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We argue that national security is a public good and its production can be analyzed in a strategic context. We first present the context of the border between Canada and the United States. Next, we discuss the options of status quo and adoption of a common security perimeter relative to sovereignty and security. We show that efficient border policies could require cooperation among countries but motivating such collaboration may be difficult since joint border security policies may involve a prisoners’ dilemma problem. On the other hand, we show that the likelihood of joint increased security will be higher if there are country-specific benefits for a country improving security at its border. If this is the case, we demonstrate it is possible to reach optimal security using independent border policies.

This paper reports on the results of a research project aimed at estimating the costs of border crossing transit time and uncertainty for the U.S. and Canadian economies. The cost estimates are based on a review of prior reports, some 20 site visits to seven key crossings, and 173 interviews of knowledgeable organizations/persons. The key finding is that border transit time and uncertainty are costing some U.S.$4.01 billion, or 1.05% of total 2001 merchandise trade, and 1.58% of truck-based trade levels. The primary implication of the research is that it provides a baseline estimate of costs that can be used in cost-benefit analysis of alternative border management strategies.

This paper evaluates the extent and implications of Canada-U.S. economic integration in the wake of two formal trade liberalization agreements. The paper considers how quantity and price measures can be used to assess integration, then surveys the evidence on the extent of integration. Overall, we find little evidence that these trade agreements had significant incremental impacts on economic integration between Canada and the United States. We find some evidence that exchange rate variability may discourage integration. Microeconomic efficiency has not been enhanced through alignment of prices and costs and the volatility of the Canada-U.S. exchange rate may also account for this. The finding provides some tentative evidence in favor of a common currency arrangement.

The U.S. 2002 Farm Bill provides sizeable direct and indirect subsidies to U.S. farmers, which has created increased competition in markets where the United States and Canada compete. Target prices were reintroduced and the overall level of U.S. Government support was increased. Canadian farmers will find it more difficult to compete in grains, oilseeds, and pulses. Government support in Canada for these crops is significantly below U.S. support. Canada and the United States have a significant two-way trade in agricultural products, including beef and pork. The outbreak of Mad Cow Disease in Canada in 2003 clearly illustrates the need for cooperation between the two countries.

Border security is a crucial part of the country’s broader homeland security efforts. It is a multifaceted and complex issue which attempts to accomplish two seemingly contradictory objectives – the prevention of people and goods from entering the country, while at the same time, facilitating lawful travel and trade. Although it is primarily a federal responsibility, securing the border crosses over multiple homeland security domains, as well jurisdictions. In recent years, numerous strategies and structures have been implemented to foster a whole-of-government approach to border security. This chapter presents border security in the larger context of homeland security. It examines the strategies and coordinating structures developed to create a secured border and an overview of the interaction of law enforcement agencies at the various jurisdictional levels. Although these structures create a robust network of mutually supportive agencies to effectuate border security, a major strategic challenge to securing the nation’s borders still persists.

This paper investigates currency substitution along the U.S.‐Canada border with specific reference to the use of the Canadian dollar in the United States. In our study sites of Bellingham, WA; Buffalo, NY; Burlington, VT; Houlton, ME; Minot, ND; Port Huron, MI; and Sault Ste. Marie, MI, we found that 70.1 percent of 364 sampled U.S. located retail establishments accepted the Canadian dollar during the study period of July 2003. Accepting firms did so at an average premium of 7.7 percent per transaction with a concomitant average increase in stores sales of 3.0 percent. The significant variables at the firm‐level in the decision to accept/reject the Canadian dollar are firm experience in the community; ownership model (local, regional, national or international); geographic location; cross‐border operations; and retail category.

National borders are a hurdle to the expansion of the open economy. Integration today remains imperfect because national borders translate into trading costs, including differences in monetary regimes. Political borders shelter many goods and services from external competition and, consequently, represent a critical exogenous force in the integration process. Small economies face thicker borders than large economies. Regional trade arrangements have softened or, in some cases, pushed outward national borders, but in the process new borders have emerged. Borders affect also finance and monies. While the speed of financial integration suggests currency consolidation and a decline in the ratio of independent monies to sovereign nations, the formation of multilateral monetary unions (MUs) pushes the ratio toward unity.

In this paper, the changes that have taken place since September 11, 2001 regarding cargo inbound to the United States are examined. An appraisal of the new rules proposed by the U.S. Bureau of Customs and Border Protection is provided along with an evaluation, using a game‐theoretic model, of how shippers and carriers may be expected to adapt to this new set of regulations. Since Canada is the most prominent trade partner of the United States, an overview of these changes in the context of the U.S.‐Canada border is presented.

This chapter reviews the effects of air transport liberalization, and investigates the roles played by airport-airline vertical arrangements in liberalizing markets. Our investigation concludes that liberalization has led to substantial economic and traffic growth. Such positive outcomes are mainly due to increased competition and efficiency gains in the airline industry, and positive externalities to the overall economy. Liberalization allows airlines to optimize their networks, and thus may introduce substantial demand and financial uncertainty to airports. Vertical arrangements between airlines and airports may offer a wide range of benefits to the parties involved, yet such arrangements could also lead to airline entry barriers which reduce the effects of liberalization. Three approaches have been developed to model the effects of liberalization in complex market conditions, which include the analytical, econometric and computational network methods. These approaches should be selectively utilized in policy studies on liberalization.