Canada must act to prevent major loss of exports, jobs and investment from new terror threats in the U.S.: C.D. Howe Institute report.

Toronto, March 19, 2003--The federal government must undertake a high-profile initiative to enhance North American physical and economic security to prevent large losses of exports, jobs and investment because of border closings if there is a new act or threat of terror in the U.S., a C.D. Howe Institute study says.

In a Commentary entitled "Risky Business: U.S. Border Security and the Threat to Canadian Exports," Danielle Goldfarb, policy analyst with the Institute, and William B.P. Robson, senior vice president and director of research, say there is a compelling need for a broad new agreement on North American economic and security integration to lessen the vulnerability of cross-border trade. Recent border tightening by the U.S. in advance of a planned invasion of Iraq provides clear evidence of the need.

"In the event of another attack, Canada will again be a target of U.S. complaints, partly because of legitimate concerns about inadequate security [in Canada] and partly because many Americans will be reluctant to accept blame for failings on their own side," Goldfarb and Robson say in the Commentary, part of the Institute's Border Papers series. "One small security flare-up linked to Canada could have major economic consequences."

The authors estimate that in the event of future actual or feared attacks, border disruptions directly threaten key sectors of the Canadian economy that account directly for as much as 45 percent of Canadian exports, 400,000 jobs and $3.7 billion of investment, as well as another half of each of those amounts for sectors that are indirectly vulnerable. The study adds that Ontario, Quebec, Manitoba and P.E.I. have the greatest proportions of highly vulnerable industries.

The authors add: "Effective `thickening' of the border by extra security measures threatens to deprive Canada of the advantages--in particular, investment by producers seeking to serve the entire North American market--that trade liberalization within this continent has conferred."

Ottawa should make a "loud and unequivocal" announcement that Canadians treat the security of Americans no less seriously than their own, then take well-publicized actions to demonstrate their concern, Goldfarb and Robson say.