Ambarish Chandra
Ambarish Chandra spoke 13 times across 1 day of testimony.
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Ambarish Chandra, Prof. (Economics – University of Toronto)
Yeah, thank you, Professor MacDonnell. So, you know, if you could look at most international trade around the world, the two most common modes by which goods are sent to and from or between countries is by air and by sea, but that's actually not true in the case of Canada and the United States. We have -- you know, the vast majority of our goods are actually transported over land, mainly by truck, although they do a slightly smaller extent by pipeline or by rail. And, you know, and not only are Canada and the U.S. each other's largest trading partners, we're also the single biggest trading relationship in the world. So we're quite unusual in that sense that we -- our trade is mainly over land because that's an outlier by world standards, But, yeah, the vast majority of our land-based trade is by truck. Something like 63 percent of all goods that are imported and exported between Canada and the United States travel across the land border by truck. And there are thousands of these trucks that enter Canada every day. There's -- you know, on an average day, there's something like 14,000 trucks enter Canada from the United States. And so when we think about our trade corridors, we really should be envisioning our land- based trade corridors with the United States because that's really most of what we trade. And specifically, when we think about our critical infrastructure, there's roadways, there's highways, but really, most importantly, there are bridges. And the reason for that is that, as we just heard, you know, Ontario is the sort of centre point of trade with the United States. In fact, it's disproportionately the case that Ontario trades with the U.S. Ontario has 38 percent of Canada's population, but it receives 63 percent of incoming trucks, so it really -- you know, by contrast, Quebec has 24 percent of Canada's population but only gets 11 percent of trucks. So trade is disproportionately concentrated in Ontario. And what's striking about Ontario is that the province is entirely separated from the United States by water bodies, by either the Great Lakes or by rivers. So that means as to enter Ontario, you have to cross a water body, which means you have to cross a bridge. And so there's really just four bridges, all of which are in southern Ontario, that carry the vast majority of our trade. And so our critical infrastructure is dependent on these bridges. We can talk more about it I think as the conversation proceeds, but just as a single point, the Ambassador Bridge is easily the most important of these bridges, getting 30 percent of our trade. But, yeah, these four bridges constitute our critical infrastructure.
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Ambarish Chandra, Prof. (Economics – University of Toronto)
So in -- as best as I can tell based on my research, a lot of this has to do with what I would call historical accident and then mass dependence. So the Ambassador Bridge was built almost a century ago. It was completed in 1929. It was built to facilitate trade across the Detroit River between Michigan and Ontario. And once it was completed, it was used heavily by the auto industry because Ford and General Motors and other car manufacturers had plants in both Michigan and Ontario, and so they relied on the bridge extensively, going back to the 1930s and since then. And the trade over the bridge became so important commercially, economically that we saw a lot of investment made to support the bridge. Investments were made both by the private sector as well as by government. So the private sector, you know, the firms that traded invested by building, you know, warehouses, sorting facilities, loading docks in order to, you know, quickly and efficiently transport goods that were coming on and off the bridge. Governments invested by, you know, building highway on ramps and off ramps, there's Ontario 401, Interstate 75 and 96 in the U.S., all of these Interstates point directly at the Ambassador Bridge. Governments also invested by allocating custom's agents, building custom's inspection facilities and so on. And so the more investment that the bridge attracted, the more efficient it became to process the vehicles, and so the more traffic it actually attracted, including by non- auto industry actors. And so we sort of got into this cycle, which you can think of as, you know, virtuous or a vicious cycle by which, you know, it attracted more traffic, so we, you know, threw more infrastructure investment at the bridge and so on. And so now the Ambassador Bridge is, you know, absolutely vital to Canada/U.S. trade getting 30 percent of our trade, and it's not as though it's all the auto industry. If you -- so like I said, Ontario gets about 63 percent of trade with the U.S. You might think that that's dominated by the auto industry, but it's actually not. But by my calculations, even the non-auto industry, so everything other than automobiles, is still heavily concentrated in Ontario, a little bit less, more like 55 percent, but, you know, that just goes to show you how even other industries became reliant on the Ambassador Bridge over time.
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Ambarish Chandra, Prof. (Economics – University of Toronto)
Yeah. I think as Professor Quigley said, these are all concepts that I think an efficient system would exhibit or features that a good system would exhibit, but in the case of trucking, I’d say that redundancy is actually something that’s lacking and, again, redundancy in the sense, as Professor Quigley said, of a component that isn’t critical on its own but that can function in the case of failure of another component. But if you think about trucking, cross-border trucking and the fact that we’re so reliant on these bridges in southern Ontario, there’s actually -- if one of these bridges fails and, you know, we saw a six-day failure or a blockade in February of this year, but there could be others kinds of failure. There could be infrastructure failure, there could be earthquakes, natural disasters, terrorist attacks and so on. If one of these bridges fails, the next best alternative, really, isn’t a very good substitute. When the Ambassador Bridge was blockaded, some trucks were diverted to the Bluewater Bridge a couple of hours north, but that’s time consuming, it’s costly, plus there’s -- it’s -- you know, for technical reasons, paperwork has already been filed, it’s not easy to just divert traffic or, for that matter, all the way around Lake Erie to the Peace Bridge between Buffalo and Ontario on the eastern side. By contrast, the infrastructure we have over roadways does exhibit redundancy in a more robust way so, for example, if you think about all of the -- there’s about 107 ports of entry in the land border between Canada and the United States. And for most of the border, if one of these road crossings is blocked or blockaded or just not available, traffic can be diverted fairly easily to nearby border crossing. That’s not true in the case of the bridges, which is another concern because, you know, we’ve concentrated so much traffic into this one small area and there’s really no redundancy built into the system so when something goes wrong, as it did in February, there’s really no good solution.
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Ambarish Chandra, Prof. (Economics – University of Toronto)
Yeah, I’m happy to. It’s actually useful to think of some examples, so where Professors Boyle and Quigley mentioned the 70 to 90 percent figure for private infrastructure, private ownership of infrastructure, in some sectors it’s 100 percent. So in pipelines and railroads, both the operators and the infrastructure itself is entirely privately held. And another example that seems small but is actually very important is network cables. So the data that we transmit to and from other countries; basically, intercontinental transmission to Europe and to Asia, all of that happens over undersea network cables. And for the most part, in fact -- well, Canada mostly piggybacks off of United States, in terms of their network of cables, but those cables are entirely privately owned. They’re owned by technology giants; governments don’t own them. And so we’re entirely dependent on the private sector in those cases. But coming back to trucking, actually in the case of trucking, a lot of the infrastructure is not privately owned, it’s publicly owned, whether it’s federal or provincial, but, you know, the roadways and highways and most of the bridges that connect US-Canada are, in fact, publicly owned. The one glaring example is actually the Ambassador Bridge itself. So the biggest bridge by far is actually in private hands, and has been, you know, for decades. In fact, it was -- it’s in family hands, belonging -- owned by a family, a Detroit-based family, and the patriarch of that family, who passed away a couple of years ago, was particularly, I would say, antagonistic towards Canada. Frequently blocking Canada, Canada’s government’s attempts to build rival bridges; taking Canada’s government to court on multiple occasions, and essentially leveraging his position and the influence and the importance of his bridge to demand and extract concessions from the Government of Michigan, the Government of Canada, and so on. So that’s a situation where, you know, private ownership is actually very striking, but that’s not the case for the other bridges. And so that’s one example I’d give about private ownership, and across different sectors, but the other thing that’s striking about trucking is that, again, the actual individual players are also private, so the individual truck drivers, the trucks they own or they drive. There’s about 160,000 truck drivers that ferry goods back and forth between Canada and the US, mostly based in Canada but about a quarter are based in the US. They’re mostly -- some of them are loosely affiliated with large organizations but for the most part, they’re independent contractors; they choose their hours, they choose which jobs to take on. And, you know, for the most part, the system actually works remarkably well; we don’t even have to think about it. But -- and as Professor Quigley mentioned, if -- you know, a failure for a small part of that network, it doesn’t really matter. You know, by contrast, airlines and railroads are very concentrated; there’s just six or seven big commercial players. So they’re also easier to regulate; the government can require them to, you know, have certain standards, which is harder to do in the case of trucking because there’s just so many, they’re so diffuse, and the entire network is so decentralized. It’s more difficult, much more challenging to regulate or require the trucking industry to do certain things. Like I said, it’s often a feature that in the industry actually works very well the vast majority of the time, but sometimes it comes with costs.
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Ambarish Chandra, Prof. (Economics – University of Toronto)
Sure. I -- one of the things that I write about, so I -- obviously I feel like it's important, is the question of diversifying our trade, and especially the way in which we trade with the United States. I've already mentioned how Ontario is the -- disproportionately attracts truck traffic and trade from the United States. We -- you know, Ontario gets -- punches well above its weight, getting 63 percent of income in trucks, as opposed to just 30 percent of population. It's more than that, though. Virtually every U.S. state, certainly every large U.S. state, the majority of its exports enter Canada at Ontario. That's true even for states like California, to the west, the majority of California's exports to Canada come to Ontario. So we are highly concentrated in a way that's a little concerning, I would think, in Southern Ontario on these bridges in terms of critical infrastructure. And so the -- what this means is that there are certainly goods and merchandise that are ultimately headed for Atlantic Canada or the Prairie provinces, some of which are actually passing through Southern Ontario, being sorted and then routed on to the final destination, which raises the risks that has, you know, obviously increased fuel costs, increased labour costs, increased risk of spoilage of perishable goods enroute, but there's just the risk, you know, concentrating all this risk into a small geographic area. And what that means is if there is catastrophic events or, you know, unforeseen events, whether they're national disasters or human caused interventions, like blockades or terrorist attacks, we're vulnerable to that -- something like that happening in Southern Ontario, which really could be catastrophic for the entire country. So as another example, we actually have a rival to the Ambassador Bridge being built right now, the Gordie Howe Bridge, which is under construction and will be operational hopefully like within a couple of years, but -- and the Gordie Howe Bridge is right next to the Ambassador Bridge. So in some sense, it does take the pressure off our reliance on this one privately owned bridge, but on the other hand it's just yet another bridge, and so in some sense we're just concentrating our risks even further by our reliance on the Gordie Howe Bridge. And so the concerns I would have would be if there are, let's say, weather related or climate related disruptions, you know, we already saw this year the Mississippi River dried up to a large extent and was almost non-navigable for large stretches, which is sort of incomprehensible to people who study trade because we take for granted that goods flow up and down the Mississippi and then they connect at the Great Lakes to roadways and railways across North America. What would happen if the Mississippi was non-navigable at some future date in some future year? Or what would happen if the Great Lakes keep rising, as they have been doing, and forecasts are that they will continue to do year after year? If there's a risk of flooding in Southern Ontario around the Great Lakes area, that's going to impact all of the roadways and highways that connect to these bridges and make us -- leave us especially to disruption. So what I'd like to see, I'm happy to hear what others have to say, but my hope would be that we have some sense of whether Canada is thinking about diversification down the road, so not to say that we're going to completely revamp North American trade, it's just not feasible, but on the margin are there small changes, certain investments, certain government decisions that can push us towards a more diversified trading network that leaves us less vulnerable and less concentrated on the Southern Ontario region? That would be one of the things that I would like to discuss further.
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Ambarish Chandra, Prof. (Economics – University of Toronto)
So if we're talking about trade into Ontario, there is no option, you have to cross a bridge to get to Ontario from the United States. Whether it's the Detroit River or the Niagara River or the St. Mary's River, or the St. Claire River, you have to cross a water body. The alternative would be to not rely on bridges, in other words, not rely on Ontario. So there are plenty of land crossings on the U.S./Canada Border, the Champlain/Lacolle crossing comes to mind. It connects Quebec and New York State. It's a land-based crossing. It doesn't need a bridge, it's a roadway. Anytime there's a blockade it's far easier to clear, far cheaper to maintain than a bridge. That bridge or that crossing is well under capacity. In fact, I would argue that Quebec, in particular, is deeply underserved by our current network of truck traffic, and that crossing could be easily handled many more -- especially if expanded and if the right infrastructure is diverted towards it, it could easily be expanded to handle, you know, the same capacity as the Ambassador Bridge. The same would be true at, you know, crossing out west, that Alberta has the Coutts crossing, for example. So I would say our reliance on these bridges that, particularly, cross into Ontario, is the problem.
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Ambarish Chandra, Prof. (Economics – University of Toronto)
It's just very interesting to hear all these points of view, and I agree with a lot of -- almost everything that's being said. I think I certainly do think that governments should be aware of risks on an ongoing basis, especially because the potential negative fallouts are more than just -- you know, so Mme. Ouellet mentioned the effect on jobs and so on, which is absolutely important, but just on a day-to-day basis, our food supply in Canada is so heavily dependent on trade and incoming trucks from the United States, especially at certain times of the year. So in February, we're getting almost all of our fresh food from the U.S., and we really can't afford to have that be interrupted. It's a matter of, you know, of feeding people, which is even more critical I would say than the jobs. And there's other critical supplies that come in every day, medical supplies, vaccines, they all, you know, come in by truck. So I guess my hope or question would be do we have a plan for inevitable failure going forward? And some of these failures we can even start to foresee are just becoming more common as driven by climate risks. You know, I mentioned the Mississippi becoming almost non-navigable this year. Well, we saw the same thing in Europe. The Rhine River was briefly non-navigable as well, which was also a big, you know, trade corridor within Europe. We saw the Swiss Canal blockade for weeks in last year. So I think governments around the world are scrambling to on the fly come up with solutions when things go wrong, but things will keep going wrong and maybe at an increasing frequency. So, yeah, my questions would be would -- does the federal government have a plan for flooding in the Ontario region, or drying up of the Mississippi, or wildfires that cut off access between B.C. and Washington just becoming increasingly common. And so I would say these are both critical threats as well as ongoing threats that we need to be aware of.
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Ambarish Chandra, Prof. (Economics – University of Toronto)
I'll just take a very literal view of the phrase, straight corridor, I think it's also coming back to the idea that, again, most of the trade, all the trade that we do with Europe and Asia and the rest of the world doesn't involve those literal trade corridors because they're over air and sea. And so the vessels and the planes and the ships leave those countries, go through international airspace, international waters and then arrive in Canada, but in the case of the U.S. there are literal trade corridors, these bridges and roadways, and so I think that's where the definition is important. Not being a legal scholar at all, I would say, though, that any -- given the importance of the Ambassador Bridge, which is clearly international -- of international concern to both Canada and the U.S., it shouldn't -- you know, it almost seems to me like a technicality that the roadway, which is under municipal control, should be able to block and international bridge, and so it to me seems as though the importance of such that there should be a unified framework ---
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Ambarish Chandra, Prof. (Economics – University of Toronto)
--- to deal with all points of access to something like a international bridge.
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Ambarish Chandra, Prof. (Economics – University of Toronto)
I can just jump in with a little bit of background more than anything else.
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Ambarish Chandra, Prof. (Economics – University of Toronto)
Sure. In some ways, the - - our trade over rail is -- well, it's a lot less important than by truck. It's about 16 percent of our trade with the U.S. But it's also easier to regulate because there's far fewer actors. There's basically Canadian National, Canadian Pacific, and then two big U.S. firms, BNSF and Union Pacific, I think, across the border, and transport maybe grain, coal, and so on. And in some ways, the nice thing is that the operators also own their own railroads, and so, you know, CN operates on CN tracks and so on. So they're very much -- they also have a strong incentive to make sure infrastructure is upgraded and maintained and so on. I'm sure there's challenges around rail, but it also strikes me at first blush to be a lot easier than regulating or the challenges that come ---
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Ambarish Chandra, Prof. (Economics – University of Toronto)
--- around trucking.
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Ambarish Chandra, Prof. (Economics – University of Toronto)
I'll just jump in with one point. This is -- I don't particularly have expertise in this area, but I do have colleagues at U of T who are working especially in this area. And coming back to the issue of network cables, which is what their research is on, it was pointed out to me that, you know, every time we communicate over the internet, send and receive messages or download information, data is being transmitted all around the world, but in particular, even messages or information that is transmitted domestically within Canada is almost invariably passing through the United States at some point. It's a well-known fact. And in the past, Canadian scholars and legal experts have raised the concern that the NSA in the U.S. has, in some ways, the right to seize or intercept these messages, and that's been a well-known problem, and it's not clear that there's ever going to be a solution to that.