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Red Tape Hampering Cross-Border Trade, Discouraging Small Businesses

Posted January 18, 2016

Silly rules, confusing regulations, mountains of paperwork, and unhelpful government policies – in other words, so-called “red tape” – has one-third of Canadian small businesses thinking twice about trading across the U.S. border, according to a new report by the Canadian Federation of Independent Business (CFIB) on day one of the group’s Red Tape Awareness Week™.

Based on 8,600 responses from small business owners, the updated report from 2010 looks at the performance of both the Canada Border Services Agency (CBSA) and the U.S. Customs and Border Protection (CBP) Agency in facilitating cross-border trade. While both agencies have shown some improvement, one-third of business owners said they would not have started trading had they known about the costs. Thirty-six percent pointed to administrative hassles and lack of transparency around fees as forcing them to reduce the frequency at which they currently trade.

“In a slowing economy, eliminating unfair and costly rules at the Canada-U.S. border is an inexpensive way of supporting small businesses, who employ more than half of all working Canadians and continue to create most of the new jobs in the country,” said Corinne Pohlmann, CFIB’s senior vice-president of national affairs. “With Prime Minister Trudeau and President Obama scheduled to meet this spring, we hope they will take steps to improve cross-border trade for all businesses by making red-tape-free-trade a priority.”

Compared to the findings in 2010, CBSA staff showed some improvement in accessibility, knowledge and how they treat customers. But the agency showed little improvement in how it provides and communicates relevant information. In fact, small business owners gave the CBSA website a worse rating for user friendliness than in 2010, likely stemming from the fact that a website developed by the agency for small businesses has been taken down. And, many are unaware of many programs put in place to help speed up traffic at the border (i.e. Fast, Canpass).

“While we are pleased to see some progress, red tape is putting the benefits of free trade out of reach for many small businesses,” said Satinder Chera, CFIB vice-president. “Small firms need timely and easily accessible information, which the CBSA can provide by improving its Single-Window Initiative to include small businesses, not just pre-approved customs brokers. Making fees more transparent and proportional to smaller transactions would also help.”

In comparison, CBSA fared somewhat better than its US counterpart, meaning that importing from the U.S. remains easier than exporting to the U.S. In particular, the CBP performed worse on the amount of paperwork and customer service than the CBSA, while it also registered higher dissatisfaction on website user friendliness than in 2010.

Government red tape is a hidden tax that affects Canada’s small businesses much more than larger firms. The annual cost of all regulations on businesses in Canada is pegged at $37 billion per year, with one-third of that ($11 billion) considered unnecessary red tape.

Click here to download the CFIB’s report Beyond the Big Border.