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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

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Page 1: Economic Significance of the Border: A Perspective at the Regional and National Levels for both Passenger and Freight Movements Bruno Penet HDR | Decision

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 StatesTransportation Border Working Group (TBWG) Meeting

Page 2: Economic Significance of the Border: A Perspective at the Regional and National Levels for both Passenger and Freight Movements Bruno Penet HDR | Decision

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

Page 3: Economic Significance of the Border: A Perspective at the Regional and National Levels for both Passenger and Freight Movements Bruno Penet HDR | Decision

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  Measure Canada China Germany Japan Mexico World

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 Total 20.2% 3.9% 4.5% 14.8% 7.8% 100.0%

Rank 1 7 5 2 3 -

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 Total 20.5% 5.8% 4.4% 10.6% 12.4% 100.0%

Rank 1 4 5 3 2 -

Annual Growth Rate 9.90% 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 Total 16.4% 14.3% 4.1% 5.7% 12.3% 100.0%

Rank 1 2 5 4 3 -

Annual Growth Rate 2.5% 14.7% 4.1% -1.5% 4.7% 4.8%

Page 4: Economic Significance of the Border: A Perspective at the Regional and National Levels for both Passenger and Freight Movements Bruno Penet HDR | Decision

4U.S.-Canada Trade by Transportation Mode (2010)

Source: North American Transborder Freight Data, U.S. Department of Transportation, Research and Innovative Technology Administration

Page 5: Economic Significance of the Border: A Perspective at the Regional and National Levels for both Passenger and Freight Movements Bruno Penet HDR | Decision

5U.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

Page 6: Economic Significance of the Border: A Perspective at the Regional and National Levels for both Passenger and Freight Movements Bruno Penet HDR | Decision

6U.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

Page 7: Economic Significance of the Border: A Perspective at the Regional and National Levels for both Passenger and Freight Movements Bruno Penet HDR | Decision

7U.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

Page 8: Economic Significance of the Border: A Perspective at the Regional and National Levels for both Passenger and Freight Movements Bruno Penet HDR | Decision

8Incoming Trucks for Selected POEs

Source: Border Crossing/Entry Data, U.S. Department of Transportation, Research and Innovative Technology Administration

Page 9: Economic Significance of the Border: A Perspective at the Regional and National Levels for both Passenger and Freight Movements Bruno Penet HDR | Decision

9Wait Times at the Canada-U.S. Border

group by CROSSING, YEAR

2 Way Total Delay in Minutes

Cost of Delay, Driver & Truck $75/hour (OTA)

CROSSING YEAR

Ambassador 2002 371 10.1 31.0 20.9 612 7.6 15.5 7.9 12.8 12,576 $53,131,691 3,322,367

Ambassador 2003 223 10.0 24.8 14.8 770 7.6 16.5 8.9 10.2 10,137 $41,482,553 3,250,744

Ambassador 2004 169 9.3 19.9 10.6 408 8.0 18.9 11.0 10.9 6,273 $45,814,212 3,371,397

Bluew ater 2002 1,061 6.2 21.7 15.5 788 5.7 14.0 8.4 12.5 23,025 $26,191,767 1,682,645

Bluew ater 2003 1,718 6.0 25.7 19.7 1,008 5.8 13.0 7.2 15.1 41,123 $32,539,187 1,725,603

Bluew ater 2004 1,794 6.4 27.5 21.1 1,518 5.8 14.8 9.0 15.5 51,469 $34,953,098 1,799,371

Detroit Windsor Tunnel 2002 53 10.9 15.2 4.3 99 5.0 10.2 5.2 4.9 739 $929,972 152,963

Detroit Windsor Tunnel 2003 296 10.9 19.6 8.7 373 4.9 10.3 5.4 6.9 4,597 $1,454,036 169,278

Detroit Windsor Tunnel 2004 198 10.9 21.4 10.5 249 5.0 10.2 5.2 7.5 3,372 $1,506,695 159,786

Peace 2002 1,659 4.2 33.3 29.2 1,068 5.7 14.9 9.3 21.4 58,314 $35,994,785 1,346,612

Peace 2003 4,523 4.1 41.5 37.4 3,358 5.7 12.2 6.6 24.3 191,179 $39,718,330 1,309,855

Peace 2004 6,542 4.0 33.2 29.2 4,929 5.6 11.3 5.7 19.1 218,974 $31,020,950 1,300,029

Queenston-Lew iston 2002 118 7.3 43.4 36.1 144 4.5 11.0 6.5 19.8 5,194 $25,950,672 1,047,192

Queenston-Lew iston 2003 780 6.2 42.4 36.1 928 4.1 7.9 3.8 18.6 31,703 $23,456,096 1,010,956

Queenston-Lew iston 2004 2,023 5.2 26.6 21.4 1,266 4.0 9.0 5.0 15.1 49,629 $18,987,728 1,006,688

Thousand Island 2002 11 7.3 58.7 51.4 6 33.0 33.0 0.0 33.3 566 $22,537,936 541,812

Thousand Island 2003 538 7.7 35.2 27.5 393 4.0 8.2 4.2 17.7 16,473 $10,825,279 489,461

Thousand Island 2004 143 6.8 47.6 40.8 58 4.3 8.7 4.4 30.3 6,087 $18,145,297 479,343

Canada to USA USA to Canada

2 Way Weighted

Delay

Yr Truck Vol

Trucks

average minimum

time

average time

average delay Trucks

average minimum

time

average time

average delay

Source: Border Wait Time Measurement Project, Transport Canada, 2006

Page 10: Economic Significance of the Border: A Perspective at the Regional and National Levels for both Passenger and Freight Movements Bruno Penet HDR | Decision

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

Page 11: Economic Significance of the Border: A Perspective at the Regional and National Levels for both Passenger and Freight Movements Bruno Penet HDR | Decision

11

Socioeconomic Data

Roadway Network

Architecture

Travel Time Forecast

Traffic Forecast

Elasticities of Productivity w.r.t.

Transportation Costs

Congestion Costs:- Delay- Vehicle Operating Costs

Logistic Costs by Industry

Industries Using the Crossings

National

Regional

LocalMultipliers

(U.S.)

Impact on Productivity by

Industry Category (U.S.)

National

Regional

LocalImpact on Earnings

(U.S.)

National

Regional

LocalImpact on

Jobs (U.S.)

National

Regional

LocalImpact on

Output (Trade) (U.S.)

National

Regional

LocalImpact on

Taxes (U.S.)

Economic Analysis Framework

Page 12: Economic Significance of the Border: A Perspective at the Regional and National Levels for both Passenger and Freight Movements Bruno Penet HDR | Decision

Detroit-Windsor Crossings

0.0

10.0

20.0

30.0

40.0

50.0

2000 2005 2010 2015 2020 2025 2030 2035 2040

Sp

ee

d (

mp

h)

$0.0

$5.0

$10.0

$15.0

$20.0

$25.0

$ p

er

Mile

Average Vehicle Speed

Travel Cost per Mile - Cars (Right Axis)

Travel Cost per Mile - Trucks (Right Axis)

12

Speed and Travel Cost per Mile for Trucks and Passenger Cars

Page 13: Economic Significance of the Border: A Perspective at the Regional and National Levels for both Passenger and Freight Movements Bruno Penet HDR | Decision

Annual Economic Impact

YearImpact 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)

Page 14: Economic Significance of the Border: A Perspective at the Regional and National Levels for both Passenger and Freight Movements Bruno Penet HDR | Decision

Annual Economic Impact

YearImpact Metric

Direct Impact

Indirect Impact

Induced Impact

Total Impact

2020Output ($828) ($720) ($672) ($2,219)

Earnings ($307) ($351) ($401) ($1,058)

2030Output ($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

CompensationProprietary

IncomeHousehold

ExpenditureEnterprises

(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

Page 15: Economic Significance of the Border: A Perspective at the Regional and National Levels for both Passenger and Freight Movements Bruno Penet HDR | Decision

  2020 2030

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)

Page 16: Economic Significance of the Border: A Perspective at the Regional and National Levels for both Passenger and Freight Movements Bruno Penet HDR | Decision

  2020 2030

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)

Page 17: Economic Significance of the Border: A Perspective at the Regional and National Levels for both Passenger and Freight Movements Bruno Penet HDR | Decision

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

Page 18: Economic Significance of the Border: A Perspective at the Regional and National Levels for both Passenger and Freight Movements Bruno Penet HDR | Decision

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

18Economic Impact Estimation Process for Personal Trips

Page 19: Economic Significance of the Border: A Perspective at the Regional and National Levels for both Passenger and Freight Movements Bruno Penet HDR | Decision

19Lost Cross-Border Trips, Personal Trips

Page 20: Economic Significance of the Border: A Perspective at the Regional and National Levels for both Passenger and Freight Movements Bruno Penet HDR | Decision

Year Impact Lost Trips Direct Indirect Induced Total

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 & Shopping 859 199 383 1,441

Vacation 440 143 253 836

Total 1,299 341 636 2,277

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 & Shopping 4,476 1,036 1,995 7,507

Vacation 2,292 743 1,319 4,354

Total 6,768 1,779 3,315 11,861

Impact on the United States (Personal Trips)

20

Page 21: Economic Significance of the Border: A Perspective at the Regional and National Levels for both Passenger and Freight Movements Bruno Penet HDR | Decision

Year Impact Lost Trips Direct Indirect Total

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

Page 22: Economic Significance of the Border: A Perspective at the Regional and National Levels for both Passenger and Freight Movements Bruno Penet HDR | Decision

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)

YearImpact 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

Page 23: Economic Significance of the Border: A Perspective at the Regional and National Levels for both Passenger and Freight Movements Bruno Penet HDR | Decision

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