OP-ED | Three amigos out of step on upgrading trade infrastructure

Improving our ability to get our products to markets around the world was top of mind when an initiative on improving North America’s integration and competitiveness was launched this month in Dallas at the George W. Bush Presidential Center.

Canada and Mexico are frustrated over the U.S. federal government’s seeming inability to fund virtually any infrastructure, including major border infrastructure. It’s a story that has significance, and some lessons, for Manitoba — where provincial infrastructure spending has been a source of controversy.

For decades, the American government’s powerful role in transportation infrastructure was envied by Canadian provincial capitals. That envy is now turning to concern.

The U.S. Congress and administration have been stuck passing a series of last-minute, stop-gap funding measures since 2009 to fund the U.S. highway trust fund. The fund, established in 1956 by then-president Dwight Eisenhower, provides about 25 per cent of all funding for bridges, highways and transit.

Congress has also refused to raise the tax rate, primarily on gas, earmarked to finance the fund. The gas tax was last raised in 1993; in real terms, factoring in inflation, the amount the government collects has actually been decreasing. Estimates are the fund lost more than 30 per cent of its buying power from 1993 to 2008.

The Canadian government, meanwhile, is increasing its investment. It recently announced $14 billion in new funding for the Building Canada Fund. Though this is not enough, it is much more than what the Americans have put forward in long-term funding.

More significant than the size of the funding is the commitment by the government to provide predictable, relatively long-term financing to encourage all-important private funding.

Mexico, too, is seized with the importance of infrastructure; that government has announced plans to spend US$590 billion by 2018. Though the global oil price drop has diminished Mexico’s investment plans, the government’s ambition is clear.

Federal action in Canada is mirrored at the provincial level. In Manitoba, the provincial government initially faced a public backlash over the tax increase to fund infrastructure, but once it was clear the new funds would entirely be devoted to infrastructure, support grew substantially.

Given shortages in the U.S. highway trust fund, individual states are being forced to follow Manitoba’s lead in finding new funding for infrastructure. Oregon, for example, is testing congestion pricing for motorists.

U.S. dysfunction on infrastructure spending is epitomized by the new Detroit-Windsor bridge on a corridor that moves $10 billion in goods daily.

What was originally a shared undertaking that would have greater economic impact in the U.S. than in Canada is now being entirely financed by Canada. Our country had to up its contribution to cover the entire $250 million for a U.S. government customs and immigration plaza in Detroit. To add insult to injury, Michigan is able to use the Canadian investment to request matching U.S. federal highway funding to spend on pork-barrel projects elsewhere in the state.

It appears we have to bribe the Americans to do things that are in our mutual interest.

This is a problem for Mexico and Canada.

In North America, we produce things together. For every dollar of goods the U.S. imports from Mexico, 40 cents is U.S. inputs. For every dollar of goods the U.S. imports from Canada, 25 cents is U.S. inputs. The next-closest country is Malaysia with only eight cents of U.S. inputs. For China, the U.S. inputs is in the range of two cents.

In an era in which products are made together, low wages or high productivity can be completely wiped out by an inability to move products and people to assemble goods efficiently and cheaply. There is also the danger American exporters, frustrated with lack of investment in the U.S., will look north to move product to foreign markets, adding a burden to our system.

We in Canada and Mexico can invest to improve our infrastructure, but unless we get the Americans to move as well, the products and jobs that are tied to a more competitive and efficient North America are in danger.

Carlo Dade is the director of trade and investment policy at the Canada West Foundation. www.cwf.ca.