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The Steep Costs of Border Security
Oxford Analytica 06.14.06, 6:00 AM ET


The arraignment of 14 terror suspects on June 12 before a judge in Ontario, Canada, has heightened U.S.-Canadian border security concerns. An immigration bill currently under consideration by the U.S. Congress includes provisions requiring a passport or alternative secure identification for all travelers entering the United States. These measures would entail significant costs.

The Western Hemisphere Travel Initiative (WHTI), adopted in response to the U.S. Intelligence Reform and Terrorism Prevention Act of 2004, requires that by 2008 all persons--including U.S. citizens--present a passport or some other secure document when entering or re-entering the United States. At present, U.S., Canadian, Bermudian and Mexican citizens do not need a passport when entering the United States from another country in the Western Hemisphere. The goal of the WHTI is to identify people who may be considered security risks.

However, a significant number of Canadians and U.S. citizens do not own a valid passport, and acquiring one is costly and time-consuming. The new requirement could also disrupt business between the two countries:

--Visitors and spending. U.S. citizens made 31.6 million trips to Canada in 2005 (including 15.7 million same-day auto trips), spending a total of 9.1 billion Canadian (U.S. $7.5 billion). Canadians made 37.8 million trips to the United States in 2005 (including 22.3 million same-day auto trips), spending a total of $12.2 billion Canadian (U.S. $10 billion).

--Passport ownership. A 2005 Conference Board of Canada survey indicates that only 34% of adult U.S. residents and 41% of adult Canadian residents hold a valid passport.

--Falling traffic. That same study estimated that U.S. residents would make 12.3% fewer visits to Canada in 2008, mostly due to a reduction in same-day visits because of the passport requirement.

The stepped-up security posture instated on the U.S. side after the Sept. 11, 2001, terrorist attacks has imposed four broad categories of economic costs:

--Security infrastructure. The annual cost of deploying more personnel and enhancing security facilities is estimated in the hundreds of millions of dollars.

--Lost business opportunities. For both the U.S. and Canada, an important potential cost of enhanced security is unrealized cross-border trade or investment due to the perception of prohibitive border-security requirements.

--Shipping delays. Longer wait times impose higher shipment costs, which industry has to absorb.

--Risk-management schemes. Compliance with border "risk-management" schemes, which allow exporters to avoid long waits or denial of access, has been very expensive.

One of the problems that might arise from the implementation of WHTI with the current deadline is the difficulty, in both the U.S. and Canada, of maintaining high standards of security verification while substantially increasing the number of passports issued. Acquiring a U.S. passport is expensive (about $100) and cumbersome. Therefore, alternative solutions are being considered:

--"Passport lite." The U.S. Department of Homeland Security has proposed a less-expensive ID card (dubbed "passport lite") that would meet WHTI requirements but could be obtained for about half the cost of a passport.

--Real-ID. Bi-national businesses would prefer to set national standards for secure driver's licenses, along the lines of the U.S. Real-ID Act of 2005, which seeks to force states to include enhanced biometrics and citizenship information on driver's licenses. However, the law is facing strong opposition from civil liberties groups and would impose heavy costs on states, so most are actively resisting its implementation.

On May 17, the U.S. Senate approved an amendment to the Comprehensive Immigration Reform bill that would delay implementation of the WHTI's passport requirement for land-border crossings until June 1, 2009. The Senate implicitly recognized the complexity of the policy challenges entailed by the measure. Most interested parties would welcome a delay.

Tightened border controls have increased rates of interception for illegal drugs, smuggled goods and wanted criminals. However, there has not been another incident like the December 1999 interception of Ahmed Ressam, who intended to plant a bomb at Los Angeles International Airport. Although the terror arrests in Ontario this month have heightened concerns south of the border, there is no indication that the alleged plotters intended to attack targets outside Canada.

The total cost of the WHTI is very substantial, and its counter-terrorism benefits are uncertain. However, U.S. legislators, under political pressure to address a perceived vulnerability, have acted without regard to expense. These measures will have negative implications for the process of North American economic integration.

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