Trade: Make a Run for the Border

If you're planning on crossing the bridge or the tunnel leading from Windsor, Ontario, north—yes, that's right, north—into Detroit, Michigan, count on spending some time stuck in traffic. You'll have plenty of company.

"It's manna from Canada," was how one Detroit-area business owner described the flood tide of Canadians swarming across the border to buy clothing, electronic appliances, gasoline, building supplies, and even groceries. "I don't ask too many questions about where they come from," he said. "I'm just glad they're not going to the guy down the street."

Indeed, white Ontario license plates are ubiquitous in shopping mall parking lots all along the American side of the border. An exceptionally strong Canadian dollar partly accounts for this stampede of Canucks. Mostly, however, Canadian shoppers cite increasingly high Canadian taxes.

Canadian customs officials report that cross-border traffic in early 1990 was double what it was at the same time last year. And that is actually a relief from the pre-Christmas shopping rush, when traffic was reported up by 300 to 400 percent, not only in Detroit but in the Thunder Bay-Duluth, Minnesota, area. In northern Vermont, stores and shops are sending their employees to French language classes in an effort to get a leg up on competitors for the heavy traffic coming down from Montreal.

Canada reports there has been a 50-percent increase in the number of people paying duty on items brought in from the United States, but everyone acknowledges that is only the tip of the iceberg. The sheer number of cars making the crossing means customs workers now check a smaller percentage of vehicles in order to avoid impossibly long lines and traffic jams.

William O'Neill, a 50-year-old Canadian auto worker from Windsor, seems typical of the cross-border shoppers. He says he shops at Pace Warehouse, a membership discount chain in Michigan, almost every Sunday, since Ontario's blue laws close almost everything on that side of the border on the sabbath. "Even after exchange, extra gas, and taxes, I figure I'm still coming out 20 percent ahead," he says.

Taxes are a major complaint. Ontario's provincial sales tax is 8 percent, on top of a hidden 12 percent federal tax on retailers that gets passed along to customers. Coming next January is Prime Minister Brian Mulroney's 7-percent "goods and services" tax, an aboveground federal sales tax that will jack up prices that much further. By comparison, Michigan's sales tax is just 4 percent.

And many Canadians are under the false impression that the U.S.–Canada Free Trade Agreement means goods can be trucked across the border for little or no duty. That isn't exactly true. The agreement, which went into effect last year, is phasing out barriers over a 10-year period and has little effect on the prices of American goods. Nevertheless, Canadian merchants are feeling the pinch.

"Michigan has an unfair trade advantage," fumes Tim Carter, vice president of the Canada Council of Grocery Distributors. "The government has to strictly enforce tariff laws, or it'll do nothing but export jobs to the United States."

Despite the complaints from business, the government in Ottawa is unlikely to do anything. "Canadian retailers will simply have to wake up to an integrated Detroit-Windsor marketplace," says Reuben Green, an economist at the University of Windsor. "They'll have to compete on selection and price or go out of business."

Canadian business owners are belatedly paying the price for Canada's longtime policy of self-imposed economic isolation from the colossus to the south. "For years, Windsor was what was known as a '10-day town,'" says Ted Douglas, a Windsor resident and Detroit News editorial writer. "That is, the storeowner would tell you, 'Don't have it in stock, but I can get it in 10 days,' meaning he had to order it from Toronto. Well now, everybody's saying, 'The hell with that, I'll just go over and get it in Detroit.'"

For the moment, few in Michigan seem impressed with the irony of it all. "Japan bashing" has been a favorite sport in the Wolverine state for years, but many ardent bashers now are greedily welcoming Canadian dollars. And when Canadian businesses call for protection from unfair U.S. competition, people on this side of the border probably dismiss it as sour grapes.

John A. Barnes is deputy editorial page editor of the Detroit News.