Economists discuss cross-border issues at WWU roundtable

Roundtable_SG-1By Steve Guntli

Economists from both sides at the border gathered at Western Washington University (WWU) for a roundtable discussion about the state of the cross-border economy.

On November 18, WWU’s Border Policy Research Institute (BPRI) sponsored the roundtable, titled “The Changing Canadian Economy and Whatcom County.” In addition to a panel of speakers, those in attendance were encouraged to voice their thoughts, ideas and concerns about the interaction between the U.S. and Canada.

Laurie Trautman, an analyst with BPRI, laid out some of the basic facts and figures about Whatcom County’s borders. In 2011, the Cascade Gateway, which comprises the five Canadian border crossings in the county, overtook Detroit and Buffalo as the nation’s busiest ports of entry into Canada. The Peace Arch crossing is the busiest in the U.S., with 3.03 million cars passing through last year. The Pacific Highway truck crossing at SR-548 came in sixth, with 1.85 million.

Despite these numbers, Canadian shoppers are declining. Crossings have gone down 20 percent since 2013, and total retail sales in Whatcom County were down 1.4 percent that year.

The declining Canadian dollar was a topic of interest for the economists, and the forecast for the loonie is less than promising. The Canadian dollar is currently valued at 75 U.S. cents. Based on projections from the Bank of Canada, the loonie should incrementally increase over the next few years, but even optimistic projections don’t see the loonie rising above 80 cents on the U.S. dollar before 2018.

Hart Hodges, professor of economics and business research at WWU, discussed economic factors from the U.S. side of the border. He claimed to have a contrarian view to the gloomy outlook for Whatcom County retail sales.

“I don’t think it’s as bad as people think it is,” he said. “The retail space is complex, and the decline is not as significant as people think.”

A lot of the problem, Hodges said, is most modern studies compare the economic landscape in Whatcom County now with its peak in 1990, when approximately 22 million commuters crossed the border. Back then, the Bellis Fair Mall and Sunset Square were brand new, and southbound attractions like Tulalip Casino and the outlet malls hadn’t been built yet.

“Canadians have more reasons to travel south than in the past, which makes it tough to measure the specific impact on retail in the county,” Hodges said.

Millennials also have different shopping patterns than previous generations. For them, the experience is as important as the product, so companies that can provide a better shopping experience will be more attractive.

“I interviewed several Canadians who were shopping at the Costco in Burlington and asked why they drove so much farther than Bellingham. Most of them said they preferred it because it was more peaceful,” Hodges said.

Despite the boost from mailboxes and online sales, the panelists did predict a decline in U.S. shopping trips, at least until the loony stabilized.

The construction of two high-end shopping complexes in Tsawwassen may complicate matters further. The developments, expected to begin opening October 2016 and together occupying nearly 2 million square feet, seek to not only attract retail dollars from lower mainland B.C., but also draw U.S. shoppers with a selection of shops not available north of Seattle.

However, Hodges argued, Canadians still have compelling reasons to head south.

Blaine and other border towns are in a good position thanks to the proliferation of mailbox services. According to Hodges, 20 percent of lower mainland B.C. residents keep a mail box in the U.S.

“You take 20 percent of the few million people living in that part of Canada, and you basically have a second Whatcom County,” he said. “That’s a significant economic boost.”

There’s a strong correlation between mailboxes and online shopping. According to Hodges, Whatcom County has the highest online sales in the state of Washington, and most of those are coming from Canadian shoppers buying cheaper items on U.S. websites like Amazon.

Gasoline prices will also continue to be a big draw. The low gas prices may have a lasting benefit for Whatcom County. In a 2014 BPRI poll, 22 percent of southbound shoppers said purchasing gas was the sole purpose for their trip, which Lawless said is likely to stay steady as U.S. gas prices remain relatively low compared to Canadian prices. According to a forecast from the Bank of Montreal, oil is expected to stay around $60 per barrel at least through 2017. Lawless said a recent projection from Goldman Sachs saw the price possibly dropping to $20 a barrel for some quarters, but in his opinion prices that low would be “shocking.”

Blaine city manager Dave Wilbrecht brought up concerns about medical tourism. The city has been considering the possibility of opening a local clinic to cater to Canadians, and Wilbrecht was curious if future policies enacted by new Prime Minster Justin Trudeau would affect the nation’s health environment. Lawless said medical policies are decided at a provincial level and are unaffected by the change in federal parties.

Ken Peacock, an economist with the Business Council of British Columbia, thinks now might be the time for Canadian companies to consider expanding operations into Whatcom County. He cited Canadian-born success stories like Nature’s Path and Superfeet as examples for how Canadian businesses can thrive in the U.S. This could prove to be a boon for border cities like Blaine. According to a BPRI study, 8.1 percent of businesses in Blaine are “Canada-linked,” or have at least one Canadian address for its governing officials. That’s far and away the largest percentage in Whatcom County, nearly doubling the percentage of Canada-linked businesses in Bellingham.

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