies represented in the survey, she and Tanguay expect their findings will be a credible, useful benchmark.

Considering the lack of documented research on the subject, Therrien and Tanguay are ahead of the game in getting an early start on research that many business interests have even yet to fully appreciate.

“There’s a lot of business going on between the two sides,” observes Wade Merritt, director of the Bangor-based regional office of the Maine International Trade Center. “Any kind of a change is going to have an effect. I think this will be really good for them to be working on. It almost seems to be a bigger thing for the Canadian side.”

Canadians, he notes, economically are more reliant upon exports to the United States, since 87 percent of Canada’s exports go to the U.S. Meanwhile, only 27 percent of American exports go to Canada.

Merritt says he hasn’t heard many complaints about the effects of, say, the Bioterrorism Act (which affects food and pharmaceuticals) or of border security measures hindering trade or transportation, but it’s a new consideration. No one has added up the costs, so far as Merritt knows.

It’s critical to understand if these policies are hindering business at a time when both the United States and Canada want to increase trade, Merritt says.

“If this turns out some interesting results, we’ll push it further and apply for more money from someone else and try to push it along,” Therrien says. “Maybe the results will be different in different business sectors.”

The Canadian Embassy annually awards research grants for studies that are expected to benefit Canadian or Canadian-American interests.