OTTAWA, ONTARIO -- (Marketwire) -- 02/27/13 -- The alarm bells are ringing on both sides of the 49th parallel over the impact of cuts in US federal government spending that will automatically kick-in on March 1.
Unless Congress and the White House can come to a budget agreement to lessen the blow - although this appears unlikely - the disruption to Canadian business could be massive. The automatic spending cuts, known as sequestration (and the equivalent of 9 per cent of all non-defense programs), were averted in January when talks aimed at keeping the United States from going over the "fiscal cliff" provided a two-month reprieve. It was hoped Democratic and Republican lawmakers would use that time to overcome their partisan bickering and resolve the budget impasse. That hasn't happened.
While the repercussions of the sequester will be felt worldwide, with some economists saying it could lead to another worldwide recession, Canada could be particularly impacted considering how reliant it is on trade with the United States for much of its economic output. Over 80 per cent of all Canadian manufacturing output is destined for the United States, so anything that dampens US demand will be felt on this side of the border.
Moreover, border operations themselves could be severely impacted - something that is of great concern to the Canadian trucking industry, which moves about two-thirds of Canada's trade with the United States.
In testimony before the Senate Committee on Appropriations on Feb. 14, Janet Napolitano, Secretary of the U.S. Department of Homeland Security said the automatic budget cuts that would be imposed on the US Customs and Border Protection (CBP) agency "would make four to five hour wait times (at the border) commonplace and cause the busiest ports to face gridlock situations at peak periods." She explained how front line CBP staff responsible for processing trucks will be furloughed and overtime budgets to meet peak and unplanned demand will be slashed.
The Canadian Trucking Alliance (CTA) will stay in contact with port officials to keep on top of the situation and pass information along to trucking companies so they can better prepare to cross the border during off-peak periods. However, no one is sure how things will actually unfold.
"At this point the only thing we can do is prepare for the worst," says David Bradley, president and CEO of the trucking alliance - a federation of the provincial trucking associations, representing over 4,500 Canadian trucking companies. "Whether a last-ditch deal can be made or the full-brunt of the cuts would be felt immediately, we just don't know. We are entering the unknown and uncertainty can be just as bad as actual delays."
Things have just started to settle down at the border after years of unpredictability and instability, Bradley said. "The North American economy cannot afford to revert to the way it was during the bad old days when truck drivers were delayed at the border for hours on end, wasting fuel, missing delivery windows and exhausting allowable driving hours. Manufacturers and retailers were forced to hold costly inventories to cope with uncertain border transit times and just-in-time turned into just-in-case."
"A predictable, reliable and efficient border is an absolute necessity if the North American supply chain is to be competitive," he added.
Canadian Trucking Alliance
VP Communications & New Media
(416) 249-7401 x 238
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