By Jeff T. Wattrick | MLive.com
Part one of my conversation with Roy Norton, Canada’s top diplomat stationed in the Midwest. We discussed why he—and by extension, the government of Canada—believes the NITC is necessary, and twinning the Ambassador Bridge is a bad idea.
Jeff Wattrick: Why is the NITC project important to Canada?
Roy Norton: It’s not just important. It’s our number one national infrastructure priority. We do more business with the United States than we do with any other country, 70% of our trade is with the United States. Firms have integrated supply chains. A third of our trade is actually intra-company—it’s the same company with operations on both sides of the border. Another third is within established supply chains. It’s vitally important to Canada—we would argue equally important to the United States—that capacity to reliably carry that trade is in place.
We think the risks are profound if the capacity were to be in jeopardy, or even if people were to think that it might not exist going forward. Companies make investment decisions over the long-term: 40, 50, 60 years. They locate in this region—by this region I mean not just central Canada, but Michigan and the industrial heartland of the United States.
If they have business plans that rely on moving things back and forth, and firms that employ millions of people do have such business plans, and because they are reasonably confident they can get their good back and forth, if at any point they begin to doubt—the bridge is, after all, 83 years of age—that capacity will be there going forward. There should be concern, particularly in Michigan I would argue, that firms would locate elsewhere.
We think as well, this has security implications. Things changed on 9/11, even between best friends like Canada and the United States. Procedures were added on, but the capacity to implement those at the existing customs plazas really doesn’t exist because there’s not enough space.
JW: Well, let me ask you about that, because one of the things that Matthew Moroun brought up with me was that at the Ambassador Bridge on the Canadian side not all Customs’ booths are in use at all times.
RN: I’ve heard that point made before. I’m not sure if you’re aware that because it’s an international zone, the Ambassador Bridge—which owns and operates the zone—actually has responsibility for building the Customs’ plazas. He argued in his interview with you that two-thirds of the booths tend to be open and one-third closed.
One-third have always been closed. The one-third that have always been closed were built over the objection of the Canadian Border Services Agency by the Ambassador Bridge corporation, and because they’re on the wrong side of the road—all of the existing Customs’ plazas are on one side and these are on another—and there is a danger that is assessed with trucks exiting.
Canada’s Border Services Agency told them from the get-go that they would not staff those booths. They went ahead and built the booths. From the day they were completed, signs were put on them that said “CLOSED,” and it’s been a talking point ever since for them to assert we’re only operating two-thirds of the booths. Well, we’re operating two-thirds of the booths that we’ve undertaken to operate and we’re not operating the ones that we’ve deemed are in an unsafe location. It’s a stunt and it’s a talking point. It’s impressed some people. It’s like a lot of things, when you scratch the surface, it’s not as it appears.
JW: The traffic issue is another, I guess, “talking point,” but it’s a legitimate issue that traffic has declined at this border over the last decade. The trend is downward, is that how you see it going forward or do you see something moving back upward?
RN: Well, the trend from 9/11 thereafter insofar as vehicular traffic. The trend wasn’t particularly down insofar as commercial traffic. Let’s separate those. Commercial traffic pretty much tends to track the economy. It was growing, and then it fell as a result of the 2007-8 recession. It grew 11% last year, commercial traffic, over 2009. There’s a trend you could fix on and you could say because commercial traffic grew in one year by 11% therefor, in mathematical terms, it will double over seven years. We’re not saying that, but I don’t you can say the opposite either—that traffic is irredeemably and irreversibly down.
Vehicular traffic is down for a number of reasons, some of which I’ve already alluded to. After 9/11, folks who used to come across the border spontaneously, for a meal, for a sporting event, either personally or anecdotally concluded that it wasn’t worth the risk. You didn’t know if you were going to get across in 15 minutes—as often times you do—or whether it could take you an hour and a half—as sometimes it does. If you’re coming across for an evening you aren’t inclined to buy into the proposition that you might spend three hours of your evening crossing.
The Detroit-Windsor Tunnel has suffered in this way. They don’t handle trucks for the most part, they can only handle very small trucks.
If people sensed there was more capacity, and plazas capable of accommodating volumes—both primary and secondary inspection—at the site, and that they had choice. Bear in mind the tolls for the Ambassador Bridge are among the highest of the 27 bridge crossings between Canada and the United States. If they had choice, and through electronic monitoring be aware of where the congestion was, our view is there is an element of “they build it and they will come.” More capacity will cause more people to decide to come.
We also think you can look at the traffic growth from 2009 to 2010 in terms of commercial traffic and extrapolate from that as long as the economy is growing there will continue to be demand.
In any event, the population of the United States and Canada—which is 350 million—will be 450 million in 30 years. One hundred million more people are going to generate more trade, and since more than a quarter of all Canada-U.S. trade crosses at Detroit-Windsor, it’s entirely legitimate to assume there’s going to be increased demand. That doesn’t mean straight-line growth demand, but increased demand.
In fact, Mr. Moroun acknowledges that in the sense that they want to build a six-lane additional bridge adjacent to their existing one. They’re of the view there’s need for six more lanes because they propose to continue to operate their four-lanes.
[ED: Point of clarification, when we spoke to Moroun, he said his vision of the twin span involved using a potential new bridge as the primary bridge, while only operating the existing bridge in the event of overflow.]
We’re proposing that six-lanes be built. So the issue becomes not demand or need for an additional six-lanes, it becomes where it’s built. I think they get hoisted on their own argumentation. Clearly there is consensus between the government of the United States and the government of Canada, the Governor of Michigan, the government of Ontario, and the owners of the Ambassador Bridge on the need for additional capacity.
JW: In terms of personal travel, your point on capacity makes a lot of sense especially with the 9/11 changes. I know my passport is expired; I can’t go to Canada right now. But is that really affecting manufacturing traffic? I guess I have to ask: If Chrysler has facilities or Ford has facilities in greater Windsor area and facilities here, those trucks—if they have to wait three hours, they have to wait three hours. Is more capacity going to improve trade?
RN: The average vehicle built in this area essentially crosses the border—from its smallest component until it emerges as a finished vehicle—six times. Chrysler argues that it costs them in the neighborhood of $700 per vehicle in costs that they ideally would not have to bear, by virtue of the congestion they incur and all that flows from that.
Companies tend to keep four hours of inventory, I’m told—I’m not an expert in this regard—and it costs them something in the order of $150,000 per hour in additional inventory they keep on hand. It used to be the case that everything was warehoused, but nothing is warehoused in buildings in a just-in-time delivery environment. It’s warehoused in trucks that are constantly moving. An engine leaves Ford’s Essex-Windsor engine plant and it’s in a Ford F-150 truck in Dearborn within four hours. Any delay associates with a cost, either for inventory or for the actual shipping cost.
The prestigious Center for Automotive Research based at the University of Michigan says that costs of congestion to the U.S. economy are in the neighborhood of $30 billion per year, and in the trucking sector it’s $106 an hour that is lost to truckers by virtue of delays.
Chrysler says they could put that money into R&D. We could reduce the cost of the vehicles, making them more competitive with imports. We could export our vehicles at a lower cost, making them more competitive abroad. Instead, they’re spending money unnecessarily on congestion costs that distort the marketplace. Which is one of the reasons why the Detroit 3 automakers have enthusiastically endorsed the NITC.
They believe, as well, that there should be competition. They might all like a monopoly in their own business, but their mindful of the fact they’re unlikely to have one. They have to compete. They regard service across the Detroit River as a key to their business model. They face some of the highest costs for that along the length of the US-Canadian border. They think that if there were competition, in addition to providing redundancy, that costs would be kept down.
JW: If and when the NITC bridge is built, do you see both that bridge and the Ambassador Bridge operating at full capacity, or at least reasonable capacity to make both viable?
RN: We think that there’s enough demand for two bridges to be profitable. The Ambassador Bridge will lose some of its traffic. But half of their traffic is either local, meaning its traffic logically wouldn’t be rerouted two miles south and then two miles north. If you’re going from Chrysler in Auburn Hills to Windsor, you don’t necessarily go to the NITC. Mr. Moroun owns a number of trucking operations, and they’ll presumably direct their trucks across their bridge. The Ambassador Bridge will be less profitable, but there’s every reason to believe it will be profitable.
And, it’s very important to us that it continues to operate. One of the objectives here is to achieve redundancy. You don’t achieve redundancy by having parallel spans using the same Customs’ plazas, but you don’t achieve redundancy by having two separate bridges separated by two miles, not six blocks as Mr. Moroun told you. It’s two miles and you achieve redundancy, and we’re convinced that demand will grow over time and they’ll get their share of that growing demand.
We’re not in the habit, the Canadian government, of making dumb financial decisions. We’re a pretty well managed country. And that for a whole bunch of reasons, a whole bunch of policy choices. It’s not in our nature to offer to pay or to assume liability for all of the costs of a project like this. But it’s so important to us. We’re mindful of the budgetary situation the state of Michigan is in, so we have said in this extraordinary circumstance that we’re prepared to assume all of the costs and guarantee all of the liabilities.
We’re convinced we’re going to get paid back, and we’re going to get paid back once the private sector operator brings a billion dollars, give or take—more likely take in the sense that it could just as easily be $900 million as it could $1 billion—for the purposes of building the span itself and the two toll plazas. Once they’ve recouped their investment over 25 years or so, then Canada gets paid back its’ $550 million it’s fronting to the private sector developer to built the roadwork to connect the bridge to I-75. We’ll be paid back that money between year 25 and year 45 is our calculation, and from year 45 on a bridge that’s built to last 125 years, each Michigan and Canada will receive revenues of between $40-60 million a year.
JW: When you say Michigan’s share will be what it is, you mean after the $550 million is paid back?
RN: Right. Michigan’s share will kick in after the liabilities have been paid back. After the private sector operator/builder has repaid itself from toll revenues and after Canada has been repaid the $500 million (or $550 million) that it advances on behalf of Michigan, so Michigan doesn’t have to pay any money up front.
JW: The bridge issue is really two issues that sort of intertwine. One is whether or not the NITC should be built, and the other is should the Ambassador Bridge be allowed to twin it’s span. It seems to be both could happen, both could not happen, one could happen and the other doesn’t separate of each other. What would it take for Canada to be comfortable with twin span, regardless of what happens with the NITC.
RN: I don’t know if Canada can be comfortable with a twin span. Certainly, the city of Windsor can’t be comfortable with a twin span. This has been tested already, and frankly it’s totally fallacious for the folks at the Ambassador Bridge to imply to anybody that somehow the two choices here are between the NITC and a twin.
The NITC has all of the environmental approvals that it requires. It is the shovel-ready option, as it were. All those jobs would be created very quickly after the Michigan legislature authorizes it. The twin has no approvals on either side of the border. The U.S. Coast Guard, which has to approve it, sent very stern letters to them in 2009 and 2010, telling them that until such time as they could substantiate a number of criteria—including that they actually own the land the city of Detroit insists they do not own, on which they would build the twin—the U.S. Coast Guard could go no further considering the application for approval.
There has to be an environmental assessment process in Canada. That is underway now. The Ambassador Bridge had submitted documentation in December 2007 asking for approval. They were told within a month that the documentation they had submitted because it dealt with the span, but it didn’t deal with the implications on the Customs’ plaza or the roads once you would exit. It was as if they were isolating just the span, and proceeding on the assumption that it would have no implications for traffic flows.
They were told within a month that they needed to revise their submission. They didn’t do that. They took three and a third years to do it, and they finally submitted documentation in April. That’s now being assessed. It’s an objective process.
But it’s important that twinning has already been assessed once. Not as exhaustively as in a complete environmental study, but their was a binational process between the U.S. government, Canada, Michigan and Ontario. We looked at 15 different options. The assumption was we’re going to need more capacity.
One of them was twinning, and twinning was rejected because of hostile opposition on the part of community in Windsor, which does not want the 7500 trucks per day that currently go across the Ambassador Bridge everyday exiting onto Windsor city streets and continue ten miles through 17 traffic lights before they connect to highway…
JW: Well, let me stop you right there because one of the things Mr. Moroun said was the way to deal with that is a road improvement, a dual grade for north-south vs. east-west. Certainly that would be cheaper than a new bridge. How would you answer that?
RN: It wouldn’t be cheaper than a new bridge. In fact, it is patronizing in the extreme, and frankly it is reflective of an attitude toward the people of Windsor and maybe the people of Canada. He said to you, and I’m quoting, “Canada fixes its stoplight issues between the bridge and 401.”
Well, to “fix” the stoplight issue is to bring freeway to the foot of existing bridge, which we cannot do. The city has grown up around the plazas. The plazas were built in 1929. Nobody anticipated the volumes of traffic or the security requirements. The University of Windsor is at the foot of the bridge. Are we supposed to obliterate the University of Windsor? There are historic graveyards, there’s retail, there’s residential, are we supposed to obliterate it all? Do the Morouns not care anything about the community? Perhaps they don’t. Maybe I’ve answered my own question.
It sounds trite, it sounds easy: Fix the stoplights! Well, to fix the stoplight issue, to achieve what it is we can achieve at the New International Trade Crossing is to bring freeway ten miles through the center of Windsor. It would fully and completely divide the community, and it would be horrendously expensive as well. It would be much more expensive than the $1.4 billion that we’re spending to bring freeway from Highway 401 to the foot of the NITC.
JW: And when you talk about the $1.4 billion for new freeway, that’s separate from the NITC project? That’s a Canadian public works project?
RN: It’s completely separate and therefor doesn’t have to be paid for from any revenues, even though the study that the Moroun company commissioned from Conway-McKenzie is predicated on a $3.5 billion expenditure having to be re-paid through toll revenues, and you can’t possibly get to $3.5 billion unless you include the $1.4 billion.
They’re pretty loose with numbers. They’ve taken, much to our consternation—I was pretty restrained on their television commercials which are devoid of factual support, in deed they’re deceitful, I was restrained on those because there’s only so much I should be involved in. I’m the representative of the government of Canada. This is for Michiganders to fight back against or not. But they’ve taken to running these commercials in Toronto, and they say: “Did you know that the Ontario government is building a $2.2 billion road to nowhere? That is what the Ontario government is building, but wait a minute,” they say, “Michigan has refused to build the bridge. Call Dalton McGuinty and tell him to spend our $2.2 billion on things we really need.”
Well, it’s not a $2.2 billion road. It’s a $1.4 billion road. We thought it would cost $1.6. It was tendered, and the contract was signed last year. It’s $1.4 billion. Construction will begin soon. Not withstanding the assertions in this commercial, Ontario pays half of that and Canada pays half of that. They’re off by 300% in terms of what Ontario is paying. This seems to be pretty characteristic in terms of their looseness with numbers.
“But wait a minute, Michigan just refused to build the bridge?” Ummm, when did that happen? Legislation was introduced on the first of June by Sen. Richardsville. It was referred to committee. I testified there on the 15th of June. Mr. Moroun testified on the 16th of June. They’ve got 85 more witnesses lined-up. It’s expected they’ll have resolution on this by October. Michigan hasn’t refused to do anything.
I’m not restrained any longer when they’ve started to advertise in my country and mislead the people of Canada, then they’re inviting me to become engaged in this debate and expose, frankly, the fraudulence of the numbers they use.
JW: Back to the idea of twinning the bridge—I interrupted that—what are the other issues?
RN: Opposition from the city of Windsor, the fact that redundancy is not achieved by twinning, and thirdly the inability to expand the Customs’ plaza. The Customs’ plaza on the Canadian side is 14 acres. The Customs’ plaza for the NITC will be 139 acres. It will be laid out in a way where Canadian Border Services Agency can discharge all functions that are required in this post-9/11 environment.
We currently send all trucks identified for secondary screening to an off-site location two and half miles away. Now, Mr. Moroun told you ten trucks a day go to the off-site. Well, Canadian Border Services Agency tells me it averages 80-85 trucks per day. He’s off by a factor of 800%. Again, characteristic with the objective of diminishing the facts in pursuit of an argument.
This is Mickey Mouse, that we can’t do all our inspections on site because there isn’t room. U.S. Customs sends their low-risk secondary screening trucks five miles away on city streets because there’s not room to do it at the U.S. Customs’ plaza. This does not make sense in national security terms.
I’ve heard the owners of the Ambassador Bridge say: “As if you could bring down a bridge.” That it’s impervious to terrorist attacks. I don’t know if it’s impervious to terrorist attack or not. A terrorist wouldn’t have to bring down the bridge. There could be a catastrophic accident.
We’ve all seen trucks with flammable material turn over on a highway or a bridge. Say a truck with flammable material turns over at the plaza, because you’re talking about two spans at one plaza. If the plaza is obliterated, can’t be used for weeks or months, then the bridge can’t be used. Neither country is going to allow traffic to enter without that kind of scrutiny.
When the Blue Water Bridge closed for two days in December…
JW: That was for the snowstorm?
RN: Yeah, the snowstorm. It wasn’t a tragic act, but it highlights the need for redundancy. Plants closed and hourly workers were laid off for a couple of days because there was no way of getting the parts there.
Prudent governments don’t allow the security of their countries or the employment of millions of people—there are eight million jobs in the U.S. that depend on trade with Canada and a quarter of U.S.-Canada trade crosses the Ambassador Bridge. Ipso facto, two million jobs in the U.S. depend on the Ambassador Bridge working just right everyday even though it’s 83 years old. It was built to last 50 years, and it will be approaching its 100th birthday in the not so distant future.
We have at the Niagara peninsula, which carries significantly less traffic, 14 lanes of traffic compared to 12 lanes at Port Huron-Sarnia plus the Detroit-Windsor Tunnel plus the Ambassador Bridge, and there is discussion of building yet an additional bridge at the Niagara peninsula. They carry less traffic, have more capacity, and there’s discussion of building still more capacity.
Clearly there’s a felt need for more capacity there. All those bridges are profitable. There’s no worry there about competition.
There’s ample scope for this frontier to build more capacity and to benefit from more competition. It would seem to be a no-brainer that we should seek to build the New International Trade Crossing.
CORRECTION: In a previous version, Dr. Norton’s answer to the third question read: “The trend was particularly down insofar as commercial traffic.” It should have read: “The trend wasn’t particularly down insofar as commercial traffic.” The transcript has been corrected to accurately reflect what he said.