Security controls along the U.S.-Canadian border have become hostage to the raucous debate over immigration in the United States.

Since the Sept. 11, 2001, attacks, the issue of border security has been a major item on the bilateral agenda. However, the politics and potential economic cost of impending controls on the flow of people have inspired controversy.

The Western Hemisphere Travel Initiative (WHTI), adopted in 2004, requires that by 2008 all individuals — including U.S. citizens — present a passport or some other secure document when entering or reentering the United States. At present, U.S., Canadian, Bermudian and Mexican citizens do not need a passport for entry from the Western Hemisphere. The stated goal of the policy is to identify people who may be considered security risks.

However, a significant number of Canadians and U.S. citizens do not own a valid passport, and acquiring one is costly and time-consuming. The new requirement could also disrupt business between the two countries.

U.S. citizens made 31.6 million trips to Canada in 2005 (including 15.7 million same-day auto trips), bringing Canada $7.5 billion. Canadians made 37.8 million trips to the United States in 2005 (including 22.3 million same-day auto trips), spending a total of $10 billion. Those numbers declined between 2004 and 2005, partly because of currency fluctuation but also because of false perceptions that the passport requirement was already in place.

A 2005 Conference Board of Canada survey indicates that only 34 percent of adult U.S. residents and 41 percent of adult Canadian residents hold passports. However, those figures increase, respectively, to 44 percent and 60 percent among same-day cross-border travelers, 50 percent and 60 percent among overnight auto travelers and 67 percent and 75 percent among overnight air travelers.

The same study estimated that U.S. residents would make 12.3 percent fewer visits to Canada in 2008, mostly because of a reduction in same-day visits created by the passport requirement. That would result in an estimated net loss of $745.9 million in travel-related receipts to the Canadian economy. The corresponding drop in Canadian visits to the U.S. in 2008 is put at 1.7 million, leading to a loss of $262.9 million.

The WHTI program to secure the flow of people augments existing measures to regulate merchandise trade across the U.S.-Canadian border. In 2005, Canadian merchandise exports to the United States totaled $304.1 billion; imports hit $212.6 billion. The stepped-up security posture instated on the U.S. side after the Sept. 11 attacks (somewhat mitigated by more recent procedures designed to allow low-risk traffic to avoid costly security procedures) has imposed four broad categories of economic costs:

• Security infrastructure. The annual cost to U.S. taxpayers of deploying more personnel and enhancing security facilities on the northern border since September 2001 is estimated in the hundreds of millions of dollars.

• Lost business opportunities. For both countries, particularly Canada, an important potential cost of enhanced security is unrealized cross-border trade or investment, owing to the perception of prohibitive border security requirements. However, this is difficult to quantify.

• Shipping delays. Longer wait times impose shipment costs that industry has to absorb. In 2004, 6.9 million trucks crossed the border from Canada into the United States. According to a 2005 Canadian trucking survey, security-induced delays increased the time spent at border crossings an average of 32 minutes, costing companies $239 million.

• Risk-management schemes. Compliance with border risk-management schemes, which allow exporters to avoid long waits or denial of access, has been expensive. Canadian exporters and their suppliers must pay for certification in the Customs-Trade Partnership Against Terrorism (C-TPAT) program. The program’s costs vary from approximately $33,000 for smaller exporters to hundreds of thousands of dollars for the largest firms. As there are more than 40,000 exporting firms in Canada, the total potential costs are substantial.

One of the problems that might arise from the implementation of WHTI with the current deadline is the difficulty in both countries of maintaining high standards of security verification while substantially increasing the number of passports issued. In Canada, demand is expected to double within the coming year, which puts the passport agency under considerable strain. In the United States, passport issuance also has risen sharply since 2001, and it is expected to increase significantly when the WHTI comes into effect.

Acquiring a U.S. passport is expensive (about $100) and cumbersome. Therefore, alternative solutions are currently being considered:

The Department of Homeland Security (DHS) has proposed a less expensive ID card (dubbed “passport lite”) that would meet WHTI requirements for about half the cost of a passport. However, business groups fear few people would obtain the new card.

Binational businesses would prefer to set national standards for secure drivers’ licenses, along the lines of the U.S. Real-ID Act of 2005, which seeks to force states to include enhanced biometrics and citizenship information on drivers’ licenses. However, the law is facing strong opposition from civil-liberties groups.

Moreover, the Real-ID program would impose heavy costs on states, and most are actively resisting its implementation. For example, Virginia estimates the startup cost of its program alone would be $169 million, with annual costs of up to $63 million. It is unlikely that more than a handful of states will implement its provisions by the statutory 2008 deadline.

On May 17, the U.S. Senate passed an amendment that would delay implementation of the passport requirement for land-border crossings until June 1, 2009, implicitly recognizing the complexity of the policy challenges entailed by the measure. Most interested parties would welcome a delay, but uncertainty remains as to whether the controversial immigration bill to which it is attached will survive a House-Senate conference committee.

The Canadian Embassy in Washington has been active in lobbying Congress on behalf of Canadian and border-state interests, and provincial premiers have mobilized the support of U.S. border-state governors. However, Conservative Prime Minister Stephen Harper has not made this issue a priority.

Tightened border controls have increased rates of interception for illegal drugs, smuggled goods and wanted criminals. However, there has not been another incident like the December 1999 interception of Ahmed Ressam, who intended to plant a bomb at Los Angeles International Airport. Although the June 2 terror arrests in Ontario have heightened concerns south of the border, there is no indication that the alleged plotters intended to attack targets outside Canada.

The total cost of the WHTI is substantial, and its counterterror benefits are uncertain. However, U.S. legislators, under political pressure to address a perceived vulnerability, have acted without regard to expense. These measures will have negative implications for the process of North American economic integration.

Oxford Analytica is an international consulting firm providing strategic analysis on world events for business and government leaders. See www.oxan.com