The Rise and Fall of Canadian Cross Border Travel to the United States

 

As the tariff and trade conflict with the United States continues, it has been reported that Canadians have been taking their own individual trade action against the United States by cancelling their trips and visits and taking their tourism dollars elsewhere.  The rather low state of our currency relative to the USD is another factor. The numbers according to US border counts have been declining since December with February recording roughly 2.2 million people in passenger vehicles entering US border states from Canada which is 500,000 fewer than the month previous.  Statistics Canada has reported that the number of Canadian resident return trips by automobile from the US in February totalled 1.2 million – a 23 percent drop year-over-year.

Canadians have always travelled to the United States for winter getaways and living in the case of Snow Birds.  In general, Canadian proximity to the United States makes leisure and shopping trips convenient especially with border town residents who are more likely to zip over the border for purchases. The most classic phase of this was the well-chronicled cross-border shopping mania of the late 1980s and early 1990s when a relatively high dollar, rising per capita incomes in Canada, a large price difference in gasoline prices and the onset of the GST saw a surge in trips.  In 1988, a total of 51.3 million Canadians returned from trips to the United States (all modes of travel) of which 36.2 million were Same Day Automobile Trips.  These numbers then began to surge dramatically and peaked in 1991 at 79.4 million Total Trips and 59.1 million Same Day Automobile Trips. By 1993, Total Trips had declined down to 66.7 million while Same Day AutomobileTrips had fallen to 48.3 million. 

However, as the two accompanying figures illustrates for All Trips and Same Day Automobile Trips, when monthly data from January 1972 to January 2025 is plotted, the period from 1972 to the early 1990s marks the rise of cross-border travel while the period since has been marked by a long-term decline.  There was a bit of a recovery that accompanied the appreciation of our dollar from 2002 to 2011 but then the decline resumed followed by the precipitous drop of the COVID-19 pandemic.  While there has been a recovery since the pandemic, the totals still have not reached the pre-pandemic highs.  And, with the current trade war induced drop, one expects that we may l soon surpass lows last reached in the early 1970s.

 

 

Of course, the interesting question is what accounts for the decline since the early 1990s.  Naturally, fluctuations in our currency are a factor.  The long-term decline in the growth rate of our per capita income is another factor.  However, what is probably more important is the change in the Canadian retail landscape in the 1990s in the wake of the cross-border shopping surge.  In the 1990s, Canada saw the spread of Sunday Shopping and the arrival of big box retail including Wal-Mart.  All of this created shopping opportunities that reduced the demand for cross-border shopping trips as Canadian retail became more competitive. Going forward, all these factors will pale as a depressant on cross border travel if there is a sustained and deliberate shift in Canadian travel habits away from the United States.

Is Donald Trump Thorstein Veblen's Economic Saboteur?

 

A lot of energy has been expended on trying to make heads or tails of what President Donald Trump is trying to achieve with his political and economic disruption. The constant flurry of pronouncements has been dizzying and have created a great deal of uncertainty particularly for businesses.   As well, a lot of people are probably feeling substantial trepidation and anxiety in the face of 24/7 media coverage of the constant spate of edicts and trolls emanating from the White House.  It is hard not to feel like one has been trapped by evil cyborg villains and rendered helpless and unable to escape from a really bad science fiction movie.

Nevertheless, there are economic changes afoot. The gyrations in international financial and stock markets have been quite large in the face of tariffs and other decisions and while such fluctuations entail losses, they also entail buying opportunities for those with the necessary resources to take advantage of drops.  And its not just financial markets.  While disruptions in production as supply chains founder in the face of tariffs will lead to shortages and unemployment, they will also drive-up prices for whatever stock is available to get to market and raise profits. Perhaps, what is going on here is what an economist of the Institutionalist school named Thorstein Veblen (1857-1929) once chronicled – namely, business people as economic saboteurs rather than producers of wealth.

Veblen was an American economist in the late 19^th and early 20^th centuries who is best known for his book during the gilded age titled The Theory of the Leisure Class which brought into common parlance the term ‘conspicuous consumption’.      Veblen was an able though radical and occasionally bizarre scholar who had some difficulty holding down academic appointments but nevertheless was quite brilliant in his insights. Veblen was a critic of neoclassical economic theory and criticized its status as a “science” as well as what he saw as its static rather than dynamic analysis of how the economy functioned including its views of people as being utility maximizers.  Veblen felt that neoclassical economics did not consider the role of habits and institutions in shaping economic behaviour and that probably explains why in the long run he was embraced more by sociologists rather than economists.

 

Veblen also criticized the neoclassical theory of the production and the firm.  Whereas neoclassical theory saw the producer as striving to meet the demands of the consumer by producing goods and services, another of Veblen’s books titled The Theory of the Business Enterprise portrays the businessman as the 'saboteur' of the economic system. Late nineteenth society was in the throes of industrialization and becoming more mechanized and increasingly dependent on technicians and engineers.  Veblen argued that engineers and technicians concerned themselves with managing 'industrial capital' and were preoccupied with producing goods.  Indeed, this was the concept of modern society and the economy being run by technocrats and a technocracy.  Business owners, on the other hand, were only concerned with what Veblen termed ‘ceremonial capital' - that is, they were interested purely in profits and the gains from financial speculation.  As a result, since business people were only interested in money and profits, they sought to manipulate supplies and cause breakdowns in the flow of output so that windfall profits could be realized. 

Fast forwards to the second quarter of the 21^st century and one finds ensconced in the White House an erstwhile business tycoon and deal maker accompanied by an assortment of other tech lords and business oligarchs who seem hell bent on breaking things and creating their vision of a brave new world.  One wonders as these disruptive edicts and decisions are made that interrupt production and drop stock markets, whether windfall profits are being made in stock and financial transactions as well as by knowing what might be in short supply as tariffs halt or disrupt production.  Far fetched?  As we scratch our heads and eliminate what seems to be one failed rational explanation after another, what are we left with?  Borrowing from Sir Arthur Conan Doyle’s Sherlock Holmes, once as other explanations have been eliminated, what you are left with however odd or improbable must be the truth.

 

 

Canada's Trade with the USA Has been Shifting for Some time

 

NAFTA and its successor CUSMA have been instrumental in growing Canada’s trade and its economy by helping us find markets that have grown our export sector.  These agreements have helped cement an economic relationship with the United States such that by 2024 “ the combined value of Canada's imports and exports of goods traded with the United States surpassed the $1 trillion mark for a third consecutive year. In 2024, the United States was the destination for 75.9% of Canada's total exports and was the source of 62.2% of Canada's total imports.”  (Source: Statistics Canada, https://www150.statcan.gc.ca/n1/daily-quotidien/250205/dq250205a-eng.htm)

However, interestingly enough, the importance of the United States as a merchandise export market has actually declined somewhat and the composition of our exports to them has shifted also.  Since 1999, the total value of Canadian merchandise exports to the United States grew by over 90 percent but the value of our merchandise exports to all other countries aside from the United States grew by nearly 280 percent.  As a result, the US share of our exports declined from 87 percent in 1999 to 76 percent at present.  As well, there has been a compositional shift. 

In 1999, 30 percent of the value of our merchandise exports to the United States was motor vehicles and parts but this share declined to 11 percent by 2022.  The greatest growth in the value of our merchandise exports to the United States since 1999 was energy products, followed by metal ores and then farm, fish and food products.  Over the period 1999 to 2022, the energy share of our exports went from 9 to 34 percent, metal ores from 1 to 2 percent and farm, fish and food products went from 2 percent to 4 percent.  On the other hand, the share of forestry products declined from 13 to 8 percent, electronic and consumer goods declined from 8 percent to 3 percent, aircraft and transportation products from 3 percent to 2 percent.  In many respects, the long-term effects of NAFTA/CUSMA appear to be a decline in our export share of value-added manufacturing products and an increase in less value-added resource products.

This is of course all rather odd when viewed in the context of the Trump Administration’s desire to impose tariffs on Canadian exports.  If the goal is to move auto manufacturing out of Canada, it’s importance as a Canadian export driver has already been in decline.    If the goal is to make Canada hewers of wood and drawers of water to the American so to speak by having it specialize in resource inputs to the American economy – that is already happening.  While there have been some increases in Canada’s exports of consumer goods, metal products and industrial equipment, by far the largest increase has been in energy products.   

President Trump seems hell-bent on tariffs and applying them to everything - including energy.  Why the Americans would subject such an important input into their economy to tariffs seems rather incomprehensible.  Given our share of their energy needs, one suspects their demand is quite inelastic meaning  that energy tariffs will have few output and employment effects in Canada and the tariff will be borne primarily by the American consumer.  There may be an incentive for Americans to try and negotiate energy prices downward to compensate for the tariff impact on their consumers  but that essentially means that Americans want to have cheaper Canadian energy and use tariffs on our energy as a revenue source and ultimately have us pay for both these goals.   Why Canada would want to subsidize American energy consumers in this manner is an interesting question.  It will be crucial for Canada to quickly find alternate energy markets to forestall such a scenario.

 

 

 

Why Does Canada Exist?

 

Last evening in Paris, as Canada’s Prime Minister was exiting his vehicle and going into a building, a journalist shouted the question “Is Canada viable as a country” which really asks should Canada exist?  This question has emerged in the wake of the ongoing verbal onslaught from the President of the United States with respect to tariffs, annexation and talk of Canada becoming a “cherished” 51^st State.  One wonders if this journalist was Canadian or American.  If American, not already knowing the answer to that question can be forgiven.  If the journalist was Canadian, well that is also disappointing indeed because that question was answered a long time ago by Canada’s great economic historian Harold Adams Innis. 

Whether or not Canada should exist as a separate entity distinct from the United States has long haunted Canadians – or at least English Canadians.  Before 1763, Canada was Quebec and Quebec has never had any doubts that they constituted a distinct people and nation within their North American environment.  English Canada was settled by refugees from the American Revolution – the United Empire Loyalists – and while they also constituted a distinct cultural group within North America, the similarity of language and culture with the United States has always led to questions of distinctiveness and identity.

These questions have been aggravated by the seemingly north-south geographic grain of the continent with only the Canadian Shield being apart from that grain.  The Atlantic region appears to be but an extension of the New England states, southern Ontario essentially juts into the US northeast, the prairies are an extension of the Great Plains while British Columbia and its mountains are an extension of the Pacific Northwest. The bulk of Canada’s population is clustered along an east-west corridor within a day’s drive of the U.S. border and therefore Canada as an east west construct has seemingly been constructed in defiance of North American geography.

And yet, in his Fur Trade in Canada, Innis argued that Canada was indeed a natural rather than unnatural construct because its east-west orientation was rooted in geography and economic relationships.  Canada became a country because of and not despite its geography and the fur Trade was instrumental in bringing that about. The fur trade waterways of the Great-Lakes-St. Lawrence system and the rivers of northern Ontario, the Prairies and British Columbia and even up to the Arctic provided the east-west canoe travel network of the fur trade first under the French, then under the traders of the Northwest Company of Montreal and finally those of the Hudson Bay Company. 

As the accompanying maps illustrate, the routes of the fur trade penetrating the Canadian Shield were the first network traversing Canada A Mari Usque Ad Mare. And given their links southward via the Mississippi system or into the Washington-Oregon area, one could make as much a case that these regions are but an extension of Canada’s east-west waterways.  Many of Canada’s towns and cities were originally fur trade posts on this east-west network and when the railway came decades later, it followed this east-west line.  This east-west alignment of the country was natural according to Innis and facilitated the east-west extension of Canadian sovereignty into the west during the 19^th century.  

 

 

 

As the famous passage from Innis’s The Fur Trade in Canada goes:

“The Northwest Company and its successor the Hudson’s Bay Company established a centralized organization which covered the northern half of North America from the Atlantic to the Pacific.  The importance of this organization was recognized in boundary disputes, and it played a large role in the numerous negotiations responsible for the location of the present boundaries.  It is no mere accident that the present Dominion coincide roughly with the fur-trading areas of northern North America.  The bases of supplies for the trade in Quebec, in western Ontario and British Columbia represent the agricultural areas of the present Dominion. The Northwest Company was the forerunner of the present confederation.” (Innis, The Fur Trade in Canada, 1930/1971, p.392)

In other words, Canada was the path dependent outcome of a natural east-west economic network.  Canada exists A Mari Usque Ad Mare for reasons that are rooted in its economic history and development and not as an artificial construct.  The border with the United States is there for a reason.

 

 

Ontario's Physician Shortage: How Bad Depends on Where You Live

 

The Ontario election is now underway and despite the Premier’s belief that this election is about a mandate to deal with Donald Trump, the reality is that the dominant issue is likely to become health care.  Given that Canada and by extension Ontario are both small open economies, aside from moral suasion,Trumpian tariff policy is beyond the direct power of Ontario’s Premier.  Health care, on the other hand is a provincial responsibility and directly within the Premier’s mandate.  Here, the picture is not pretty.

There are apparently 2.5 million people in the province without access to a family physician and the number has been growing because while total physician supply in Ontario since 2019 is up over one percent, population has grown by nearly 10 percent.  The Ontario Medical Association already has a campaign underway highlighting the crisis in provincial health care and in particular the shortage of medical professionals and physicians.  The province has indeed responded to this crisis with the unveiling of an additional $1.8 billion to ensure that everyone has access to a family doctor with four years.  And yet, the nature of the crisis is such that the absolute number of physicians required is only part of the problem given demographic changes in the profession, changing workloads as well as the reality that the size of the shortage differs regionally.

Figure 1 takes data on total physician vacancies from HealthForceOntario for major Ontario cities (accessed January 29^th) and plots them ranked from highest to lowest.  The number of vacancies range from highs of 683 and 204 for Toronto and Ottawa to lows of 21 and 16 for Barrie and Brantford.  This ranking is in terms of absolute numbers and says little about relative vacancies which need to consider population.  So, Figure 2 presents these vacancies in terms of vacancies per 100,000 population (using CMA population data from Statistics Canada for 2024) and ranks them from highest to lowest and the results show the physician shortage in relative terms varies considerably.  The largest vacancies once adjusted for population are in Thunder Bay, Peterborough and Belleville at 34, 28 and 26 physician vacancies per 100,000 population. Meanwhile, the lowest vacancies per 100,000 population are in Oshawa, Hamilton and Windsor at 7, 6.6 and 5.8. 

 

 

 

Two things come to mind with these results.  First, a blanket or provincial level response approach to this problem is likely to be unsuccessful.  Solutions for Thunder Bay or Peterborough cannot be the same as those for Barrie or Toronto given the size of the gap in terms of vacancies per 100,000.  Indeed, the size of the problem in Thunder Bay, Peterborough and Belleville seems to be in a league of its own given the drop off in Figure 2 after Belleville. Second, for the time being, if you are indeed looking for a physician in a major Ontario city, given these numbers, your odds of getting access to one is greatest in Windsor and worst in Thunder Bay.