Abstract
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Despite the elimination of tariff barriers between Canada and the United States, the volume of trade between the two countries has been less than would be expected if there were no impediments. While considerable work has been done to gauge the degree of integration between the Canadian and U.S. economies through trade, relatively little analysis has parsed out the underlying costs for cross-border trade. The costs of crossing the border can be divided into formal tariff barriers, non-tariff barriers, and the cost of the transport system itself. This paper focuses on the latter by estimating the cost of shipping goods by truck between Canada and the U.S. during the 2004-to-2009 period. The analysis assesses the degree to which costs to ship goods by truck to and from the U.S. exceed those within Canada by measuring the additional costs on a level and an ad valorem basis. The latter provides an estimate of the tariff equivalent transportation cost that applies to cross-border trade. These costs are further broken down into fixed and variable (line-haul) costs. Higher fixed costs are consistent with border delays and border compliance costs which are passed on to the consumers of trucking services. Higher line-haul costs may result from difficulties obtaining backhauls for a portion of the trip home. Such difficulties may stem from trade imbalances and regulations that restrict the ability of Canadian-based carriers to transport goods between two points in the United States.
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