Good morning, Mr. Chair and members of the committee.
Thank you for inviting me here to speak on behalf of Canada's 90,000 manufacturers and exporters, and our association's 2,500 direct members, to discuss Canada's relationship with the United States.
CME is Canada's largest industry and trade association, with offices in every province, and is the chair of the Canadian Manufacturing Coalition, which represents roughly 55 sectoral manufacturing associations. More than 85% of our members are small and medium-sized enterprises representing every industrial sector, every export sector, and all regions of the country.
Manufacturing is the single largest business sector in Canada. In 2016, manufacturing sales surpassed $600 billion for the third consecutive year, directly accounting for 11% of Canada's total economic output, while directly employing over 1.7 million Canadians in highly productive, value-added, high-paying jobs. With the base in the NAFTA region, manufacturers are also directly responsible for the majority of Canada's exports. In 2015 and 2016, manufactured goods reached nearly $350 billion in exports, an all-time high, accounting for almost 70% of all Canadian exports. Nearly 75% of those exports go directly to the United States.
Much of this trade is due to the deep integration of manufacturing operations across the NAFTA region, and in particular between Canada and the United States. This integration has created a unique relationship for our countries globally. We do not simply trade goods with each other—we build things together, innovate together, and compete with the world together.
Canada's relationship with the U.S., in most ways, is a model upon which all relationships, especially trade relationships, can be judged. It has helped increase the standard of living of all participants. It has strengthened industry by combining the talents and expertise of both markets, creating bigger markets at home and strengthening our combined competitiveness globally. No other relationship that Canada has can compare to the historical, current, or future importance of this one for our economy and our citizens.
Securing and expanding this relationship must remain the single most important priority for Canada in dealing with the new administration. While there are many uncertainties in this regard moving forward—not the least of which are potential border taxes, increased protectionism such as Buy American, and NAFTA renegotiation—we also believe that there is great opportunity for Canada and for Canadian industry, if it is efficiently handled.
Since the signing of NAFTA nearly 25 years ago, the business world has changed dramatically. NAFTA itself created much more competitive and global industries and spawned almost unimaginable levels of integration and flows of people, services, and goods across our borders. China rose from almost nothing to an industrial powerhouse competing for customers, investment, and market share against Canadian and U.S. companies. New technologies have emerged that have reshaped the way we live and work. Almost none of this was contemplated when NAFTA was signed.
These changing realities are why CME has been working constructively with the federal government for years on avenues to improve that framework. Efforts like the border action plans of the 2000s and the Regulatory Cooperation Council and the Beyond the Border agreements of the 2010s were aimed directly at improving our common manufacturing platform, because modernization of the trade relationship between Canada and the U.S. was not an option.
Now that opening the agreement is a political reality, we should look for ways to cement improvements that support the economic base of NAFTA. To help prioritize this, the CME is surveying its members to identify priorities for modernization and improvement of the Canada-U.S. relationship. While our survey is ongoing, I am pleased to share with you an overview of the responses as they currently stand.
As a starting point, the overwhelming priority for Canadian industry is to maintain market access and uninterrupted supply chains with the U.S. While companies want improvements, they are also very concerned about a renegotiation that may lead to worse economic outcome through more restrictions, barriers, and protectionism on imports and exports of people, goods, and services.
On specific measures for improvement in the relationship, the priorities mainly stem from the deep level of integration and the volume and value of the trade. Improved customs processes to speed up border transactions and eliminating uncertainty through reduced red tape for both people and goods rank as the top priority. Following that, companies are looking to maintain effective dispute resolution processes, improve regulatory co-operation and alignment, and take much stronger coordinated trade action on the dumping of goods from other markets.
Many of these priorities are already included in the existing Canada-European Union economic and trade agreement framework and were being negotiated as part of the TPP. We believe they could create a framework for modernization of our trade relationship with the U.S.
At the same time, the relationship between Canada and the United States is fundamentally different from those represented by other trade agreements. We believe that if Canada can come to an agreement on these priority areas with other, largely new trading partners, we should be looking to go beyond the commitments with our NAFTA partners, and especially the U.S.—for example, expanding the RCC to implement a mutual recognition agreement on regulations or strengthened perimeter coordination of trade rules, such as illegal dumping.
In summary and conclusion, our economic relationship with the U.S. is paramount, and we must work aggressively to strengthen and grow integration while there is an opportunity. We don't simply trade goods with the U.S., but rather we build goods together and compete with the world together. And while there are significant uncertainties and concerns, we believe that with the right approach our integrated economies can be strengthened and increase global competitiveness to drive job creation and economic growth at home.
Thank you again for inviting me here today. I look forward to the discussion.
Good morning. Thank you to the honourable members for the opportunity to present today on behalf of the Canadian Steel Producers Association.
We represent Canada's $14 billion primary steel production industry. Our producers are integral to the automotive, energy, construction, and other vital industrial supply chains in Canada.
I would like to start my remarks today by providing some context in regard to the currently balanced and mutually beneficial nature of the Canada–U.S. relationship in steel. Canada and the U.S. enjoy a complementary trade relationship founded on the fair market principles embraced in both jurisdictions.
In 2016 more than 10 million tonnes of steel was traded between our two nations, with a market value of over $8.8 billion. These are U. S. dollars, by the way. Canada shipped $4.4 billion worth to the U.S and the U.S. producers shipped $4.45 billion worth to Canada. So it's extraordinarily balanced.
Steel continues to be a major export commodity from the United States into Canada, and supports significant economic activity and employment in America's steel sector. Last year 50% of U.S. steel exports came to Canada, which accounted for approximately 30% of Canada's domestic market. Additionally, significant volumes of raw inputs for Canadian steel production are sourced from U.S. suppliers. Approximately $1.5 billion of iron ore, metallurgical coal, scrap steel, zinc, and other metals were purchased by Canadian companies for processing into steel in 2016. Beyond the value of the commodities themselves—and I know that later today you will be hearing from the port authorities, who can speak to this as well—the economic activity and transportation associated with those raw materials contribute significantly to the economies of both countries.
Without question, American employment and industry are supported by the ability to access fairly traded Canadian-made steel, and any disruption to our well-established, heavily integrated, and mutually beneficial supply chains will create unintended economic consequences on both sides of the border.
Several steel producers maintain facilities and employment in both Canada and the United States, with their shared supporting additional investment and expansion. Integration also facilitates timely delivery of products, which meets complex customer requirements, allows for specialization in market segments, maintains appropriate economies of scale and, importantly, supports a common competitive defence against dumped and subsidized imports.
Mutually assisted defence against unfairly traded steel is critical in the Canada–U.S. context. As we have known for some time, dumped and subsidized steel—primarily from China—is justifiably the United States' top international trade irritant.
Global excess production in steel has now risen to nearly 700 million tonnes annually. The People's Republic of China, through a variety of state supports, by itself now maintains more than 425 million metric tonnes of the global surplus—that is almost 30 times the size of the entire Canadian steel market—despite declining demand in China. Simply put, that steel has to go somewhere.
The price deterioration and market instability associated with that illegal trade has contributed significantly to our industry's challenges. This is hurting North American families, and capacity utilization and employment are under threat throughout North America.
To that end, since 2003, NAFTA governments and the NAFTA steel industry have worked through the North American Steel Trade Committee to demonstrate our shared commitment to combatting market distortions in the steel sector, to further collaborating between our steel industries, and to preserving our fair and balanced trading relationship.
We have worked together within the NASTC to develop strong and coordinated positions on issues in multilateral settings of importance to steel, including the OECD steel committee and WTO rules negotiations. Moreover, we have used the NASTC to track developments in certain steel-producing countries for the purposes of identifying and addressing distortions in the global steel market. This is including the submission of joint comments on China's proposed changes to its steel industrial policies.
I mentioned the OECD steel committee. We're also active partners with the United States there and, through that forum, have supported the establishment of the G20 Global Forum on Steel Excess Capacity, from which we share an expectation that an eventual permanent reduction of excess capacity and government interference in the sector will follow in the near term.
However, until that time comes, we fully support appropriate domestic and multilateral action to address unfair trade. I would highlight, in that context, the recent establishment of a trilateral customs steel enforcement dialogue among Canada, the United States, and Mexico to facilitate coordinated compliance efforts and information sharing regarding the enforcement of anti-dumping and countervailing measures on steel products.
Despite all of our best efforts and collaboration, continual vigilance is required to make sure that Canada's steel industry is not negatively affected by sweeping U.S. action to defend the interests of its domestic producers. To that end, I would specifically note that it is essential that Canada secure national consideration in the Department of Commerce's ongoing section 232 national security investigation on imports of steel; in the department's process on the construction of pipelines using domestic steel and iron; and as regards the department's ongoing processes on the enforcement of current Buy American policies. In each instance, the Government of Canada should continue to rigorously defend the interests of Canadian steel producers and steelworkers to ensure that no adverse consequences result from direct action taken by the United States, and to make sure that our market is not unduly exposed to the diversion of foreign product that would result from U.S. action. Without positive outcomes on these three consequential investigations, the health of the Canadian steel industry is at risk and any potential benefits to industry that would result from a NAFTA modernization would be effectively neutralized.
In closing, I would again note that the Canada–U.S. relationship in steel is defined by mutual benefit and fairness. The United States, I would note, has not filed a trade complaint against Canada on its steel products since 2002. Preserving that relationship while collectively addressing damaging, unfair global trade in steel should be our shared focus.
Thank you very much for your time. I'm happy to take your questions.
Obviously, this is an important issue for us and for you as we work through things with the new administration and where NAFTA may go.
I have a couple of really specific examples, and maybe I'll give one on business professionals crossing the border. There are defined rules within NAFTA and within the trade relationship with the U.S., even within subagreements that Canada and the U.S. have on the movement of people and goods, that are aimed at facilitation. These go back, primarily, post 9/11 when a bunch of different agreements were put in place.
A really good example of one that we've never been able to get our head around and that doesn't really work that well is the movement of business professionals going back and forth. The specific example that I'll give will be around service and repair professionals.
As a pure Canadian example, machinery or equipment will often be bought from a U.S. supplier. As part of the agreement they will bring in people to install it, and then there will be a long-term service relationship to maintain that equipment. If something breaks down, the repair person needs to come into Canada because they're very often very specialized and trained only on one piece of equipment and they bring in the parts that come with it.
Under NAFTA rules and agreements with the U.S., those people should be able to enter Canada without any problem whatsoever. However, depending on the day that person crosses the border and which border crossing they might be crossing at, and which person might be asking them questions when they get to the border, they're often stopped and held for hours at a time and denied entry.
It's that type of problem. It's the uncertainty that comes with crossing the border. The excuse typically is that they're taking jobs away from Canadians. What ends up happening is that when that person can't get into the country to repair something, Canadians are losing jobs. It's that kind of thing.
We've also heard of a tit-for-tat type of problem, in which the U.S. is starting to increase its enforcement, asking for things like T4 slips when someone is crossing the border to prove that they're employed by a Canadian company. That requirement is not written anywhere, but a border guard decided that day to ask for these. The Canadians will reciprocate the next day when coming back. It's that kind of stuff that drives businesses crazy and really undermines the competitiveness of our intertwined economy. That's my example on that very specific issue.
On regulations, the RCC between Canada and the U.S. was a great step forward for us. The deal that was signed in 2011 was hugely supported by industry and, generally speaking, across governments, and we support it. It was really good in a lot of ways, but it also is weak in a lot of ways, because you're still relying on regulators to agree that their regulations should be merged with someone else's regulations. What ends up happening is that the two countries still regulate in tandem with one another. Sometimes they share data, and in some sectors like automotive, they've made really big leaps forward in areas like vehicle emissions, for example. In other areas there haven't been, so Canada will still regulate and make one small change over here without thinking much of it, and it will undermine the ability of a company to make one product and sell it in both markets.
What we think and mentioned here today and certainly mentioned before the trade committee is that we need to be looking beyond that, looking at something like a mutual recognition agreement of regulations. Then you're not relying anymore on regulators to come to agreement on what's aligned, but the political side of things can say that we trust each other's regulatory systems. We're going to allow each other to regulate. Canada can still regulate and the U.S. can still regulate, but we're going to accept U.S. regulations as domestic regulations, so you don't end up getting into these situations where products are banned from Canada simply because a regulator has a bad day one day. That is is happening today.
A lot of it comes back to the need for business certainty and to remove uncertainty as much as possible from the processes in regulatory approvals.
Thank you. I apologize for the problems with the microphone.
This is something we take very seriously. We've said, and Joseph just said as well, that we never know how some of these things are going to play out. Certainly right now the talk around any type of border adjustment tax seems to be fading in the U.S. At the same time, we're really well aware that if the administration is going to put through its corporate tax cut agenda, it will need to find revenue somewhere. We're not sure where it would come up.
There has been a wide variety of opinions on what that might look like. Without getting into specifics on any one of the models that are out there, our concern, frankly, is simply with the level of integration and the number of things that go back and forth across the border. Joseph could talk about the steel that goes into auto assembly, for example. But pretty much anything that we make within the North American environment is crossing back and forth across the border numerous times.
In some of the cases I've seen, like an engine block that's created, that block alone will cross the border six times before it's put into a car. So with all the various parts, you're talking about thousands of transactions across the border. If you have to capture every single one of these shipments that go into the U.S.... Just the tracking, in and of itself, of those shipments will be difficult, as will be the effort to try to tax all of these. Trying to figure out exactly what it is that's value-added in Canada on the way back in, from a part that actually originated in the U.S. and separating out what might be Canadian versus what's American will be an administrative nightmare. From the way we're looking at it, it would be very difficult.
I've seen economic studies that show an increase in consumer prices of anywhere between 5% and 10% in the U.S. almost overnight. I'm not an economist. I've just read different articles from different economists who have looked at this. But I don't think that's the big cost. I think the big cost is actually going to be trying to figure out what is American, what's Canadian, what's Mexican, and what's from somewhere else.
I know the automotive sector fairly well. The steel sector is part of that in the integrated supply chains. In pretty much any sector you look at between Canada and the U.S., they eliminated all of that tracing a long time ago. They did it because with the rules that were set up in the automotive sector going back to the 1960s, in aerospace and defence in the 1950s, and other sectors you're looking at from the FTA onward in the 1980s, the data isn't there to trace a lot of that anymore. To try to re-establish the data trails on a lot of this stuff would be very costly for businesses to do. They would lose productivity, lose competitiveness.
Again, we're not talking about this just from a Canadian competitiveness point of view, but Canadian and U.S. global competitiveness together as we compete against China, Europe, and other markets. It's not just about building a car in Canada. It's about building a car within NAFTA and competing against cars coming from South Korea, Japan or Europe. That's the really big unknown in this.
To put a dollar figure on that, I would have no idea what it would be. I don't think anyone could truthfully tell you what that number is. But the cost for business would be significant. It may not even be a direct dollar cost. It may be an indirect business processing cost that would be very difficult to put a number on, if you ever had to start figuring out some of the tracing of some of these things.
My comment earlier, and our comments on these things, is that the biggest priority we hear from our members on NAFTA and Canada-U.S. relations is the need to simplify borders. These are American companies, Canadian companies, and European companies. If you were to ask American companies in the U.S. what their priorities were, they'd say a lot of the same things. To us, this just adds an additional complexity to this, rather than making us more competitive and stronger globally.
That's a great question, and I'm happy to talk about it. I'm sure that Joseph would talk about it as well, specifically from a steel perspective.
I think what we get is this media image of smokestacks and really heavy industry and dark corners and things like that. If you go into a modern assembly plant, including in the more traditional industries like steel, what you see is often more like a lab than what you would expect from manufacturing—floors so clean you could eat off them, and that type of thing. The introduction of technology into manufacturing is really rapidly changing what is happening. The old jobs and the old type of work that was taking place—screwing things together and old assembly line processes—are being replaced very quickly by autonomous robots.
Even new ways of building things, such as using 3-D printers, are changing the way companies are building products, and very rapidly so. An example would be that we build a lot of auto parts and aerospace parts, especially in Ontario, and probably a lot in your riding would be parts manufacturers for different industries—tier one and tier two suppliers. We're at a stage now where we have a history of being really good in that space. Companies like Magna, Linamar, and Martinrea, for example, are world leaders in this area. But they're changing, because of technology, from being able to maybe take eight or 10 separate parts and making one part that then goes into a bigger unit like an automobile to 3-D-printing that one part. You're eliminating eight parts and making one part to make it more efficient, and that's all through technology.
The face of manufacturing is about that. It's now more about computer programming and design than it is about smokestacks and things like that. That's going to continue to change as new technologies come along. There is a lot of discussion out there about AI and the Internet of things. Most of that Internet of things and AI is actually going to be applied in a factory setting long before it will be applied for you and me in day-to-day use.
Maybe one of the best examples of that is autonomous vehicles, which is a big discussion point right now. The first auto assembly plant I ever went to was a GM plant in Oshawa in about 2001. That entire plant was a mobile robot. Every pickup truck moved from station to station, and the truck itself was on a robot that was autonomously moving. That was almost 20 years ago, and that technology is probably 25 years old. Industry is really at the forefront of implementing all of these technologies, so as we're talking about these in consumer settings, that's really what's happening.
Going back to the earlier question by Mr. Allison, about competitiveness, our concern and the stuff we're looking at, from a Canadian perspective, is that we're falling behind on the development and the adoption side of these new technologies. The further we fall behind, the harder it will be for Canadian industry to keep up in terms of our global competitiveness, whether it's in a relationship with the U.S. or our ability to even supply U.S. companies in those supply chains.
Our focus in Canada needs to be, one, to understand the disruption by these technologies and how they can apply to the industrial sector; two, how we take advantage of those technologies; and three, how we help and get more companies, especially those 10- and 15-person shops that are really risk-averse and unable to adopt technology, to adopt the technology, because they're not adopting it today at the levels they need to in order to be globally scaled and globally integrated.
Hopefully that helps. I'm happy to answer anything specific.
Good morning, honourable members.
My colleague Debbie Murray will be joining us shortly. She is my director of policy and regulatory affairs, and certainly is involved in the nitty-gritty of all the work we do at the association.
On behalf of the association, thank you for the invitation to speak this morning. I want to take a few minutes to set the context and sketch a picture or an image for you of what port authorities are, and then how we interact within the North American transportation system.
To start, we represent the 18 Canada port authorities that exist across the country. We are on both coasts, the Atlantic and Pacific, but we also have to remember that we are within the St. Lawrence Seaway and the Great Lakes system. We hear a lot about Canada comprising three coasts. I always say we are four coasts, the fourth coast being the interior of the country.
The ports are both bulk and container ports, and they handle collectively over $200 billion worth of cargo every year, incoming and outgoing, with trading partners in more than 160 countries. This carries some economic heft with it. We are responsible for creating nearly a quarter of a million direct and indirect jobs that, it should be noted, pay higher than average wages.
We are also committed environmental stewards and are contributors back into our communities. We did an economic impact analysis recently that showed that just in baseline terms, we donated some $22 million back into our communities over the past five years.
In terms of foreign policy, I was looking at the mandate and the questions of the committee, and we very much approach these questions through the lens of trade. As I said, I want to draw a picture for you today of the points of intersection that Canadian ports have in the transportation supply system in Canada and the U.S. The picture is certainly about cargo flows, but we are also going to talk about passengers, people, as well as other areas of collaboration, because the system we have is much more complex than it appears on the surface. Then I'll end with a few words on the issues that we are keeping an eye on as our relationship with the United States evolves.
In terms of cargo flows, clearly the committee has heard ad nauseam about the strength of the relationship between Canada and the U.S. and the volume of trade that goes back and forth across the common border. However, we have to remember that a lot of this occurs through intermodal connections that link ships, ports, rail, and road. What does this look like in terms of numbers? This is seen most obviously in the movement of containers, and 25%—or 1.2 million TEUs—of total laden containers handled in Canadian ports were destined for or received from U.S. destinations in 2015. In 2016 this amount decreased slightly to 23%, which is about 1.1 million TEUs.
Containers flowing through Canada and into the U.S. supplied everything from consumer electronics, furniture, and clothing to auto parts and other inputs into the American manufacturing system. The majority of the containers, whether they are coming in from the east coast or the west coast, flow into the American Midwest, especially Chicago, for processing or onward movement.
Again, the story goes beyond simple container movements in that the two nations have evolved a symbiotic relationship in transportation that worked to improve the cost-effectiveness and the efficiencies on both sides of the border. The best example of this, again, is in the St. Lawrence Seaway Great Lakes region, where cargo inflows and back-haul arrangements have been worked out to maximize the cost efficiencies of the system. Remembering that transportation operates on extremely narrow margins, it has led to a matter of survival to try to eke some profit or sustainability out of the system. Again, this system has evolved to become extremely efficient and extremely cost-effective.
To put it in context, the Great Lakes St. Lawrence Seaway is an integrated binational marine corridor that goes 3,700 kilometres into the heart of North America. It's unique in the world as a system, and it provides marine access for two provinces and eight U.S. states. It has a combined GDP of some $7.8 trillion, which represents about 30% of the economic activity in that region on both sides of the border. The importance of the Great Lakes St. Lawrence Seaway, as a key enabler of economic prosperity, led the governors of the eight states and the premiers of the two provinces, Ontario and Quebec, to adopt a Great Lakes St. Lawrence maritime strategy in 2016.
We were part of those discussions. They were multi-stakeholder discussions. The strategy's objectives were to double maritime trade, shrink the environmental footprint of the region's transportation network, and support the region's industrial core. The strategy is designed to help grow the region's maritime sector, which already contributes some $30 billion to the U.S. and Canadian economies, and frankly, accounts for some 220,000 jobs on both sides of the border.
On the Great Lakes, most of the cargo is bulk or project cargo, and it comes out to an estimated 1 billion tonnes that moves every year on the water and supports key industries such as grain, auto, and steel, which I believe you heard from earlier.
I keep saying the word “symbiosis” because it's an important concept. An interesting symbiosis has evolved to make the system as efficient as possible. For example, you get trans-shipment along the points of the system to maximize the efficiencies of the ships. Iron ore is loaded by Canadian ships and carried to the Port of Quebec, where the ships are either topped up or they're trans-loaded onto ocean carriers for onward transport to Asia for steel production.
We're also seeing American lakers carrying iron ore from Duluth/Superior to Conneaut, then picked up by Canadian domestic ships again for transport up via the seaway.
Similarly, within the Great Lakes St. Lawrence Seaway system, grain exports are concentrated at the ports of Thunder Bay, Duluth, Superior, and Toledo. From these ports, wheat is either directly transported overseas, again, by ocean-going ships that will load, go up the seaway, top up in Quebec City where they've got greater depth, and then head out across the ocean. But it's loaded on as back-haul cargo, or is loaded onto lake vessels for, again, trans-shipment at ports along the St. Lawrence. From there, the larger vessels carry the cargo to overseas destinations.
It's important to note that everybody in the system recognizes how well the system works, and our American friends certainly recognize the value of this. The Duluth Port Authority has talked about how project cargo makes it way through this waterway, and the back hauls of grain along the same trade lanes are what make the freight rates even more competitive. Similarly, the Port of Milwaukee has suggested that one of the keys to their success for agricultural product exports is the importing of steel. The ships bringing in steel are looking for returning cargos, so it's more economical if there are products like grain to ship out. It's important to think of this as a circuit or a closed system.
Looking further at integration within cargo movement, if you take it outside of the Great Lakes St. Lawrence system, we've had pilot projects where the Canada Border Services Agency has conducted examinations of U.S.-bound containers on behalf of the U.S. Customs and Border Protection staff. These pilot projects were held at the Ports of Prince Rupert and Montreal, and both projects were designed to test, validate, and shape the implementation by sharing information, adopting common standards for security screening, and inspecting inbound marine cargo at the first point of arrival in North America.
The success of these pilot projects led to improved cross-border clearance procedures such as developing tamper-evident technology on container seals, standardizing regulations on wood packaging materials, harmonizing the trusted trader programs, and developing electronic single window data transfer initiatives. It's been successful, certainly more so coming out of Prince Rupert on the west coast.
I mentioned earlier that I was going to talk about cargo, people, and collaboration. Another significant area of synergies is in the burgeoning cruise industry that Canadian ports also host. In 2015, Canadian ports hosted over 1.5 million cruise passengers who came in. This is obviously on the coast, but also within the St. Lawrence Seaway and the Great Lakes system.
If you look at percentages, Port of Vancouver gathers the most precise data, and 62% of their passengers were U.S. residents. Overall, the number of cruise passengers is growing. On the eastern seaboard, earlier in May, Quebec City announced that they've become a new port of call and a new itinerary for Disney cruises. Disney also calls at the ports of Saint John and Halifax, but also calling on Canadian ports with very active cruise itineraries are ships from Royal Caribbean International, Celebrity Cruises, and Carnival Cruise Lines.
Again, this has lead to synergies within the system, so Canadian ports, especially Port of Vancouver, have worked with U.S. Customs and Border Protection Services to provide pre-clearance at the port to maximize the customer experience, if you will. They provide pre-clearance for passengers boarding a cruise ship bound for Alaska, which is considered re-entering U.S. jurisdiction. The Port of Vancouver has installed 10 automated passport control kiosks at Canada Place cruise terminal, which help speed up the passenger processing rates through U.S. Customs and Border Protection.
There are two big areas, and the last one I will mention is simply that of collaboration. Beyond cargo and passenger movement, by virtue of our having to work together to essentially deal with the same kinds of issues, we've developed a whole number of areas of joint collaboration. Safety is a great one. We have shared icebreaking and pilotage duties in the Great Lakes–St. Lawrence system. In fact, we have a memorandum of understanding with the U.S. in which we have to alternate American and Canadian pilots to transit ships in the system and bring them into Canadian ports.
On the security side, the port of Windsor is probably the best example, but we all collaborate closely with American ports. Port Windsor collaborates closely with the Detroit police, the FBI, and the U.S. Department of Homeland Security to jointly manage public events and respond to safety and security issues on the Detroit River. In fact, they're now working on the potential and possibility of a joint command centre on Canadian soil to be used by both jurisdictions.
We also have examples of joint market development. Most recently, the ports of Three Rivers, between Quebec and Montreal, and Indiana formed a first-of-its-kind marketing partnership. They will explore conducting joint studies for new maritime shipping opportunities and holding trade ventures overseas to help build their commercial activity and explore short-sea shipping possibilities.
Lots of work has been done, both on cargo flows and certainly on passenger flows, but also dealing with, say, the softer issues that touch us on both sides of the border in the marine sector. Certainly, collaboration, partnership, and integration are the realities of such a highly specialized continental and global supply chain. Over decades, we've collectively built up this highly sophisticated supply chain and an effective symbiosis—there's that word again.
Looking ahead as we watch things evolve both in Canada and the United States, we do have a few concerns. There are some areas that we're keeping an eye on that we need to be watchful of.
The first is the border adjustment tax, of which there has been a significant amount of discussion with our friends in the United States. Much has been said on this topic, and we certainly would like to add our voices to the chorus of concern on this. There is no doubt that any border adjustment tax would in effect thicken the border and add costs while slowing cargo movement, and increase cost to manufacturers, shippers, ports, and ultimately the consumer, both in handling and then the add-on costs.
At the same time, there is the potential for border thickening through regulatory impediments. The question of how quickly and freely goods and people move across the border has been touched on a number of times. One-sided security or cargo screening requirements and slower data processing for cargo movement would undermine the efficiencies and relationships that have been established and refined over the years. We noted in the recent U.S. budget—although it still has to pass Congress—that significant dollars have been earmarked for border security initiatives, which, depending on how they're designed, could increase the requirements on goods crossing the Canada–U.S. border. These are requirements that our CPAs may have to accommodate to compete for the same markets and shippers.
On the positive side, as an off-setting measure, strengthening bodies such as the Regulatory Cooperation Council would certainly make them even more valuable forums for dialogue, the goal being to avoid unintended consequences. We would ask and must seek to move towards a regulatory playing field where equivalency, or at least mutual recognition of respective regulatory regimes, allows for the safe, secure, and efficient, continental and international movement of goods.
With that, I will stop. It's a huge story, and there's so much to say. There's a big difference between coastal ports and inland ports. I hope I've been able to sketch a bit of the picture of what the integrated ports and North American transportation system look like.
I look forward to your questions.
It ultimately comes down to recognizing that a port city is a lucky city and to getting that message out there for exactly the reasons you've talked about. But that is a difficult message to convey to people who have to deal with truck movement and light and dust, all of which are things that port authorities work very hard to mitigate.
That said, it's then also necessary to support the activities of the ports, the port authorities themselves, in the work that they do.
The nature of ports has changed over time and the port authorities, again, by virtue of being shared governance organizations that are related to the federal government, have been able to benefit from a more trusting relationship with their supply chain partners to broker the kinds of dialogue and information sharing that I mentioned. This has translated into the efficiencies and discussions of trade corridors as a system. To be able to continue to support that would be extremely important, that notion we're talking about of supply chains and systems that are in fact growing, that span the country now. That's one important part.
The second part is to allow the port authorities to expand into that role more fully. One way of doing that, which we've talked about quite a bit, is allowing us to become even more competitive through increased financial flexibility.
We have challenges. When we were created the government was risk- averse and we were given extremely low borrowing limits. Borrowing on the open market is part of the patchwork quilt of financing that I mentioned earlier. I keep saying that the current borrowing limits are the equivalent of your going to your bank and asking for a mortgage and the bank coming back and saying, great, lucky you, you've been pre-approved for a mortgage of $150,000, and you say, thanks, but I'm trying to buy in Vancouver.
The limits are artificially low. The port authorities have to go on an individual project-by-project basis to plead their case before three government departments. It takes years to actually get that moved. That starts to become a drag on the speed with which a port authority can proceed with an infrastructure project.
So there are a number of financial flexibilities that we need to be able to have to respond in a more competitive market. Amendments to letters patent is another issue. We acquire land. We sell land. It happens in commercial timelines on the commercial market, but again, there's the same issue: it takes upwards of two years to amend our letters patent to recognize the acquisition of land. In the meantime, the port is either trying to pay extra to hold on to that land, or in the case of one port authority, it was given 50 acres from the municipality for free, but it cost them $55,000 in legal fees just to process the change.
These kinds of flexibilities would go a long way towards keeping the ports moving in commercial real time. Then again, the question of infrastructure funding is extremely important.