Making way for free trade. US, Canadian firms plan cross-border raids
The US-Canada Free Trade Agreement is coming to town. President Reagan has said he will sign it. Although the historic pact still awaits Canadian approval, businessmen here have been figuring ways to make money on what they expect will be more vigorous trade between the two countries.
The White House estimates annual US exports to Canada will increase by $2.4 billion. In the mean time, Canadian and American businessmen in Buffalo are setting up factories, renting warehouse space, and moving into former mills converted into office space.
Local plants hope to increase their exports since duties will be coming down. Architects, engineers, and lawyers are taking refresher courses in Canadian business practices and making plans to set up Canadian offices.
While Buffalo appears to be ahead of other border cities in its interest in Canada, it is not unique. The Minneapolis Chamber of Commerce in a survey of its members this year found that half are now exporting to Canada. Last year they were mainly interested in exporting to Europe.
Other border cities that could benefit include Seattle; Duluth, Minn.; Toledo and Akron, Ohio; Detroit; and Rochester, N.Y. Canadian officials expect Toronto, Vancouver, Montreal, and possibly Calgary to jump in as well. But for the most part the trade gains will be national, says R.K. Morris, director of international trade at the National Association of Manufacturers. ``We hope the trade agreement is largely border-blind,'' he says.
That may turn out to be true, but for the moment Buffalo is a city with Canada on its mind. ``I think it's terrific,'' says Mayor James Griffin, talking about the new trade agreement.
Taped to a wall behind the business-oriented mayor is an enlarged photocopy of a story that recently ran in the Toronto Star, extolling the virtues of a city that is used to being the subject of Johnny Carson jokes about blizzards and rust. Grins the mayor: ``Every week more Canadian businesses are moving into western New York.''
Local businessmen are coining it the ``Canadian-American Commerce Corridor.'' Already, Charles Rosenow, president of Buffalo Development Companies, estimates Canadian companies employ 15,000 to 20,000 workers. And more are coming. ``We look like the Deep South to the Canadians,'' he says referring to Buffalo as a lower-cost, lower-wage area.
Drawing a map, Ian Gent, chairman of the Can-Am Business Council, shows a visitor how Lakes Erie and Ontario naturally funnel traffic into Buffalo. ``Buffalo is rapidly becoming a major distribution center'' he contends. There are two warehouses that cater just to Canadian companies. From Buffalo, interstates fan out to the Middle Atlantic states. Local officials are now pressing for the expansion of US Route 219, linking Buffalo directly to the Pennsylvania Turnpike.
The highway system is critical since much of the commerce travels on 18-wheelers. According to the US Customs Service, 815,000 trucks crossed the ``Peace Bridge'' that links the two countries last year. On some days, it can take a trucker nearly an hour to grind his way through US Customs.
Anticipating even more traffic as trade between the two nations increases, two local businessmen have each proposed building a Buffalo World Trade Center, where freight forwarders, attorneys, and customs officials would process the commercial paperwork.
At the request of Rep. Henry Nowak (D) of New York, whose district includes the bridge, the General Services Administration has issued a report on the need for a new non-bridge Customs inspection facility for the trucks. The mayor says the next step is to widen the Peace Bridge from its current three lanes.
Perhaps the enthusiasm is a bit premature. James McConnell, chairman of the Department of Geography at the State University at Buffalo says, ``the potential is there for more trade, but we're a little unsure how business will respond.'' He is in the middle of a study trying to pinpoint what types of businesses are likely to step across the border to get their feet wet in the US.
Canadian businessman Lorne Smith is already in US waters. Last month, the division manager of Berenson Inc., a distributor of cabinet and furniture hardware, opened shop to tap the US market. Although Smith says his company would have expanded to the US regardless of the agreement, he admits one of the reasons for the relocation is defensive: Smith expects to see US competitors taking some of Berenson's market share in Canada. To continue to grow, therefore, requires a US presence.
Canadian businessmen moving across the border means opportunity for First Canadian Courier Corporation, which is trying to become the ``Federal Express'' of Canada. ``Each month our business increases,'' says Carlo Marinello, station manager at the Buffalo airport. A significant portion of Mr. Marinello's business is coming from Canadian companies who want a Post Office Box in Buffalo (which he supplies), and then want their US mail delivered the next day in Toronto. ``We're far faster than the post office,'' he says.
Although they are less aggressive, US businessmen also see opportunity. At American Brass Company, Bruno Eisner, a vice-president, sees better sales opportunities for the coils of brass and copper his company makes. Currently, the tariff on brass products going north of the border is 4 percent. The tariff on brass coming to the US is half that. ``Any reduction will help,'' he says.
The agreement will also provide a chance for US architects and engineers to win contracts. ``We feel we can compete,'' says Paul Becker, general secretary of KAI/Russell Associates. Once they can expand into Canada, Becker anticipates getting involved in some joint ventures with smaller Canadian engineering firms. Eventually, he envisions buying them out.
Once such business between the two countries picks up, David Herer, executive vice-president of the American Bureau of Collections, expects his collection business will as well. ``Canadian companies eager to get market share will be too liberal in marketing, meaning some companies won't pay their bills,'' he explains. But according to a provincial Ontario law, his collection company cannot expand into Ontario without 75 percent local ownership. ``In the spirit of the agreement, I hope they open up,'' he says.