Economics of Preclearance: Literature Review, Discussion, and Proposed Measurement Methodologies

1.	BACKGROUND AND CONTEXT

In December 2011, the Prime Minister of Canada and the President of the United States of America released the Perimeter Security and Economic Competiveness Action Plan.  This Action Plan outlines specific initiatives that will implement a long-term Canada-U.S. partnership built upon a perimeter approach to security and economic competitiveness.  This partnership was established by both leaders in February 2011 in the joint Canada U.S. declaration Beyond the Border: A Shared Vision for Perimeter Security and Economic Competiveness.

The Action Plan recognizes that the free flow of goods and services between Canada and the U.S. creates economic benefits for both countries, and it includes a numbers of initiatives related to trade facilitation, economic growth and jobs.  One of these initiatives is preclearance. 

‘Preclearance’ refers to a process in which customs, immigration and other border functions of a foreign country (such as the United States) are undertaken within a host country (such as Canada).  The United States has been conducting air preclearance in Canada for more than a decade.  The Preclearance Act authorizes “the United States to preclear travellers and goods in Canada for entry into the United States for the purposes of customs, immigration, public health, food inspection and plant and animal health” (Canada 1999).   

Preclearance has resulted in a number of observed benefits for both countries.  This includes economic and commercial benefits for the Canadian air industry, security benefits (e.g., screening passengers before they board on an airplane) and convenience benefits (e.g., reduced wait times, simplified travelling).  The United States has also been conducting some preclearance activities (pre-inspection) in selected rail, road and marine operations in British Columbia, with similar outcomes.  The Action Plan identifies preclearance as a strategy to further build on these successes.  

United States Customs and Border Protection (CBP) pre-clearance and pre-inspection operations in Canada are located at the following locations:

Air

•	Calgary International Airport
•	Edmonton International Airport
•	Halifax Stanfield International Airport
•	Montréal-Pierre Elliott Trudeau International Airport
•	Ottawa Macdonald-Cartier International Airport
•	Toronto Pearson International Airport
•	Vancouver International Airport
•	Winnipeg James Armstrong Richardson International Airport
Marine

•	Victoria Inner Harbour, BC (Ferries)
•	Sidney, BC  (Ferries)
•	Prince Rupert, BC (Ferries)
•	Port of Metro Vancouver, BC (Cruise Ships)

Rail

•	Pacific Central Station, Vancouver, BC

Land

•	Pacific Highway, Surrey BC/Blaine WA (Truck Cargo Pre-Inspection Pilot Project, Phase I) (Pilot Project)
•	Peace Bridge, Fort Erie, ON/Buffalo NY (Truck Cargo Pre Inspection Pilot Project, Phase II) (Pilot Project to be implemented in early 2014)

2.	PROJECT OBJECTIVES 

The objectives of this contract are to: 

1) summarize the international literature on the economic and social impacts of pre clearance and pre-inspection operations that could apply to the Canadian economy and to Canadians, which shall include a comparison of similar preclearance operations and arrangements in other countries (e.g., juxtapose controls between the United Kingdom, Belgium and France);

2) identify and discuss other possible economic and social benefits of pre clearance and pre inspection operations not well-covered in the literature; and

3) propose feasible methodologies to quantitatively measure the economic and other benefits to Canada of establishing preclearance in different environments on either side of the border (i.e., Canadian pre-clearance located in the United States and U.S. pre-clearance located in Canada, in all types of border crossing situations).  

3.	APPROACH 

A systemic literature review should be conducted to summarize the public and the available gray literature  on the economic and social impact of current pre clearance and pre-inspection operations, whether in Canada or internationally.  A thematic analysis should be undertaken of the collected materials to identify other possible economic and social benefits of pre-clearance and pre-inspection operations not mentioned in the published literature.

The methodologies identified to measure the economic and other benefits of preclearance should include an analysis of the direct economic impacts on businesses, in particular the tourism and transportation industries (e.g., variations in revenues and freight transportation costs), as well as efficiencies generated for governments and industry (e.g. reduction in opportunity and transaction costs, processing efficiencies through reduced congestion, intercepting threats and criminality earlier in the clearance process).  The indirect, down-stream and induced impacts in regions surrounding the Port of Entry (POE) and overall on the Canadian economy should also be included.  Measures of impacts should include: employment and wage creation; taxes generated; economic spillovers; creation of new travel/transportation patterns (or supply chains); efficiency gains; and increases in the Gross Domestic Product (GDP).

Examples of propose feasible methodologies to quantitatively measure the economic benefits to Canada of establishing preclearance in the land environment could include the economic modelling of quantitative data obtained through operational records, industry data, and/or the direct observation of preclearance work sites, as well as by qualitative data obtained through such methods as surveys of industry experts or travellers, as well as media or legal analysis.  

For each methodology the following elements should be outlined: theoretical grounding for the use of the methodology; a detailed data collection strategy; a proposed analytic approach including relevant equations and plain language explanations; as well as a mitigation strategy to address any possible ethical, legal, or privacy concerns.

The study will be completed over approximately an 18 week period, with all scheduled deliverables being finalized by March 14, 2014.

4.	PROJECT SCHEDULE

The period of the Contract is from date of contract award and to be completed on or before 
March 31st, 2014.