09/13 00:28 U.S.-Canada Trade Slows to Crawl With Border Checks (Update1) By Matt Mossman

Lewiston, New York, Sept. 13 (Bloomberg) -- Gerry Medvic had a truckload of pineapples and bananas due yesterday at a Sobeys Inc. supermarket in Milton, Ontario. Then he spent 18 hours waiting to cross the U.S. border into Canada.

Medvic was among the hundreds of truckers backed up for 6 miles at Lewiston, New York, after the U.S. and Canada stepped up security in the wake of terrorist attacks on the World Trade Center and the Pentagon Tuesday. He inched his way along Interstate 190 until 5 p.m. yesterday, when officials crawled into his 18-wheeler and gave it a 20-minute inspection, then allowed him to pass through.

Intensified checks are slowing the flow of $1.3 billion in goods that cross between the two countries each day, mostly by tractor-trailer. Guards on both sides of the border at Niagara Falls, Detroit, Blaine, Washington, and the other 75 ports of entry on the longest undefended border are searching every car, truck and pedestrian.

``It's never been this bad,'' Medvic, a driver for Zavcor Trucking Ltd. who's been in the business since 1981, said on his mobile phone. ``People are just standing around out on the shoulder talking.''

Car parts headed for Detroit, furniture for Winnipeg, Manitoba, and Medvic's 1,200 boxes of fruit all must wait in line until the guards are satisfied they pose no threat.

``These are different times,'' said Canada Customs and Revenue Agency spokeswoman Collette Gentes-Hawn. ``We are questioning everyone.''

`Major Delays'

Until Tuesday, the Canadian and U.S. governments had been looking for ways to open their border even further. Already, some preapproved truckers were able to cross using a passcard -- without ever seeing a customs agent.

That system has been suspended ``indefinitely'' at the Whirlpool bridge near Niagara Falls, Gentes-Hawn said.

The result of such measures: queues all along the 4,000-mile frontier. As of 9 a.m. New York time yesterday, 10 miles of trucks were waiting to cross the bridge from Sarnia, Ontario, to Port Huron, Michigan.

Medvic said he's whiling away the time watching news on TV in his truck. He doesn't expect to complete his delivery until sometime today.

The delays are clogging the arteries of the $650 billion Canadian economy, which sends 86 percent of its merchandise exports to the U.S. South of the border, they're contributing to a looming slowdown as consumer pare spending in the aftermath of the attacks.

According to U.S. customs, almost 2 million cars and about 500,000 trucks cross the border into Canada each year.

`Touch-and-Go'

The two countries are the world's largest trading partners.

``If truck drivers have to sit and wait around for 10 hours at the border, there will be major delays in production and distribution on both sides of the border,'' said Michael Hart, a professor of trade policy at Carleton University in Ottawa. ``They can adjust, but the adjustment is going to cost money.''

As much as a third of cross-border shipments either originate from or are destined for the automobile industry, he said.

Automakers are vulnerable to disruption because they depend on ``just-in-time'' parts deliveries, said Hart. Under such a program, pioneered by Toyota Motor Co., components often arrive three hours before they're used, saving on storage space and inventory-management costs.

General Motors Corp.'s Oshawa, Ontario, plant sent 1,000 workers home midway through yesterday morning's shift because parts were stalled at the border, holding up production, spokesman Richard James said. The factory, one of seven GM operates in Canada, makes Chevrolet Silverado and Sierra pickups.

``It's touch-and-go at many of our plants in Canada,'' James said.

Enormous Blip

Ford Motor Co. shut a truck plant in Oakville, Ontario, yesterday because of a lack of parts, said spokesman John Arnone. Ford has six factories in Canada.

``I think three months from now we'll be looking at the data and we'll see an enormous blip in the numbers,'' said Stephen Poloz, chief economist at the Export Development Corp., a government-owned lender, in Ottawa. ``If tensions were to remain high for a long period, the economic impact is going to grow with each day.''

Security crackdowns have slowed Canada-U.S. trade before. After terrorist Ahmed Ressam was nabbed at Blaine trying to drive a car full of explosives from British Columbia into the U.S. near Seattle in December 1999, U.S. Customs searched every car from Canada for six weeks, said Kevin Weeks, the agency's director of operations for Michigan.

Still, many inventory systems are flexible enough to adapt ``within a day,'' said Chris Sands, an expert on U.S.-Canada trade at Washington's Center for Strategic and International Studies. He said a 1998-1999 blockade of the Detroit-Windsor crossing by protesting truckers and the December 1999 arrest of Ressam didn't result in the problems that analysts had expected.

Permanent Change

For now, Yanke Transport, a trucking company in Saskatoon, Saskatchewan, can't deliver about 50 percent of its goods, President Scott Johnston said. The company sends about 150 to 200 trucks over the border daily.

Johnston figures the traffic snarls will cost Yanke the C$400,000 ($256,262) profit he expected for September.

This pure mindless, overreaction is going to end up devastating companies and resulting in more layoffs - EXACTLY what the terrorists intended. He said he also wonders if the magnitude of Tuesday's destruction of the World Trade Center and part of the Pentagon will change procedures at the border permanently.

``I don't know that customs will ever function the same,'' Johnston said. ``The degree of vulnerability was made clear. I expect tighter security now, and much more diligence from customs officers.''

-- Guy Daley (guydaley1@netzero.net), September 13, 2001

Answers

Just think of what all of this will do, to industrial production, durable goods orders, retail sales figures, employment, and other vital data reported next month, covering the third quarter and the month of September.

I expect mayhem to ensure on markets everywhere around the world.

-- Wellesley (wellesley@freeport.net), September 13, 2001.

The look on Bill Gates' face says it all, I'm afraid.

-- number six (iam_not_a_number@hotmail.com), September 13, 2001.

Well he was on the bottom of this thread a minute ago!

-- number six (iam_not_a_number@hotmail.com), September 13, 2001.