m ANAwsss OF MICHIGANAND. f: ONTARIO rum AND TRANSPORT RECIPROCITY Thesis for flu Doqrfig of DI'I. D. ,7 ' I MICHIGAN STATE UNIVERSITY Cecfl V. Hynes ' _ 7196.5 IHESIS L I B RA R Y Michigan State, University This is to certify that the thesis entitled AN ANALYSIS OF MICHIGAN AND ONTARIO TRADE AND TRANSPORT RECIPROCITY presented by Cecil V. Hynes has been accepted towards fulfillment of the requirements for Ph. D. degree in Businegg Administration xééw/ Major profegr Date W/f \ V 0-169 ROOM 535 om: m. FALL 1983 ABSTRACT AN ANALYSIS OF MICHIGAN AND ONTARIO TRADE AND TRANSPORT RECIPROCITY by Cecil V. Hynes Michigan and Ontario are large contiguous states unique in location, similar in economic development and interests, yet separated by an international boundary. The trade moving between them offers an opportunity to study trade and transport between contiguous foreign states. The primary purpose of this study was to determine how transport reciprocity affects trade between the two jur— isdictions. The core of this research is an empirical study of the flow of commodities between Michigan and Ontario. This study discloses both the tonnage and value of ship- ments in the Michigan and Ontario trade. Accurate know— ledge of this contiguous trade has not been available here- tofore. The results should be useful to anyone studying Canadian and American economic relations and hopefully the study will contribute to scholarly activities, methodology, and to future studies of Canadian-United States trade. In this study the trade data afford the empirical support for analysis of transport reciprocity. The technique involved an exploration of secondary Cecil V. Hynes sources, survey research of primary sources, followed by depth interviews and on—the—spot observation. The sources of secondary data pertaining to customs, carriers, and trade were thoroughly searched and revealed little information on commodity flows. There is no specific data on trade between Michigan and Ontario. The survey technique using questionnaires yielded considerable data from the carriers and industries in both Michigan and Ontario. These data were useful in determining the tonnage and value of commodity flows, and in providing information on the modes of transport utilized in the border traffic. The depth interviews revealed valuable insights and opinions on the ease of commodity and carrier movements and restrictions to trade. The empirical findings of this research study indi— cate that the direct trade between Michigan and Ontario was approximately $1 billion (7 million tons) in 1963. About 2 per cent of the total Michigan shipments to all markets were exported to Ontario in 1963. These exports amounted to approximately $500 million to form Michigan's largest single foreign market. Yet most of the manufacturing com— panies tended to view Ontario in the context of a domestic market. Again, during 1963 approximately 4 per cent of the value of the total Ontario shipments were exported to Mich- igan for a total of $525 million. Ontario ships almost II'HI Cecil V. Hynes as much to Michigan alone, as she does either to all other U.S. states combined, or to all overseas countries. But the problems of reciprocity are broader than the direct trade between Michigan and Ontario. The gateway traffic traversing Michigan—Ontario enroute to other points is larger than the direct trade and moves primarily by rail, highway, and water carriers. The Michigan and Ontario cor- ridor serves as a very useful short—line route connecting important markets and production areas in both Canada and the United States. With respect to transport reciprocity, Michigan and Ontario have a formal agreement extending very limited reciprocity to highway carriers. The lack of full reciproc— ity restricts the interchange of equipment necessitating additional handling of freight at the border. This increases time enroute from origin to destination and causes ineffi- cient carrier border operations resulting in higher operat- ing costs which are reflected in higher rates to the shipper. The investigation did not reveal any interest on the part of the state and province in negotiating reciproc- ity agreements with respect to the other modes of transport. Based on the findings of this research study, some specific courses of action are proposed for Michigan which could lead towards more complete reciprocity with Ontario for motor carriers. More liberal transport reciprocity, more uniformity in regulations at the border, and better through transport Cecil V. Hynes service would help to reduce the costs of distribution for exporters serving the Michigan and Ontario markets. More efficient and less costly distribution would improve ex— porters' competitive positions, serve as a stimulus for an expansion of trade between the two jurisdictions, and fur- ther economic development on both sides of the border. There was some evidence that Michigan, while in the process of improving transport reciprocity, might wish to consider other means of facilitating and expanding trade with Ontario, such as the simplification of the customs import and export procedures with emphasis on reducing the documentation requirements; and providing more comprehensive information to Michigan manufacturers on potential export opportunities in the Ontario markets. There were indications that in the future Michigan might wish to study and examine the implications of: (l) the possible development of a joint Canadian and United States Foreign Trade Zone located somewhere in the Detroit— Windsor area encompassing territory in both Michigan and Ontario, and (2) how the possible future development of a free trade arrangement between Canada and the United States might affect the direct trade and transit traffic between the two jurisdictions. AN ANALYSIS OF MICHIGAN AND ONTARIO TRADE AND TRANSPORT RECIPROCITY By Cecil V. Hynes A THESIS Submitted to Michigan State University in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY Department of Marketing and Transportation Administration 1965 Copyright by CECIL V. HYNES 1965 ACKNOWLEDGMENTS It is not possible to name all the people in Mich- igan and Ontario who directly and indirectly assisted in the development of this research work. Many individuals in government, industry, and industrial associations pro- vided much of the material and gave generously of their time for numerous interviews. To them, I extend my grat— itude and sincere thanks. However, I should like to name the members of my dissertation committee to whom I am in- debted for their significant contributions toward the com- pletion of this study: Dr. John L. Hazard, Professor of Marketing and Transpor- tation Administration, Chairman of the committee. His guidance and enthusiasm, his personal interest, finan- cial support, and constructive criticism at all stages of the work were invaluable to the development of the study. Dr. Frank H. Mossman, Professor of Marketing and Trans- portation Administration, who also served as Chairman of my course work committee. His continuous advice and counsel have been greatly appreciated. Dr. Harry G. Brainard, Professor of Economics. His con— structive suggestions and critical reading of the manu- script were very helpful. This work is dedicated to my wife, Pene10pe, for without her patience, encouragement, and aid, this disser— tation may never have been written. ii II- TABLE OF CONTENTS ACKNOWLEDGMENTS O O O O O O Q C O O O O Q 0 O O O O 0 LIST OF LIST OF Chapter I. II. III. IV. TABLES O O O O O O O O O O O O O O O C O O O O ILLUSTRATIONS . o O 0 Q o O I O O o O I 0 O 0 INTRODUCTION 0 o o C C O O O O 0 O I o O O o 0 Purpose of the Study . . . . . . . . . Method of Investigation and Source of Material. . . . . . . . . . . Terms and Definitions. . . . Scope and Limitations of the Study . Possible Contributions . . . . . . . Organization of the Study. . . . . . MICHIGAN AND ONTARIO: CONTIGUOUS, INTERIOR ECONOMIES SEPARATED BY NATIONAL BOUNDARIES . Introduction . . . . . . . . . . . . . . Geographic Location. . . . . . . . . . . Economic Aspects of Michigan and Ontario Political Boundaries and Trade . . . . . Summary 0 O O O O O O 0 O O 0 0 O 0 O O O O O O O O O 0 O C 0 TRADE BETWEEN MICHIGAN AND ONTARIO. . . . . . Introduction . . . . . . . . . . . . Market Orientation and Mode of Transport . . Origin, Destination, and Flow of Commodities Transit Commerce . . . . . . . . . . . . . . Obstacles to Trade . . . . . . . . Manufacturing Companies' Views of Obstacles to Trade. . . . . . . . . . . . . . . . . . TRANSPORT REGULATORY AGENCIES AND RECIPROCITY Introduction . . . . . . . . . . . . . . Commerce Clause and Freedom of Transport . . Michigan Laws and Transport Regulatory Agencies. . . . . . . . . . . Canadian and Ontario Transport Regulatory Agencies. . . . . . . . . . . . . . . . . . iii Page ii $3)qu H I-‘ 129 129 129 138 147 II- Chapter Page Reciprocity Agreement Between Michigan and Ontario 0 O O O O O O O O O O O I O O O O O 157 smary O O O O O I O O O O O O D O C O I O D 168 V. TRANSPORT PROBLEMS AND RECIPROCITY. . . . . . 169 Introduction . . . . . . . . . 169 ~ -— " Exporter Evaluation of Border Transport. . . 169 Exporter' 5 Problems of Transport Service . . 170 Motor Carrier Service Between Michigan and Ontario . . . . . . . . . 176 Operating Alternatives and Practices under Existing Reciprocity. . . . . . . . 184 Carrier's View of Transport Problems and Reciprocity. . . . . . . . . . . . 190 Reciprocity at the Border. . . . . . . . . . 197 Achievements of Reciprocity. . . . . . . . . 197 Summary. . . . . . . . . . . . . . . . . . . 200 VI. CONCLUSIONS AND RECOMMENDATIONS . . . . . . . 202 Summary. . . . . . . . . . . . . . . 202 Reciprocity Recommendations. . . . . . . . 216 Reciprocity and a Foreign Trade Zone . . . . 224 Informational Recommendations. . . . . . . . 226 Organizational Recommendations . . . . . . . 228 Trade Related Measures . . . . . . . . . . . 230 Further Research . . . . . . . . . . . . . . 233 APPENDICES A Methodology and Data Collection. . . . . . . 237 B Mississippi Valley Multiple Screenline Study 280 C Michigan Truck Weight Study of 1963. . . . . 283 BIBLIOGRAPHY O I O I O O D O C O O O O O O O C O O O O 29]. iv CI'I' Table 1. 10. ll. 12. 13. 14. LIST OF TABLES Comparison of the size of United States, Michigan, Canada, and Ontario. . . . . . . . . Population and work force of United States, Michigan, Canada, and Ontario, 1961. . . . . . Industry distribution of labor force for United States, Michigan, Canada, and Ontario, 1961. . Personal income for United States, Michigan, Canada, and Ontario for selected years . . . . Per capita income for United States, Michigan, Canada, and Ontario for selected years . . . . Manufacturing statistics for United States, Michigan, Canada, and Ontario, 1961. . . . . . Manufacture employment and value added at selected Michigan and Ontario cities, 1961 . . Metropolitan areas of Michigan and Ontario showing population and personal income, 1960 . Modes of transport used by Michigan manufactur- ing companies to reach the Ontario market, 19 O U 0 O O O O O 0 O I O G O C O O O O O 0 Comparison of mode of transport used for shipments terminating in Ontario and transit shipments terminating in other Canada or other United States, 1963. . . . . . . . . . . . . . The five~year outlook of Michigan manufacturing companies by industry, 1963. . . . . . . . . . Market orientation of Ontario manufacturing companies, 1963. . . . . . . . . . . . . . . . Market orientation of exporting Ontario manufacturing companies, 1963. . . . . . . . . Market orientation of non-exporting Ontario manufacturing companies, 1963. . . . . . . . . Page 16 21 24 26 26 29 31 34 47 48 50 53 56 58 Table 15. 16. 17. l8. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. Comparison of exporting, non—exporting, and average Ontario manufacturing companies, 1963. Mode of transport used by Ontario manufacturing companies to reach various markets, 1963 . . . Mode of transport used by Ontario manufacturing companies to reach various markets weighted by the value of shipments, 1963 . . . . . . . . Mode of transport used by Ontario manufacturing companies to reach the Michigan market, 1963 . Mode of transport used by Ontario manufacturing companies when shipping across the border to Michigan, other United States, and other Canadian markets, 1963 . . . . . . . . . . . . The five-year outlook of Ontario manufacturing companies by industry, 1963. . . . . . . . . . Total Michigan—Ontario commerce, 1963 . . . . . Michigan shipments to Ontario by mode of transport, 1963. O O Q 0 Q C O O O O O O O O 0 Michigan receipts from Ontario by mode of transport, 1963. . . . . . . . . . . . . . . . Railroad traffic crossing the Michigan-Ontario border, originating in United States, terminating in Canada, 1962. . . . . . . . . . Railroad traffic crossing the Ontario—Michigan border, originating in Canada, terminating in United States, 1962. O O O O O D O O I I O Q 0 Total value of commodities that crossed the Michigan—Ontario border by railroad, originat- ing in United States, terminating in Canada, 1962 I o O O O O O O O o o o o o o I o o o 0 0 Total value of commodities that crossed the Ontario—Michigan border by railroad, originat— ing in Canada, terminating in United States, 1962 O I O O O O O O O O O D O O O O I O O I 0 Railroad traffic that crossed the Michigan- Ontario border, originating in United States, terminating in Canada, 1962. . . . . . . . . . vi Page 59 61 62 63 64 66 71 74 76 8O 80 82 83 84 Table Page 29. Value of commodities that crossed the Michigan— Ontario border by railroad, originating in Michigan, terminating in Canada, 1962. . . . . 86 30. Railroad traffic crossing Michigan-Ontario border, originating in Canada, terminating in United States and Michigan, 1962 . . . . . . . 87 31. Value of commodities that crossed the Ontario- Michigan border by railroad, originating in Canada, terminating in Michigan, 1962. . . . . 88 32. Michigan shipments to Ontario by highway carriers, 1963 C O O O O O O O O O C O I O O i 91 33. Ontario shipments to Michigan by highway carriers, 1963 O O O I O O O O G O I O O O O O 92 34. Loaded trucks crossing the Ontario-Michigan border, entering Michigan from Ontario, 1962— 1964 O O 0 O O O O O I O I 0 C O O O C l O O O 100 35. Destinations of loaded trucks from Ontario entering Michigan at Detroit port-of—entry, 1962-1964. 0 O O O O O O O O I O O I O O O O I 101 36. Border traffic from Ontario entering Michigan at Port Huron port—of—entry, 1961-1964 . . . . 102 37. Total transit commerce crossing Michigan both in and out of Ontario, 1963. . . . . . . . . . 109 38. Comparison of rail statistics showing Ontario commerce for 1962 and 1963 . . . . . . . . . . 110 39. Ontario highway transit traffic, originating in Michigan, going to eastern United States and other Canada, 1963 . . . . . . . . . . . . 112 40. Ranking by the Michigan manufacturing companies of problems confronting their initiation or expansion of trade with Ontario, 1963. . . . . 121 41. Specific problems confronting expansion or initiation of Ontario trade listed by Michigan manufacturing companies, 1963. . . . . . . . . 123 42. Ranking by the Ontario manufacturing companies of problems confronting the initiation or expansion of trade with Michigan, 1963 . . . . 124 Table 43. 44. 45. 46. 47. 48. 49. 50. A-3. Specific problems confronting expansion or initiation of Michigan trade listed by Ontario manufacturing companies, 1963. . . . . Michigan revenue from transit permits and registration plates issued to Ontario commercial vehicles, 1963. . . . . . . . . . . Ranking of border transport problems by Mich— igan and Ontario manufacturing companies, 1963 Ranking of measures that would provide better transport service on shipments between Michigan and Ontario, 1963 . . . . . . . . . . Motor common carrier class rates from Grand Rapids to Toronto and Cincinnati, 1963 . . . . Motor carrier out-of—pocket costs for actual distance of 318 miles for various weight shipments, 1962. . . . . . . . . . . . . . . . Motor carrier out-of—pocket cost scales for shipments by type of movement and by weight brackets, 1962 I O O I O C O O O O I O O I 0 Motor carrier line-haul costs adjusted for effect of speed, 1962. . . . . . . . . . . . . Market orientation of Michigan manufacturing companies, 1963. . . . . . . . . . . . . . . . Mode of transport used by sample of Michigan manufacturing companies to reach various markets, 1963 O O O O 0 O O O O 0 O O O O O O 0 Cross reference for code numbers used in summary table, transport tables, and industry tables 0 o o o o c o t o o o o o o o o u o o 0 Railroad commodity groupings. . . . . . . . . . Waterborne commodity groupings. . . . . . . . . Weighted average values per ton of commodities transported by Class I Line-Haul Railroads, 1 O O o 0 O o o O I 0 o I I O O O o O O O 0 viii Page 126 163 171 174 178 180 182 185 250 252 270 271 272 276 THE Table Page A-7. Comparison of the Michigan and Ontario limits on height, width, length, and combinations allowable. I l O O O I O O O I D 0 O I O O O O 279 C—1. Comparison of the geographical movements of trucks as shown by the 1963 Michigan Truck Weight Study and the 1960 Mississippi Valley Multiple Screenline Study. . . . . . . . . . . 288 C-2. Results of the 1963 Michigan Truck Weight Study showing the number of interstate and intra- state truck movements by carrier . . . . . . . 289 C-3. Results of the 1963 Michigan Truck Weight Study showing the number of inbound, outbound, and transit commercial vehicle movements by carrier. . . . . . . . . . . . . . . . . . . . 290 ix Figure 1. 2. 3. 4. 5. 10. 11. LIST OF ILLUSTRATIONS Map of Canada and the United States. . . . . . Sault Ste. Marie port-of—entry . . . . . . . . Port Huron and Detroit ports-of—entry. . . . . Location of Ontario population by regions. . . Value added by manufacture for selected cities in Michigan and Ontario, 1963 . . . . . . . . Location of metropolitan market areas in Michigan and Ontario. . . . . . . . . . . . . Effects of a trade barrier and port—of—entry restriction upon the distribution area of a production center . . . . . . . . . . . . . . Railroads of Michigan. . . . . . . . . . . . . Ontario gas and oil pipelines. . . . . . . . . Mississippi Valley Screenline Interview stations 0 O O O O O O O O I O O O O O C o O O Weigh stations for the 1963 Michigan Truck weight study 0 O I I D O O O O O O O O C O I O Page 12 13 14 22 32 35 37 39 104 281 284 CHAPTER I INTRODUCTION PURPOSE OF THE STUDY The study was undertaken to seek an answer to the question, “How does transport reciprocity between Michigan and Ontario affect trade and transportation between the two sovereign areas?" In order to answer this question it was necessary to: (1) ascertain the flow of commodities between the two jurisdictions; (2) determine how the com— modities are transported; (3) determine the problems of transport service encountered by the shippers and carriers; and (4) examine the state of transport reciprocity that exists between Michigan and Ontario. With this background information in hand the influence of transport reciprocity on trade and transport service between Michigan and Ontario could be evaluated. While the study is primarily exploratory and infor— mational, some recommendations are suggested for policy consideration and for further research. METHOD OF INVESTIGATION AND SOURCE OF MATERIAL All possible methods of securing material and in- formation were used. Secondary sources were searched and primary data were gathered by questionnaires, specific letters, and field interviews. Regional trade and transport data are hard to come by and the search called upon diverse sources . SECONDARY DATA Secondary data tell relatively little about Mich— igan-Ontario trade. In Canada the Dominion Bureau of Sta- tistics publishes statistics on the total Canadian trade, and export and import trade with the United States. How— ever, a finer breakdown is not available. Ontario's total foreign trade, including the trade with Michigan, is unknown. The statistics available on United States foreign trade are provided by the Bureau of the Census of the De— partment of Commerce. Statistics are published for the various customs districts of the United States, and those supply the only data approximating state foreign trade. The state of Michigan is coterminous with the thirty-eighth customs district, except that one town, Menominee, is in the Wisconsin district. Customs reports show the value of the imports and exports passing through the customs dis— trict. While providing some insight on the value and the trends of foreign trade, they do not provide data on the amount that originates or terminates in Michigan. Nor do they provide any information on Michigan's trade with On— tario. Past studies of the foreign trade of Michigan have been based on the customs district statistics provided by the Bureau of Customs and the Department of Commerce.1 Sliger, in his study of the foreign trade of Mich— igan, placed heavy reliance on customs district data. A later study of the foreign trade statistics of Michigan by O'Donnel and Verway utilized the same source of data and extended the Sliger findings through 1959. Though both were thorough and informative studies, their usefulness was circumscribed. Because they used Michigan customs dis- trict statistics, it was impossible to make meaningful state— ments about the exports and imports that originated and terminated in Michigan. In fact, the only Michigan trade included were imports and exports moving overland to and from Canada, and through Michigan's lake and air ports, to and from overseas ports. In July, 1957, a study was published entitled "For— eign Trade Interests in the State of Michigan."2 It iden— tified the primary importing and exporting interests in Michigan but did not provide data on specific trade with Ontario. At present there are no published reports on the 1Bernard F. Sliger, "Michigan and a Study of its Foreign Trade, 1951—53" (unpublished Ph.D. dissertation, Dept. of Economics, Michigan State University, 1955). See, also, J. L. O'Donnell and D. I. Verway, "An Analysis of For— eign Trade Statistics of the Michigan Customs District (1951— 53 and 1958—59)," Bureau of Business and Economic Research, Michigan State University, East Lansing, Michigan, 1961. 2The Legislative Reference Service of the Library of Congress, Foreign Trade Interests in the State of Mich- igan, House Document No. 209, 1957. trade between Michigan and Ontario. PRIMARY DATA Primary data were obtained through the use of mail questionnaires and personal interviews. A total of 2,179 questionnaires were mailed to com— panies located in Michigan and Ontario. These included 1,001 questionnaires sent to Michigan manufacturing com- panies, 1,008 to Ontario manufacturing companies, 109 to Michigan motor carriers, 56 to Ontario motor carriers and 5 to the railroads that participate in the rail traffic crossing the Michigan—Ontario border. Copies and details of the questionnaires and information about the returns appear in Appendix A. Interviews were conducted with Michigan and Ontario government officials, customs officials, officials of manu— facturing companies in Michigan and Ontario, officials and employees of various Michigan and Ontario transport com— panies, and many other people who had some knowledge of, or an interest in, Michigan and Ontario trade and transpor— tation. TERMS AND DEFINITIONS Some general terms used in the dissertation are defined below. Other terms will be defined in the text as necessary. 1. "Reciprocity" as used here means a mutual ex— change of special privileges between two countries, to the advantage of both. It is the principle whereby one country (A) grants specific concessions, i.e., outright waiver of taxes and fees, to country (B), providing country (B) does the same for country (A). 2. "Transport reciprocity" means reciprocity agree— ments or arrangements between sovereign states pertaining to the carriage of goods by a mode of transport. 3. “Mode of transport“ refers to one of the five common types of transportation such as air, rail, waterborne, pipeline, and motor truck. 4. "Private motor carrier" means the load being hauled is the property of the owner of the vehicle. 5. "Common motor carrier of property" means any person who holds himself out to the public as being engaged in the business of a common carrier as at the common law, . . . in the transportation by motor vehicle from place to place upon or over the highways of the state of Michigan, the property, or any property, or any class there— of of others who may choose to employ him.1 The short title of "common motor carrier" will be used throughout the study. 6. "Contract motor carrier of property" means any person engaged in the transportation by motor vehicle of property for hire upon the public highways of Michigan other lMichigan Motor Carrier Act, 254 of Public Acts 1933, Article 1, Section 1, paragraph (f). than as a common carrier of property, either directly or through any device or arrangement.1 Normally the carrier contracts with certain manufacturing companies to transport their products. 7. "For hire" means Public Commercial Vehicles (P.C.V.) owned and registered in Ontario, operated for com— pensation beyond urban areas. This is comparable to the Michigan common motor carrier. In this study the term "On— tario common motor carrier" shall be used in place of "for hire" carriers. 8. "Private intercity" means Ontario private non- farm commercial vehicles operated beyond urban areas. In this study the term "private motor carrier" will be used in place of "private intercity." 9. "Trade" is used here in a narrow sense of the term. It refers primarily to the tangible products of trade, i.e., manufactured goods, raw materials and semi-processed goods. The definition excludes all intangible items and non-trade transactions such as tourist travel, service, and financial transactions, primarily because these items are not significantly influenced by commercial transport reciprocity as defined above and examined in this study. 10. "Commercial motor vehicle" means any motor vehicle having permanently attached thereto a truck or delivery body, or a highway tractor with a fifth wheel lIbid., paragraph (i). IH used for hauling purposes on the highways. 11. "Trailer“ means any vehicle that is at any time drawn upon a highway by a motor vehicle, designed to transport property and considered to be a separate vehicle and not part of the motor vehicle by which it is drawn. The term includes the vehicle called a "semi-trailer“ which is a trailer mounted to the fifth wheel of a tractor. SCOPE AND LIMITATIONS OF THE STUDY The primary concern of the study is with the trade and transport reciprocity between Michigan and Ontario. Background data are presented for Michigan and Ontario with respect to their contiguous geographic location, population, work force, personal income, value added by manufacture, and size and location of the principal markets. The study concentrates on manufacturing companies that are interested in the export markets of Michigan and Ontario. Manufacturing companies in both jurisdictions are surveyed regarding value of shipments to various markets, mode of transport utilized to reach each market, and prob- lems of initiating or expanding trade between the two areas. Primary emphasis is placed on company shipments with little consideration being given to the inbound traffic. Problems of tranSport service between Ontario and Michigan, caused by the existence of the border, are ex- amined from the shipper's and carrier's point of View. Reciprocity between Michigan and Ontario is examined for (TH its effect on the modes of transport and the movement of goods between the two areas. Data pertaining to the primary—extractive industries are derived as much as possible from secondary sources. Secondary data on commodity origin and destination are gravely limited. What is available affords little aid to this study; as a consequence, findings must be based on primary data. A policy of non—disclosure of the identity of com- panies was observed throughout the study. Some information was given in confidence with the understanding that it would serve as background material and not be included in the written report. Therefore, some of the more interesting statistics and data had to be eliminated, or where possible, aggregated in order to prevent disclosure of the source. No attempt has been made to relate or derive elab- orate location theory from this study. Although such an analysis could be interesting and rewarding, it is not the purpose of this study. Very little consideration is given to the problem of documentation required for custom clearance. It is rec— ognized as a problem that has some influence on Michigan and Ontario trade, but time and financial resources did not allow pursuing the matter in detail. POSSIBLE CONTRIBUTIONS The stated policy objectives of both Michigan and Ontario are to increase their economic output and thereby provide high standards of living and more employment for their citizens. A greater flow of trade between the two jurisdictions could aid in this expansion and thus be bene- ficial to both economies. The law of comparative costs is a basic principle of international trade. Stated differently, it is the dif— ference in the costs of production between nations that provides the basis for trade. Trade free from artificial barriers allows economic specialization and results in op— timum output from scarce resources. Free trade encourages economic growth in the industries where the state has a comparative advantage. Artificial barriers distort the economies and may hinder the economic growth. Thus, those barriers that no longer serve the best interests of their respective societies, should be removed. This study examines the trade flowing between Mich— igan and Ontario. Many of the problems and artificial re- strictions encountered by the shippers and carriers in each jurisdiction are presented and discussed. Recommendations as to possible ways of eliminating the various restrictions are set forth for consideration. The study indicates some areas and problems where further research and consideration would be beneficial for the state or province. ORGANIZATION OF THE STUDY The first chapter is an introduction to the study. IHE 10 The second chapter contains material pertaining to the lo- cation and economic aspects of both Michigan and Ontario, and provides a setting for the discussion of trade and reciprocity in the ensuing chapters. The third chapter is used to present data on the specific trade between Michigan and Ontario. Data obtained from the manufacturing companies are presented first, fol- lowed by the origin and destination statistics of transport carriers, closing with an analysis of some of the obstacles to Michigan and Ontario trade. Chapter four contains a discussion of the history and origin of the power to regulate commerce and transport; information pertaining to the transport regulatory agencies in Michigan and Ontario; and closes with a consideration of the present transport reciprocity agreement. Transport problems and reciprocity as viewed by the exporters and carriers are discussed in chapter five. The final chapter is used to present some conclu— sions, and make some policy suggestions for Michigan and Ontario. . k ('1'. CHAPTER II MICHIGAN AND ONTARIO: CONTIGUOUS, INTERIOR ECONOMIES SEPARATED BY NATIONAL BOUNDARIES INTRODUCTION The major purpose of this chapter is to provide background information on Michigan and Ontario as the basis for the discussion of trade and transport reciprocity in the ensuing examination. A brief geographic description will be presented first, then economic data for both Mich— igan and Ontario will be examined, and finally a discussion of the influence of a political border completes the chapter. GEOGRAPHIC LOCATION As shown by Figure 1, Michigan and Ontario are lo— cated in the interior of the North American Continent. The major portion of their border lies nearly in the middle of the Lakes Superior, Huron, St. Clair and Erie. They do, however, share over one hundred miles of border, narrowly separated by rivers and channels. Part of this common bor— der is in the vicinity of Sault Ste. Marie, as shown in Figure 2. Here Michigan's Upper Peninsula is separated from Ontario only by the St. Mary River which may be crossed by the International Bridge or 300 Line railroad bridge. The remainder of the common border is in the thumb area of the lower peninsula, as shown in Figure 3. The two 11 flux-.1 '._I‘-' : mmumum 0.3.35 9.3 33 momcmu "Ho mm: .H 0.595 . coo «(v and O / My 31? fl _/(_ 12 l4 nuwuu "—9-.- Beach Innwnu 11 am» P I ovmcuL ' mu: F" Ravensvtod ." '1 DGI BIOS DDDGEDOS'A" PINK - anus "° ‘ ; summer: 0 Ul ca nun ‘ e Gmsse Polnte FINDS o r Painle $I ~9\m‘. L-=" ,. Dearbor u ' Sse ., M ,3.- .A "mm—y, Gross: Polnlc Park I ‘ 4 o \__r Ravemde . 0 _ 0 m8 m. ; rellv‘ I: .. z o W 2 , v % I \\ a “3“" ’0 K t \ og‘ 2 a 'II ‘ I [I j? ytmfi; 7 Q_. _® EfiIngi . a ,0 r s. , ’ Highm. '. . - o'° ,/ “ _ , 9’ .10 ”a ® I gelown . "n ’Ws 2' , ‘ l " 5. m (3g 10;, ‘ . ./ (re/mm u ‘ ”gum: 0 4'33? mg 0 o M '13 x 9 .Eatofivoll'aflh day I I w 0‘ Staying; .' 3323:1111 / 'I 9 5 'OA. 0 Ochduu :0 . . . \ x . a”. ‘zwu & m a 2 WM“ '9' \. PM Mm. ”"9“" fl 0. ' woman .1" M 9? // nu ~ ouch“. - ' ronn run - . . mm! ' . urn "" PI’LIE flu ' I) a k In. mqu ...‘."f.‘;‘.‘,fi? _ “mm...“ '--§ . 5141-0 -' if}? ' " ' 0 10 nun-u" Source: American Automobile Association, Washington, D.C. Figure 3. Port Huron and Detroit ports-of—entry — ‘ 12 33.3 nouns 93 van mumnmu mo mm: . H 0.33m 13 mg: v ~- MARQUETTE \__/\\ 32%‘g Sault Ste. Marie/ N ~~~~~ L: Q '{S‘ldtgug‘ ' “H.4- 043V ' Q VJX/flc: u (tori: Canada v SM no g7 . /; . ‘R ,‘s. a.” 'ufév. saw I. ’5 ‘® 75 ' ‘ NATIONAL ;' ~ GD 0 8 “J V M l Kmvoss / I. . ( . Cfltflvfifll m\ o . sun "DI '~ \ ‘ "an “ ' o noun ..‘r~‘.- ‘ nan-u" 03% Man C I .1 0“ ‘V ‘5‘ :V:" :~ . ‘ J, smt nu 1'0“" * . . 003'), '1 m 13 .‘ " M'»- C . - #:L[ s . _. I Q ”1‘ ‘ ~ ‘ L. N, O I o I O PC‘CG'“ o t, o v I num- . sun Mn ‘- .IU.’ you" {C (4‘- "M ‘4 ‘ ‘0 32 Source: American Automobile Association, Washington, D.C. Figure 2. Sault Ste. Marie port-of—entry 14 runtnu- tuu.nno Beach 1‘ N w \C’el‘ Inuwuu ‘3‘ IIACN 0 Hanson," , ran 0 0 “9°" 1’ Ravenmdd'" "”100" 0. m a. a 3...‘ 3 Point ‘ Edw rd Fore“. w . w“; A450 I ()6! nos . _ ”sun mu ’Vplys “0 ‘ ’4’ Ville ’/ wood - Mansion.) "'9 k A . g A ‘- -' A OONAC O 5'!!! PA“! N "or: ‘0 , .\ l Grosse Pointe Show: Gtosse Pdnte Farms Point: 1 A rosse . “ "04!! L c . rosse Pomle Potk L a k e .. Ruvemde \ ‘11..” "'IV I- I , ’ ec mseh . i 9"» ‘ 1' Sta Clalr “ {A 619 d tt ‘ an ’49" ° C \ >5“: t o U V 9 \ ‘Ih \@ u outim @ mi ,‘Qh. 3‘ x . . " .p a ‘ . /‘60 Ha .. a. «. Q Palm / 0 endow Park WIEIIU 'IOVIICMQ~ 'AII A Amherst ' “mu burg 0 2 ' ~ ~- \ / .P/ am, «on ' 4* 4:332. ouccnaor O M “.:?:3‘~° .. .muo were. "a “m; '. I: 51410 4' °. 0 on unmnr Source: American Automobile Association, Washington, D.C. Figure 3. Port Huron and Detroit ports-of—entry 15 jurisdictions are separated at Port Huron by the St. Clair River which flows south from Lake Huron for about 35 miles, emptying into Lake St. Clair. At Port HUron, highway traffic crosses the river by the Blue Water Bridge, while the rail- roads use a tunnel. At four small towns south of Port Huron (St. Clair, Marine City, Roberts Landing, and Algonac) the river may be crossed by ferry. These, however, are used primarily for passenger cars. In the vicinity of Detroit and Windsor the land area is separated by the Detroit River. The river is about 30 miles long and flows from Lake St. Clair to Lake Erie. Highway traffic may cross the river by the Detroit-Windsor tunnel, or by the Ambassador Bridge. All railroad traffic crosses by ferry. Table 1 shows a comparison of the size of United States, Michigan, Canada, and Ontario. The total land area of Ontario is six times that of Michigan, or equal to the states of New York, Pennsylvania, Ohio, Michigan, Indiana, Missouri, Illinois, and Wisconsin taken together. However, the southern industrial and agricultural section of Ontario is about the same size as all of Michigan. Geographically, Michigan lies south of the northern region of Ontario and is contiguous with part of southern Ontario. The western half of Michigan's upper peninsula is made up of old limestone and sandstone formations containing 16 Table 1. Comparison of the size of United States, Michigan, Canada, and Ontario (Square miles) Inland Great Total Land Water Lakes square area miles United States 3,548,974 66,237 60,489 3,679,700 Michigan 57,022 1,194 38,575 96,791 Michigan as a per cent of United States 1.6% 1.8% 60.0% 2.6% Canada 3,560,238 291,571 35,908 3,887,717 Ontario 344,092 68,490 35,908 448,490 Ontario as a per cent of Canada 9.7% 23.0% 100% 11.5% Sources: Statistical abstract of the United States, 1964; Michigan Manual, 1963-64; Canada Year Book, 1963—64. iron and copper deposits. Through the years the depletion of these metallic ore deposits has effected a decline in the economy of this part of the state. In the eastern half of the upper peninsula and the northern half of the lower peninsula, cattle and a few field crops are raised. Both are considered to be marginal agri- cultural areas because of poor soils, a small amount of rainfall, and a short, unpredictable growing season. One exception is the fruit area around Grand Traverse Bay in the northern part of the lower peninsula. However, most commercial agricultural production is found in the southern half of the lower peninsula. 17 Ontario is separated into two definite geological regions, with the dividing line about fifteen miles north of the 46th parallel, or nearly due east of Sault Ste. Marie. This line separates the heavily populated and industrialized region of the south, from the sparsely inhabited, mineral and mining area of the north. The northern region of Ontario extends from the 46th parallel north to 57° latitude at Hudson Bay, and west from 80° to 90° west longitude. It covers approximately 294,000 square miles of land and is a vast area of mineral and forest wealth. While it is thinly inhabited (3 persons per square mile), with only 14% of the Ontario population, it still accounts for close to 40% of the total mineral output of Canada.1 This includes 85% of the nickel, 50% of the copper, 60% of the gold, 25% of the iron ore, and 75% of the uranium that is produced in Canada. There has also been an increase in the production of sand, gravel, stone, and cement in recent years. Ontario has about 262,000 square miles of forested land which supports a large pulp and paper industry. It produces close to 30% of the paper output of Canada.2 The southern region of Ontario contains about 50,000 square miles of land and is roughly triangular in shape, lying between Lake Huron on the west, Lakes Erie and Ontario lCanada Year Book, 1963—64, p. 11. 2Ibid., p. 12. 18 on the southeast, and the Ottawa River on the northeast. It is the most densely populated (109 persons per square mile) and highly industrialized area of Canada. The focal point of industrial development is Toronto, the second larg— est city in Canada. Hamilton, located at the west end of Lake Ontario, is the steel producing center of Ontario. Southern Ontario, favorably endowed in climate and soil, is the most highly diversified and productive agri- cultural area in Canada. It specializes in fruit, tobacco, commercial vegetables, dairy products, and cattle. Geographically, the way in which Michigan and On— tario are located in relation to the Great Lakes affects all aspects of their economies. Because of their location, a large volume of commerce crosses Michigan and Ontario flowing both to and from various parts of Canada, United States and the world. This commerce moves on the overland route or by the Great Lakes waterway. The primary overland route is the corridor formed between Lake Huron on the north, and Lake Erie on the south, in which Michigan and Ontario are connected by two gateways,1 one at Port Huron, and the other at Detroit. This route is used extensively by the railroads serving Michigan and Ontario, and by many United States and Canadian motor carriers. 1Gateway is used here to indicate the point of cross- ing the border between Michigan and Ontario, where commer- cial traffic may be cleared through United States and Canad— ian customs. 19 A secondary overland route is the corridor formed by Lake Superior on the northwest and Lake Huron on the southeast, where Michigan and Ontario are connected at Sault Ste. Marie. The Sault Ste. Marie gateway serves primarily the 800 Lines railroad and some Canadian and United States motor carriers. There is considerably less traffic on this route than on the main route in southern Michigan and Ontario. Michigan and Ontario enjoy the advantages accruing from the use of low cost waterborne transport in the Great Lakes for intrastate (intraprovincial), interstate, and international trade. The Lakes serve as a shipping route for the economical movement of bulk commodities. Such ma- terials as grains, oil and oil products, metallic ores, non-metallic minerals (gypsum, sand, gravel, and limestone), and forestry products are moved extensively by waterborne carriers, to and from Michigan and Ontario ports. Internationally, the Great Lakes—St. Lawrence Sea— way furnishes a unique seagoing trade route. Few interior regions can boast of providing such advantages for reaching world markets as:1 Low transport and distribution costs, low intermediary and service costs, less loss and damage in transit, and more direct control over shipments. 1"Toward a Trade Expansion Policy for the Midwest," a statement prepared for the Midwestern Governors' Confer- ence, at Minneapolis, Minnesota, Sept. 10, 1964, by J. L. Hazard, Michigan State University, p. 12. 20 However, there are three technical limitations that restrict the Seaway's usefulness:l seasonal—-it is open for navigation approximately eight months of the year; di- mensional——determined by the length, breadth, and depth of the locks; and directional——opens into the North Atlantic, limiting the advantage to trade moving to the south and west of the Seaway opening. The last limitation, however, is the only permanent obstacle, as the other two will eventu— ally be overcome by technological progress. ECONOMIC ASPECTS OF MICHIGAN AND ONTARIO POPULATION AND WORK FORCE Although Canada has a similar geographic location and is slightly larger than the United States, it still has only about one—tenth as many people. A comparison of the size of the population and work force of United States, Michigan, Canada, and Ontario is shown in Table 2. Michigan, with 140 persons per square mile, accounts for 4.3% of the total United States population, but only 3.4% of the work force. Only 31% of Michigan's population is included in the state's work force, compared to the na- tional average of 39%. It appears that Michigan has a larger proportion of unproductive people than does the nation as a whole. Ontario is just the opposite, with 34% of the total 1Ibid., p. 3. 21 Table 2. Population and work force of United States, Michigan, Canada, and Ontario, 1961 Persons Work force per Work as per Population square force cent of 000) mile (000) population United States (1961) 183,043 51.6 71,063 39% Michigan (1961) 7,993 140.0 2,437 31 Michigan as per cent 4.3% 3.4% of United States Canada (1961) 18,238 8.6 6,472 35% Ontario (1961) 6,236 18.1 2,392 38 Ontario as per cent 34% 37% of Canada Sources: Statistical Abstract of United States, 1964; Agri- cultural Statistics, USDA, 1963; Ontario Statis— tical Review, Dept. of Economics and Development, Toronto, Ontario, 1963. Canadian population and 37% of the Canadian national work force. The Ontario per cent of population in the work force is 3% higher than the Canadian national figure, or about equal to that of the United States. About 38% of the On— tario people were working as compared to 31% for Michigan. Thus, although Michigan has 1,757,000 more people than On— tario, her actual work force is only 45,000 greater. One—third of the Canadian population lives in On- tario. Eighty—five per cent of these people are concentrated in the southern section of Ontario, as shown in Figure 4. The heaviest populated area surrounds the west end of Lake Ontario in the Kitchener, Hamilton, and Toronto section. mCOHmmu an coaumwpmma oahmuco mo soaumuoq .0 muommm I‘llll onop 0. .00— .:030: 0.523% .0 c3330.... r a . 3.50:3m .0 .300 0.320 0.: .3 to.0E..-w 0—00 300.00g onop 0 H3 5 5 8.3.03 .0 009.3 3.5600 0.... >3 v0.0.5.6 .20» on: . O _ a < h 2 O a WUHEMWOU GWO wwmmuOWHRMWMH s... , . m o o 0.266 33w 2%.... Emma 53..” 9.8 an 3.2 9.20 a 3 H H62 . o I 0.0: n60— kéo— Nun. vdo— —.mm .20 .>>.z.t02.9.o.. on m 3.“ OH HMO. o muusom 0.93 ong Noon ad; N3.“ 6.: 0.52.0 50.32.:02 on . . 0&3 Odom inn“ o.—nu v.nv~ QNKN son 5.9000 km . oinn «.23 0.Vom o.—n~ 0.3.“ 0.0—“ to...“ 0:20 b2...: on ong «flaw «Jun nKoN nme edu— ..0_U .3 8.0.. no a . Odom 1;.” «.0; odnn odvu ad; 05 2.0.. vn . ca? 33 3% 3.3. 33 32 2322 an 08.. 1.5 I owns; took.— 363 23.. 32 3.3 c2282.»: an . :3 . 8o _ . .8 g odun oion QKN pin“ nNmu —Nn~ 0.320 3.0.. .n .<.m.: . 0....» _ M oon . pom a: 0.2K ndno N—on Rig 5ro odov 0:200 Eozum on - ...W — cow . —0_ § one. one .mm. .02 39 «cm. urn... oo. . 3 HAM/m , 40:030.: £1! 9 0.5.. “013.. , fl. ._0_ on . z .. /. 20:330.. . 20.0: 2 - _ . 7...: 20:0. .2. 20:2... *0 3353.. £200 00.3.2.0; 5.0.03. 0.80005 .0 auto—0200a ozmome 2 — New... . .,.._.1_.....%__...> a 5...... o oHOHOIoo. 000 £034... . 3.2.5 9.3 flooooooooooaococoooooomousLUOU.onoo-ooooo#1000000...cocoon-hororoooo ooooooocoooooo 0 ..... 00000000.... 00 0- . C O I O I O O O O O O O O O O O O O C O O O C O O O O O . .p...’.lr p . (I I! l r . D ' p 1’ ' E ’ . .71. p . (Dr - ' I p b I D h / UmnwDO 23 Table 3 shows the industry distribution of the labor force for the United States, Michigan, Canada, and Ontario for the year 1961. These are the latest figures available for comparison. Michigan's labor force is only slightly (45,000) larger than Ontario's, but is distributed somewhat differently. Michigan has 9% more of her labor force in the manufacturing industry than does Ontario, and 2.3% more in retail and wholesale trade, 6.2% more in public adminis— tration and government, and 1.6% more in agriculture. While forestry, fishing, and trapping employ .8% of Ontario's labor force, it is of little significance in Michigan. Ontario employs 1.2% more of her labor force in mines, quarry, and oil than does Michigan, and 2.6% more in con— struction, 2.9% more in transportation and communications, .7% more in finance, insurance and real estate, and 8.6% more in the service industry. Thus, the greatest differ- ences in the labor force distribution are in the manufac— turing and the service industries, and in public administra~ tion and government. Since 1961 Ontario has pursued a very aggressive program for industrial expansion and it is very possible that a larger percentage of the labor force is now utilized in the manufacturing industry. This aggressive program was responsible for establishing 143 new manufacturing operations in the year of 1961, 149 in 1962, and 173 in 1963.1 lOntario Industrial Review, 1963, Department of Economics and Development, Toronto, Ontario, p. 24. ,\ jdl.. 43;-41 F J ‘ 24 ‘0xwfixnmxwfiziwl 1 oi‘l-l «I. 5 .linz..: ..... 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N 0. mm mcflmamue 0 mQHSmflm 0. ma 0.H moa huwaHOA 00.0 000 00.0 000 00.0 000 00.00 000.0 00500500004 0 .oz 0 .oz 0 .oz 0 .02 0000000 000000 cmmflgoflz 000m0m 0000GD .0000 0000 .0000000 000 .mvmcmu .cmmHLUHS .mw0m0m pmpflcb mom muuom HOQMH Mo 000059000000 muumSUcH .m magma . . 0 1 . . . . . I . . 0 . .. . . . I . . .. .. l _ _. .. . .0 . . . . u . . a . .. . . u. .. . A .. . .. .. . _ , . . . . a I . . .. . . . . I . . . r . r .r . .. y . . n. u I . . 25 Comparing the labor distribution by industry between Michigan and Ontario, it is apparent that, although Ontario is Canada's principal mining province, her economy is highly diversified and in many respects is comparable to that of Michigan. PERSONAL INCOME Table 4 shows the personal income for United States, Michigan, Canada, and Ontario. Michigan's personal income has been about 4%% of the total United States personal income for the past decade. During the same period, Ontario ac— counted for about 40% of the total Canadian personal income. Although the labor forces are about equal, personal income in Ontario is only about two-thirds that of Michigan. Much of the difference is in wage rates in the two areas. In 1962 the average hourly earnings in Ontario for all manufac— turing concerns were $1.98 per hour,1 while at the same time, the figure for Michigan was $2.91.2 The greatest differences were in manufacturing industries; however, the general wage level in Michigan was also higher than that in Ontario. Table 5 shows the per capita income for United States, Michigan, Canada, and Ontario. In 1950 the per capita income of Michigan was $1,682, or $191 greater than lCanada Year Book, 1963-64, p. 724. . 2Statistical Abstract of the United States, 1964, p. 240. 26 Table 4. Personal income for United States, Michigan, Canada, and Ontario for selected years (millions of dollars) Mich. Ontario Total as per as per United cent of Total cent of States Michigan U.S. Canada Ontario Canada 1950 $255,473 $10,803 4.2% $13,428 $5,285 39.4% 1955 306,598 15,785 5.1 19,738 7,918 40.0 1960 398,561 18,151 4.5 27,411 11,002 40.2 1961 414,022 18,054 4.4 28,506 11,540 40.4 1962 439,661 19,307 4.4 30,794 12,292 40.0 Note: Ontario and Canada figures in Canadian dollars. Sources: Statistical Abstract of the United States, 1963, and 1964; Ontario Statistical Review for 1963, Dept. of Economics and Development, Ontario, Canada. Table 5. Per capita income for United States, Michigan, Canada, and Ontario for selected years % % % % inc. inc. inc. inc. ('50— ('55- ('60- (1950- 1950 1955 '55) 1960 '60) 1962 '62) 1962) United States $1,491 $1,866 25% $2,215 19% $2,366 7% 58.5% Michigan 1,682 2,178 29% 2,313 6% 2,416 4.5% 43.6% Canada 979 1,257 28% 1,534 22% 1,658 8% 68.5% Ontario 1,182 1,504 27% 1,800 20% 1,938 8% 64.0% Note: Canada and Ontario income in Canadian dollars. Sources: Statistical Abstract of the United States, 1963 and 1964; Ontario Statistical Review for 1963, Dept. of Economics and Deve10pment, Toronto, Ontario. 27 the United States average, and $500, or 42% greater than that of Ontario. The per cent increase from 1950 to 1955 ranged from a low of 25% for the U.S. average to a high of 29% for Michigan. Canada and Ontario were very close to the Michigan rate, with 28% and 27% respectively. In the next five years, Canada had the highest per cent increase, 22%, with Ontario slightly less at 20% and United States close with 19%. Michigan, however, increased at a very low rate of only 6% for the period. This trend for Michigan continued into 1962 with a low of 4.5% as com- pared to 7% for United States as a whole, and 8% for both Ontario and Canada. In 1962 Michigan still had the highest per capita income at $2,416, but this was only $50 above the United States average, and $478, or 24.7% greater than that of Ontario. Thus, in the twelve-year period, Ontario had grad- ually increased her per capita income in relation to Michigan. For the period between 1950 and 1962, Michigan had the lowest per cent increase of 43.6%, while Canada had the highest with 68.5%. Ontario at 64% was somewhat less than Canada, but still greater than the United States av- erage of 58.5%. Although Canada's per cent increase from 1950 to 1962 was greater than that of the United States, the gap in the dollar amount between the two national per capita figures increased by $196, resulting in a difference of $708 in 1962, compared to $512 in 1950. Comparing Ontario 28 to the United States average, the difference in 1962 had increased to $428 from $309 in 1950, or in other words, Ontario's increase for the period had not kept pace with that of United States. The change in per capita income, as shown in Table 5, has been steadily upward for the last several years. This increase has resulted in a relatively high level of per capita income in Canada, and especially Ontario. This indicates an expanding economy and should serve as a basis for continued growth in the Ontario markets that are of interest to Michigan exporters. MANUFACTURING AND VALUE ADDED Table 6 shows some manufacturing statistics for United States, Michigan, Canada, and Ontario. The data showing the number of establishments and number of employees for the United States and Michigan are for the year 1958. The corresponding Canada and Ontario data are for 1961. It is therefore difficult to make comparisons between Mich— igan and Ontario, yet some meaningful relationships can be observed. Michigan accounted for 4.5% of the total United States establishments and 5.5% of the number of the total United States employees. The Michigan establishments were slightly larger than the U.S. average, employing 12 more employees per establishment. Michigan accounted for 6.5% of the total United States manufacturing payroll, but only A ,. his: om.m1l‘it 4: 7::1\ - 29 Table 6. Manufacturing statistics for United States, Michigan, Canada, and Ontario, 1961 No. No. Ave. Payroll Value added Employ- Employ— by mfg. Estab- ees ees per (million (million lishments (000) estab. dollars) dollars) United States 299,036a 16,025a 53a $88,141 $164,369 Michigan 13,429a 88oa 65a 5,681 10,203 Michigan as per cent of U.S. 4.5% 5.5% 6.5% 6.2% Canada 32,415 1,265 39 5,231 10,682 Ontario 12,081 591 49 2,597 5,430 Ontario as per cent of Canada 37.2% 46.7% 49.7% 50.8% aFigures for 1958, latest available. All other statistics are for 1961. Sources: Statistical Abstract of U.S., 1963; Canada Year gggk, 1963—64. 6.2% of the value added by manufacture. Ontario, with about 1,500 fewer establishments than Michigan, still accounted for 37.2% of the total establish- ments in Canada. These Ontario establishments provided employment for 46.7% of the total number of Canadian em- ployees in manufacturing; accounted for 49.7% of the total Canadian manufacturing payroll; and 50.8% of the national value added by manufacture. The average Ontario establish- ment employed 25% more employees than did the average manu- facturing establishment in the rest of Canada. The average $ 30 Ontario establishment was nearly the size of that found in the United States; however, it was about 30% smaller than its counterpart in Michigan. Michigan, with only 43% as many establishments as all of Canada, had a manufacturing payroll $450 million dollars greater than the Canadian total, but produced $479 million less in value added by manufacture. Michigan's payroll and value added by manufacture was about twice that of Ontario. It is clearly evident that, based on manufacturing data, Ontario is the most important Canadian province for industrial production. Table 7 shows the number of manufacturing employees and the value added by manufacture for the most important metropolitan areas in Michigan and Ontario. Three cities and their surrounding suburbs account for 63.1% of Michigan's manufacturing employment and 62.8% of the value added by manufacture. Industry is less concentrated in Ontario. Each of the six Ontario cities individually produced over 100 million dollars in value added by manufacture. They accounted for 39.1% of Ontario's manufacturing employment, and 36.9% of the value added by manufacture. The remaining 63% of value added was manufactured in 62 cities, located for the main in the populated area between Windsor and Toronto. There were some exceptions such as Sault Ste. Marie, which had a value added of 82 31 Table 7. Manufacture employment and value added at selected Michigan and Ontario cities, 1961 Number of Value Employees in Per cent added by Per cent City manuf. est. of state manuf. of state (000) total (mil. $) total Michigan Total 890 100.0% $10,203 100.0% Detroit 450 50.6 5,139 50.3 Flint 64 7.2 760 7.5 Grand Rapids 47 5.3 514 5.0 Total three cities 561 63.1% $6,413 62.8% Ontario Total 594 100.0% $5,219 100.0% Toronto 120 20.2 851 16.3 Hamilton 51 8.6 517 9.9 Windsor 22 3.7 215 4.1 London 16 2.7 124 2.4 Kitchener 16 2.7 110 2.1 Sarnia 7 1.2 112 2.1 Total above cities 232 39.1% $1,929 36.9% Note: All Michigan statistics are for 1961; all Ontario statistics are for 1960. Sources: Statistical Abstragt for United States, 1963; Canada Year Book, 1963-64; Ontario Statistical Review, 1963. million dollars. Other northern cities such as Port Arthur, Fort Williams and Pembroke have some manufacturing estab- lishments, but together accounted for only 88 million dol- lars in value added. Figure 5 shows the value added by manufacture by areas, for both Michigan and Ontario. These are the most important industrial areas; however, there is considerable industrial activity in the whole land area extending from 'P‘nmmlul . urfl' " """""‘"""“1’~] I 1 mm .03 . mH H uco can camaradz cw mofiudu oohuoaom now ousuummsams an canon 09Hm> .m ouzmam an,» 0.6 \\ Maya 0.. \ s \\ \\x 32 flu .8 u. 1.28% ~26 WHflHHOQ m0 WCOHHHHZ 33 Benton Harbor and Muskegon on the west, to Hamilton and Toronto on the east. LOCATION AND SIZE OF MARKETS Table 8 shows the metropolitan areas of Michigan and Ontario, and their population and personal income. The personal income was computed by multiplying the city popu- lation by the per capita income for the respective state and province. Ten Michigan cities accounted for 75% of the state's population and personal income. In Ontario seven cities accounted for 55% of the province's pOpulation and personal income. Figure 6 shows the geographic location of the above metropolitan areas. The mileage circles are drawn so that the distance between each circle represents one hundred miles. Five of the Ontario markets listed in Table 8 are located within, or very near, the three-hundred-mile circle from Lansing. These five markets account for 44% of the total population and personal income of Ontario. They are the most important Ontario markets for Michigan export prod- ucts. Although it is technically possible to reach mar- kets located three hundred fifty miles from Lansing (such as Toronto) with overnight truck service, it is actually being accomplished at the present time only within the 34 Table 8. Metropolitan areas of Michigan and Ontario showing population and personal income, 1960 _l__ Personal Per cent income of state Cities Population $(000) total Michigan total (1960) 7,823,000 $18,151,000 100% Ann Arbor 172,440 398,854 2.1% Bay City 107,042 247,588 1.3 Detroit 3,762,360 8,702,339 48.2 Flint 416,239 962,761 5.3 Grand Rapids 461,906 1,068,389 5.9 Jackson 131,994 305,302 1.6 Kalamazoo 169,712 392,544 2.1 Lansing 298,949 691,469 3.8 Muskegon 149,943 346,818 1.9 Saginaw 190,752 441,209 2.4 Ten Cities 5,861,337 $13,557,273 74.6% Ontario total (1961) 6,111,000 $11,002,000 100% Hamilton 395,189 731,495 6.6% Kitchener 154,864 286,653 2.6 London 181,283 335,555 3.0 Ottawa 429,750 795,467 7.2 Sudbury 110,694 204,895 1.9 Toronto 1,824,481 3,377,114 30.6 Windsor 193,365 357,919 3.2 Seven Cities 3,289,626 $6,089,098 55.1% Note: Michigan statistics for 1960; Ontario for 1961. Sources: Statistical Abstractiof the United States, 1964; Ontario Statistical Review, 1963; Canada Year Book, 1963-64. 35 n. oaumuco 0cm cmmanuaz CH mound pagans umufiaomouumfi omuuoamm mo aoaummoq §\t& '- llvlul 404300.54 II. II II. . .|'t’"‘ll¢l"‘l|l‘.ln. ‘ .m musmwm 36 United States.1 It is much easier, faster, and simpler to ship goods from Lansing, three hundred miles to Cin— cinnati, than it is to London, Ontario. The international political border causes a delay ranging from several hours to several days, depending on the shipment. All of the major Michigan markets are within 350 to 400 miles from Toronto. Using modern four-lane highways, these markets are technically within the range of overnight truck service from Toronto. However, such service is not possible at the present time, because of the existence of border restrictions. POLITICAL BOUNDARIES AND TRADE In most cases political boundaries between countries provide grounds for establishing artificial restrictions to the flow of trade. These include tariffs, exchange con- trols, quota systems, import fees, and national policies requiring manufactured products to contain a certain per— centage of domestic materials. Even if the above restric— tions were removed from international trade, there would still be the problems of filling out extra documents, ar— ranging for border transactions, customs clearance, meeting inspection and labeling requirements, and delays in transport. 1This is based on information provided by Michigan motor carriers. With average two—lane highways, driving the allowed 10 hours, the vehicle can cover about 350 miles, for an average speed of 35 miles per hour. This may vary depending on circumstances peculiar to the movement. 37 Most borders have a "circuitry effect" caused by the necessity of directing all traffic to ports-of~entry for inspection and customs clearance.1 Edgar M. Hoover, in The Location of Economic Activity, shows the effects of a trade barrier and port—of—entry restriction upon the dis- tribution area of a production center. Figure 7 shows this effect. Figure 7. Effects of a trade barrier and port-of-entry restriction upon the distribution area of a production center Producers are located at A, and a boundary runs along the straight line HK. Within the home country, pro— ducers at A can lay down their product at the same total cost—~say $2 per unit-—anywhere on the circular arcs BC and FG. If transfer across the border entailed no extra lEdgar M. Hoover, The Location of Economic Activity (New York: McGraw—Hill Book Company, Inc., 1948), p. 218. 38 costs or circuitry at all, the product could also be deliv- ered anywhere on the arc CSF at this cost. If crossing the border does entail some extra costs but can be effected at any desired point, producers at A can sell only as far as the arc DRE in the foreign country. The cross—hatched area in the figure represents the loss of distribution range due to the barrier effect of the boundary. If it be fur— ther stipulated that all transboundary traffic must pass through the port-of-entry P, the limit of $2 delivery shrinks to GFMRLCB. The further loss of distribution range due to the funneling of traffic through P—-circuitry effect--is indicated by the area EMR and RLD.l The effect of political boundaries is not uniform on all types of commodities. If the restrictions at the border are severe, the tendency will be for the producer to concentrate on the domestic market for revenue and source of supply. Thus the area and range of benefits from eco— nomic Specialization are curtailed. The above theory is well illustrated by the three major ports-of-entry that exist between Michigan and Ontario. A11 commercial traffic must be funneled through these gate- ways. Figure 8 shows the railroads of Michigan and how they converge on the three gateways where all shipments must be cleared through United States and Canadian customs prior to moving across the Michigan—Ontario border. lHoover, p. 220. 39 «AN AHA . O “I / “Dw- _, A 7 \'\ r RAILROADS OF‘ MICHIGAN new to ammo»: . l :6 - t .' .- Ann Arbor R.R. ""' : Q is, 3 . ' l l ~" (— Boyne City R.R. l O . u. l 5 .nm ear-nun ‘ «Ir-I Chesapeake & Ohio Ry. ‘ ‘ ‘ ' § E ' ,",,,, ~ _.___, t Chicago 8. North Western Ry, . . . g l m ' .._- '—' Chicago, Milwaukee, St.Paul &Pacitic RR 0 '°“--‘£.__‘ i “‘55:? . "mm mm nun “u" 0 Copper Range RR. "“nJ- """" Delray Connecting R.R. 9 . ..--‘237 " '3‘"; '- . 2 Detroit 8. Mackinac Ry. “a"."fl‘z‘, ' m' ..l_.'(.£. '_'-’1L" :‘1—‘—"+-’—. Detroit 8- Toledo Shore Line R.R. ~\‘ g" 7 "" mr ,m,” ' ”u.“ . ”up... nun ' com Detroit Terminal KR. ' ‘2'" “ o I l l . Detroit, Toledo 8. lranton R.R. ‘ lo' “'t “"m L’s-um: l. ‘ Escanaba 8. Lake Saperior R.R. _ ,ar' "0. "Ir ' ° ' ’— — '. . ' t Grand Trunk WOI'O'H R.R. '9‘“... 5d. o“‘\ um no: T— norm . 'o uur ame- n“ ‘ Lake Superior 8. lshperning R.R. ' '31...‘: u 1 . . "~ ,‘ .... Ludington 8. Northern Ry. . ~ 1. mm- " ' ° .- ‘. L ‘9 u m'". Manistique 8. Lake Superior R.R. . ’x ._..,._. .+.. "' 2'2... ' ...... ._.:---‘m . Marquette & HU'O" Mounta'n ReRe ' . ’1 0““ s . .v ‘‘e ' 5‘ T'— New York Central R.R. A §/’ ' I Jam... -' .m... , J... .m Pennsylvania R.R.. ~ ’1’ 3. I o i . u, ”'1‘. ' c. ." 3 a .- Port Huron & Detroit R.R. ‘3, ' ._. W. "m" my.“ ..l_ I M. °. .- l, 500 Line R.R. I" t nee venture . h" ' u ‘ not“ wObOSl‘! ReRe ”’ N e .—[ .. ’0 ”.' l .‘U I.“ 'O. ". l r. . Wyandotte Southern R.R. ,’ h” 1"“..‘3': ”amt. " u " . 3 ' '1 to. _ Wyandotte Terminal R.R. 0’ ,--&"""‘ .__.. ' "" ' '31:? '..-.._..— - n ‘ .‘ l P ‘ " “ ' ‘ . I’..o-"" 2:": r were ”—1 "" ' . " e3“ '12:: rem H on.“ ‘0“ ‘ ' m e ‘ eme- ~ :- unre- un-u our on ' t” "f .2“ 5 .9. . .49 ' ‘ .“NO‘. u .e d 2:3..4 . v . - a: "1:17 : tr] 0. h .0 . ’ Ln“; ure- l neue nous \ 00-" ‘ :m I ‘ u . '3 rarer-I -e- : . O “n. e ' ‘ "I! ’ :23}: “ fl" . ._ _. . . —'—.— .”.7‘" :7 “up 0 iv tuningg’“ 00' 1': ‘ 2'“ "93“,. w. e ‘ ' en ' ' “Jew neo- 0 v. v 0 CANADA ”:z-umr e" ' . '. MICHIGAN ' 7/ " .,..... ' T" .- ) ' . .0 e '|" en “M ' o . ~ nee (eve PUBLIC SERVICE COMMISSION. «an «- enu- ,.... I. 3‘- " / \ 0 ~—_:- ”—0., .. n . - o u x 0 N" '\ - January 1964 5 . ‘ l 40 Figure 2 shows the Sault Ste. Marie port-of-entry that is used for all railroad and highway traffic that moves across the upper peninsula of Michigan, entering or leaving, Ontario. Separate customs facilities are provided for the railroad and highway traffic, which crosses the border by the railroad bridge and the International Bridge. At the Port Huron port-of-entry, as shown in Figure 3, the highway traffic crosses the border by the Blue Water Bridge, while the railroad traffic utilizes a tunnel. Three railroads, the Chesapeake and Ohio Railway Company, the New York Central Railroad Company, and the Grand Trunk Wes- tern Railroad Company, accomplish customs clearance at this point. This is the only port-of-entry used by the New York Central Railroad, and is the major crossing point for the Grand Trunk Western Railroad. About 80% of the Grand Trunk Western's Ontario and Eastern Canadian traffic that orig— inates, terminates, or crosses Michigan passes through the Port HUron port—of—entry, where it clears United States and Canadian customs.l Figure 3 also shows the Detroit port-of-entry where the highway traffic crosses the border by the Detroit-Windsor tunnel, or the Ambassador Bridge. This is the major port— of—entry for most commercial highway traffic because there is a large selection of motor common carriers available on 1Based on information gathered during an interview with railroad officials at Port Huron. 41 both sides of the border. With more equipment available, border delays due to trans-shipment may be reduced, and the possibility of obtaining direct motor carrier service from the port-of-entry to the destination is increased. The Detroit port-of-entry is used by the Grand Trunk Railroad, the Chesapeake and Ohio, and is the only crossing point for the Wabash railroad. The railroad traffic is ferried across the river. The necessity to funnel all Michigan—Ontario border traffic to the three ports-of-entry and the delays enroute to, and at the border, caused partially by the volume of traffic clearing customs,l tend to increase the cost and reduce the range of distribution for products moving across the border. SUMMARY Michigan and Ontario are located in the interior of the North American Continent. They share over 100 miles of border narrowly separated by rivers and channels, which are bridged, allowing traffic to flow between the two sovereign areas. The corridor formed by Lake Huron on the north and Lake Erie on the south includes the southern sections of Ontario and Michigan. A large volume of commerce, flowing lDelays of several hours are not uncommon, espec— ially when moving shipments from Windsor to Detroit. This information provided by Ontario carriers located in Windsor. 42 both to and from various parts of Canada, United States, and the world, uses this short-line, overland route. Although located in the interior of the continent, Michigan and Ontario utilize direct ocean shipping, via the Great Lakes-St. Lawrence Seaway, to reach world markets. Both Michigan and Ontario are highly industrialized and make significant contributions to their respective na— tional economies. However, Ontario is the source of 40% of the total Canadian mineral output, and at the same time accounts for 40% of the total Canadian personal income; 46.7% of the total Canadian manufacturing employment; and 50.8% of the total value added by manufacture. Thus, On— tario is considered to be one of the most important Canadian provinces. Ten major markets in Michigan account for 75% of the state's population and personal income. In Ontario five major markets account for 55% of the province's popu- lation and personal income. The most distant of the 15 markets are located no further than 400 miles apart. Tech— nically, overnight carrier service is possible between most of the Ontario and Michigan markets. However, due to the border regulations and restrictions, such service is not being provided. Because of their contiguous location, comparative economic development, and rising personal income, a large volume of trade flows between Michigan and Ontario. An analysis of the trade is the subject of the next chapter. CHAPTER III TRADE BETWEEN MICHIGAN AND ONTARIO INTRODUCTION This chapter will be used to examine Michigan—On- tario trade and transport. The market orientation and mode of transport data derive primarily from research surveys of exporters in both Michigan and Ontario. Additional in- formation on the origin, destination, and flow of commod- ities is based on carrier statistics. The chapter will conclude with a discussion of some obstacles to the initi- ation and expansion of trade between Michigan and Ontario. MARKET ORIENTATION AND MODE OF TRANSPORT The research findings for Michigan will be presented before those for Ontario companies. The primary empirical questions are: What is the geographic market distribution of shipments?; and What is the role of each mode of trans- port in conducting the trade? To provide perspective on the immediate future, each exporter was asked for an expres— sion of his five—year outlook. MICHIGAN MARKET ORIENTATION Secondary statistics provide little information on where Michigan establishments sell their products. There are no data on the trade between Michigan and Ontario. 43 44 Federal government statistics in Canada and the United States show exports and imports by country of destination and ori- gin. But it is impossible to determine the exports and im- ports of a particular state or province by utilizing federal or dominion data. To gain some knowledge of Michigan exports it was necessary to go directly to those who export. A question- naire was developed to secure certain information on prod- ucts exported, modes of transport utilized, and problems encountered by the exporters.1 The questionnaire was mailed to a selection of 490 Michigan manufacturing companies. It was not known whether all the companies were engaged in the export business. A total of 152 questionnaires were returned, but only 108 of these provided usable answers. Thirty-three of the 108 were not engaged in exporting, but shipped their products only to Michigan and other states. Because of the small number of responses, the re- sults are shown in Table A-1 in Appendix A. Companies are grouped according to two digit Standard Industrial Classifi- cation (SIC). There were nineteen industrial categories represented in the reporting companies. The total shipments for the sample were $446 million dollars in 1963. The shipments went to the following markets: 1A discussion of the sample surveyed, copy of the questionnaire, and information on the returns appear in Appendix A, page 245. A more complete study of Michigan's market orientation and trade is being conducted by Professor John L. Hazard of Michigan State University. 45 Michigan, 31.1%; North Central District, 32.0%; Other United States, 32.3%; Other Canada, .5%; Overseas Countries, 2.4%; and 1.7%, or $7,782,000 was exported to Ontario. The largest volume of exports to Ontario was in the machinery and metal products classifications. Much of the machinery exported represents tools and machines not manu- factured in Ontario. Some of the fabricated metal products are components of machines that are assembled in Ontario using a certain specified amount of Canadian materials. In the automotive field many body parts, that are made by the use of expensive dies, are manufactured in Michigan and exported to Ontario. These parts can be imported duty- free into Canada if the final automotive product contains 60% or more Canadian content.1 Again, because of the small number of responses, the data on the modes of transport utilized in reaching all markets by the Michigan companies have been placed in Appendix A, Table A-2. MODE OF TRANSPORT TO ONTARIO The original sample of 108 companies did not pro- vide sufficient data on the trade going to Ontario. A sec— ond questionnaire, similar to the original, was sent to the Director of Traffic of 511 additional Michigan manufacturing 1The agreement between U.S. and Canada on January 8, 1965, to abolish tariffs on new automobiles and parts for new vehicles, has eliminated the 60% requirement. 46 companies that indicated an interest in the export markets.1 A total of 204 questionnaires were returned. Of these, 163 gave answers that were useful to the study. Putting the returns of the two samples together yielded a total of 185 companies that were exporting to Ontario. Although some of the companies did not make shipments in 1963, they indi- cated the mode of transport ordinarily used. Other companies refused to divulge figures on total shipments but did indi- cate the percentage of time each mode of transport was used in reaching various markets. Table 9 shows the modes of transport for reaching the Ontario market, with the per cent of companies using each mode. This is compared to the per cent using each mode, weighted by the dollar value of shipments moving by each mode to the Ontario markets. When weighted by the value of shipments, truck trans— port accounts for 82.9% of the transport service utilized. Rail was used for 13.9% of the shipments, with air, water, and other modes being used for less than 4% of the shipments. Although the truck percentage appears high, two factors tend to influence the use of trucks: (1) the study is presenting data on manufactured products which tend gen— erally to move by truck, and (2) the distance to the Ontario markets favors the use of truck transportation. Table 10 is a comparison of the mode of transport lA cepy of the questionnaire is in Appendix A, page 255. 47 Table 9. Modes of transport used by Michigan manufacturing companies to reach the Ontario market, 1963 Per cent of Per cent weighted by Mode of transport companiesl value of shipments Truck 80.5% I 82.9% Privately owned 9.7% 11.8 Commercial carrier 70.8 71.1 Railroad 12.8 13.9 Air freight .8 .2 Waterborne .3 .2 Other3 5.6 2.8 Total 100.0% 100.0% 1Each respondent has a value of one, with 185 com- panies responding. 2176 companies gave data pertaining to their ship- ments. 3Other includes parcel post, railway express, bus, etc. Source: Survey of Michigan manufacturing companies. 48 Table 10. Comparison of mode of transport used for shipments terminating in Ontario and transit shipments terminating in Other Canada or Other United States, 1963 Per cent of companies using each mode: For shipments moving through Ontario ter- For shipments minating in Other ' terminatin Canada or Other Mode of transport in Ontario United States2 Truck 82.9% 71.8% Privately owned 11.8% 7.0% Commercial carrier 71.1 64.8 Railroad 13.9 23.2 Air freight .2 .2 Waterborne .2 .8 Other 2.8 4.0 Total 100.0% 100.0% 1Data from 176 Michigan manufacturing companies. 266 Michigan manufacturing companies reported ship- ments moving through Ontario to other Canada or eastern United States. 49 used for Michigan shipments terminating in Ontario and those moving through Ontario terminating in either other Canadian provinces or eastern United States. As the shipments move over greater distances, the use of truck transportation decreases and shipments moving by rail increase to 23.2%. The importance of the privately owned truck decreases also from 11.8% of the Ontario ter- minating traffic, to 7.0% of the transit truck traffic mov- ing through Ontario. This seems to indicate that private trucks are used by the respondents to service the closer markets, and greater dependence is placed on commercial carriers for reaching distant markets. THE FIVE YEAR OUTLOOK FOR MICHIGAN MANUFACTURING COMPANIES All companies in the sample were asked to estimate their expected shipments for the next five years. If the company expected to ”cease“ business at the end of five years, it is here assumed that it would diminish shipments 20% per year. Consequently, we assumed that a ”decrease" of shipments for the five-year period would be at the rate of 10% per year. For the sake of uniformity on the upper half of the scale, it was assumed that an "increase" in shipments would be at the rate of 10% per year. And, "ac- celerate" was then assumed to mean something greater than a 10% yearly increase, possibly approximating a gain of 20% per year for the next five years. Table 11 is a summary of the five-year outlook pre- sented by industry groups for 103 Michigan manufacturing 50 Table 11. The five-year outlook of Michigan manufacturing companies by industry, 1963 Accel- Stab- erate Increase ilize Decrease Food & kindred products 2 4 Textile mill products 2 1 Apparel & related pdts. 1 Lumber & wood products 1 1 Furniture & fixtures l 3 1 Paper & allied products 2 1 Printing & publishing Chemicals & allied pdts. 2 6 Petroleum & coal products 1 Rubber & plastics pdts. 2 1 Leather & leather pdts. 1 Stone, clay & glass pdts. 1 1 Primary metal industries 5 Fabricated metal products 5 5 3 Machinery, except elect. 11 14 5 Electrical machinery 2 3 Transportation equipment 2 5 3 Instruments & related pdts. Miscellaneous mfg. l l 1 Wholesale trade 1 1 Totals 31 55 15 2 Per cent of total 30% 53% 15% 2% Source: Based on questionnaire returns from 103 Michigan manufacturing companies. 51 companies. The prevailing attitude is one of general Opti- mism. Only 17% expected shipments to stabilize or decrease and none anticipated a cessation. Some 30% expected ship- ments to accelerate. The largest group, or 53%, expected shipments to increase. The greatest optimism was evidenced by the non- electrical machinery group, followed next by the fabricated metal products group, chemicals, transportation equipment, and food and kindred products. There is some slight dif- ference in the outlook of the 73 exporters versus the 30 non-exporters. The general outlook of the non-exporters appears to be somewhat more conservative, with 77% expecting an increase or acceleration in shipments. Of the exporters, 86.4% expect shipments to increase or accelerate in the next five years. ONTARIO MARKET ORIENTATION There were no secondary data available on Ontario's markets so questionnaires were mailed to 504 manufacturing companies that were supposedly interested in export markets.1 There were no known lists of exporting companies available so the names and addresses were taken from the 1963 Canadian Trade Index, Canadian Manufacturers' Association, Toronto 1, Canada. 1A discussion of the sample and a copy of the ques- tionnaire are presented in Appendix A, page 238. 52 A total of 115 questionnaires were returned but only 85 gave information pertaining to their markets and mode of transport utilized. Consequently, it was decided to send out 504 additional questionnaires to different manu- facturing companies. This time 102 questionnaires were returned with 88 furnishing the desired information. Thus, from both mailings a total of 173 manufacturing companies (17%) provided useful information on their markets. Table 12 shows the market orientation of the Ontario companies. Each company was requested to state its prin- cipal product. On the basis of the product, the company was classified and given a number based on the United States Standard Industrial Classification (SIC) system. Eighteen industry groups were included in the sample returns, plus one company supplying product designs. This one was placed in the Miscellaneous Business Services cate- gory. ’ Table 12 shows the industry shipments to each of the markets in dollars and per cent. Some 51.28% of the total shipments remained within Ontario. The smallest per cent shipped to the Ontario market, 35%, was by the Miscel- laneous manufacturing group, while the Textile Mill Products group shipped only slightly more, or 36%. The highest per— centage (86%) shipped to the Ontario market was by the Ap- parel and Related Products. The next largest market for Ontario manufactured products was the Other Canadian Provinces, which took 34.8% 53 an ass mma me.N ama.m sma.w mmm m nauseoua nmmam a swan .mcoum .mm as 8 mos omo.H oaa.H omH m nauseoua umrummfl a umgummg .Hm ond mmm mmm.H omm.~ man a nauseoua nonunnaa a nongam .om a m omm.a Nam.m mmo.m mom m nauseoua noaaam a manuaeozu .mN an a ma mm eon mom.m oaa.v one m mqaanaansa a maauqaua .am mma mNH.H omN.H oom.~ on H nauseoun saunas 8 Hanna .mm mm me on mmm.m moa.m m¢m.m can a nauspxam a manuacusa .mm a mnn.m am mom mma.m mma.m Nmm a nauseoua 6003 a garage .am as a one ana.e oam.m mmm a nauseoua nmhnamu a Hoummm< .mm com mma.m Hmm.m omo.oa omm m nauseoua Haas maapxoa .NN mama aman mean ooo.am mom.aaa omm.mmm www.man Noa.m ma nauseoua nouncax a noon .oN mawnpczou mouwum know camarowz momcmu oauwuco muses moamoadem mchmQEou uanszc 0600 can mmmmuo>o oa#HCD smz mango OH Imago mo MO masonm mSmcaU umfiuo Haves Hmnfisz umnfisz Aooovn mwma .mawsmmeoo mcwuopomwscme ownapco mo coauMpcmHuo porno: .NH OHQMB 54 6.4 o.o o. m.e m.¢m m.am mood momuoouuom oam.am aam.om Hom.m maa.mm 6am.mm~ mom.mma ova.mmoa oam.mm man Houoe we on m cm omH NH H moua>umm mmacamdn msoacaaaaomflz Han aam am mo mmn.o omm.m omm.m «an m moauouommaome msomsmHHaomHz on on woe mas mmm.a on N nuuzooua omuoHou w musaeswumcH sea one on ma mom.aa mam.am oma.am mom.~ m unmeaaooo cowumuuommaaua omm.a mom won mos Hma.am omm.a~ oma.mm Hmm.m mm saunasume Hmuauuuoam Hmo.m aao.a moo omo.o aao.o~ aam.am mma.am amm.m am Houauuuoao noon Ixm .mumcfinuaz aoo.m own ova ond aom.oa mam.m~ mmo.ma ama.m om nausoouo snows ovumUHunmm Hma.o~ amo.om mmo.m Hma.m~ mmm.vma oao.mmm amo.oo¢ amm.aa an nmaupnsoca Haves humaaum .mu .mm .mm .bm .mm .mm .fim .mm 55 of the total shipments. A high 13.9% of all manufactured products were exported, with 4.3% going to Michigan, .6% to New York, 4.4% to Other U.S. states, and 4.6% shipped to Overseas Countries. New York was included as a separate market because it was expected that considerable trade moved through the Niagara and Buffalo gateways to New York and eastern states. Although the large industrial horseshoe stretching from Niagara—Hamilton—Toronto around Lake Ontario is closer to New York markets, it is apparent that the companies in the sample were not trading there. Michigan was the largest single export market in the United States for the Ontario manufacturing companies. The exporting and non-exporting companies were listed separately to allow comparisons of size of shipments to each market. Table 13 shows the market orientation for ninety- four exporting companies, and Table 14 gives the same data for the seventy-nine non-exporting companies. Comparisons of the exporting, non—exporting and average Ontario company are shown in Table 15. Non-eXporting companies ship primarily to local (Ontario) markets. Almost two-thirds of their shipments remain in Ontario with the other one-third going to other Canadian provinces. The size of the non-exporting companies in the sample is considerably smaller than that of the exporting companies 56 ma 6 NHo mos oeN.H ONH H nauseoua umsuoaa a umnumaq .Nm oHH non mNm ooH.H oHH H nuusoouo nonuano o magnum .om a o avN oao omm mo N npusoouo omHNHo a nHooHamnu .mN am a ma mm mad NNm.N ooN.N omN N monrnaaosa a moauaaum .AN mNH mNH.H omN.H oom.N on H nuosoouo omnaao a umomo .oN on me on moo.m ooo.a HAN.» one m nousoxam a unannousm .mN a moN.N 4N aom omo.a ooo.m ooo a nuosooua boos w Hanson .wm 6H m mam mom mNo.H mma N nausoona ooumaou w Haummd< .mm oom oom.m oom.a ooo.o ooo H nuusoouo Hana maauxoe .NN oao ems New ooo.H mmo.mH mao.mN mam.o¢a Nam.N on muosoouo oouooax a noon .oN mmflupcsou moumum xuow savanna: momcmu owumuco muses mammoaaam mmacmmsou Hanan: aoou can mommum>o tapas: 302 uaruo 08 learn Ho mo museum mamcmu uaruo Hence wonasz umnfizz mooovm moma .mowcmaeoo mcwusuummscme owumuco mcfiuuomxm mo cOHpmucoHuo “drum: .mH manna 57 av.m mN.m as. sH.m $4.4m mN.aa sooa oam.am «Hm.om NoN.m Naaumm mmm.HoN mNo.oam ava.Noaa omn.om an we o6 m an own NH N Hmo «an no mo mas.¢ ooN.m ooa.o Now a on on now mas mNN.H on N sea one on as maa.aa mmo.om omo.os omo.N m 6mm.a mom Non mod amm.NH amm.oa mmo.am mmm.N an Hmo.m aflo.a moo ooo.a ANN.HH ooa.ma Ham.am NNm.H NH oom.m 4mm mod was ooo.m Nam.ma omm.oN Naa.a ma HNa.oN amo.om Nmo.m Nme.mN Nmo.NmH New.mNN mmm.mea aom.oa 6H mm Nan mos oNN.N omo.N omN.o Nae N ammucmuuam Hmuoa .Hom .msn .umHz mawuopomwscme msomamaamumfiz mpusooum owpmaou a mucmezuumCH broadened coagppuommcmua hnmcwnuma Hmowuuuoam Hmowuuuoam ammo Ixo .muodanumz whosooum Hobos oopmuwunmm mowuumsoca Honda aumfiflum nauseoua mmwam e hmau .mcoum .mu .mm .mm .bm .mm .mm .fim .mm .Nm H 58 «.NN o.No no.ooH monucmuumo mHm.ao aao.ma mom.oNHm oaH.o ma Hmuoa on on omH NH H oaHusuuomsoos nsomooHHoonHz .om maH mNm.oN oom.oN mmm N pomsaHsoo ooHuouuoonooua .am amw.HH meo.HH NNm.mN maa.H m sumoHnume HoUHuuuon .oN amm.mH amH.m www.mN NoH.H mH HmUHuHuoHo uamoxo .sumaHrumz .mm ooN.m www.6H moo.mN aHm.H NH nuoooouo Houms oomeHuomm .oN Hom.N NNH.N eao.oH aao.H m noHanaooH Hobos suoaHum .mm we HoN son on H monsooua nnoHo o soHu .ocopm .NN mmN NHN can on N nauseoua umsuomH a umrumoH .Hm oNv one omH.H no N nauseouo noHHana o Honnsm .om mmN.H NNo.N moH.¢ mom a ouuooouo omHHHm a nHoUHsmnu .mN mNm Haa.H oNN.N oNN m ooHrmHHnsn a mcHucHum .NN mHm oom.H mAN.N omm o nonsume a musuHausm .mN Hoe moa.H moH.N NmN m nuuoooua 6003 a nonesH .aN ANN mam.m mHH.a oam N npuooouo ooanmu a Hosanna .mN mmN.N HNm.H omo.a omm a muusoouo HHHe oHHuxoa .NN omm.Nn Nmm.Nm Nmo.mm oHN m nauseoum oouoaHH a ooom .oN moncmu oauauco mucmemflnm mammoHan newcomeou Hones: opou one mmzoum momcau umsuo Hmuoa mo Honesz mo Honesz Aooovm moma .mmflnmmEou mcflnduummscme oaunuco mcauuomxalnoc mo coaumucmwno begun: .wa OHQMH 59 Table 15. Comparison of exporting, non-exporting, and average Ontario manufacturing companies, 1963 I I; Average of Exporting Non-exporting all Ontario companies companies companiesl Average number of employees per company 323 103 49 Average shipments per company $7,476,031 $1,607,506 $996,441 Average shipments per employee $23,400 $15,550 $20,230 Per cent of shipments to: Ontario Market 49.2% 62.6% N/A2 Other Canada 34.4 37.4 N/A Note: Data on exporting and non-exporting companies pro— vided by the Ontario survey of manufacturing com- panies. 1These data were for 1961, the latest statistics available, taken from Ontario StatisticaliReview for 1963, published by Department of Economics and Development, Toronto, Ontario; and Canada Yearbook, 1963-64. 2N/A means not available. 60 using any one of the three criteria set forth in Table 15. However, they are larger than the average company in Ontario except for average shipments per employee. Some difference in size between the non-exporting company and the average for all Ontario companies would be expected due to the selection of the sample. The sample was picked so as to reach only those companies interested in export markets. The fact that many non-exporting com- panies responded indicates data for compiling the original mailing list were incomplete or inaccurate. However, having both exporting and non-exporting companies in the sample allows some meaningful comparisons to be made with respect to the differences in problems and attitudes of the two groups. Generally speaking, the comparison in Table 15 indi- cates that the non-exporting company does not have as many employees as the exporting company; shipments per non—ex— porting company are only one-fifth as large as the average for the exporting company; shipments per employee for the non-exporting company are only about two-thirds as large as for the exporting company. MODE OF TRANSPORT USED BY ONTARIO COMPANIES The mode of transport used by Ontario companies to reach their various markets is shown in Table 16. This table shows the reliance on each mode by the respondents. Some companies were reluctant to give information on the 61 Table 16. Mode of transport used by Ontario manufacturing companies to reach various markets, 1963 From Ontario to the Per cent of companies using each mode: following markets: Rail Truck Water Air Other Province of Ontario 17% 79.5% 6% 2% 2.7% Other Canadian Provinces 39.8 55 2.4 1.4 1.4 Michigan 12.9 81.6 2.3 3.2 New York 19.9 80.1 I Other U.S. States 17.4 73.8 1.7 4.8 2.3 Overseas exports 88.7 11.3 All Markets 20.7 61.4 13.6 2.8 1.5 Note: Not weighted by the value of shipments. Source: Data obtained from 173 Ontario manufacturing com- panies. value of their shipments but did indicate which modes were used to reach their markets. When the per cent of usage is weighted by the value of shipments, as shown in Table 17, it is evident that On- tario companies rely very heavily on both rail and water transportation. Several factors pertaining to Ontario may account for the greater use of these modes. A greater distance between provincial markets favors the use of rail transport. Some rail rates are kept low by government policy, thus making rail more advantageous than motor carrier, from a transport cost point of view. Ontario is also in a favorable location for the use of water transport. Some of the large industrial areas 62 Table 17. Mode of transport used by Ontario manufacturing companies to reach various markets weighted by the value of shipments, 1963 W From Ontario to the Weighted by the value of shipments following markets: Rail Truck Water Air Other Ontario 19.3% 79.7% .1% .3% .6% Other Canada 59.8 33.8 5.0 .8 .6 Michigan 27.3 72.4 .3 New York 7.5 92.2 .2 .1 Other U.S. States 47.5 47.8 4.6 .1 Overseas 88.4 11.5 .1 All Markets 32.8 59.1 6.4 1.2 .5 Source: Data obtained from 173 Ontario manufacturing com- panies. have excellent harbors. Goods can be shipped easily by water to the eastern provinces which increases the overall use of water transport. During warld War II, Canada main- tained the coastal package trades, while that of the United States was abandoned. If time is not a critical factor, waterborne transport provides the most economical service. MODE OF TRANSPORT USED TO REACH MICHIGAN MARKETS Table 18 shows a comparison of the modes of trans— port used by Ontario manufacturing companies when shipping products to Michigan. A comparison of the indicated per cent of time used by the Ontario companies in Table 18 with the same figures indicated by Michigan companies in Table 9 shows a great LA 63 Table 18. Mode of transport used by Ontario manufacturing companies to reach the Michigan market, 1963 Per cent of Weighted by the Mode of transport companies: value of shipments: Truck 81.6% 72.4% Privately owned 7.9% 28.8 Commercial carrier 73.7 43.6 Rail 12.9 27.3 Air 3.2 .3 Waterborne 2.3 0 Other 0 0 Total 100.0% 100.0% Source: Data supplied by 51 Ontario manufacturing companies that exported to Michigan. similarity with respect to the use of rail and truck. How- ever, when the per cent of time used is weighted by the value of shipments, rail and private truck are shown to be used more than twice as much by Ontario companies. Only 43.6% of the shipments across the border move by commercial carrier for Ontario companies, versus 71.1% for Michigan companies. One explanation for the difference in the use of modes in Ontario is that Primary Metal, and Machinery, ex— cept Electrical, respondents weighed heavily in the sample. The Primary Metal industries use rail approximately 40% of the time. Machinery, except Electrical, uses private truck a large per cent of the time, and so did Food and 64 Kindred Products industry which weighed heavily in the num- ber of respondents. Fifty companies in the sample made shipments either to Michigan, or through Michigan, or both. Ontario ship- ments crossing the Ontario-Michigan border had the follow- ing destinations in 1963: To Michigan $15,375,000 61% To Other U.S. 4,012,000 16 To Mexico 15,000 To Other Canada 5,831,000 23 Total $25,233,000 100% Table 19 shows the mode of transport used to reach the above markets with the per cent of time used weighted by the value of shipments. Table 19. Mode of transport used by Ontario manufacturing companies when shipping across the border to Michigan, other United States, and other Canadian markets, 1963 From Ontario to Mode of transport the following weighted by the value of shipments markets: AIR RAIL WATER TRUCK OTHER Private Commercial All Border Traffic .2% 25.7% 0 24.2% 49.9% 0 Terminating in Michigan .3 27.3 0 28.8 43.6 0 Terminating in Other United States 27.8 0 1.2 59.9 0 Terminating in Other Canada 19.9 0 27.7 52.4 0 Source: Data supplied by 50 Ontario manufacturing companies involved in this traffic. 65 Trucks carry approximately 75% of all shipments moving from Ontario across the Ontario-Michigan border. Privately owned trucks are used considerably more by Ontario companies than by Michigan companies on the opposite move- ment. Although the use of privately owned trucks appears to be high, it actually is quite consistent with secondary data reported by the Dominion Bureau of Statistics. In the sample, privately owned trucks moved 32.6% of all exports moving by truck crossing the Ontario-Michigan border. Ac- cording to the Dominion Bureau of Statistics publications, private trucks moved 34.4% of all international truck traf- fic, in tonnage, for the year 1962.1 Some 27.3% of Ontario exports terminating in Mich— igan were moved by rail. This is just twice as much as was moved by rail from Michigan to Ontario (13.9%). On the move- ment from Ontario to the more distant markets, Other U.S. and western Canadian Provinces, rail is used 27.3% and 19.9% of the time respectively. This compares very favorably with the 23.2% the Michigan companies report on shipments through Ontario to eastern Canada and U.S. by rail. THE FIVE-YEAR OUTLOOK FOR ONTARIO MANUFACTURING COMPANIES Each company was asked to estimate his outlook re— garding total future shipments for the next five years. Most of the companies were Optimistic. Table 20 shows the 1Motor Transport Traffic, Province of Ontario, 1962, Dominion Bureau of Statistics, Ottawa, Canada, p. 11. 66 Table 20. The five-year outlook of Ontario manufacturing companies by industry, 1963 Accel- Stab- erate Increase ilize Decrease Cease 20 Food & kindred pdts. 3 9 1 22 Textile mill pdts. 1 2 l 23 Apparel & related pdts. 4 24 Lumber & wood pdts. l 5 l 25 Furniture & fixtures 3 4 26 Paper & allied pdts. 1 27 Printing & publishing 2 1 l 28 Chemicals & allied pdts. 2 6 l 30 Rubber & plastics pdts. 1 2 31 Leather & leather pdts. 3 32 Stone, clay & glass pdts. 2 l 33 Primary metal industries 2 13 34 Fabricated metal pdts.6 20 3 1 35 Machinery, except elect. 4 l8 2 1 36 Electrical machinery 10 11 2 37 Transportation eqpt. 2 3 1 38 Instruments & related pdts. 1 1 39 Miscellaneous mfg. 3 2 73 Miscellaneous bus. serv. 1 Totals 44 103 15 3 Per cent of total 27.7% 62.4% 9.1% 1.8% Source: Based on questionnaire returns from 165 Ontario manufacturing companies. 67 outlook for 165 companies listed by industrial groupings. Only three companies expect decreased shipments, and fifteen expect shipments to stabilize. These companies were scat- tered throughout the industry groups and apparently reflected individual company attitude rather than a general anticipa- tion of weakness in a particular segment of the economy. The remaining companies in the sample were optimistic with 67.4% expecting an increase and 27.7% expecting shipments to accelerate. It is assumed here that an increase means generally up to 10% per year, while acceleration indicates improvement of 20% or greater per year. A comparison of the 69 non-exporters with the 96 exporters in the sample shows that the exporters again are slightly more optimistic than are the non-exporters. Exporters Non-exporters Accelerate 30% 22% Increase 64 61 Stabilize 4 16 Decrease 2 1 Cease O O 100% 100% The Ontario companies, both the exporters and non- exporters, were more optimistic in their outlook for the next five years than were their counterparts in Michigan. CONCLUSIONS The survey results indicated that, by value, 1.7% of Michigan's manufactured products are shipped to Ontario. This was a small sample of Michigan manufacturing companies 68 and was not selected at random so there is no way of knowing whether the returns may be representative of all Michigan companies. It is known that the survey did not include shipments from the three large automotive companies which account for a large amount of the total shipments to Ontario. However, assuming that the 1.7% is fairly accurate, and that Michigan's total shipments for 1963 amounted to 27 billion dollars, then shipments of manufactured products would be 459 million dollars.1 This would only represent the shipments of manufactured products. Adding to it the shipments of the bulk industries, i.e., sand and gravel, limestone, petroleum, and grains, would probably bring the total to about 500 million dollars of exports to Ontario for 1963. Looking at Michigan's receipts from Ontario, Table 12 indicates that 4.3% of Ontario manufactured products are shipped to Michigan. Again, the Ontario sample was not a random sample so that projections to the total economy would be erroneous. However, to get some idea of the mag— nitude of Ontario shipments to Michigan, we will apply the 4.3% to the 14.5 billion dollars estimated by the Ontario Department of Economics and Development as being the selling 1Total shipments here means the value of products shipped to all destinations from Michigan plants. There will be some duplication involved especially on semi-proc- essed materials shipped to other Michigan plants for further processing. 69 value of factory shipments for 1963.1 Shipments to Michigan then would be approximately 544.4 million dollars of manu- factured products. If the value of the products of agri— culture, forests and mines that were exported to Michigan were included, the total value, based on the above, would be close to 600 million dollars. This is probably an in— flated figure for the 1963 total value of Canadian imports into the Michigan customs district was 1,040.4 million dol- lars.2 The question is how much of the customs district figure originated in Ontario, and how much of that originat- ing in Ontario terminated in Michigan? Although the above figures are not as precise as would be desired, these estimates do provide some idea of just how important Michigan markets are to Ontario, and Ontario markets are to Michigan. The survey provided some data on the dollar amount of trade between Michigan and Ontario. But to get some idea of the quantitative flow of commodities, it will be necessary to examine carrier statistics. This will be done in the next section. ORIGIN, DESTINATION, AND FLOW OF COMMODITIES This section will present data based on carrier lOntario Statistical Review, 1963, published by the Department of Economics and Development, Toronto, On- tario, p. 19. 2“Summary Report FT970 I United States Foreign Trade," Bureau of the Census, Foreign Trade Division, De— partment of Commerce, Washington, D.C., 1963. 70 statistics providing some explanation of the origin, des- tination, and flow of commodities. The carrier data are not as complete and specific as desired, but are the best available at this writing. MICHIGAN-ONTARIO COMMERCE Table 21 is presented to show some idea of the total trade in tonnage, that moves between Michigan and Ontario. It is a compilation of statistics from many sources and does not provide the precise answers that are desired. However, it does have value as a first attempt at showing the aggregate trade between Michigan and Ontario. In evaluating the figures, three qualifications must be considered. First, the statistics for the modes of transport are not all for the same year. The data on recent years waterborne traffic are not yet available, so the data used are older than we would like; however, they , do provide some useful information. Second, wherever possible, the data have been pre— sented to show the trade having an origin and destination in either Michigan or Ontario. There is, however, a con- siderable flow of commodities across both jurisdictions. The railroad data do not provide detailed information of the Ontario origin and termination of trade. Thus, a break- down of some totals into commodity groups is impossible, unless it is done on some prorate basis. It is not always possible to make specific statements regarding the commod— ities that make up the aggregate shipments. 71 Table 21. Total Michigan-Ontario commerce, 1963 Tons Code Michigan Michigan Total No. Commodity classification shipments receipts commerce 012 Crops, veg. and fruits 96,454 11,219 107,673 013 Animals and products 6,013 10,419 16,432 8 Timber, pulp & wood pdts. 19,030 596,582 615,612 10 Metallic minerals & metals 1,214,066 1,432,199 2,646,265 12 Coal & coke pdts. 103,355 729 104,084 13 Petroleum pdts. 470,506 2,149 472,655 14 Non-metallic pdts. 611,373 253,304 864,677 20 Food and pdts. 29,749 215,969 245,718 22 Fibers & textile mill pdts. 215 888 1,103 26 Paper & allied pdts. 15,759 224,490 240,249 28 Chemicals & allied pdts. 61,821 90,319 152,140 30 Rubber & plastic pdts. 3,407 3,184 6,591 32 Stone, clay, & glass pdts. 198,333 3,481 201,814 34 Fabricated metal pdts. 117,987 59,526 177,513 35 Machinery except electrical 63,785 54,589 118,374 36 Electrical machinery 2,156 1,462 3,618 37 Transportation equipment 453,399 9,916 463,315 39 Miscellaneous manufacturing 335,238 252,273 587,511 Total 3,802,646 3,222,698 7,025,344 Percentage 54% 46% 100% Note: For information on data see footnotes in Table 22. Sources: Tables 22 and 23. 72 Third, the highway statistics were estimated from export survey studies and total shipments of manufacturing .industries in both Michigan and Ontario. Table 21 shows some interesting facts about the trade between Michigan and Ontario. Michigan ships nearly nine times as many Crops, Vegetables and Fruits to Ontario as she receives. The primary movement of Animals and Prod— ucts is in the opposite direction with about twice as much received in Michigan as shipped. About 97% of the traffic in Timber, Pulp and Pulp— wood, and 93% of the Paper and Allied Products move into Michigan. But 99% of the traffic in Coal and Coke, 99.4% of the Petroleum Products, and 71% of the Non—metallic Min— erals (sand, gravel, limestone, etc.) moves from Michigan as shipments to Ontario or eastern Canada. Some 54% of the total border traffic in Metallic Minerals and Metals is shipped from eastern Canada, or Ontario to Michigan. How— ever, Michigan ships a total of 140,000 tons more in raw materials (Non-metallic Minerals, and Metallic Minerals and Metals) than she receives. Of the total border traffic in Food and Products, Michigan receives 88% of the tonnage, in Textile Mill Prod~ ucts she receives 80% of the tonnage, and in Chemicals and Allied Products the figure is 59%. For the remaining categories of products that cross the border Michigan is a net shipper as follows: Rubber and Plastic Products, 52%; Stone, Clay and Glass Products, 73 98%; Fabricated Metal Products, 66%; Machinery Except Elec- trical, 54%; Electrical Machinery, 60%; Transport Equipment, 98%; and Miscellaneous Manufacturing, 57%. Considering only all categories of manufactured products, Michigan ships 58% of the total tonnage crossing the border, or stated in tons, she ships 1,281,859 tons and receives 916,097 tons. Table 22 shows Michigan shipments to Ontario by mode of transport. A comparison of the modes shows that the greatest tonnage, about 54% of the total, is moved by waterborne carriers, with Metallic Minerals and Metals, Petroleum Products, and Non-metallic Minerals accounting for most of the tonnage. Since the waterborne figures were published in 1960, the movement of Petroleum Products has diminished. This is due mainly to the increased use of the Lakehead Pipeline System connecting Western Canada with Ontario. Truck carriers account for about the same tonnage as hauled by rail, while air carriers account for a very small amount of tonnage. Most of the truck traffic is made up of manufactured products which tend to have a high value per cubic foot, as compared to bulk commodities. The Trans- port Equipment Products accounted for 47% of the truck traf- fic, which represented the highest tonnage of any category that was moved by truck. The next largest truck tonnage was in the Stone, Clay and Glass Products group, or 18% of the total truck traffic, followed by Fabricated Metal 74 Table 22. Michigan shipments to Ontario by mode of trans— port, 1963 Code Commodity Tons No.a Classification Railb Highwayc Waterborned Aire Total 012 Crops 55,391 426 40,637 96,454 013 Animals 4,242 1,666 105 6,013 8 Timber 14,585 4,428 17 19,030 10 Metallic min. 14,934 19,767 1,179,365 1,214,066 12 Coal 103,355 103,355 13 Pet. pdts. 2,691 50,233 417,582 470,506 14 Non-metallic 233,349 378,024 611,373 20 Food 18,124 11,563 62 29,749 22 Textile 205 10 215 26 Paper 10,506 5,221 6 26 15,759 28 Chemicals 26,139 21,111 14,489 82 61,821 30 Rubber 558 2,823 26 3,407 32 Stone 50,218 148,115 198,333 34 Fab. metals 39,981 78,000 6 117,987 35 Mach. exc. elec. 9,088 54,600 9 88 63,785 36 Electrical mach. 647 1,412 5 92 2,156 37 Trans. equip. 64,842 388,300 159 98 453,399 39 Misc. manuf. 277,713 30,170 27,324 31 335,238 Totals 926,363 818,040 2,057,728 515 3,802,646 Percentage 24% 22% 54% 100% aA cross reference sheet, relating the code numbers above to those used in other tables, is in Appendix A, Table A_3e All railroad statistics are for 1963, origin, Mich- igan, with 72% terminating in Ontario, and 28% terminating in other Canada. cAll highway statistics for 1963, with Michigan origin, and Ontario termination. For procedure in deter- mining tonnage, see Appendix A, page 274. A11 waterborne statistics for 1960, Michigan origin and Ontario termination. eAll air statistics for 1962, Michigan origin and Ontario termination. Sources: Railroad statistics obtained individually from Chesapeake and Ohio Railway Co., New York Central System, Grand Trunk Western Railroad Company, Soo Lines Railroad, and Wabash Railroad; Highway data based on combined results of Professor J. L. Hazard's Michigan Export Survey and the Michigan manufacturing company survey included in Chapter III, plus statistics from U.S. Dept. of Agriculture, Lansing, Michigan; Waterborne statistics from Waterborne Commerce of the United States Calendar Year 1960, Part 3, Waterways and '"e-H 75 Products at 9.5%, Machinery Except Electrical at 7%, and Petroleum Products at 6%. Of the Michigan shipments crossing the border by railroad 54% was accounted for by manufactured products. The remainder was raw materials, coal and coke, etc. Raw materials such as Metallic and Non-metallic Minerals, Crops and Grains, and Petroleum Products made up 97.5% of the waterborne shipments from Michigan. The remaining 2.5% was made up of Miscellaneous Manufacturing Products, and Chemical and Allied Products. Table 23 shows the Michigan receipts from Ontario and eastern Canada by mode of transport. The total tonnage is about 15% less than the traffic originating in Michigan going to Ontario. Of the rail tonnage shown here only 56% originates in Ontario with 44% originating in other Canadian provinces, primarily eastern Canada. However, the termina- tion is in Michigan. About 52% of the rail tonnage is in Timber, Pulp and Wood Products, and Paper and Allied Products, which is mostly newsprint. Metallic and Non-metallic Minerals account for only 11%, while all manufactured products make up about 36% of the total shipments by rail. In the manu- factured categories, the largest tonnage is in Miscellaneous Harbors, Great Lakes, Dept. of Army, Corps of Engineers, and Grain Transpprtationl§tatistics for Narth Central Re- gion, USDA, Statistical Bulletin No. 268; Air data from Detroit Air Cargp Statistics, 1962, Greater Detroit Board of Commerce. 76 Table 23. Michigan receipts from Ontario by mode of trans— port, 1963 Code Commodity Tons No. Classification Rail Highway Waterborne Air Total 012 Crops 8,729 2,490 11,219 013 Animals 3,282 7,137 10,419 8 Timber 351,626 86,916 158,040 596,582 10 Metallic min. 96,378 230,508 1,105,313 1,432,199 12 Coal 729 729 13 Pet. pdts. 2,149 2,149 14 Non-metallic 18,629 234,675 253,304 20 Food 19,266 196,672 31 215,969 22 Textile 883 5 888 26 Paper 174,104 50,373 13 224,490 28 Chemicals 72,396 5,694 12,188 41 90,319 30 Rubber 3,171 13 3,184 32 Stone 3,481 3,481 34 Fab. metals 39,320 13,814 6,392 59,526 35 Mach. exc. elec. 9,120 45,425 44 54,589 36 Elect. mach. 514 902 46 1,462 37 Trans. equip. 9,630 237 49 9,916 39 Misc. manuf. 207,828 44,430 15 252,273 Totals 1,021,235 634,225 1,566,981 257 3,222,698 Percentage 32% 20% 48% 100% Note: For sources, note on code numbers, and footnotes see Table 22. Rail data has 56% Ontario origin, 44% other Canada. mm. . .__--,,,.,..,.,1.12.2 77 Manufacture, followed by Chemicals and Allied Products, and then Fabricated Metal Products. Of the total traffic crossing the border from On— tario by highway carrier, 36% is accounted for by Metallic Minerals which is primarily composed of nickel. Food and Kindred Products account for 31% of the receipts moved by highway, while all manufactured product categories accounted for about 17%, or 110,000 tons. In the manufactured prod— ucts categories, Machinery, Except Electrical, shipped the most (45,425 tons from Ontario) closely followed by Miscel— laneous Manufactures with 44,430 tons, while Fabricated Metals accounted for 13,814 tons, and Chemicals and Allied Products 5,694 tons. The remaining categories were of little importance as far as tonnage is concerned. The waterborne is mostly Metallic Minerals and Metals (70%) with ores representing the largest component. Over 14% is made up of Non-metallic Minerals, such as sand, gravel and other building materials. Timber and Paper Products make up 13% of the total tonnage by waterborne, with the remaining 3% being accounted for by Chemicals and Allied Products, and Fabricated Metals. A very small amount of the total trade between Mich— igan and Ontario moves by air freight. The products that do move by air are primarily high-priority manufactured parts and machines, or fragile products that have a very high value. Some perishable products, such as flowers and drugs, are sent by air freight. --& 78 In summary of Table 23, of the total Canadian and Ontario outbound which terminates in Michigan, Timber, Pulp and Wood Products account for 18% of the tonnage; Metallic Minerals and Metals, 45%; and Non-metallic Minerals, 8%. Thus, 71% of the total tonnage is from three industrial groups. The composition is mostly raw materials with some semi-finished metal and paper products. The remainder of the outbound, amounting to 29%, is made up of manufactured products. MICHIGAN—ONTARIO BORDER RAILROAD TRAFFIC Statistics on the railroad traffic crossing the Michigan-Ontario border were obtained individually from the Chesapeake and Ohio Railway Company, New York Central System, Grand Trunk Western Railroad Company, 300 Lines Railroad and the Wabash Railroad.1 Three of the railroads submitted figures based on 1962 operations and the other two gave figures on 1963 operations. The 1963 figures were converted to 1962 values for part of the analysis. The conversion was accomplished by determining the change in total commodity tons moved from 1962 to 1963, then using the relationship to convert the 1963 tons to “1962" basis for the two railroads. For another part of the analysis the 1962 figures were converted to 1963 tons. In 1963 there was an increase of 161,934 1A complete discussion of the questions used to £§ecure the information is presented in Appendix A, page 79 tons moving into Ontario and other Canada from the United States, and an increase of 161,674 tons moving out of On— tario and other Canada to the United States. Such a small change in total tonnage does not materially affect the an— alysis. Table 24 shows the total railroad tonnage crossing the Michigan—Ontario border enroute to Canadian destinations in 1962. Only 29.47% of the total tonnage crossing into Canada originated in Michigan, while 70.53% originated in other U.S. states. In Canada, 71.75% of the tons terminate in Ontario, with 28.25% going on to other Canadian provinces. Table 25 presents the total railroad tons crossing the Ontario-Michigan border enroute to the United States from Canada. More than half, or 56.39%, of the total tons originates in Ontario, while 43.61% originates in other Canadian provinces. Some 25.55% of the tonnage terminates in Michigan with the remaining 74.45% going on to other U.S. states. It is evident from the two tables that there is considerable transit railroad traffic across Michigan going to, and coming from, Ontario and eastern Canada. Michigan ships and receives only about 1/4 of the railroad tonnage crossing the Michigan-Ontario border. Ontario ships slightly over half (56.39%) of the tonnage coming to the United States across Michigan, but receives nearly 3/4 (71.75%) of the tons crossing into Ontario and eastern Canada. me.vs mm.mm Hm.m¢ mm.mm Rooa bCoo Ham mHm.mem.N soa.mam mow.m66.H mma.mmH.N ONo.mHm.m noon mwpapm momcmu CODHCD Hmeo CmmHCUHS CH Hanna Ca OHHmuCO CH uwonoa CmmHCUHz CH ooumCHEHaB ooumCHEuaB omnocamwuo pmpmcamauo IOAHMDCO mCNmmouU NooH «nohmhm omuHsp sH osHuosHsHm» .moosou CH mCHuaCHmHno .nmouon CmmHCoHEIOHumuCO 0CD mCHmmouo uamwmup omouaflmm .mN magma mm.mm mo.Hh mm.on bw.mm Mooa ucmu Mom Hoo.ovw mom.meH.N mHo.NHH.N omm.NmN mom.ooa.N noon Mahabm oopHCD MCMCmU HOCbo oaumuCO CH uono CH CMmHCUNE CH Hanson Cwmflroflz CH oobmcasnoe ooumcaeuoe oarmcwmfluo oopaCHmHno Ionumpco mCHmmonU illlll AmoCUOQ ooo.N mo mCOpV mmma "mooCmU CH mCHDMCwEuob .md»dbm oopHCD CH mavmcmeHo .woouon oaumuCOICmmHCOHE 05b mCHmwouU Uflwwmup omouafimm a vN MHQMB 81 In the following tables the tons are accurate but the values should be viewed as approximations, inasmuch as they are computed by the use of U.S. national weighted average values per ton taken from Freight Revenue and Whole— sale Value at Destination of Commodities Transported by Class I Line-haul Railroads, 1959. This is the only com— prehensive report of rail traffic values and was published by the Interstate Commerce Commission. Table 26 is presented to show the value of the ship- ments crossing the Michigan—Ontario border by railroad and originating in Michigan and other U.S. states. About $755 million worth of products moved across the border enroute to Ontario and eastern Canada. Table 27 presents the value of the tons received in Michigan and other U.S. states, with an origin in Ontario and eastern Canada. The value of this traffic is about 745 million dollars, or about 10 million dollars less than the movement in the opposite direction. However, looking at the tonnage, the inbound to the United States is about 825,000 tons more than the outbound. Comparing the composi- tion of the tonnage in the two tables, it is evident that the movement into the United States is composed of more unfinished materials such as pulpwood, metals and paper products; while the traffic out includes finished products which tend to have a higher value per ton. Table 28 shows the tons originating in Michigan of the coutbound U.S. traffic. More than half of the Michigan 82 Table 26. Total value of commodities that crossed the Michigan-Ontario border by railroad, originat- ing in United States, terminating in Canada: 1962 Commodity Classification Total tonsa Total value 1. Animals and products $5,553 $34,167,873 2. Crops, vegetables & fruits 550,442 57,256,977 3. Food & kindred products 131,671 35,377,364 4. Rubber and products 8,728 9,715,399 5. Textile mill products and apparel 16,206 31,573,015 6. Timber 2,567 58,502 7. Pulp and pulpwood 5,133 129,968 8. Lumber & wood products 98,846 75,103,191 9. Paper & allied products 37,017 7,350,466 10. Coal and coke 387,480 3,502,819 11. Petroleum and products 53,841 2,618,288 12. Non-metallic minerals 343,047 5,409,851 13. Stone, clay & glass products 234,705 3,105,147 14. Metals 67,432 1,795,040 15. Primary metal industries 33,543 10,253,760 16. Fabricated metal products 109,342 29,151,671 17. Machinery except electrical 37,133 34,136,738 18. Electrical machinery 6,927 14,831,123 19. Transportation equipment 166,290 155,138,593 20. Chemicals & allied products 135,746 27,465,488 21. Miscellaneous manufacturing 512,920 216,811,284 Total 2,994,569 $754,952,557 aData supplied by railroads operating across the Michigan—Ontario border. bThe values per ton used to determine the total value for each commodity classification are listed in Table A-6 of Appendix A. 83 Total value of commodities that crossed the Ontario-Michigan border by railroad, originat- ing in Canada, terminating in United States: Table 27. 1962 Commodity Classification Total tonsa Total valueb 1. Animals and products 11,423 $7,025,716 2. Crops, vegetables & fruits 24,993 2,599,772 3. Food & kindred products 54,154 14,550,097 4. Rubber and products 9,897 11,016,648 5. Textile mill products and apparel 3,583 6,980,508 6. Timber 27,913 636,137 7. Pulp and pulpwood 679,028 17,192,989 8. Lumber & wood products 211,291 160,538,902 9. Paper & allied products 616,567 122,449,580 10. Coal and coke 6,304 56,988 11. Petroleum and products 9,094 442,241 12. Non-metallic minerals 275,683 4,347,521 13. Stone, clay & glass products 38,820 513,589 14. Metals 922,709 24,562,514 15. Primary metal industries 43,063 13,163,928 16. Fabricated metal products 99,045 26,406,387 17. Machinery except electrical 81,449 74,876,880 18. Electrical machinery 3,017 7,283,219 19. Transportation equipment 21,547 20,102,058 20. Chemicals and allied products 261,486 52,906,462 21. Miscellaneous manufacturing 418,554 176,922,776 Total 3,819,620 $744,574,912 aData supplied by railroads Operating across the Michigan-Ontario border. bThe values per ton used to determine the total value for each commodity classification are listed in Table A-6 of Appendix A. 84 Table 28. Railroad traffic that crossed the Michigan- Ontario border, originating in United States, terminating in Canada: 1962 Tons orig- Per cent Total inated in originated Commodity Classification tons Michigan in Michigan 1. Animals and products 55,553 6,359 11.45% 2. Crops, vegetables & fruits 550,442 53,488 9.72 3. Food and kindred products 131,671 17,867 13.49 4. Rubber and products 8,728 517 5.92 5. Textile mill products and apparel 16,206 6. Timber 2,567 445 17.33 7. Pulp and pulpwood 5,133 187 3.64 8. Lumber and wood products 98,846 12,426 12.57 9. Paper and allied products 37,017 13,009 35.14 10. Coal and coke 387,480 94,314 24.34 11. Petroleum and products 53,841 6,888 12.79 12. Non-metallic minerals 343,047 220,381 64.24 13. Stone, clay & glass products 234,705 44,912 19.14 14. Metals 67,432 10,321 15.31 15. Primary metal industries 33,543 6,995 20.85 16. Fabricated metal products 109,342 37,131 33.96 17. Machinery except electrical 37,133 8,461 22.79 18. Electrical machinery 6,927 598 8.63 19. Transportation equipment 166,290 60,117 36.15 20. Chemicals & allied products 135,746 24,330 17.92 21. Miscellaneous manufacturing_512,920 263,904 51.45 Totals 2,994,569 882,550 29.47% Source: Data supplied by railroads operating across the Michigan—Ontario border. 85 tons were made up of Non-metallic Minerals and Miscellaneous Manufactured Products. Of the remaining tonnage, Michigan supplied one-third or more of the tonnage of only three sectors, i.e., Paper and Allied Products, Fabricated Metal Products, and Transportation Equipment. Table 29 is presented to show the approximate value of the rail tonnage originating in Michigan and terminating in Ontario and other Canadian provinces. Nearly 50% of the value is accounted for by the Miscellaneous Manufactures, while Transportation Equipment accounted for 25%. Fabri— cated Metal Products, providing 4.5% of the value, was the next most important category. Table 30 shows both the tons and per cent of ter— minations in Michigan of the traffic originating in Ontario and other Canada. Pulp and Pulpwood, plus Paper and Allied Products, make up over 43% of the total tonnage terminating in Michigan. Miscellaneous Manufactures accounts for 20%, while metals and chemicals account for about 8% and 7% re- spectively. Thus, five commodity groups account for 78% of the tons originating in Ontario and eastern Canada, and terminating in Michigan. Table 31 presents the approximate value of the Mich— igan tonnage shown in the previous table. Miscellaneous Manufactures accounts for 34% of the total value; Lumber and Wood Products, 24%; Paper and Allied Products, 14%; with the three commodity groups accounting for 72% of the total value of Michigan receipts. 86 Table 29. Value of commodities that crossed the Michigan— Ontario border by railroad, originating in Michigan, terminating in Canada: 1962 Commodity Classification Total tonsa Total valueB— 1. Animals and products 6,359 $3,911,103 2. Crops, vegetables & fruits 53,488 5,563,822 3. Food & kindred products 17,767 4,773,638 4. Rubber and products 517 575,488 5. Textile mill products and apparel 6. Timber 445 10,142 7. Pulp and pulpwood 187 4,735 8. Lumber & wood products 12,426 9,441,275 9. Paper & allied products 13,009 2,583,197 10. Coal and coke 94,314 852,599 11. Petroleum and products 6,888 334,963 12. Non—metallic minerals 220,381 3,475,408 13. Stone, clay & glass products 44,912 594,186 14. Metals 10,321 274,745 15. Primary metal industries 6,995 2,138,302 16. Fabricated metal products 37,131 9,899,496 17. Machinery except electrical 8,461 7,778,282 18. Electrical machinery 598 1,280,354 19. Transportation equipment 60,117 56,085,554 20. Chemicals and allied products 24,330 4,922,689 21. Miscellaneous manufacturing 263,904 111,552,221 Total 882,550 $226,052,199 aData supplied by railroads Operating across Mich— igan-Ontario border. bThe values per ton used to determine the total value for each commodity classification are listed in Table A—6 of Appendix A. Table 30. 87 Railroad traffic crossing Michigan-Ontario border originating in Canada, terminating in United States and Michigan, 1962 Tons ter- Per cent Total minated in terminated Commodity Classification tons Michigan in Michigan 1. Animals and products 11,423 3,253 28.48% 2. Crops, vegetables & fruits 24,993 8,703 34.82 3. Food & kindred products 54,154 18,602 34.35 4. Rubber and products 9,897 3,005 30.36 5. Textile mill products and apparel 3,583 821 22.91 6. Timber 27,913 3,964 14.20 7. Pulp and pulpwood 679,028 255,778 37.67 8. Lumber & wood products 211,291 77,615 36.73 9. Paper & allied products 616,567 167,762 27.21 10. Coal and coke 6,304 805 12.77 11. Petroleum and products 9,094 2,028 22.30 12. Non-metallic minerals 275,683 17,558 6.37 13. Stone, clay & glass products 38,820 3,349 8.63 14. Metals 922,709 80,899 8.77 15. Primary metal industries 43,063 12,969 30.12 16. Fabricated metal products 99,045 37,305 37.66 17. Machinery except electrical 81,449 8,546 10.49 18. Electrical machinery 3,017 476 15.78 19. Transportation equipment 21,547 8,919 41.39 20. Chemicals & allied products 261,486 65,451 25.03 21. Miscellaneous manufacturing 418,554 197,899 47.28 Totals 3,819,620 975,707 25.55% Source: Data supplied by railroads operating across Mich— igan-Ontario border. 88 Table 31. Value of commodities that crossed the Ontario— Michigan border by railroad, originating in Canada, terminating in Michigan: 1962 t I Commodity Classification Total tonsa Total value 1. Animals and products 3,253 $2,000,758 2. Crops, vegetables & fruits 8,703 905,286 3. Food and kindred products 18,602 4,997,985 4. Rubber and products 3,005 3,344,956 5. Textile mill products and apparel 821 1,599,497 6. Timber 3,964 90,340 7. Pulp and pulpwood 255,778 6,476,299 8. Lumber and wood products 77,615 58,971,877 9. Paper and allied products 167,762 33,312,500 10. Coal and coke 805 7,277 11. Petroleum and products 2,028 98,622 12. Non-metallic minerals 17,558 276,890 13. Stone, clay & glass products 3,349 44,307 14. Metals 80,899 2,153,531 15. Primary metal industries 12,969 3,964,494 16. Fabricated metal products 37,305 9,945,886 17. Machinery except electrical 8,546 7,856,423 18. Electrical machinery 476 1,019,145 19. Transportation equipment 8,919 8,320,892 20. Chemicals & allied products 65,451 13,242,701 21. Miscellaneous manufacturing 197,899 83,651,907 Total 975,707 $242,281,573 aData supplied by railroads Operating across Ontario- Michigan border. bThe values per ton used to determine the total value for each commodity classification are listed in Table A-6 Of Appendix A. fizJ-dw —1_ ———~—- - w-Fg- 7, _ _ a 89 In evaluating the tonnage and value of Michigan's receipts, it should be pointed out again that only 56.39% of the total tonnage originates in Ontario. It is entirely possible that more of the Michigan receipts could originate in Ontario; however, it is impossible to determine the exact source of commodities from the data provided for this study. MICHIGAN—ONTARIO BORDER HIGHWAY TRUCK TRAFFIC Michigan and Ontario do not have statistics pertain- ing to the origin and destination of commodities moved by highway carriers. However, the Michigan Highway Department conducts each summer a Truck Weight Study for the United States Bureau of Public Roads.1 Some data regarding com— modities carried were gathered in the 1963 Study. This included origin, destination, vehicle combination and gross weight of the vehicle and load. Using various assumptions and estimates, some information regarding the net weight of the commodity, its origin and destination, was developed. The Truck Weight Study did not have stations at the Port Huron or Detroit ports-of-entry, so consequently, there is little useful information on the traffic crossing the Mich- igan-Ontario border. Some transit traffic across Michigan, to and from Ontario, was detected and will be discussed later in the chapter. To get some idea of the movement of products by 1The 1963 Truck Weight Study was analyzed for this research and the results are presented in Appendix C. 90 truck across the border, an estimate of the tonnage was developed based on the research findings of this study, plus the findings of a Michigan Trade Expansion Study being conducted by Professor J. L. Hazard at Michigan State Uni- versity. Table 32 shows the Michigan shipments, in tons, to Ontario by truck. Most of the traffic is concentrated in the manufactured products area, with the Transportation Equipment industry accounting for nearly half of the ton— nage. Table 33 shows the Ontario shipments, in tons, to Michigan by truck. The Metallic Minerals and Metals group in this table also includes the Primary Metals group (SIC 33) of the Standard Industrial Classifications shown in the tables listing exports by SIC groups. Though the num- bering system and classifications in Tables 32 and 33 are slightly different from those used previously, the data are comparable to those shown in previous transport tables.1 In the Ontario shipments, Metallic Minerals and Metals ac- count for 36.5% Of the tonnage, with Food and Kindred prod— ucts accounting for 31%. Although the truck data included in the previous two tables are based on estimates, they show that there is a considerable amount of tonnage moved across the border by highway carriers. 1For cross reference on numbering system and clas- sifications, see Appendix A, Table A—3. “VHWWi m _. .. .. . . _ V———— _ ,, y‘, _ _ __‘ 91 Table 32. Michigan shipments to Ontario by highway carriers, 1963 Code # Commodity Claggification 3L3 Tonsil-m“B 012 Crops, vegetables & productsa 426 013 Animals & productsb 1,666 8 Timber, pulp & wood products 4,428 10 Metallic minerals & metals 19,767 12 Coal & coke products 13 Petroleum products & natural gas 50,233 14 Non-metallic minerals 20 Food & kindred products 11,563 22 Fibers & textile mill products 205 26 Paper & allied products 5,221 28 Chemicals & allied products 21,111 30 Rubber & plastic products 2,823 32 Stone, clay & glass products 148,115 34 Fabricated metal products 78,000 35 Machinery except electrical 54,600 36 Electrical machinery 1,412 37 Transportation equipment 388,300 39 Miscellaneous manufacturing 30,170 Total tons 818,040 aStatistics from Fresh Fruit and Vegetable Unloads, in Eastern Cities, Agriculture Marketing Service, AMS-427, USDA, February, 1964. bStatistics provided by the Lansing Office of the United States Department of Agriculture. Source: Based on findings of this survey plus research findings of Michigan Trade Expansion Study, con- ducted by Professor John L. Hazard, Michigan State University. For a discussion of the procedure, see Appendix A, page 274. 92 Table 33. Ontario shipments to Michigan by highway carriers, 1963 Code # Commodity Classification Tons 012 Crops, vegetables & productsa 2,490 013 Animals & productsb 7,137 8 Timber, pulp & wood products 86,916 10 Metallic minerals & metals 230,508 20 Food & kindred products 196,672 28 Chemicals & allied products 5,694 34 Fabricated metal products 13,814 35 Machinery, except electrical 45,425 36 Electrical machinery 902 37 Transportation equipment 237 39 Miscellaneous manufacturing 44,430 Total tons 634,225 aFresh Fruit and Vegetable Unloads in Eastern Cities, Agriculture Marketing Service, AMS—42 , USDA, February, 1964. bStatistics provided by the Lansing Office of the United States Department of Agriculture. Source: Based on the findings of this survey study except as noted above. For a discussion of the proced- ure, see Appendix A, page 275. 93 MOTOR COMMON CARRIERS The motor common carriers in both Michigan and Ontario were sent questionnaires requesting certain infor- mation on border operations. They were asked for the amount and kind of traffic carried between Michigan and Ontario.1 In Michigan 109 questionnaires were mailed to motor carriers, with 41 or 36% of them being returned. However, only seven answered all of the questions pertaining to com- modities. Commodity information was not sufficient for this research. Most of the carriers indicated that they were unable to supply the commodity information from their records. In Ontario 56 similar questionnaires were mailed to motor carriers.2 The carriers selected were those hold- ing operating authority allowing trailer-interchange with Michigan carriers. A total of 17 questionnaires were re— turned but only 9 supplied commodity information. Two of the nine were authorized to carry only fruits and vegetables; six were permitted to haul general commodities and dry freight; and the ninth was engaged solely in traffic between Ontario and western Canada. Thus, the information supplied by the Ontario motor carriers was also insufficient to be useful to this part of the research project. 1A discussion of the sample and a COpy of the ques— tionnaire are presented in Appendix A, page 262. 2Appendix A, page 257. 94 WATERBORNE AND OTHER CARRIERS WATERBORNE All the waterborne statistics were compiled from The data presented were for 1960. United States sources. .An attempt was made to verify these statistics from data Ipublished by the Dominion Bureau of Statistics, but because c>f differences in classifications and reporting techniques, Therefore, United States data 171-, Ann —Arbor, Michigan; Waterborne Commerce of the United Calendar Year 1960, Part 3, Waterways and Harbors, W14 e2311: Lakes, Dept. of the Army, Corps of Engineers; Grain T ‘§%%——EE§;§§portation Statistics for North Central Region, USDA, EELt=-.‘:Lstical Bulletin No. 268. 95 The statistics presented in Tables 22 and 23 for air freight are based on tonnage figures for 1962 supplied by the Transportation Bureau of the Greater Detroit Board of Commerce.1 The Detroit air port—of—entry accounts for about 80% of the movements of freight by air, both in and <:ut of Michigan. Statistics for the state as a whole are .raot compiled. Thus, the tons for Michigan shipments and ereceipts have been estimated based on the propensity of :i_ndustrial groups to use air freight. For the present study the volume of air freight IDetween Michigan and Ontario could be ignored without ma- ‘terially affecting the outcome of the research project. PIPELINE Nearly 100% of the flow of commodities by pipeline Jrepresents transit commerce across Michigan into Ontario. flChere is no petroleum moving from Ontario to Michigan. CZ1? 4John L. O'Donnell and David I. Verway, An Anal sis .TIIT‘ I?oreign Trade Statistics of thgiMichigan Customs District SeSSl—SB and 1958—59), Bureau of Business and Economic Re— 1_S>EELJ:ch, Michigan State University, East Lansing, Michigan, QESZL, p. 3. 97 across Michigan, but only give percentages of the aggregate that originates and terminates in Ontario, and other Canada. Motor carriers provided no data; however, United States Customs Office at Detroit gave some estimates of the num— bers of transit trucks crossing the border. IMICHIGAN TRANSIT COMMERCE IRAILROAD Table 28 shows the total railroad tonnage crossing ‘the Michigan-Ontario border into Ontario. About 70.5% of 'the tonnage originates in states other than Michigan, and .37% of other state origin is accounted for by 497,000 tons of Crops, Fruits and Vegetables, plus 293,000 tons of Coal and Coke. The approximate value of this transit railroad traffic is 529 million dollars. Table 30 shows the total railroad tonnage crossing izhe Ontario-Michigan border into Michigan. About 74.5% (suf the tonnage moves through Michigan to other U.S. states. £3Iaps of products comprise 80% of the Michigan transit railroad traffic originating in Canada. The approximate V2353L—Iie of this transit railroad traffic is 502 million dol- labs. The total railroad transit traffic, to and from 98 Ontario and other Canada, had a value of about 1 billion dollars in 1962. Again, these are only approximate figures as they are based on national weighted average values per ton. HIGHWAY Quantifying the Michigan highway truck transit com— merce to and from Ontario is impossible from the existing secondary statistics. The Michigan Highway Department's Truck Weight Study for 1963 yields very limited data on transit truck traffic.1 A total of 35 trucks in-transit through Michigan to Canada were counted, eight of which were empty. In the sample results, 254.8 tons of commodi- ties moved to Ontario from western Canada, 9 tons from Illi- nois, and 3.6 tons from Ohio. The total traffic cannot be determined from this study. Only 9/10 of a ton moved out of Ontario across Michigan in the Truck Weight Study. The United States Customs offices in Sault Ste. Marie, Port Huron, and Detroit were asked for information on all truck traffic crossing the border. Detailed statis- tics were not available; however, some estimates of the number of loaded trucks were provided by the Detroit and Port Huron offices. No statistics were obtained from the office at Sault Ste. Marie. There is some traffic crossing Upper Michigan from the Soo port-of—entry, but presumably 1See Appendix C for the results of the Truck Weight Study. 99 it represents only a small per cent of the total transit truck traffic across Michigan. Table 34 shows the total number of loaded trucks entering Michigan from Ontario only, based on the estimate of the Detroit office of the Bureau of Customs. The total number increased 12% in fiscal year 1963, but only 5% in fiscal year 1964. About 2/3 of the total loaded trucks enter Michigan at Detroit, with most of the other 1/3 en— tering at Port Huron. Assuming an average load of 11.22 tons, 1,366,001 tons crossed the border into Michigan in fiscal year 1964.1 Deducting the transit tonnage shown in Table 35 of 128,862 tons going to other Canada and other United States, and the transit tonnage in Table 36 of 68,352 tons going to other Canada, then a total of 1,168,787 tons terminated in Michigan. This figure is about twice the tonnage shown in Table 23 (634,225 tons) so obviously one of the estimates is wrong. Table 35 shows the destinations of the loaded trucks entering from Ontario, at Detroit. The data indicate that most of the transit truck traffic through Detroit for the past three fiscal years has gone to other Canadian provinces. The data also indicate that the transit traffic from western Canadian provinces to Ontario is about 1/2 of the traffic outbound from Ontario to western Canada. 1The 1964 fiscal year corresponds more closely with the 1963 calendar year used for the highway data in previous tables. 100 Table 34. Loaded trucks crossing the Ontario-Michigan border, entering Michigan from Ontario, 1962—1964 M W Entering Michigan at: Fiscal Total traffic Port Huron and year crossing border Detroit Sault Ste. Marie Trucks Tonsa Trucks Tons Trucks Tons 1962 103,224 1,158,173 72,958 818,589 30,266 339,584 1963 116,461 1,306,692 77,087 864,916 39,374 441,776 1964 121,747 1,366,001 85,396 958,143 36,351 407,858 aTons are figured at 11.22 tons per load, based on the average tons per load as shown for the United States Central Region, i. e., Michigan, Illinois, Indiana, and Ohio, in Cost of Transportinngreight by_Class I and LClass II Motor Common Carrier of General Commodities, Central Region, 1962 Statement No. 3- 64, I.C.C., Bureau of Accounts, Wash— ington, D. C. Note: The term “truck" includes all commercial vehicles except small pick-up and panel trucks. The traffic is composed mostly of tractor—semitrailer combina- tions. Source: Data are from the Bureau of Customs, Detroit, Michigan. Truck count represents loaded trucks only, based on an estimate by the Bureau that 45% of all trucks entering United States carry merchandise. 101 .ComHCUHz .ufloubmn .meoumsu mo Smmnsm mo moammo “Houuoo orb ha CTHHQQSM oboe “condom .U.o .CoumCHCmma .muCCOUU< mo smonzm ..U.U.H admlm .Oz uCOEmumwm .NmmH .Commmm Hmubcou .mOHpHoOEEOU Hmuuwmw mo HOHHHCU COEEOU mono: HH mmmau OCT H mmmHU Nb pronoun mCHvuomnCmna mo bmou CH .OHCO CCm .mCmHoCH .MHOCHHHH .CmmHCOHE ..0.H .Cowmom Hmuucmu mmumbm COHHCD any MOM CsoCm mo omoa non moon ammum>m or» CO comma .omOH Had mcou NN.HH pm condone mum mCOB "ouoz aoN.dd oda.m somH moN.Ne oea.m mooH HNa.mm ooN.m NooH mCOB mxosue know Hmomwm umzoaaow mm mm: mooCflbouQ Cmflomcmu umnuo Eoum oeumuco ObCH uaouvoo bosons“ quEo>OE when HmN.aNm HHm.ma www.mN ooN.N dog.moH oHN.m de.mmo mom.mm domH mov.Haa Hoe.mo oNN.mN HNm.N NNH.mo mom.m oHa.doN amo.ee mooH omm.ooo eam.mm oam.eN and.N NmH.omH ooG.HH amm.mHm mmm.Ne NooH mCOB nxusua mCOB mxusua mCOB mxusua mCOB mMusuB Cameron: ocm mOMMDm CODHCD mmomcmu Cannon mCHmmouu and» mono vacuuoa nonuo HOCbo mxusnb Hobos Hannah mCOHmeHummn domalmwma .muucmnmonbuoa bHOquQ be CmmHCowz mCHHObCO OHMMDCO Eonm mxosub omomoa mo mCOHDMCHuMOQ .mm manna 102 Table 36 shows the border traffic from Ontario en— tering Michigan at Port Huron. The truck totals here listed are not comparable to those of Table 34 and Table 35 because the trucks crossing at Port Huron may originate in Ontario, other Canada, or eastern United States. However, the trucks enroute to western Canada are of Ontario origin. They ac- count for about 11% of the total trucks entering Michigan at Port Huron. Table 36. Border traffic from Ontario entering Michigan at Port Huron port-of-entry, 1961-1964 Trucks enroute to Western Canada Fiscal Total Total b c year Vehicles Trucks Trucks Tons 1961 796,606 55,431 6,000 67,320 1962 955,661 49,100 5,422 60,835 1963 1,040,255 52,012 5,793 64,997 1964 6,092 68,352 aIncludes all trucks empty and loaded, with origins in Ontario, other Canadian provinces, and eastern United States. bThese trucks all originated in Ontario. CTons based on 11.22 tons per load, assuming that all trucks are loaded. See Table 35 for data on the 11.22 average tonnage figure. Smarce: Based on data supplied by the Port Huron office of the Bureau of Customs, Port Huron, Michigan. PIPELINE There are no oil or gas shipments of Michigan ori- gin moving to Ontario by pipeline. At the same time there 103 are no Michigan receipts of gas or oil originating in On- tario. However, there is a large volume of crude oil, and some natural gas, moving as transit traffic across Michigan into the eastern part of Ontario, primarily to Windsor and Toronto. The Panhandle Gas Company has two l6—inch gas pipe— lines across the Detroit river, terminating in Windsor. A very small amount of gas originating in other U.S. states is exported to the Windsor market area. The movement is of an interstate and international character, and as such, the state of Michigan has limited jurisdiction over the operations. Michigan establishes engineering and safety codes for the equipment and operations, and requires the filing of tariffs with the Utilities Division of the Mich— igan Public Service Commission. By far the most important, and interesting, transit traffic is the movement of crude oil from western Canada across Michigan, to Sarnia and thence to Toronto. The pipe- line originates in Edmonton, Alberta, crosses Minnesota, Wisconsin, Michigan, and terminates in eastern Ontario (see Figure 9). It is the longest crude oil pipeline in the world totaling approximately 1,930 miles in 1959, and by 1964 the complete system totalled 3,428 miles.1 The complete pipeline is owned and Operated by 1Data and statistics for the pipeline operation were provided by the annual reports of the Lakehead Pipe— line Company and the Interprovincial Pipe Line Company. 104 mmcaammfia Hwo new mom OHHMuco . m 9:63 .Hmma .muaeozoum mo .umwn oaumuco .Mm>u5m oaumuco «wuuzom .30. E! at £15. 4 e—LC-fl-v 388:Et{.. Our-JtIOU 0.23.3: :0 . O-nOsOIt nus-3.“ n10 cup-a\!OU hols-5.; «(O M OZHOua u:_>..61. gee—.33:- 93¢. haql-a 105 Interprovincial Pipe Line Company with headquarters at 10049 Jasper, Edmonton, Alberta. The executive offices are in Toronto, Ontario. The pipeline across Michigan is owned and operated as a wholly owned United States subsidiary by Inter-provin— cial Pipe Line Company, under the name of Lakehead Pipe Line Company with headquarters at Superior, Wisconsin. The Lakehead Pipe Line Company operates a 30 inch pipeline from Superior, Wisconsin, to Sarnia, Ontario. The pipeline crossing the Straits of Mackinaw is two twin 20-inch pipelines approximately four miles long, and 243 feet deep. The original pipeline of Interprovincial was com— pleted from Edmonton to Superior in the late forties. From Superior the oil was shipped by tanker to Sarnia for move— ment into the Toronto area. However, the tanker operation was gradually decreased after the completion of the Mich- igan portion of the pipeline in 1953. By 1959 the tanker operations ceased completely. The 30 inch Lakehead pipeline started with a capac- ity of 200,000 barrels per day. Since the beginning in 1953 addition pumping stations have been activated which have increased the daily capacity. In 1957 an additional line from Edmonton to Superior was completed, and in the same year the pipeline from Sarnia to Toronto was put into operation. By 1959 pumping stations at Iron River and Bay City, Michigan, were in operation, which boosted the capacity 106 to 300,000 barrels per day. As the market demand grew in eastern Ontario, more capacity was required. The original line was engineered to accommodate the future demands of the Ontario market. The limiting factor was the pumping capacity. In 1962 the Michigan Public Service Commission approved the addition of five pumping stations in Michigan to be located at Goge- bic, Rapid River, Mackinaw, Lewiston, and North Branch. When these were completed, the daily capacity was increased to 416,000 barrels. The original agreement allowing the transit move— ment of the Canadian crude oil was worked out at the national level between the governments of Canada and the United States. Special permits for this type of operation were secured from the United States government. The operations within the United States are interstate in character and, there— fore, come under the jurisdiction of the Interstate Commerce Commission. The Lakehead Pipe Line Company which Operates in Michigan is an interstate common carrier of crude oil as defined in Act 16 of the Public Acts of 1929. Michigan's jurisdiction is limited to establishing safety standards and requiring the filing of interstate and intrastate tariffs. The tariffs are first accepted, and filed, with the Interstate Commerce Commission. COpies are then forwarded to the Utilities Division of the Michigan Public Service Commission. The tariffs are filed jointly by the 107 Interprovincial Pipe Line Company and the Lakehead Pipe Line Company. The Lakehead Pipe Line Company transports crude oil to several Michigan cities; Rapid River, West Branch, Sterling, Bay City, Port Huron, and Alma via the facilities of the Michigan-Ohio Pipe Line Corp. Oil is also transported to Detroit and Toledo by using both the Lakehead lines and the Buckeye Pipe Line Company system. The Interprovincial Pipe Line Company also trans— ports crude oil to Clearbrook and Wrenshall, Minnesota, and in the past year to Buffalo, New York. The total volume of crude oil transported in 1954 was 67.6 million barrels; in 1959, 122.9 million barrels; and by 1963, a total of 171.8 million barrels was carried at an average rate of over 470,000 barrels per day. The Michigan imports of crude oil to the above cities are not of Ontario origin, but rather from western Canadian provinces. However, the operations of the combined carrier system is a good example of how common problems of the region can be solved for the mutual advantage of all concerned. Western Canada, Minnesota, Wisconsin, Michigan, and Ontario all benefit from these operations. In this instance the existence of the border did not hinder a joint solution to the problems of operating the pipeline system. WATERBORNE Although it is often not thought of as transit com— merce, much of the waterborne traffic in the great lakes 108 moves through Michigan or Ontario territorial waters. All intra-Canadian, and most interlake United States waterborne commerce, moves enroute through the waters of Canada, United States, Michigan and Ontario. There are many statistical reports published in United States and Canada covering the waterborne commerce in the great lakes and connecting canals. But it is ex- tremely difficult to isolate the transit traffic, or deter— mine the origin, destination, and quantity of commodities that make up this traffic. SUMMARY An effort has been made to assimilate statistics by mode of transport to show the volume and value, where possible, of the commerce crossing Michigan, entering, or leaving Ontario. Table 37 presents a summary of the Mich- igan transit commerce by mode. The rail data are based on individual reports obtained from the participating rail— roads. It is considered to be accurate with respect to tonnage . The highway traffic is based on estimates by the Detroit office of the Bureau of Customs. The highway out- bound tonnage in Table 37 is only 7% of the rail tonnage. 1For United States publications see "Description f Shipping Statistics Program of Bureau of the Census, 3. S- Dept. of Commerce, Washington, D. C., 1960; for Canadian sub]. 1catlons see "Current Publications Dominion Bureau of Statistics,“ 1964, The Queen's Printer, Ottawa, Canada. 109 Table 37. Total transit commerce crossing Michigan both in and out of Ontario, 1963 INBOUND TO ONTARIO FROM OTHER U.S. STATES (tons) RAIL HIGHWAY PIPELINE TOTAL 2,112,019a 44,207b 25,265,000C 27,421,226 OUTBOUND FROM ONTARIO 2,843,913d 227,214e none 3,971,127 Total 30,492,453 tons aFrom Table 24. bFrom Table 35. CRepresents 171,800,000 barrels (6.8 barrels equal 1 ton). dFrom Table 25. 8From Tables 35 and 36 for fiscal year 1964. For inbound, highway is only 2% of rail tonnage. Obviously the highway data are incomplete, yet at this writing they are the only data available. The pipeline movement is nearly 100% into Ontario from western Canadian provinces. It has grown considerably over the last few years and will be eXpanded in the future as market demand and economic conditions warrant. The pres— ent daily capacity is 470,000 barrels and the total deliv- eries for 1963 were 171.8 million barrels. ONTARIO TRANSIT COMMERCE RAILROAD Secondary statistics are not available on the transit llO commerce through Ontario. However, the following data will give some idea of the volume and content of such trade. Detailed railroad statistics, comparable to those presented for Michigan transit commerce are not available for Ontario. Some aggregate tonnage figures have been de— veloped for 1962 and 1963. These are presented in Table 38. Table 38. Comparison of rail statistics showing Ontario commerce for 1962 and 1963 INBOUND TO ONTARIO FROM UNITED STATES Transit, Termin- Total Terminating ating in Other Year Tons in Ontario Canada 1962 2,994,569 2,148,508 846,061 1963 3,156,503 2,264,838 891,665 OUTBOUND FROM ONTARIO TO UNITED STATES Originating Originating in in Ontario Other Canada 1962 3,819,620 2,153,755 1,665,865 1963 3,981,294 2,233,822 1,747,472 Source: Data provided by the individual railroads partic- ipating in the border traffic. The 1963 inbound and outbound Ontario transit com- merce increased 5%. The commodity composition of the rail inbound traffic from the United States is the same as that shown in Table 26, with 846,061 tons crossing Ontario to other Canadian provinces. Table 27 shows the commodity composition of the outbound traffic to the United States, with 1,665,865 tons originating in other Canadian provinces. The data on the actual tons for specific commodity groups 111 is not available. This is, however, transit commerce to and from the United States. There is also a substantial through movement to and from other Canadian provinces for which the data are not available. HIGHWAY The Ontario Department of Transport issues a spec- ial "L" license which permits foreign motor carriers to transport merchandise in bond across Ontario. There is no license fee, but a special $9.00 permit is required for each bonded trip. In the fiscal year ending March, 1964, 52,181 per- mits were issued for a total revenue of $469,629. This means that 52,181 trucks, or tractor—trailer combinations, made trips across Ontario. Assuming each load averaged 11.2 tons, the total tonnage was 584,427. There is no way to determine the origin, destination or commodity composi— tion of this highway traffic. Table 39 is presented to show that 15 manufacturing industries in Michigan shipped products across Ontario in 1963. These data are taken from the sample of Michigan manufacturers who responded to the questionnaire used for this study. It is only indicative of the commodity composi— tion of the Ontario highway transit traffic that originates in Michigan. The total transit commerce in Ontario by rail and highway appears to be as follows: 112 Table 39. Ontario highway transit traffic, originating in Michigan going to eastern United States and other Canada, 1963 Destinations Number of Other SIC companies United Other Total Classification reporting States Canada amount 14 Non—metallic 1 $45,000 $9,000 $54,000 20 Food & pdts. 4 50,058,000 70,000 50,128,000 24 Lumber & wood 3 193,000 193,000 25 Furniture 1 3,000 3,000 26 Paper & pdts. 2 990,000 45,000 1,035,000 27 Printing 1 1,000 1,000 28 Chemicals 5 680,000 3,000 683,000 32 Stone, clay 1 500,000 75,000 575,000 33 Primary metals 2 500,000 29,000 529,000 34 Fabricated metal 7 19,000 91,000 110,000 35 Mach. exc. elect. 23 3,937,000 1,218,000 5,155,000 36 Electrical mach. 8 1,000 64,000 65,000 37 Transportation eq. 5 25,000 1,065,000 1,090,000 38 Instruments 2 30,000 81,000 111,000 39 Misc. mfg. 1 1,000 1,000 Totals 66 56,981,000 2,752,000 59,733,000 Percentage 95% 5% 100% Source: Data from survey of Michigan manufacturing companies. 113 1962 1963 Michigan gateways Rail Highway Total across Ontario tons tons tons Inbound from U.S. 846,061 846,061 Outbound to U.S. 1,665,865 1,665,865 Both directions 584,427 584,427 Total 2,639,137 584,427 3,096,353 It seems quite probable that 3,096,353 tons is a conservative figure for Ontario's transit commerce. The truck tonnage is based on assumed average loads, and no consideration has been given to private carrier traffic. Such carriers could possibly move across Ontario using the 5-day, $20.00 permits, that were first issued in 1963. SUMMARY About 2% of the Michigan shipments were exported to Ontario in 1963. This was valued at about 500 million dollars. At the same time, based on the survey results, about 4% of the value of the Ontario shipments were exported to Michigan. This had a value of about 525 million dollars. Both figures are estimates, but they indicate the importance of the trade (over $1 billion) between Michigan and Ontario. Waterborne carriers hauled 51% of the total Mich— igan—Ontario tonnage with highway carriers accounting for 21% and rail carriers 28%. Considering all manufactured products, highway carriers hauled 48% of the tonnage, rail carriers 47% and waterborne only 5%. Michigan shipments amounted to 3,802,646 tons, with 114 54% hauled by waterborne carriers, 22% by highway carriers, and 24% by rail. Michigan receipts amounted to 3,222,698 tons, with 48% being hauled by waterborne carriers, 32% by rail, and 20% by highway carriers. However, only 56% of the Ontario shipments (Michigan receipts) by rail orig- inated in Ontario. Because of the location of both Michigan and Ontario there is considerable transit traffic across each jurisdic- tion. The only valid statistics on this traffic were fur- nished by the railroads participating in the traffic. The highway statistics were estimated, based on figures provided by the Detroit customs office. The total transit commerce across Michigan, into Ontario was 2,112,019 tons by rail, 44,207 tons by highway (a very conservative estimate) and 25,265,000 tons of oil by pipeline. The transit traffic across Michigan, out of Ontario was 2,843,913 tons by rail, and 227,214 tons by highway (estimate). The Ontario transit commerce passing through Mich— igan gateways, inbound from the United States was 826,061 by rail, and outbound to the United States was 1,665,865 tons by rail, with 584,427 tons (estimate) moving by high- way in both directions. Thus Michigan transit commerce to and from Ontario was 5,227,453 tons by rail and highway, and 25,265,000 tons by pipeline. While at the same time the Ontario transit commerce passing through Michigan gateways was 3,096,353 tons for a combination of 1962 and 1963 data. The Michigan 115 and Ontario transit commerce together (excluding the pipe- line) was 8,323,806 tons, or greater than the direct Mich— igan-Ontario trade of 7 million tons. Having discussed the direct trade and transit com— merce for Michigan and Ontario, we shall now turn our at- tention to some of the major obstacles to this trade. An examination of the types of restrictions applicable to the trade will start in the next section. It will be followed by a discussion of the manufacturing companies' Views of obstacles to trade. OBSTACLES TO TRADE TARIFFS AND IMPORT RESTRICTIONS The primary and perhaps most publicized obstacle to trade is the tariff. Tariffs are defined as a system- atic arrangement of the customs duties levied on goods when they pass the border of a political unit.l Import tariffs are levied either to raise revenue or to protect home industries. Usually revenue tariffs are kept low so as not to discourage the importation of goods. This, however, depends upon the elasticity of de— mand for the good. If the demand is relatively inelastic, a higher rate of tariff may be applied without curtailing imports. If the demand for the good is relatively elastic, the rate must be low or it will curtail all imports. 1Paul V. Horn, International Trade Principles and Practices (New York: Prentice-Hall, Inc., 1945), p. 123. 116 A protective tariff, if it is fully effective, is high enough to restrict all imports of a particular commod— ity. It may be such as to prohibit most of the importation of the foreign merchandise, while allowing the domestic price to rise enough for profitable manufacture of the product by the local industry. Export tariffs are used by some countries to raise revenue. Generally such tariffs are on raw materials as in the case of Chile levying an export duty on nitrates. In the past tariffs have been used to collect duties on merchandise passing through one country into another. These are referred to as "transit duties" and, for all prac— tical purposes, they are non—existent in present day trade. The tariff rate may be set as a specific duty, i.e., ‘0‘ 7,"; . A so many cents per unit of weight or measurement; an ad valorem rate, i.e., a per cent of the value of the product ! imported; or a combination of the above two systems. The quota system is another direct restriction to trade. It may be applied to imports or to exports. In the case of imports, a quota is set by the government lim- I iting the total amount of a particular commodity that may be imported. By the use of an importer's license, or some other arrangement, the quota is divided among the various importers, except in the case where the government is the sole importer. Government control of foreign exchange can effec— tively restrict the flow of trade. In this situation foreign 117 currencies are provided by the government for only those imports that it deems important. This procedure may be used alone or in conjunction with a quota system. The point to be made with respect to tariffs, quotas, and exchange controls is that, although a tariff restricts imports by its effect on prices, trade generally continues, but quotas and exchange controls generally prohibit trade. With a tariff complete cessation of trade is un- likely but it slows up the marketing processes. The com— modity on which the tariff is imposed may be purchased by the consumer provided he is willing to pay the price. How— ever, if the consumer substitutes a domestically produced good for the higher priced imported product (the higher price due to the effect of the tariff), then imports are indirectly restricted by the tariff. Under a system of quotas, or control of foreign exchange, the government can prohibit trade completely. A government agency determines the quantity of the product that is to be imported. When this quantity has been reached no more units of the product may be imported, regardless of how much the consumer might be willing to pay for the product. In this case consumer preference is ignored by the government and the marketing processes become inopera- tive. OTHER OBSTACLES TO TRADE There are many indirect restrictions or barriers 118 to trade often referred to as "invisible tariffs" or "in— visible trade barriers."1 As reported in a study by Francis Masson: . . . the term "invisible tariff" was applied to the unwarranted——and sometimes unintended——protec- tive effects of valuation and classification legis— lation and procedures, regulations providing for marking to indicate the country of origin, import controls imposed by administrative fiat and without proper procedural safeguards, arbitrary enforcement of laws against “unfair competitive practices" such as dumping or violation of patent and trademark regulations, vague or unduly stringent standards for health and quarantine, and special protective devices relating to the traffic in materials for supplying military establishments. Generally tariffs are changed only after hearings, discussions and governmental negotiations. But this is not true of'the administrative procedures used to enforce the tariff laws. As one authority has stated: "I care not who writes the tariff act if I may be permitted to draft its administrative provisions."2 If there is no certainty beforehand of the manner in which the customs administrator will classify and value the merchandise, the importer is faced with considerable 1Francis Masson and J. B. Whitely, Barriers to Trade Between Canada and the_United Statee, Montreal: Canadian— American Committee of the National Planning Association (U.S.A.) and the Private Planning Association of Canada, 1960. Constant Southworth and W. W. Buchanan, Changes in Trade Restrictions Between Canada and the United States, Washington, D.C.: Canadian-American Committee of the—Na- tional Planning Association (U.S.A.) and the Private Plan— ning Association of Canada, 1960. Francis Masson and H. E. English, Invisible Trade Barriers Between Canada and the United States, Washington, D.C., National Planning Associ— ation of Canada, 1963. 2 Horn, p. 149. 119 risk. It may be sufficient to restrict the importation of the goods. Carried to the extreme, it is possible that a new classification of imported merchandise can be applied to some previous importations and the additional duty col- lected. If the importer decides to take the matter to the court, he is faced with other problems such as a time limit with respect to administrative appeals, absence of appeal against certain kinds of administrative actions, and finally considerable delay in the court due to the volume of work before the court. In some cases the delay has been several years, and this record, coupled with the uncertainty of winning a favorable decision, causes many importers to set— tle the case out of court. However, if the importer has cause to feel that he has been unjustly treated by the cus— toms administrators, his importations of such merchandise will probably be reduced in the future. MANUFACTURING COMPANIES' VIEWS OF OBSTACLES TO TRADE Michigan.—-Each Michigan manufacturing company sur— veyed in the study was asked to state his most serious prob— lems confronting initiation or expansion of trade with On— tario. He was given six conditions representing problems common to most exporters and was asked to rank them in order 0f importance as they affected his business. He was also requested to write in any other problem and to weight them appropriately. Non—exporters were encouraged to answer this question 120 so as to give some indication as to why they were not in— terested in exporting to Ontario. The answers to this question were weighted and ranked as first most serious problem, second most serious problem, etc. Table 40 shows the ranking by the Michigan manufac- turing companies. A comparison is shown for all companies, non—exporting companies, and exporting companies. There is little difference in the ranking by all three groups. "High Canadian Tariffs and Customs Regula— tions" was the most important obstacle. It is interesting to note that the thirty non—exporting companies considered "Lack of Ontario market information and services" as the second most important problem. It was ranked third by the other companies. This is one area that is not related to governmental regulations. The state government, Chamber of Commerce, or other organizations could set up the nec— essary machinery to provide Michigan companies with this information. During the interviews it was apparent that the non—exporting companies were less informed on all ex— port procedures and some evidenced no interest whatever in expanding their operations. Some voiced no desire to enter the export markets regardless of how profitable they might be.1 Transport service and distribution problems did 1Based on correspondence from various manufacturing companies. 121 Table 40. Ranking by the Michigan manufacturing companies of problems confronting their initiation or expansion of trade with Ontario, 1963 Non— A11 exportinga Exportingb Companies companies companies Rank Wt. Rank Wt. Rank Wt. High Canadian tariffs and customs regulations 1 1,127 1 94 1 1,033 Complexity of Canadian import procedures and regulations 2 642 4 65 2 577 Lack of Ontario market information and services 3 420 2 49 3 371 Complexity of United States export procedure and regulations 4 340 3 37 4 303 High cost of transport and distribution 5 267 5 18 5 249 Inefficient transport service due to border regulations and admin— istrative practices 6 211 6 5 6 206 aData from 30 non-exporting companies. bData from 217 exporting companies. Note: Respondent was asked to write in specific problems pertaining to his operations. These appear in the next table. Source: Data were provided by 247 Michigan manufacturing companies. Method of weighting appears in Appen— dix A. 122 not seem to be of great concern to the respondents. Some complained of the high freight rates but didn't indicate that they were high enough to keep them out of the Ontario market. The extra time in—transit caused by the existence of the border was frustrating to many companies, but most had accepted it and planned their operations accordingly. Many of the companies indicated special problems that influenced their decision not to enter the Ontario market. These are listed in Table 41. Ten companies had subsidiaries or license arrangements to cover the Ontario market. Fifteen companies were not interested because of the small size of the market, or for other reasons. Five had no representation in the market and were not sure whether it warranted representation. Many of the other (listed) problems concerned situations that were beyond the control of the Michigan company. Ontario.--The Ontario manufacturing companies were asked the same questions about the problems confronting the initiation and expansion of trade in the Michigan market. Table 42 shows how they ranked the first six problems. The "High United States tariffs and customs regu— lations" was considered the most important single problem. Many companies gave this as the only problem confronting their initiation or expansion of trade with Michigan. The only difference in the ranking of the answers by the non-exporters, as opposed to the exporters, was in the second and third choices. "Lack of Michigan market 123 Table 41. Specific problems confronting expansion or initiation of Ontario trade listed by Michigan manufacturing companies, 1963 Numberoof companies answered 12 Market potential too small 7 Subsidiary of U.S. firm located in Ontario 3 Have Canadian license that covers the market 5 Value of the Canadian dollar 5 No representation in that market 1 Plant capacity utilized fully now Lower Canadian production costs 5 Canadian competition is too great 2 Canadian taxes 1 Too much paper work 1 Too much other U.S. competition 1 High cost of distribution 1 Rail rates too high 3 "Buy Canadian" attitude limits demand for American product 3 Not interested in the market _£' Customs clearance delays 52 Total write-in answers to the question Source: Survey of Michigan manufacturing companies. 124 Table 42. Ranking by the Ontario manufacturing companies of problems confronting the initiation or expansion of trade with Michigan, 1963 _l Non— All exporting Exporting companies companies companies Rank Wt. Rank Wt. Rank Wt. High United States tariffs and customs regulations 1 506 1 216 l 290 Lack Of Michigan market information and services 2 284 3 123 2 161 Complexity of United States import procedure and regulations 3 242 2 132 3 110 High cost of transport and distribution 4 164 4 62 4 102 Complexity of Canadian export procedure and regulations 5 75 5 33 5 42 Inefficient transport service due to border regulations and admin— istrative practices 6 26 6 6 6 20 Note: Respondent was asked to write in specific problems pertaining to his Operations. These are summarized in the next table. Source: Data from 168 Ontario manufacturing companies with 80 non—exporting companies and 88 exporting com— panies. 125 information and services" was ranked third by the non—ex— porters, while the exporters ranked it second. This is just the opposite of the ranking of these problems by the Michigan manufacturing companies. The non—exporters considered the "Complexity of United States import procedure and regulations" a greater problem than a "Lack of Michigan market information and services." Many of the non—exporters were not too well informed as to the exact United States import procedure. Some stated they did not have sufficient or trained person- nel to accomplish the necessary paper work required to sat— isfy the United States customs regulations. The Ontario manufacturing companies were more con— cerned with the "High cost Of transport and distribution" than were their counterparts in Michigan. The last two answers, "Complexity of Canadian ex— port procedure and regulations" and "Inefficient transport service due to border regulations and administrative prac- tices" were seldom mentioned as problems. Each received about 1/10 the weight for ranking purposes as did the prob— lem of "High United States Tariffs and customs regulations." Table 43 lists the various specific problems that were given by the Ontario manufacturing companies. Thirty companies were subsidiaries of United States firms and were not interested, or in some cases prohibited by the parent organization from selling in the Michigan market. Many of the other problems reflected the situation Table 43. 126 Specific problems confronting expansion or initiation of Michigan trade listed by Ontario manufacturing companies, 1963 Number Of companies answered 19 ID I". (’11—. m N H Para H F4 H .32 82 Prohibited by the U.S. food and drug administra- tion Higher Canadian cost due to greater number of styles carried compared to the size of Canadian market Plant capacity fully utilized serving Canadian market U.S. price competition too great No sales representation Can't satisfy Canadian market Have not solicited U.S. markets Canadian market fills production needs Purely a product and sales nature, i.e., didn't have the right product Not our market Complicated duty rebate (Canadian) on material of foreign origin Product prices all too high to enter the Mich- igan market Uneconomical to move flour against the flow of wheat Customs inspections at border hold up transport Section 16 of the U.S. copyright act Exchange rate——affects long—term contracts Inefficient administrative practices Threat of patent suit Disinclination of U.S. firms to buy Canadian product Subsidiary of a U.S. company Total write—in answers to the question Source: Survey of Ontario manufacturing companies. 127 of the individual company. This restricted its ability to participate in the Michigan market. Many companies stated that if the tariffs could be reduced they would be interested in initiating, or ex— panding activities in the Michigan market and those of the surrounding states. Nineteen of the companies stated that the United States price competition was too great for them to try and enter the Michigan market. SUMMARY The survey findings indicated that the greatest obstacle to initiation or expansion of Michigan—Ontario trade was "High United States (Canadian) tariffs and cus— toms regulations." Michigan companies considered the "Com— plexity of Canadian import procedure and regulations" as the next most serious obstacle, while "Lack of Ontario mar- ket information and services" was third. The Ontario companies ranked "Lack of Michigan mar— ket information and services" as the second most serious obstacle, with "Complexity of United States import proced— ure and regulations" third. "High cost of transport and distribution" was fourth for the Ontario companies and fifth for the Michigan companies. The Michigan companies ranked "Complexity of United States export procedure and regulations" as fourth, while the counterpart of this question was ranked by the Ontario companies as fifth, tending in most cases to feel it was 128 an unimportant Obstacle. All companies in both Michigan and Ontario ranked "Inefficient transport service due to border regulations and administrative practices" as the least important obstacle. Two of the above obstacles, "Lack Of Michigan (On- tario) market information and services" and “High cost Of transport and distribution," can be dealt with at the state, or local level. However, the other four are caused directly or indirectly by federal regulation and may possibly be changed or improved, by the state or province taking pos- itive action to influence the federal government. The majority of exporters in the survey were opti- mistic and expected shipments to increase annually 10% to 20% over the next five years. Non-exporters tended to be somewhat less optimistic regarding shipments for the same period. Considering the Optimistic attitude of the exporters in the survey, given a favorable governmental and economic climate, expansion of Michigan—Ontario trade can be an im- portant contributing factor to the future progress and growth of each economy. In the following chapters we will examine the trans- port reciprocity between Michigan and Ontario and see how it affects the commerce between the two jurisdictions. However, first it is necessary to determine what agencies in both Michigan and Ontario are involved in transport regu- lation and see what responsibility they have for reciprocity. This is the subject of the next chapter. CHAPTER IV TRANSPORT REGULATORY AGENCIES AND RECIPROCITY INTRODUCTION This chapter is concerned with transport regulatory agencies and reciprocity between Michigan and Ontario. The relationship of the federal and state governments with re— spect to the exercise of power in the regulation of trans- port carriers is examined first. An explanation of the origin and evolution of the functions and responsibilities of the state and provincial agencies that exercise regula- tory power over the several modes of transport follows. A statement of the formal motor carrier reciprocity agree- ment between Michigan and Ontario will complete the chapter. COMMERCE CLAUSE AND FREEDOM OF TRANSPORT The United States constitution sets up the relation- ship of the state and federal government with respect to the exercise of power over commerce. Article I, section 8, paragraph 3, states that Con— gress shall have power to regulate commerce with foreign nations, and among the several states, and with the Indian tribes.1 1The Constitution of the United States of America, published_ by the Office of Education, U. S. Department of Health, Education, and Welfare, Washington, D. C., 1957, p. 10. 129 “l‘ 5!?IP'I‘Y7V 130 The tenth amendment states that the powers not dele— gated to the United States by the Constitution, nor prohib- ited by it to the states, are reserved to the states, re— spectively, or to the people. Supreme Court decisions interpreting the constitu- tion have divided the exercise of governmental power into three areas: 1. The area in which federal power has exclusive jurisdiction. 2. The area where the state power has exclusive jurisdiction. 3. The area where both federal and state power are applicable. With respect to interstate and international car— riers, neither the federal nor the state has exclusive jur— isdiction. The exercise of governmental power falls into the third area where such powers are concurrent.l Because of the intertwining of local and national interests in the operations of interstate carriers, it is impossible to draw lines between the proper areas of state and federal control. The areas of control have been the subject of judicial in— terpretation with the Supreme Court of the United States as the ultimate arbiter in such cases. 1"Concurrent" is used to denote the co—existence of paramount federal and subordinate state power, the sense in which it is customarily used in discussing the power to regulate commerce. 131 The judicial interpretation of federal power with respect to carriers and the commerce clause was first pro- vided in the case of Gibbons v. Ogden in 1842.1 The state of New York had granted Ogden the exclu— sive navigation of all the waters within the jurisdiction of that state. Gibbons had two boats, licensed by the federal gov- ernment, carrying on coasting trade in the same waters. Ogden had secured an injunction from the state of New York prohibiting Gibbons from navigating the waters within the territory of New York. The injunction was up— held by the highest court in New York, and consequently Gibbons had taken the case to the United States Supreme Court. The case was of national interest as it raised the issue of whether Congress, under the commerce power, could authorize interstate navigation wholly within the territor— ial waters of adjacent states contrary to the provisions of the state laws. The decision in the case was delivered by Chief Justice Marshall. Congressional authority was upheld and Gibbons was allowed to navigate the state waters. The state was unable to grant a monopoly to Ogden. lCases Argued and Decided in the Suprege7Court of the United States, 9 10,11,12,Wheaton, Book 6, Lawyers' Edition, New York, The Lawyers' Co—operative Publishing Company, 1901, p. 23. ‘r*q~’~.nanynflVvfln-UUFIpWV“firmwvuput—_-!-_n‘__n__‘_n 132 In the opinion Chief Justice Marshall clearly de- fined the meaning of the words "commerce," “regulate" and "among the several states." "Commerce" was defined first by the following: The subject to be regulated is commerce; and our constitution being, as was aptly said at the bar, one of enumeration, and not of definition, to ascertain the extent of the power, it becomes nec- essary to settle the meaning of the word. The coun- sel for the appellee (Ogden) would limit it to traf— fic, to buying and selling, or the interchange of commodities, and do not admit that it comprehends navigation. This would restrict a general term, applicable to many objects, to one of its signifi— cations. Commerce, undoubtedly, is traffic, but it is something more: it is intercourse. It de— scribes the commercial intercourse between nations, and parts of nations, in all its branches, and is regulated by prescribing rules for carrying on that intercourse. The mind can scarcely conceive a sys- tem for regulating commerce between nations, which shall exclude all laws concerning navigation, which shall be silent on the admission of the vessels of the one nation into the ports of the other, and be confined to prescribing rules for the conduct of individuals, in the actual employment of buying and selling, or of barter. Commerce "among the several States" is defined: The word "among" means intermingled with. A thing which is among others, is intermingled with them. Commerce among the States, cannot stop at the external boundary line of each State, but may be introduced into the interior. It is not intended to say that these words comprehend that commerce which is completely in- ternal, which is carried on between man and man in a State, or between different parts of the same State, and which does not extend to or affect other States. Such a power would be inconvenient, and is certainly unnecessary. Comprehensive as the word "among" is, it may be properly restricted to that commerce which con- cerns more States than one. . . . The completely 19 Wheaton at 189, 190, p. 68. 133 internal commerce of a State, then, may be consid— ered as reserved for the State itself. But, in regulating commerce with foreign nations, the power of Congress does not stop at the jurisdic— tional lines of the several states. It would be a very useless power if it could not pass those lines. . . . If Congress has the power to regulate it, that power must be exercised whenever the sub- ject exists. If it exists within the States, if a foreign voyage may commence or terminate at a port within a State, then the power of Congress may be exercised within a State. The term "regulate" is defined: To regulate is, "to prescribe the rule by which com— merce is to be governed."2 This power, like all others vested in congress, is complete in itself, may be exercised to its utmost extent, and acknow— ledges no limitations other than are prescribed in the constitution. The reasons for the decision in this case laid the foundation for a broad interpretation of federal commercial power. The view that federal power could regulate commerce was extended and applied in other cases in the years that followed. In the case of Cooley v. Board of Wardens (1851), 12 Howard 299, the doctrine was developed that over subjects of commerce which are "in their nature national or admit only of one uniform system, or plan of regulation" Congress alone may legislate, while over subjects of commerce con— cerning which there is a "superior fitness and propriety, l9 Wheaton at 194—196, pp. 69-70. 29 Wheaton at 196, p. 70. 3Ibid. at 197, p. 70. 134 not to say absolute necessity, of different systems of reg- ulation" state legislation is valid until supplanted by Congress.1 The judgment of the court in the Cooley case was based upon the concrete applications of state power. The court pointed out that even in local matters state regula- tion is invalid if it is unduly burdensome to interstate commerce, at the same time national commerce may be sub— jected to state regulation if the effect of the regulation is "remote,“ "indirect“ or "incidental."2 These are matters of reasonableness to be determined by the judgment of the court. In the last of the nineteenth century and the first of the twentieth century regulation of surface transporta— tion was concerned primarily with railroad and water navi— gation. The principles of regulation evolved only after conflicts between States and Federal Supreme Courts, and the independent regulatory commissions. Such principles were set forth, primarily in court interpretations.3 MOTOR CARRIERS With the advent of motor carriers, new problems of regulation arose due to the nature of their operations. lEpcyclopeedia of the Social Sciences, Vol. 7, p. 229. 2 . Ibid., p. 230. 3See Munn v. Illinois, 94 U.S. 113 (1877); and the Shreveport rate case, 234 U.S. 342 (1914). 135 Insofar as possible, the principles, developed in the course of prior regulations, were extended to the regu— lation of motor carriers. Problems dealing with the exercise of power by the state or federal government, separately or jointly, are ultimately settled by the Supreme Court of the United States. The interrelationship of the commerce clause and the state regulation of motor carriers is slowly developing by such Court decisions. In 1935 Congress passed the Federal Motor Carrier Act based on the exercise of federal power granted to Con— gress by the commerce clause. Under the authority conferred by the Act, the Interstate Commerce Commission could pre— scribe regulations dealing with interstate motor carriers. As the motor carrier industry has developed some general principles have evolved from decisions applying the commerce clause. Although Congress has the power to curtail state power in some measure, it does not preclude all state action affecting interstate commerce. In the absence of congressional action, power to regulate matters of local concern may generally be exercised by the states subject to other applicable constitutional restrictions even though such regulation may unavoidably involve some regulation of motor carriers moving in interstate commerce. Where the object of state legislation has been to promote highway conservation and traffic safety, the Supreme Court has often ruled that there is no clash with the commerce 136 clause.1 Some burden on interstate commerce is permissible when it is an exercise of state authority left to it under the constitution, such as police power and economic regula- tion. However, direct interference with interstate commerce by application of a state statute, will not be allowed re- gardless of the purpose of the statute.2 No state may es- tablish standards which would derogate from the equal power of other states to make regulations Of their own.3 Even where Congress has not acted, state legislation is invalid which unreasonably burdens, or discriminates against, or materially affects interstate motor carriers. However, a carrier engaged in both interstate and intrastate business must show that the enforcement of the state legislation is detrimental to the interstate business.4 In application of these general principles, it has been determined that a state may not deny a carrier engaged in interstate commerce the right to use its highways, pro- viding the carrier meets police and safety regulations. 1Cases Argued and Decided in the Suprege Court of the United States, Book 97, Lawyers' Edition, New York, The Lawyers' Co-operative Publishing Co., 1953, p. 157, here- after referred to as Lloyd A. Fry Roofing Co. v. Wood (1952), (vol.) 344, U.S., (case) 157, (book) 97 L ed., (page) 168. 2South Carolina State Highway Dept. v. Barnwell Bros. (1938), 303 US 177, 82 L ed 734. 3Sproles v. Binford (1932), 286 us 374, 76 L ed 1177, 52 s Ct 581. 4Interstate Busses Corp. v. Holyoke Street R. Co. (1927), 273 US 45, 71 L ed 530, 47 S Ct 298. 137 However, it may do so to a carrier engaged wholly in intra- state business. A state may require an interstate carrier to secure a certificate, or permit, or register with a state agency, thus providing identification information on its vehicles, if this will aid the state in applying its police, welfare, and safety regulations. In most instances, the court has found no undue burden on interstate commerce. A state may enact legislation relating to size, dimensions, and other physical characteristics of motor vehicles operating on its highways. These have been held valid by the Supreme Court on the ground that they are for public safety and highway conservation, their effect on interstate commerce being merely incidental. A state has the power, which may be delegated to a municipality, to require users of motor vehicles to provide adequate liability insurance to cover judgments against the carrier as a result of its operations. This is not an un- reasonable burden on interstate commerce if the liability is limited to damages suffered within the state by persons other than the passenger.1 A state may properly regulate the motor carrier as to the routes to be used within the jurisdiction of the state. Other areas of state regulatory power pertain to the prohibition of advertising on common carrier equipment lHicklin v. Coney (1933), 290 us 169, 78 L ed 247, 54 s Ct 142. 138 and drivers' qualifications. A state may tax a carrier for the privilege of op- erating within the state or over its highways. A state may issue license plates to carriers at fees determined solely by the state. Reciprocity permits or plates may be issued at the discretion of the state. The effect of Congressional power, stemming from the commerce clause, has been considerable on all modes of transport. Freedom of transport as such does not exist. A11 modes of transport are controlled by at least one level of government, if not by several. But regulation on all levels is not static. It is constantly being challenged in the courts, and being altered as necessary to provide for changes in technology, Operations, Concepts in trans- portation, and the extension of reciprocity among, and be- tween, states. MICHIGAN LAWS AND TRANSPORT REGULATORY AGENCIES In Michigan, there are many regulatory agencies that have some responsibility for controlling the various modes of transport. The functions and authority of each agency are set forth in certain Public Acts. In the next section these Acts are examined to determine the extent of authority each agency has with respect to the modes of trans— port. MICHIGAN DEPARTMENT OF AERONAUTICS The Department of Aeronautics created by Act 327, 139 Public Acts of 1945, replaces the Michigan Board of Aero— nautics which was first created by Act 177, Public Acts of 1929. The Act of 1945 provided for the establishment of a Department to be composed of the Commission, a Director of Aeronautics and the employees. The commission is required to govern and regulate commercial Operations in intrastate commerce within the borders of the state . . . issue rules and regulations . . . provided; That prior to issuance of such rules and regula- tions, notice and an opportunity to be heard shall be given all interested parties; and provided further, that in in- stances where there are intrastate commercial operations that are a part of the interstate route of an air carrier duly certificated by proper federal authority, there shall be required only the registration of such federal certifi- cates with the commission; the commission shall thereupon issue a state certificate of approval covering the intra— state portions Of such interstate air commerce.1 Aircraft and airmen are exempt from registration and certification if they are operating commercial aircraft con- stituting an act of interstate or foreign commerce, or in that part of such commerce which is intrastate in character.2 1Act 327, Public Acts of 1945, Chapter IV, Section 51. 2 84, (d). Act 327, Public Acts of 1945, Chapter IV, Section 140 The Department of Aeronautics is not involved in problems of regulating air carrier Operations except when the public health, welfare and safety is concerned. With the federal government controlling interstate and interna- tional air commerce, the Department has no interest in reci— procity. MICHIGAN STATE WATERWAYS COMMISSION The Michigan State Waterways Commission was estab— lished by Act 320, Public Acts of 1947. The powers and duties of the Commission are primarily for acquiring prop- erty, constructing and maintaining harbor and navigation facilities, and contracting with the federal government for various programs. This is the only state Commission concerned with waterways; however, the wording Of the Act is such that it prohibits the Commission from having any power over the activities of commercial vessels and commercial shipping of any kind. MICHIGAN PUBLIC SERVICE COMMISSION The Michigan Public Service Commission was created and its powers and duties defined by Act 3, Public Acts of 1939, as amended.1 The commission consists Of three 1Public and Local Acts of the Legislature of the State of Michlgen passed at JRegular Session of 1939, Com- piled by HarryF . Kelly, Secretary of rState, Lansing, Mich- igan, p. 7. 141 members, appointed by the Governor, with the consent of the Senate. The Commission has complete authority to regulate motor carriers, railroads, and pipelines engaged in intra- state activities. Its power and authority over the inter- state and international operations of these carriers is restricted by the federal government. The only interest the Michigan Public Service Com- mission has pursued in transport reciprocity is in the area of motor carrier operations. MICHIGAN DEPARTMENT OF REVENUE The Motor Fuel Tax Division of the Department of Revenue establishes the Michigan motor fuel tax requirements. Operators of commercial vehicles are required to purchase a sufficient quantity of gasoline or other fuels in Mich- igan to propel the vehicle for the number of miles traveled on the highways of the state.1 Owners of diesel type motor vehicles, operated on the public roads and highways of Mich- igan, must be licensed with the Motor Fuel Tax Division, as users of diesel fuel. Carriers Operating the equipment must secure the license in its name, listing each diesel fuel type vehicle. The fee for the license is $1.00 regard— less Of the number of vehicles listed. 1Public and Local Acts of the Legislature of the State of Michigan passed at Regular Session of 1951, Com- piled by Fred M. Alger, Jr., Secretary of State, Lansing, Michigan, p. 68. 142 Each vehicle must display an identification permit when it is operated within the state. Monthly reports must be filed with the Division, stating the name and address of the diesel fuel supplier, the dates of purchases, and the amount of diesel fuel purchased and used in Michigan. The license is granted for an indefinite time, but the individual vehicle permits expire December 31 of each year and must be reissued at that time. The motor fuel tax has not been subject to recip- rocal negotiations. MICHIGAN DEPARTMENT OF STATE The Department of State is primarily responsible for the administration of Chapter II of the Vehicle Code which requires the registration and titling of certain types of vehicles which use the public highways. Section 216 of the Vehicle Code covers the Registration and Certificate of Title provisions. Sections 224 and 225 provide that the Department of State shall issue to the owner one or two registration plates for each vehicle properly registered. The Division of Driver and Vehicle Services of the Department of State issues ten-day $20.00 permits (sticker) for vehicles licensed in jurisdictions with which Michigan does 222 have reciprocity. This is in lieu of the required regular registration plates. The permit authorizes ten consecutive days of interstate travel into and through Michigan. The permits are issued through designated branch Offices and the Finance Division, Department of State, 143 Lansing. They may be purchased in advance if the dates for travel are specified. However, the permits are issued for a particular vehicle, specified by license number, in- dicating state or province of issue. The Reciprocity Division of the Department of State also issues Michigan Reciprocity Permits for use on certain types of commercial vehicles registered in Ohio. MICHIGAN HIGHWAY RECIPROCITY BOARD The Michigan highway reciprocity board was created by Act 124, Public Acts of 1960. This Act repealed all previous acts establishing a reciprocity board. The board consists of the Secretary of State, who serves as the chairman, State Highway Commissioner and the Chairman of the Michigan Public Service Commission. Section 3 states that, notwithstanding any other provision of law to the contrary, the board may enter into and make such reciprocal compacts, agreements or arrange- ments as the board deems proper or expedient and in the interests of the people of this state, with the proper authorities of other jurisdictions, either individually or with a group of jurisdictions, concerning the fees, charges, taxation, operation and regulation of trucks, tractors, trailers, automobiles, buses, and all other auto- motive equipment engaged in international, interstate or intrastate commerce upon and over the public highways. "Jurisdiction" means other states of the United 144 States, the District of Columbia, territories and posses- sions of the United States, foreign countries or political subdivisions of foreign countries. Section 8 states that in the absence of a compact, agreement-or arrangement with any jurisdiction, the board may examine the laws and requirements Of the jurisdiction and declare the extent and nature of the exemptions and privileges to be extended to the owners or operators of vehicles properly registered or licensed in the other jur- isdiction, which in the judgment of the board, shall be equivalent to the exemptions and privileges which are ex- tended by the 1aws of the jurisdiction, to vehicles properly registered or licensed in this state, or to the owners or operators Of vehicles properly licensed in this state. Section 11 states that to the extent another jur- isdiction is not fully reciprocal as to taxes or fees on vehicles in international or interstate commerce, the board may make a limited agreement with the jurisdictions cover- ing only part of the fees, taxes and charges otherwise ap- plicable, or the board may require the owners or operators of the foreign registered vehicles to pay a tax in the amount equal to the tax of whatever character assessed by the other jurisdiction against vehicles registered in this state and operated in international or interstate commerce in that jurisdiction. Owners or Operators of foreign registered vehicles which are subject to registration under the pro— visions of this section shall make application for a permit 145 in which shall be set forth the conditions for operation of the vehicles in this state. The board may examine the laws of other jurisdictions and determine what taxes or fees shall be payable to this state by the owners or operators of foreign registered vehicles. Section 14 . . . The board may require owners and operators of foreign registered vehicles claiming exemptions or privileges under compacts, agreements, arrangements, or declarations authorized by this act, to supply lists of vehicles for which exemptions and privileges are requested and to require the vehicles to display a reciprocity plate or other identification prescribed by the board, as a pre- requisite to the enjoyment of the exemptions and privileges claimed thereof. Section 15 states that the members of the board and such officers and investigators of their respective departments as they shall designate shall have the powers conferred upon peace officers by the general laws of the state when enforcing the provisions of this act. Nothing in the act shall be construed as authorizing the board or the members of the board to create a highway patrol. Section 16 states the compacts, agreements and ar— rangements shall not operate to supersede or suspend the power and authority and discretion of the Michigan Public Service Commission to make and enforce rules and regulations governing motor carriers for hire or to grant or deny cer— tificates or permits to motor carriers for hire. The public 146 service commission may adopt rules and regulations making applicable to vehicles operated in foreign commerce over the highways of this state similar provisions to those pre— scribed by Act No. 254 of the Public Acts of 1933, as amended, being sections 475.1 to 479.20 of the Compiled Laws of 1948, for vehicles operated in interstate and intrastate commerce over the highways of this state and by rule may make appli— cable to vehicles operating in foreign commerce fees and charges similar to those imposed upon vehicles of this state operating in other countries in foreign commerce. The inspectors of the Michigan Public Service Com— mission are charged with the policing of the reciprocity agreements with other jurisdictions. However, this does not supplant enforcement by the duly authorized state police. The weighmasters at the various state scales are not con- cerned with the enforcement of the reciprocity agreements. They are concerned only with the size and weight restric— tions as applied to all commercial vehicles. SUMMARY The above Michigan agencies are concerned in a lesser, or greater extent, with regulation of the modes of transport. However, due to the operational character— istics of the international rail, air, waterborne, and pipeline carriers, the State's jurisdiction and control are very limited. The State makes no agreements, nor evi— dences any concern with reciprocity as far as the above 147 four modes are concerned. Any reciprocity for these modes on an international level would be developed by the national governments of the countries involved. Michigan's only concern at present with transport reciprocity has to do with motor carriers. The motor car— rier reciprocity agreement between Michigan and Ontario will be discussed after the next section which deals with the Canadian and Ontario regulatory agencies. CANADIAN AND ONTARIO TRANSPORT REGULATORY AGENCIES The distribution of legislative powers in Canada between the federal government and the provincial govern- ments is set forth in The British North American Act of 1867. Article 91 enumerates the powers of the Parliament of Canada, giving it exclusive power over the regulation of trade and commerce, and over navigation and shipping.1 Article 92 enumerates subjects of exclusive Provin— cial legislation. Provincial transport regulation is re- stricted by section 10 which states: Local works and under- taking other than such as are of the following classes: (a) Lines of Steam or other Ships, Railways, Canals, Te1e~ graphs, and other WOrks and Undertakings connecting the Province with any other or others of the Provinces, or extending beyond the Limits of the Province; (b) Lines lRules, Orders and Forms of ngceeding of the Sen- ate of Canada, Ottawa, R. LeMOine, MacLean, Roger and Com- pany, 1876, p. 75. 148 of Steam Ships between the Province and any British or For- eign Country; (c) Such Works as, although wholly situated within the Province, are before or after their Execution declared by the Parliament of Canada to be for the general Advantage of Canada or for the Advantage of Two or more of the Provinces.l The Canadian courts have been called upon to deter- mine the limits of Dominion legislative power. The general philosophy of the courts has been to abstain from defining exact limits, but rather to leave its determination to the particular case. In Citizens Insurance Company v. Parsons (7 app. cas 96 (1881), the Judicial Committee of the Privy Council found it necessary to restrict the literal meaning of the words ”regulatibn of trade and commerce" in order to afford scope for the powers granted exclusively to the provincial legis— latures in Article 92.2 Over the years the policy of the Privy Council has been in general to interpret narrowly and strictly the powers granted to the dominion, and has upheld the right of various provinces to pass measures of local policy which affect particular trades. Thus in the area of trade and commerce the dominion government has gradually yielded some of its 1Ibid., p. 78. 2Encyclopaedia of the Social‘Sciences (New York: The Macmillan Company, Vol. 8), p. 227. 149 authority to the provincial governments. In the area of most transport regulation, though, such a transition of authority has not taken place. The dominion government still exercises jurisdiction over inter- provincial and international operations of pipelines, air- lines, water carriers and railways, but motor carriers are completely under provincial jurisdiction. In order to gain a better understanding of Ontario's transport regulation, it will be worthwhile to look first at the Federal regulatory agencies. CANADIAN DEPARTMENT OF TRANSPORT The Department of Transport was established in 1936 by The Department of Transport Act (S.C., 1936, Chapter 34, now R.S.C., 1952, Chapter 79, as amended) when the functions of the Department of Railways and Canals, the Department of Marine, and the Civil Aviation Branch of the Department of National Defence were amalgamated. The Department has the management, charge and direc- tion of: all government railways (this function is carried out by the Canadian National Railway Company); canals (ex- cepting those under the jurisdiction of the St. Lawrence Seaway Authority); marine services, which include lighthouse services and other aids to marine navigation, steamship inspection, nautical services and floating equipment; and air service, which includes maintenance and operation of airports, control of flying operations, meteorological serv- ices and radio services. 150 The Department of Transport has jurisdiction over all international and interprovincial transport service by rail, water, air, and pipeline. BOARD OF TRANSPORT COMMISSIONERS FOR CANADA The Board of Transport Commissioners for Canada was first established (as the Board of Railway Commissioners for Canada) on February 1, 1904, by The Railway Act, 1903. The Board of Railway Commissioners had been estab- lished as a court of record with extensive regulatory, ad- ministrative and judicial functions in respect of railway tariffs and tolls and the location, construction, mainten— ance and operation of railways within the jurisdiction of the Parliament of Canada. In 1938, Part I of The Transport Act (R.S.C., 1952, Chapter 271, as amended) changed the name of the Board Of Railway Commissioners for Canada to the present name. Over the years the Board has acquired jurisdiction to cover Canadian Government Railways, express and telephone companies (1906), telegraph companies (1908), and in 1929, international bridges and tunnels. In 1933 it was further extended to cover the abandonment of Operation of railway lines; in 1938, to the administration and approval of agreed charges negotiated between the railways and shippers, and to the regulation of rates on ships on certain inland waters of Canada and licensing such ships; in 1949, to the oil and gas pipelines of companies authorized under private 151 Act of Parliament to construct and operate such pipelines; and in 1953, to all companies authorized to construct or operate oil or gas pipelines connecting two or more prov- inces or extending beyond the limits of a province.1 The Board of Transport Commissioners has functions that include regulation, supervision and administration. Some of its duties include the settlement Of rates and of disputes on rates and on alleged discrimination, the regu- lation and inspection of certain railway operations, and matters concerning other modes of transport, except highway. A part of the work of the Board is judicial or quasi— judicial. The Board hears disputes between a railway and its customers and decides on the facts in accordance with rules laid down by Parliament. Others of its decisions do not rest upon clearly defined statutes, but are stated in such vague terms that they may rest on general principles that have been worked out over the years by the experience of the Commission. Some of the work of the Board borders on the legis- lative power, such as decisions on railway rates that have become rules that guide future policy and decisions. Decisions of the Board of Transport Commissioners may be appealed to the Supreme Court of Canada. 1 Or anization of the Government of Canada, Secre- tary of State of Canada, October, 1959, p. 287. 152 CANADIAN AIR TRANSPORT BOARD The Air Transport Board was established in September, 1944, by amendment to the Aeronautics Act.l Subsequent amendments to the Act were made in 1945, 1950, and 1952. The Board is responsible for the economic regula- tion of commercial air services in Canada and is also re— quired to advise the Minister of Transport in the exercise of his duties and powers in all matters relating to civil aviation. The regulator function relates to Canadian air services within Canada and abroad and to foreign air serv- ices operating into and out of Canada. Thus its functions extend to the licensing of persons to operate commercial air services; the regulation of air carriers; investigations and surveys as required by the Minister of Transport relat- ing to the operation and development of commercial air serv- ices in Canada, and such other matters connected with civil aviation as the Minister may direct.2 The provinces have no jurisdiction over commercial air service. In the field of international aviation, the Board continues to take an active part in the work of the Inter- national Civil Aviation Organization, and to undertake bi— lateral negotiations for the exchange of traffic rights lCanada Year Book, 1962, Ottawa, Dominion Bureau of Statistics, p. 761. 2Organization of the Government of Canada, Pub— lished by the authority of the Secretary of State of Canada, Ottawa, Canada, October, 1959, p. 68. 153 when appropriate. At present, Trans—Canada Air Lines, Canadian Pacific Air Lines Limited and TransAir Limited are Canada's designated international scheduled carriers.1 The Board also regulates tariffs to be charged for the carriage of passengers and freight. THE CANADIAN MARITIME COMMISSION The Commission was established in 1947 by the Mari— time Commission Act (RSC 1952, c. 38), as a separate depart— ment of the Government reporting to Parliament through the Minister of Transport. It is the function of the Commis- sion to “consider and recommend to the Minister from time to time such policies and measures as it considers neces— sary for the operation, maintenance, manning and develop- ment of a merchant marine and a ship-building and ship- repairing industry commensurate with Canadian maritime needs." (Section 6 of the Act.) It is authorized to ex— amine into, ascertain and keep records of all phases of ship operation. The Commission is specifically directed to "administer, in accordance with regulations of the Gov- ernor in Council, any steamship subventions voted by Par- liament." (Para. b, Section 8, of the Act.) Except in the case of the coasting trade, all Ca— nadian waterways including canals, lakes and rivers are open on equal terms to ships from all countries of the lCanada Year Book, 1963—64, Ottawa, Dominion Bureau of Statistics, p. 753. 154 world. In 1960-61 the Canada Shipping Act was amended to give Canadian—registered ships the exclusive right to carry goods and passengers between Canadian ports in the Great Lakes and the St. Lawrence River system from Havre St. Pierre westward. This change was made primarily to exclude the Commonwealth ships, including the British, from partic- ipating in such coastal traffic.l THE CANADIANefléTIONAL ENERGY BOARD The National Energy Board was established in 1959 by the National Energy Act.2 This Act provided for a five- member Board charged with the duty of assuring the best use of energy resources in Canada. It is responsible for the regulation of the construction and operation of the oil and gas pipelines that are under the jurisdiction of the Parliament of Canada, the tolls charged for transmis— sion by oil and gas pipeline, the export and import of gas and the export of electric power, and the construction of the lines over which such power is transmitted. All authority for regulation and control of inter— provincial and international pipelines rests with the Canad— ian federal government. The provinces have no jurisdiction. These, then, are the Canadian federal regulatory 1Canada Year Book, 1963-64, Ottawa, Dominion Bureau of Statistics, p. 783. 2Canada Year Book, 1963-64, Ottawa, Dominion Bureau of Statistics, p. 887. 155 agencies that have the authority to regulate the modes of transport. The provincial authority of Ontario will be discussed in the next section. ONTARIO DEPARTMENT OF TRANSPORT The present Ontario Department of Transport was established in 1957. It took over the functions of the prior organization, the Department of Highways, and, fol- lowing the recommendations of the Legislature's Select Com- mittee on Toll Roads, set up an organization to separate the problems connected with roads from those related to the users of the roads. In 1954 the Motor Vehicle Transport Act (Canada) was passed by the Dominion Government. This Act delegated the legislative powers over interprovincial and international motor carriers to the provinces, provided the Governor in Council issued a proclamation declaring it to be in force in that province. Section 1, of paragraph 3, of the Act states: Where in any province a license is by the law of the province required for the Operation of a local undertaking, no person shall operate an extra—pro- vincial undertaking in that province unless he holds a licence issued under the authority of this Act. "Extra—provincial undertaking" is defined to mean a work or undertaking for the transport Of passen- gers or goods by motor vehicle, connecting a prov- ince with any other or others of the provinces, or extending beyond the limits of a province. Again the Act states in paragraph 3, section 2: The provincial transport board in each province may in its discretion issue a licence to a person 156 to operate an extra-provincial undertaking into or through the province upon the like terms and conditions and in the like manner as if the extra- provincial undertaking operated in the province were a local undertaking. Prior to the passage of the Federal Motor Vehicle Transport Act in 1954, it was generally understood that such traffic was to be regulated by the Dominion Government. However, there were no acts passed by Parliament that gave official credence to the general belief. Bills were intro- duced in 1937 and in 1940 to provide federal control, but were withdrawn in the face Of opposition from the carriers 1 The fact that the Federal Government and some shippers. satisfactorily regulated other modes of transport seemed to have little bearing on the decision to give the provinces complete jurisdiction over all motor carriers. The Ontario Highway Transport Board must review all applications for new operating licenses. After the Board issues a certificate of public necessity and conven- ience, the Minister may issue an operating license to the applicant. The restrictions on weight, height, length and ve- hicle combinations are set out in the Highway Traffic Act of the Ontario Revised Statutes of 1960, as amended in 1963. As in Michigan, this area does not technically lend itself to reciprocal negotiation, because it is controlled by the 1A. W. Currie, Economics of Canadian Transportation (Toronto: University of Toronto Press, 1959), p. 499. 157 legislature. However, in other matters pertaining to the regulation of motor carriers, the Department of Transport maintains authority and control. RECIPROCITY AGREEMENT BETWEEN MICHIGAN AND ONTARIO The Dominion government of Canada has exclusive jurisdiction over air lines, ship lines, railroads, and pipelines. All rules and regulations pertaining to these are formulated and administered by the federal government. This is somewhat comparable to the situation in the United States where the federal government, through the Interstate Commerce Commission, and other agencies, regulates the in- terstate and international operations of all modes. How— ever, there is considerable difference in the regulation of motor carriers in the two countries. Ontario has complete jurisdiction over motor car- riers, whereas Michigan shares concurrent power with the federal government for control of interstate and interna- tional operations of motor carriers. Thus, Ontario has a greater opportunity to develop and control motor carrier reciprocity than does Michigan. The present motor carrier reciprocity agreement between Michigan and Ontario became effective in April, 1963. The text of the agreement is given below.1 1From information provided by Mr. P. J. Foley, Special Assistant to the Michigan Secretary of State. 158 Michigan has only limited reciprocity with Ontario on commercial vehicles. Michigan extends complete reciprocity to the following types of vehicles which are properly registered in Ontario. Ontario extends substantially the same reciprocity to such vehicles properly registered in Michigan: (1) (2) (3) (4) (5) (6) (7) (8) All passenger cars registered as such, and hearses and ambulances. All vehicles having a gross weight of not more than 6,000 lbs., tranSporting goods owned by the owner of the vehicle, and all public passenger vehicles having a gross weight of not more than 6,000 lbs. (This will include most pick-up and panel trucks and certain other light delivery vehicles, and commercially registered passenger cars and station wagons.) Vehicles of any size used for transporting natural products of the farm and/or live- stock, owned by the owner of the vehicle. Motor buses operated in a scheduled service in Michigan or Ontario within a distance of ten miles of the border. Motor buses registered in Ontario while op- erating on chartered trips into or through Michigan, which originate outside of Mich— igan, and motor buses registered in Michigan while Operating on chartered trips into or through Ontario, which originate outside of Ontario. Vehicles transporting objects and materials used in the production of cultural presenta- tions and exhibitions, including musical and ballet concerts and art exhibitions, provided such presentations and exhibitions are not carried on solely for the purpose of financial gain. Fire apparatus operating in Michigan during emergencies. Trailers and semi-trailers operated within, and no more than eight miles beyond, the city limits of Detroit, Port Huron, and Sault Ste. Marie, if the trailer or semi- trailer is drawn by a commercial vehicle registered in Michigan, Ontario trailers 159 and semi-trailers which operate beyond the eight mile limit, must be fully registered in Michigan. Vehicle operators from Ontario who do not qualify for reciprocal privileges under any of the above provisions, can purchase a ten day permit for $20, authorizing ten consecutive days of travel into or through Michigan. All vehicles operated either under full reciprocity or under a ”trip permit" may only be operated in Interstate or International movement of goods or passengers. Ontario registered vehicles engaged in Intrastate activities in Michigan, must be fully registered in Michigan. Michigan regis- tered vehicles engaged in Intraprovincial activi- ties in Ontario, must be fully registered in Ontario. “Private“ carriers, transporting their own goods, which are not otherwise qualified for reciprocal privileges under any of the above provisions, can purchase a five day trip permit for $20, from On- tario, which will authorize them to operate into or through Ontario for five consecutive days. The alternatives for Michigan motor carriers who operate into or through Ontario are summarized as follows: 1. They may secure from The Ontario Transport Board an "L" license which authorizes in-bond transit privileges across Ontario. In order to obtain the "L“ license, the applicant must first secure authority from the Customs De— partment of the Canadian Federal Government to carry goods in-bond through Ontario. Secondly, they must have I.C.C. operating authority from the United States government for operations between areas that can be served by the route through Ontario, i.e., Buffalo to Detroit, Boston to Chi— cago, etc. Finally, they must provide evidence that their insurance meets the limits as required in Ontario. After securing the license, the operator must pay a $9.00 permit fee for each single trip. 160 2. All carriers operating into or through Ontario have the Option of purchasing Ontario registration plates for their equipment. 3. At Detroit, Port Huron, and Sault Ste. Marie, trailers and semi-trailers, registered in Michigan, may be operated into Ontario for a distance of 20 miles, provided they are hauled by an Ontario registered tractor.l 4. “Private" carriers, who own their own goods, may purchase a five-day permit for $20.00 which authorizes them to operate into or through Ontario for five consecu— tive days. In 1963 there were 57 United States carriers licensed for in—bond Ontario transit Operations, under the authority of the "L“ license. Fifteen Of these carriers were resi— dents of Michigan.2 In the fiscal year ending March, 1963, 66,319 nine—dollar permits were purchased by "L" license holders, for a total revenue of $596,871. In the fiscal year ending March, 1964, 52,181 permits were purchased for a total revenue Of $469,629. The alternatives for Ontario motor carriers who operate into or through Michigan are summarized as follows: 1. All Ontario motor carriers may purchase a 10— day permit for $20.00, authorizing 10 consecutive days of lFor states other than Michigan the distance is eight miles from the border. 2From information provided by Mr. W. M. Earl, Reg— istrar of Motor Vehicles, Province of Ontario. 161 interstate travel into or through Michigan. This permit is only in lieu of Michigan registration plates. 2. All Ontario carriers operating into or through Michigan have the option of purchasing Michigan registra- tion plates for their equipment, at the same cost as a Michigan resident. 3. At Detroit, Port Huron, and Sault Ste. Marie, trailers and semi—trailers, registered in Ontario may be operated into Michigan a distance no greater than eight miles beyond the city limits of the above cities, if drawn by a commercial vehicle registered in Michigan. If oper— ated beyond this limit a $20.00 permit or Michigan regis— tration plate must be secured. 4. Ontario registered vehicles engaged in Michigan intrastate activities must be fully registered in Michigan. All Ontario "for-hire“ carriers that operate more than eight miles beyond the city limits of Detroit, Port Huron, and Sault Ste. Marie must register their operating authority with the Michigan Public Service Commission, and pay the registration and mileage fees required by the com— mission. If diesel type motor vehicles are operated, a license as a diesel fuel user must be secured from the Motor Fuel Tax Division of the Michigan Department of Rev- enue o MICHIGAN'S VIEW OF RECIPROCITY Michigan's motor carrier reciprocity policies are 162 formulated by the Michigan Highway Reciprocity Board. The following are not at present subject to reciprocal negotia- tion: 1. Registration of equipment with Michigan Public Service Commission. 2. Mileage fees collected by the M.P.S.C. 3. Motor fuel tax. 4. Length, height, and weight limits as set by the legislature. The primary area open for reciprocal negotiations and agreement is that of vehicle registration. The issu- ance of registration plates comes under the jurisdiction of the Michigan Secretary of State. Because of this, the Secretary of State's office has been the most active in reciprocal negotiations. Table 44 shows a breakdown of the Michigan revenue received from Ontario motor carriers for transit permits and registration plates. The total amount for 1964 is $194,200. This is the amount of money that Michigan would forfeit if she granted Ontario full and free reciprocity. Under full reciprocity with Ontario, Michigan would still collect the fuel tax plus the M.P.S.C. mileage fees. Michigan officials have stated they would like a more complete reciprocity agreement with Ontario. However, they are reluctant to grant further concessions to Ontario carriers until such time as Ontario will extend the same concessions to Michigan carriers. 163 Table 44. Michigan revenue from transit permits and reg- istration plates issued to Ontario commercial vehicles, 1963 TRANSIT PERMITSa Total permits Issued to Issued Ontario carriers No. Dollars No. Dollars 1961 1,000 $20,000 900 $18,000 1962 1,425 28,500 1,283 25,660 1963 1,522 30,440 1,370 27,400 1964 1,500 30,000 (est) ONTARIO VEHICLES REGISTERED IN MICHIGAN Commercial Trailers and trucks Semi—trailers Total c Total Total Total Foreign Ontario Foreign Ontario 1964d 2,498 707 466 114 MICHIGAN REVENUE FROM ONTARIO VEHICLES Ontario commercial trucks 707 x $200e = $141,400 Ontario trailers & semi. 114 x $200 = 22 800 Total from registration plates 164,200 Plus revenue from permits 30,000 1964 Total Michigan revenue from Ontario vehicles $194,200 aPermit cost $20, allows 10—day Operation in Mich— igan without purchasing a registration plate for the vehicle or combination, Act 98 of Public Acts 1960, effective 26 April 1960. bAssume 90% of the permits issued to Ontario car— riers. CForeign includes all out of state registered ve- hicles. dNo breakdown by place of origin prior to 1964. eAssume each commercial vehicle weighs 10,000 lbs., at a registration rate of $2.00 per hundred weight, i.e., cost per unit is $200 per registration plate. Source: Michigan Secretary of State's office. 164 ONTARIO'S VIEW OF RECIPROCITY Ontario's motor carrier reciprocity policies are formulated and administered by the Ontario Department of Transport. Ontario has not been willing to grant full rec- iprocity to Michigan or to other states.1 This is because the full cost of building provincial highways is borne by the Ontario government. Little, if any, aid comes from the Canadian Dominion government. Thus, the highway users must provide the revenue for construction and maintenance. As stated previously, the revenue for Ontario transit com- mercial highway traffic moving in bond across the corridor, was $596,871 for fiscal year 1963, and $469,629 for 1964. In 1963 there were 57 motor carriers authorized to move goods in bond across Ontario; 15 were Michigan car- riers. Assuming that 50% of the trips across the Ontario corridor were made by Michigan carriers, Ontario received the following revenue from Michigan carriers in 1963:2 33,160 $ 9.00 transit permits $298,440 206 $20.00 five-day permits 3 4,120 8 Trucks registered at $309.00 ea. 2,472 20 Trailers at $249.00 ea. 4 980 Total revenue $310,012 1This information is from a talk given before the Greater Detroit Board of Commerce, June 7, 1963, by Mr. W. M. Earl, Registrar of Motor Vehicles for Ontario. 2Data supplied by the Motor Vehicle Licence Branch of the Ontario Department of Transport. 3The trucks and trailers were probably registered for border use at Detroit or Port Huron. The cost of each registration plate has been estimated, assuming the most expensive plate was purchased for two-axle units. 165 The $20.00 five-day permits were issued to private carriers as a result of the change in the reciprocity agree- ment that became effective in May, 1963. This figure will probably be larger in 1964 as more carriers become familiar with the use of the permit. On the basis of the above figures, Ontario received slightly more than three hundred thousand dollars from Mich- igan carriers in 1963. This was the result of the limited reciprocity agreement. Ontario received about one hundred thousand dollars more revenue in 1963 from Michigan carriers, than Michigan received from Ontario carriers in 1964. Limited reciprocity, with its attendant charges, not only helps to raise revenue, but also reduces the num— ber of foreign commercial vehicles that travel Ontario high— ways. Full reciprocity would cause a loss of revenue and at the same time raise the maintenance costs due to increased commercial travel on the highways. At present Ontario does not have the highways, nor can she afford the highways, required to handle the United States commercial traffic that would result from full reciprocity. For the immediate future Ontario seems to be committed to a policy of limited reciprocity. Ontario does not view limited reciprocity as a restriction to trade with Michigan. Since 1959 Ontario motor carriers have been allowed to purchase transferrable trailer plates. The use of the transferrable plate allows the Ontario carrier to move Michigan registered trailers 166 from the Michigan border to the Ontario destination, or across Ontario, and back again to the Michigan border. NO other permits are required and the movement can be accom- plished with little loss of time. Before being allowed to purchase the transferrable trailer plate, the carrier must first secure an Extra-Pro— vincial Licence (X) from the Ontario Department of Trans- port. After securing the Licence, or authority, the carrier may purchase as many (X) transferrable plates as required for his operation. In 1963 there were 781 carriers holding Extra-Pro- 1 Of these, 441 were holders of other vincial Licences. operating Licences, while 340 were granted only the Extra- Provincial Licence. Altogether, about 9% Of the Ontario carriers (total number 9,031) were granted Extra-Provincial Licences. During the same year these carriers used 3,314 transferrable trailer plates in the operation of their in- ternational and interprovincial business. This system works fairly well for the Ontario car- riers who, by the nature of their authority and routes, are in effect granted monopolistic powers for this service. As the predominant flow of goods moved by motor carrier is from Michigan to Ontario, a large part of this traffic can be moved on Michigan trailers. These Michigan trailers may 1Annual Report of the Ontario Department Of Trans— port, 1962-1963, Printed by Order of the Legislative Assem— bly of Ontario (Sessional No. 54), Toronto, Ontario. 167 be loaded with Ontario exports back to Michigan, or in some instances they may be loaded for other United States des— tinations. This system furnishes the Ontario carriers with a source of trailers for the international business, thus releasing their trailers for inter- or intra-provincial traffic. This advantage furnished the Ontario motor car— riers has not gone unnoticed, for they have at times also opposed full reciprocity. This was evidenced by their op— position to the change in reciprocity in April, 1963, which granted Michigan private carriers the privilege of purchas— ing the five-day $20.00 permit in lieu of paying the full registration fee. Heretofore, rather than pay the full registration fee, many of them had engaged the Ontario car— rier to move the trailer to destination and return it to the Michigan port—of—entry. There are two factors that may influence Ontario to accept full reciprocity with Michigan in the future. Both factors will tend to decrease the highway commercial motor traffic across the Ontario corridor. The first fac— tor is the movement of highway trailers on railroad flat cars, called "piggyback." This traffic is moving primarily between Michigan and the eastern states of the United States. The second factor will be the completion of the Interstate highways around Lake Erie from Toledo east to the New England states. This will be a toll—free road which will increase the volume of commercial traffic moving both east and west on the United States side of Lake Erie. 168 SUMMARY The Federal and State governments in the United States exercise concurrent powers with respect to regula- tion of interstate and international transport carriers. In Canada all modes Of transport, except motor carriers, come under the jurisdiction of the Federal government. The Motor Vehicle Transport Act (Canada) in 1954 gave the prov- inces complete jurisdiction over motor carriers. Michigan has numerous agencies that participate in some regulation of the five modes of transport. But only the Michigan Public Service Commission and the Secretary of State are concerned with reciprocity. The only formal transport reciprocity agreement between Michigan and Ontario covers motor carriers. The Ontario Department of Transport has sole juris— diction over motor carriers and is responsible for recip- rocal agreements. Limited reciprocity is employed by On- tario as a means of collecting additional revenue for build- ing highways and restricting the flow of United States com- mercial vehicles across the Ontario corridor between Mich— igan and New York. Michigan is interested in full reciprocity with Ontario, but Ontario is satisfied with limited reci— procity for the present. CHAPTER V TRANSPORT PROBLEMS AND RECIPROCITY INTRODUCTION 7 This chapter will present a discussion of the prob— lems of transport and reciprocity from the standpoint of both Michigan and Ontario exporters and carriers. Some aspects of motor carrier service between Michigan and On— tario will be examined, and a discussion of the operation and achievements of reciprocity will complete the chapter. EXPORTER EVALUATION OF BORDER TRANSPORT All Michigan and Ontario manufacturing companies in the samples were asked to evaluate the transport service between Michigan and Ontario.1 The response to this part of the survey seemed to indicate that the manufacturing companies did not have sufficient technical knowledge to appraise properly the transport service between Michigan and Ontario. The poll of the exporters indicated that they con- sidered the freight rates too high and that the total time enroute from point of shipment to destination was too great. However, on other aspects and the mechanics of the transport 1For information on this part of the survey, see Appendix A, Michigan-Ontario Trade and Transport question— naires. 169 170 service, they seemed to be less well informed. The survey did help to identify tariffs and customs regulations as primary problems affecting trade, and place the transport obstacles in perspective. EXPORTER'S PROBLEMS OF TRANSPORT SERVICE MICHIGAN AND ONTARIO MANUFACTURING COMPANIES The Michigan manufacturing companies were asked to rank several problems of transport service to Ontario that were caused by the existence of the border. They were also asked to state any other specific problem they encountered with transport service. None was stated individually which means that the listing of problems was complete, or none were encountered that the respondent cared to write about. Table 45 shows the ranking of specific problems by the Michigan and Ontario respondents. A total of 150 Michigan companies indicated that "Duplications and costs due to regulations at the border" were the most serious problem with "Too much time enroute from pick-up of goods to delivery to consignee" as second. "Lack of efficient through service under joint rates" and "Restrictive carrier equipment regulations in Michigan and Ontario" were ranked in that order as third and fourth. The Ontario companies were asked the same questions with respect to problems of transport service to Michigan that were caused by the existence of the border. Eight of the companies stated they experienced no difficulties, 171 Table 45. Ranking of border transport problems by Michigan and Ontario manufacturing companies, 1963 Michigan Ontario companies companies Rank Weight Rank Weight Duplications and cost due to regulations at the border lst 401 2nd 72 Too much time enroute from pick-up of goods to delivery to consignee 2nd 278 3rd 64 Lack of efficient through service under joint rates 3rd 216 lst 83 Restrictive carrier equipment regulations in Michigan and Ontario 4th 180 4th 62 Source: Survey of Michigan and Ontario manufacturing com- panies. but three indicated problems of customs clearance. "Lack of efficient through service under joint rates" was the most serious problem for the Ontario com- panies. Based on the weighting of each problem, it is clear that they made little distinction between the four problems. There were only a total of 21 points between the first and fourth ranked problems. However, there were 221 points difference between the first and fourth ranked problems by the Michigan companies. The Ontario companies ranked as the second most serious problem "Duplications and cost due to regulations at the border." Many respondents complained of the amount of paperwork required by both United States and Canadian 172 customs. The third problem was "Too much time enroute from pick—up of goods to delivery to consignee" and the fourth was "Restrictive carrier equipment regulations in Michigan and Ontario. Those companies using private motor carriage were more concerned with the equipment regulations, and complained of the necessity of securing a special permit from the Michigan Department of State when entering Mich- igan. Comparing the Michigan and Ontario results in Table 45, it is apparent that the Ontario companies were most concerned with the problem of efficient service and rates. Some Ontario exporters considered the motor carrier rates as excessive when considering the distance involved in reach- ing Michigan destinations. The problem of “Duplications and cost . . . ," ranked first by the Michigan companies, was considered serious by all respondents, being weighted more heavily than any other problem. This ties in very closely with the problem of "Too much time enroute . . . “ for in some respects the time factor depends on the regulations and administrative actions at the border. All respondents ranked "Restrictive carrier equip— ment regulations in Michigan and Ontario" as fourth; how- ever, the Ontario companies made little distinction between this problem and that of "Too much time enroute . . . " Many respondents in both jurisdictions indicated 173 they knew very little about the equipment regulations be- tween Michigan and Ontario. The equipment needs of those using commercial carriers were readily supplied by the car— rier, so the exporters were not aware of any problem involv— ing equipment regulations. MEASURES FOR IMPROVEMENT The five hundred Michigan companies in the first sample were asked to rank four proposed measures that would provide better transport service on shipments to Ontario.1 The five hundred Michigan companies in the second sample were asked a slightly different question.2 These companies were asked to rank five proposed measures that would provide easier marketing and better transport service on shipments to Ontario. The fifth proposed measure to be ranked was "Tariff reciprocity between United States and Canada resulting in lower rates." This was included because it had been specified by several respondents in the first sample as being more important than the proposed measures dealing with transport service. Therefore, it was included in the questionnaire mailed to the second sam- ple to see how they would rank "tariff reciprocity" when compared to the problems of transport. As expected, the proposed measure of "Tariff 1See Appendix A, question 10, page 249. 2See Appendix A, question 6, page 256. 174 reciprocity between United States and Canada resulting in lower rates" was ranked first by the respondents. This is a measure oriented towards freer trade and only indirect— ly influences transport service. The primary interest here is with transport, so the measure on "Tariff reciprocity . . . " will be omitted from the following table and discussion. Table 46 shows the ranking by Michigan and Ontario manufacturing companies of measures that would provide better transport service on shipments between Michigan and Ontario. Table 46. Ranking of measures that would provide better transport service on shipments between Michigan and Ontario, 1963 Michigan Ontario companies companies Rank Weight Rank Weight Greater customs reciprocity with more uniformity in regulations at the border lst 430 2nd 92 Through service under joint rates 2nd 318 lst 100 More liberal reciprocity with respect to equipment use in Michigan and Ontario 3rd 254 3rd 71 Better cooperation between Michigan and Ontario carriers 4th 170 4th 67 Source: Survey of Michigan and Ontario manufacturing com- panies. The Michigan companies ranked "Greater customs rec- iprocity with more uniformity in regulations at the border" as first. It is evident that the problem of border customs 175 clearance is of great concern to Michigan companies ship- ping to Ontario. It has a direct effect on transport serv— ice because of the delays, and transferring of merchandise attendant to customs. "Through service under joint rates" was ranked as second. Some Michigan companies stated that they thought better through service would decrease the time in-transit and hopefully reduce the rates. "More liberal reciprocity with respect to equipment use in Michigan and Ontario" was ranked third. This meas— ure was of more apparent concern to those Michigan companies using private motor carriage. Ranked last was "Better cooperation between Mich— igan and Ontario carriers." This was not considered very important for it received only about one—third the weighted points given to "Greater customs . . . " The Michigan companies that responded to these ques— tions were primarily companies that shipped 75% or more (by value) of their merchandise by motor carrier. Those respondents that shipped primarily by rail indicated that only the first and second measures in Table 46 had any bear— ing on their transport service. The Ontario manufacturing companies ranked the first two measures just the Opposite from the Michigan ranking. "Through service under joint rates" was ranked first by the Ontario companies with "Greater customs reciprocity with more uniformity in regulations at the border" second. I l 176 The third was "More liberal reciprocity with respect to equipment use in Michigan and Ontario" and "Better cooper- ation between Michigan and Ontario carriers" was last. One company in Ontario stated that lower bridge tolls at the Mackinaw Straits would help it compete in the Michigan market. Such a complaint was also voiced by sev- eral of the Michigan manufacturing companies as well as Michigan motor carriers. The research findings indicate that the Ontario exporter is primarily concerned with the quality and cost of service to Michigan. He is also interested in having regulations at the border improved so as to reduce the amount of paperwork required by both United States and Canadian customs. This differs somewhat from the Michigan counter- part who considers (1) Border Regulations and (2) Time Loss, more important than through service or equipment regulations. MOTOR CARRIER SERVICE BETWEEN MICHIGAN AND ONTARIO SOME ASPECTS OF COSTS When the manufacturing companies were asked to eval- uate the transport service between Michigan and Ontario, there was evidence of a lack of knowledge by many exporters. They could state clearly that they considered the rates too high, and that the time in—transit from point of origin to destination was much greater than for shipping compar- able distances wholly within United States Or Canada. But 177 they apparently were unfamiliar with the mechanics of trans— port and, therefore, could not give, or evaluate, specific reasons accounting for the additional time enroute and higher rates. There are some differences in transport service between Michigan and Ontario as compared to a similar serv— ice from Michigan to another U.S. state, or from Ontario to another Canadian province. These differences, however, are experienced primarily by motor carriers. Because single line1 motor carrier service is not available, at least two carriers must move the shipments, unless private carriage is used. Table 47 shows a comparison of the class rates charged by motor carriers on shipments from Grand Rapids to Toronto and Cincinnati. Toronto is approximately forty miles fur— ther from Grand Rapids than is Cincinnati. However, this would have very little effect on the data here presented. On a first class shipment of 2,000—5,000 pounds, it costs 23% more to ship to Toronto than to Cincinnati. The differential increases to 25% on all shipments over 5,000 pounds. On truckloads from Grand Rapids to Toronto for all classes below first class, the rate is 21% more than to Cincinnati. The higher rate charged shippers is due primarily lSingle line here means direct service, whereby the same carrier picks up the merchandise, makes the road haul, and completes delivery at destination. 178 Table 47. Motor common carrier class rates from Grand Rapids to Toronto and Cincinnati, 1963 First Second Third Fourth class class class class 100 85 70 50 Shipment weights Tor Cin Tor Cin Tor Cin Tor Cin 100 pounds or less 500 468a (Minimum Charge) Less than 1,000 na 354 na 308 na 259 na 211 1,000 - 2,000 na 319 na 279 na 234 na 192 Less than 2,000 380 na 328 na 279 na 218 na 2,000 - 5,000 341 277 295 243 243 203 194 167 b / \/ \/ \/ (per cent) 23% 21% 20% 16% 5,000 and over 295 231 251 200 207 164 163 130 ‘\ \. /' \. /’ ‘\ ./ (per cent) 28% 25% 26% 25% Truckload Class 1 45 40 375 35 Toronto minimum weight 23,000 '129 115 // \\ (per cent difference) 21% 21% \\ // Cincinnati minimum wt. 20,000 106 95 88 85 aRates are given in cents per hundred pounds. bShows the difference in per cent, i.e., first class to Toronto for shipment of 2,000-5,000 pounds is 23% higher than the rate to Cincinnati. The distances are approxi- mately 300 miles to Cincinnati and 340 to Toronto from Grand Rapids. Sources: glass Rates, Tariff 66, Niagara Frontier Tariff Bureau, Inc., Agent, Buffalo New York. Class Rates, Central States Motor Freight Bureau, Chi- cago, Illinois. 179 to the necessity of using at least two carriers to reach Toronto versus a single line movement to Cincinnati. How— ever, there are also some other costs involved due to the border that are reflected in the higher rate structure. It is impossible to get the exact costs applicable to the movement of goods between Michigan and Ontario, but Table 48 presents some interesting data on the cost of motor carrier operations with a single line versus a two line operation. These data are taken from the 1962 annual re- ports, plus certain supplemental information, furnished by 167 Class I and Class II motor common carriers of general commodities domiciled in the Central Region (Illinois, In- diana, Ohio and Michigan) having gross revenues over $500,000 with 75% or more of such revenues being derived from general commodities. For shipments Of 300 pounds, a distance of 318 miles (Lansing to Toronto), the cost is about 41% greater when using two line service. The differential gradually decreases as the weight per shipment increases. The smallest differ- ential is from 20,000 pounds and up, which usually repre- sents truck load shipments, in which case the trailer is interchanged, thus decreasing the handling and interline costs. The point to be made here is that, for less than truck load shipments moving between Michigan and Ontario, the cost of the service for the carrier is at least 25% to 41% greater than it is to markets that can be reached 180 Table 48. Motor carrier out-of-pocket costs for actual distance of 318 miles for various weight ship- ments, 1962a Costs in cents per 100 pounds (c) Weight bracket . (a) (b) p % (b) Pounds per shipment Single line Two line exceeds (a) 50 295 421 . 43% 100 368 524 42 200 504 719 43 300 634 904 41 300-499 188 268 42 500—999 - 159 226 42 1,000-1,999 136 193 42 2,000-4,999 117 164 40 5,000-9,999 98 133 36 10,000-19,999 76 95 25 20,000—29,999 61 71 16 30,000-39,999 50 58 16 40,000 and over 47 52 ll Note: Out-Of-pocket costs are those expenses which can be assigned to particular shipments or kinds of traffic and the constant costs are those expenses incurred on behalf of the operation as a whole. a318 is the approximate highway mileage between Lansing and Toronto, and Lansing and Cincinnati. Source: Cost of Transporting Frei mg by Class I and Class II MotorI Common Carriers of General COmmOdities, Central Region, 1962; I. C.CC, Bureau of Accounts, Statement No. 3- 64, Washington, D. C., March, 1964. 7i, , 181 by a single line motor carrier service. The differential in costs would actually be greater than shown in Table 48 on shipments between Michigan and Ontario because of the additional documentation and delays at the border necessi- tated by clearing customs. Table 49 is presented to show the cost differen- tials between single line and two line service, as influ- enced by weight brackets, and by mileage increments. An examination of the table shows that the cost differential varies by the weight of the shipment but not by mileage brackets. On a shipment of 300-499 pounds, the cost dif- ferential is 80¢ per hundredweight for 100 miles and remains the same for each mileage block through 600 miles. Another difference in service between Michigan and Ontario markets that is not reflected in carrier rates,- but rather in exporter costs, is the time in-transit. By highway, Toronto and Cincinnati are about the same distance from Grand Rapids. Overnight service is available on ship— ments to Cincinnati, whereas fourth morning delivery is provided on shipments moving to Toronto.1 There are sev- eral reasons for the greater in-transit time to Toronto. First, the shipments to Toronto must clear customs, either at the border, or at a bonded warehouse at destination. This may take a few hours or possibly days, depending upon the shipment and whether problems of valuation and 1Information provided by Michigan motor carriers. 182 .vme .suumz ..U. m .soumaHammz .m#030004 m0 ammusm ..U. U. H 0m: m .02 acmempwpm NmmH .GOHmmm 1Hmuusmu .mmeHUOEEOU Hmumsmw Ho mHMHHHMU GOEEOU Mono: HH mmMHUP 0cm H mmmHU‘Nn HmmHmum UGHHuomwcmuB mo umOU «muusom .mmHHE Hmsuom swap mmmH am mum £0H£3 mmaHE mstma 000mm .psmHms omuoasn H00 00000 0H pmamnm mum mumou "0002 00 00 00 00 00 H0 00 00 00 00 00 00 + 000.00 00 00 00 00 H0 00 00 00 00 00 mm 00 000.00-000.00 sHH 00H 00H 00 00 00 H0 H0 00 00 00 mm 000.00u000.00 00H 00H 00H 00H HHH m0 00 00 00 H0 00 00 000.0H:000.0H 00H 00H 00H HmH 00H mHH 00H 00 0HH H0 H0H 00 000.0:000.m 0H0 00H 00H HmH 00H 00H 00H 0HH 00H H0H 00H 00 000.0:000.0 000 00H 000 HHH 0H0 00H 00H 00H 00H 0HH 00H 00H 000.H1000.H 000 0H0 000 00H 000 00H 000 00H 000 00H 00H 00H 000-000 0H0 000 000 000 000 000 000 00H H00 HsH 000 00H 000-000 HmoH 000 000H 000 000 000 000 000 000 000 000 000 000 H00 000 000 000 000 000 0H0 000 000 000 000 000 000 000 0H0 000 000 000 000 000 000 000 000 H00 000 00H 000 000 000 0H0 000 000 H00 000 0H0 000 000 000 00. QGH H $031.“ 003......” GEHH 0631—” 0051—” MGHH 003”...” 063....” OGHH QGHH OCH H #GGEQHSW 039 mesHm 038 mawaHm 038 0HmsHm 039 mHmGHm 039 0HmGHm 039 mamch 000 000500 CH 000 000 000 000 000 00H 0006000 uanmz mmmHHz 000H .mumxumun ur0Hmz 00 0:6 acmem>os mo mama >0 mpsmemHnm mom mmHmum pmoo umxuomumonpso umHunmu mono: .mw mHnt 183 classification develop. The next delay is caused by the physical handling of the shipments. If the shipment is a trailer load, the trailer may be interchanged at the border and moved to a bonded warehouse at destination for customs clearance. This procedure usually involves less time, but there is an additional cost of $.20 per hundredweight for using the bonded warehouse. The alternative would be to clear customs at the border which might cause a greater delay in-transit. If the shipment is less than a trailer load, it is usually cleared through United States and Canadian customs at the border by the originating carrier. If the trailer has to be unloaded at customs, the merchandise is reloaded on the equipment of the delivering, or connecting line car- rier, assuming they have equipment available. If not, then the originating carrier, after clearing customs, takes the merchandise to the dock of the connecting line carrier at Sarnia, or Windsor. If this connecting line carrier can provide direct service to the destination of the shipment, this may be the last time the merchandise is transferred. However, it is possible that it could be transferred once or twice more before reaching destination and the consignee. Small shipments may also be transported in bond to a bonded warehouse at the destination, where they are cleared through customs. It is evident that the size of the shipment has some bearing on how the shipment is moved and the time in— transit. 184 Another factor influencing time in-transit is the condition of highways. The highway between Windsor and Toronto is a modern, separated four-lane highway that al— lows reasonable truck speed. However, the highways to other Ontario market areas are single-lane and highly congested near cities at particular times of the day. We have no specific data from Ontario as to how this affects transit time and costs of operation, but it is assumed that adverse highway conditions slow the motor vehicle and increase costs. In this connection, Table 50 presents some interesting data on line-haul costs adjusted for the effect of speed. Again, the Central region may not be exactly comparable to Ontario, but the data give some indication of the relationship of road conditions and cost per vehicle mile. As can be seen in the table, modern highways that allow an average speed of 45 mph as opposed to 25 mph can reduce the cost per ve- hicle mile ll.559¢. The additional speed also reduces the overall time in-transit. OPERATING ALTERNATIVES AND PRACTICES UNDER EXISTING RECIPROCITY MICHIGAN CARRIERS Under the existing reciprocity agreement between Michigan and Ontario, private carriers can purchase from the branch offices of the Ontario Department of Transport in the port—of-entry city a $20.00 permit authorizing five consecutive days' operation of the vehicle, or combination, into or through Ontario. The permit is in lieu of purchasing 185 Table 50. Motor carrier line—haul costs adjusted for effect of speed, 1962 Total line-haul Line—haul running speed cost per vehicle (miles per hour) mile 35.4 mph (actual cost study average speed) 38.199¢ 15 mph 63.179¢ 20 mph 52.342¢ 25 mph 45.840¢ 30 mph 41.505¢ 35 mph 38.409¢ 40 mph 36.087¢ 45 mph 34.281¢ Source: Cost of Transporting Freight by Class I and Class II Motor Common Carriers of General Commodities, Central Region, 1962; I. C. C., Bureau of Accounts, Statement No. 3- 64, Washington, D. C., March, 1964. Ontario registration plates for the vehicle. For the car- rier that operates intermittently in Ontario, the permit offers substantial savings without causing excessive delay at the border. The permits are available on a 24-hour basis. The carrier still has the option of purchasing Ontario reg— istration plates if it is to his advantage to do so. Michigan common carriers may secure from the Ontario Transport Board an “L" license which authorizes in-bond transit privileges across Ontario.1 The carrier must pay 1Full details for securing the license and the ex- tent of its use were covered in Chapter IV. 186 a $9.00 permit fee for each single trip. Michigan carriers with the "L" license have the option of purchasing Ontario registration plates for their vehicles, in lieu of the $9.00 trip permit, if it is to their advantage to do so. However, with a large fleet of tractors and trailers, providing freight service to several states, it is usually impossible to keep the same vehicles on the Ontario corridor movement. Thus, the use of the permit does afford some savings to the car— riers. At Detroit, Port Huron and Sault Ste. Marie, trailers registered in Michigan may be operated into Ontario for a distance of 20 miles from point of entry, provided they are hauled by an Ontario registered tractor. Trailers operated beyond this point must be fully registered in Ontario. In practice, if the Michigan registered trailer is moved beyond the 20—mile limit, it is interchanged to an Ontario carrier and moved on a transferrable (X) trailer plate. Such a plate is purchased by the Ontario carrier from the Ontario Department of Transport for use only on foreign registered trailers while being operated within Ontario. For the operation within the 20-mile zone of the port-of-entry city, some Michigan carriers have secured operating licenses from the Ontario Department of Transport for a limited international operation confined to the moving of trailers across the international border. The Michigan carrier's tractors are fully registered within Ontario and 187 Michigan, thus allowing them to haul both Ontario and Mich- igan registered trailers within the zone, providing it is an international movement. Michigan Shipments.—-of LTL freight usually clear customs at the border and are transferred to the Ontario carrier for delivery to final destination. Occasionally such shipments cross the border in-bond and are moved to a bonded sufferance warehouse at destination, where they are cleared through Canadian Customs, and then delivered to the consignee. On trailer load (truckload) shipments, if the freight is on a Michigan registered trailer, the trailer is taken by the Ontario carrier at the port—of-entry and moved to final destination. The movement is facilitated by the use of the transfer trailer (X) plate provided by the Ontario carrier. The shipment may be cleared through customs at the border or moved to destination in—bond and cleared through customs at the sufferance warehouse. In actual practice, because Ontario does not grant reciprocity to Michigan registered trailers, the Ontario carrier must purchase transfer trailer (X) plates to oper- ate the Michigan registered trailer in Ontario.1 Often the trailer is delayed from several hours up to two days at the Ontario carrier's terminal, waiting for a transferrable 1The cost of each plate is $369.00. 188 trailer (X) plate.1 With an unbalanced movement of freight, it is difficult to have sufficient (X) plates at the right terminal at the proper time to accommodate the volume of traffic. ONTARIO CARRIERS All Ontario motor carriers may purchase a $20.00 permit, authorizing 10 consecutive days of interstate travel into, or through, Michigan. This permit is only in lieu of the Michigan registration plates. Such carriers have the option of purchasing Michigan registration plates for their vehicles if it is to their advantage to do so. All international and interstate carriers traveling into, or through, Michigan must register their ICC common carrier certificates, or contract carrier permits with the Michigan Public Service Commission. At Detroit, Port Huron and Sault Ste. Marie, trailers registered in Ontario may be operated into Michigan a dis- tance no greater than eight miles beyond the city limits, if drawn by a commercial vehicle registered in Michigan. If operated beyond this limit, a $20.00 permit, or Michigan registration plate, must be secured for the trailer. To facilitate the border operation, some Ontario carriers have received operating certificates from the Michigan Public Service Commission authorizing a limited 1Information supplied by Ontario carriers at Windsor. 189 international operation confined to the movement of trailers across the international border. The Ontario carrier's tractors must be fully registered in Michigan in order to allow the movement of Ontario registered trailers within the Michigan zone. Ontario Shipments.--of LTL freight usually clear customs at the border and are transferred to the Michigan carrier for delivery to final destination. In some instances the freight is moved in-bond to the final destination where it is then cleared through United States customs. Many Michigan motor carriers are "bonded" carriers which allows them the privilege of moving freight in-bond to any of their inland Michigan terminals. The customs official<2hecks the freight either at the carrier's dock or at the consign- ee's place of business at time of delivery. This same pro- cedure is used for truckload shipments, also. Ontario trailer load (truckload) shipments that are moved across the border on Ontario registered trailers are usually transferred to Michigan registered trailers for delivery to final destination. The Michigan carrier has the alternative of either purchasing a lO-day, $20.00 per— mit, or a Michigan registration plate for the Ontario reg- istered trailer. Usually due to the inconvenience and lim- itations of the permit, the freight is transferred. When the final destination is beyond Michigan, in some other state, the freight is automatically transferred at the port- of-entry because other states do not have reciprocity with 190 Ontario, nor do they recognize the Michigan lO-day permit. Approximately three-fourths of the freight originating in Ontario, going to Michigan inland destinations, or beyond Michigan, is transferred at the port—of-entry to a Michigan carrier's trailer.l In actual practice, because Michigan does not grant reciprocity to Ontario registered trailers, a considerable volume of freight originating in Ontario is transferred at the Michigan port-of-entry. This increases the transport cost for the carrier, which is in turn reflected in higher rates for the shipper. The additional delays enroute due to transferring the freight is not reflected in the rate, but is a cost borne by the shipper. The carrier's view of transport problems and reci— procity will be examined in the next section. CARRIER'S VIEW OF TRANSPORT PROBLEMS AND RECIPROCITY RAILROADS The railroads involved in the traffic between Mich— igan and Ontario do not report any particular problems as a result of border regulations. Customs regulations and procedures cause the only apparent difficulties in moving freight across the border. However, when the required forms are in order and properly attached to the waybill, a min— imum of delay is usually experienced in clearing customs. 1Information from interviews with Michigan motor carriers at Detroit. 191 The railroads reported no problems with "Adminis- trative procedures" or "Reciprocity problems." Occasion— ally problems develop with the "Interchange of equipment" but they are not caused, nor influenced, by the existence of the border. Some railroads have greater problems inter— changing equipment with carriers within the United States than with those located in Canada.1 There are no reciprocity agreements between Mich- igan and Ontario affecting the railroad operations. In fact, the Michigan regulatory agency could envision no sit— uation where reciprocity on the state level could have an influence on the railroad operations between the two juris— dictions. If the political boundary with its customs regula- tions was removed, the movement of freight between Michigan and Ontario would flow with the same ease as traffic between states within the United States. MICHIGAN MOTOR CARRIERS The following discussion is based on the returns from the Michigan-Ontario Transport Questionnaire mailed to motor carriers and interviews with various motor carrier officials. The officials of the motor carriers were asked to rank various obstacles encountered in moving freight between 1From correspondence with railroad officials. _ ._._-__._.._.~:._.c.‘.;‘.__ .. .._. ...__. 192 Michigan and Ontario.1 The Michigan carriers were unani- mous in their choice of serious obstacles. The first ob- stacle was "Requirement of Michigan permits when using On- tario licensed trailers 8 miles beyond city limits of the point of entry." Second choice was "Michigan and Ontario regulations hamper free interchange of equipment between carriers"; and third choice was "Delays enroute due to cus- toms regulations and procedures.“ The other three structured answers—~"Canadian bor— der administrative practices"; “United States border admin— istrative practices“; and "Cost of operations due to border problems makes it difficult to compete with other types of transport"-—were not considered to be serious problems. The effect of these on transport service was minor when compared to the problems listed as first, second and third. The officials of the motor carriers were asked what effect unrestricted interchange of equipment between Mich- igan and Ontario carriers would have on their operations. The concensus of opinion was that unrestricted interchange would shorten the elapsed time in transit from pick—up to delivery to consignee, and reduce the costs of operations for the carriers. Some expected that the volume of freight moving between Michigan and Ontario would be increased, but others said this would have little bearing on the demand 1See page 2, Transport Problems, of the Michigan- Ontario Transport Questionnaire in Appendix A, page 265. r“ 193 for their service. For the most part, it was recognized that the de— mand for transport service is a derived demand, and, as the exports and imports increase, the demand for transport service will increase, also. By decreasing the time in- transit, the exporters' cost would decrease, which might allow a decrease in the price of the export product, and thus expand the market. Thus, by improved operations, the carriers hoped to gain: (1) better distribution service for the exporters who might then be able to increase their business with Ontario, (2) a better competitive position, enabling them to secure more business from the exporters, and (3) based on a greater volume of traffic, the possibil- ity of lowering rates. The motor carrier officials were asked to rank cer— tain recommendations for improvement of transport service between Michigan and Ontario. Here again the choice was similar. Ranked first was "Non—restricted interchange of equipment between Michigan and Ontario, thus eliminating the necessity of securing special permits." Next was "Uni— form regulations in Michigan and Ontario regarding weight, 1 "Through routing and length and vehicle combinations." billing between points in Michigan and Ontario" was con- sidered an impossibility at the present time, although it 1A comparison of the Michigan and Ontario regula— tions is shown in Appendix A, Table A—7. 194 would provide an ideal service from the standpoint of the exporter. Some carriers have attempted to purchase rights in both Ontario and Michigan, so that single line service could be provided. However, the opposition has been too great to allow such a motor carrier operation, even though such service is available with the other modes of transport. Apparently some of the greatest Opposition has come from the other motor carriers who could not offer such a serv— ice and thus would be at a competitive disadvantage. Yet if the governments of Michigan and Ontario were fully con- vinced that such a motor carrier service would be beneficial to trade, it seems highly probable that single—line service could become a reality. In general, the Michigan motor carriers would wel- come any changes in reciprocity that would reduce the re— strictions placed on operations involving traffic between Michigan and Ontario. However, they do operate more or less successfully under the existing conditions, and are not quick to voice opposition or demand that changes be made. ONTARIO MOTOR CARRIERS The following discussion is based on questionnaire returns and interviews with officials of the Ontario motor carriers. Most of the information was supplied by "for hire" carriers and some by private carriers with little differ- ence between the answers of each. ,711 w my ; z, _, . . mm_:-.:JH_‘"°_‘.'?:' 195 The officials of the motor carriers were asked to rank various obstacles encountered in moving freight between Ontario and Michigan.1 The Ontario carriers selected first "Requirement of Ontario permits or special license when using Michigan licensed trailers beyond a 20—mile limit of the point of entry.” Even though these carriers enjoy the privilege of using a transferrable trailer plate for moving Michigan trailers from the border to destination and return, they still considered this to be the greatest obstacle to moving freight between Ontario and Michigan. The next selection was "Michigan and Ontario regu- lations hamper free interchange of equipment between car- riers," while the third ranked obstacle was "Delays enroute due to customs regulations and procedures.“2 The remaining obstacles were not considered too important by the Ontario carriers; however, some indicated that "Cost of operations due to border problems makes it difficult to compete with other types of transport” was as serious an obstacle as the one listed above as third. The motor carrier officials were asked what effect 1See page 2, Transport Problems, of the Ontario- Michigan Transport Questionnaire in Appendix A, page 260 2According to some officials of Ontario motor car— riers, the physical facilities of the U.S. Customs at the Ambassador Bridge in Detroit are inadequate to handle the volume of commercial traffic by motor carrier, during nor- mal hours of 8-5 on week days. It is not uncommon for loaded commercial vehicles to be delayed from two to sev— eral hours waiting for customs clearance. 196 unrestricted interchange of equipment between Ontario and Michigan carriers would have on their operations. Most considered such interchange would reduce the elapsed time of movement from pick-up to delivery to consignee, as well as lower the cost of operations on such traffic. This they considered to be favorable for their operations and might also enable them to increase their volume of freight mov- ing between Ontario and Michigan. Motor carrier officials were also asked to rank certain recommendations for improvement of transport serv— ice between Ontario and Michigan. Their ranking was as follows: First, ”Uniform regulations in Ontario and Mich- igan regarding weight, length and vehicle combinations"; second, "Non-restricted interchange of equipment between Ontario and Michigan, thus eliminating necessity of secur— ing a special license or permits"; and, third, "Through routing and billing between points in Ontario and Michigan.“ Some carriers indicated that "More realistic bridge tolls, in line with other International Bridges," would help to improve the service by lowering the cost of operations. Generally the Ontario and Michigan carriers' views on transport problems and reciprocity were in accord. Any changes that would allow greater freedom of transport and improvement in service would be welcomed by the motor car- riers. OTHER CARRIERS The air, pipeline, and waterborne carriers are not 197 affected by reciprocity agreements between Michigan and Ontario. Their international operations are regulated by the United States and Canadian federal governments. All border traffic must be cleared by the United States and Canadian customs. These carriers did not indicate that they were ex- periencing any particular problems in moving traffic between Michigan and Ontario. There did not seem to be any area in their operations that could be directly influenced by reciprocal negotiations at the state and provincial level. RECIPROCITY AT THE BORDER The traffic crossing the Michigan—Ontario border is controlled by legislative acts, regulations and proced— ures, and administrative interpretation and performance. Most of the people working at the border are federal em— ployees of the Bureau of Customs. There is very little opportunity, or inclination, for the local border employees to use their judgment or discretion when enforcing the laws or regulations. Forms must be filed, records kept, and permits obtained, such that the whole border crossing pro— cedure is a highly impersonal and routine matter ninety per cent of the time. The other crossings usually involve commodities that have to be appraised and classified by the customs officials. This means that shipments must be scheduled during working hours on week days to avoid seri— ous delays. There have been occasions when the laws and 198 regulations have been relaxed. One such occasion occurred in the spring of 1962 at Sarnia. Michigan farmers wanted to bring seed potatoes into Sarnia for shipment by rail through Ontario and Quebec to Maine. Each farmer made only one or two trips by truck, so the Ontario laws pertaining to registration plates were not enforced.1 ACHIEVEMENTS OF RECIPROCITY The recent modification in the reciprocity agree— ment between Michigan and Ontario is an improvement over the past agreements. The most recent achievement has been beneficial to private carriers. In 1963 the use of the $20.00 special permits was agreed upon, authorizing Mich— igan private carriers five consecutive days' operation in Ontario, and Ontario private carriers ten consecutive days' operation in Michigan. The permits are issued in lieu of the registration plates that were previously required. However, if a Michigan carrier makes over thirty trips each year into Ontario with the same vehicles, it may be cheaper for the carrier to purchase Ontario registration plates, rather than pay the $20.00 permit fee each time.2 For Ontario carriers making over twenty trips each year into Michigan with the same vehicles, it may be cheaper 1Information from Mr. W. M. Earl, Registrar of Motor Vehicles, Toronto, Ontario. 2This will depend on the size of the vehicles which determines the cost of the registration plates. 199 to purchase Michigan registration plates, instead of buying the permits. If, in either case, the same vehicles are not used each trip, it might still be cheaper to use the permits as registration plates are not transferrable to other vehicles. This has been the only major gain in reci— procity in the last few years. The transit traffic across Ontario by common car- rier is not presently subject to reciprocal negotiation. As stated before in this chapter, the "L" license must be secured which authorizes the equipment to cross Ontario on a one-way $9.00 permit. Ontario carriers crossing Mich- igan must either purchase the $20.00 permit, good for ten days, or purchase Michigan registration plates for the vehicles. However, if the Ontario carrier's equipment should be registered in a state or province, with which Michigan has full reciprocity, then that equipment could cross Michigan exempt from all fees except the MPSC mile— age fee and the fuel tax. Full reciprocity for common carriers has not been achieved as yet, even though they haul the bulk of the man— ufactured products that move in volume across the border. The problems of the carriers, due to lack of full reciproc- ity, have not been great enough to bar, or seriously re- strict, the flow of trade. The carriers operate success— fully under the existing conditions and the additional costs are reflected in higher rates charged the shipping public. If the situation is viewed from the standpoint of 200 two foreign countries sharing a contiguous border, engag- ing in commerce, then it must be admitted that trade flows smoothly relative to other Foreign Trades and reciprocity has been rather successful. SUMMARY Problems in transport service to Ontario caused by the existence of the border were ranked by the Michigan companies as follows: (1) "Duplications and cost due to regulations at the border," (2) "Too much time enroute from pick-up of goods to delivery to consignee," and (3) "Lack of efficient through service under joint rates.“ The On- tario companies ranked the same problems on service to Michigan in the following order: (1) "Lack of efficient through service under joint rates," (2) "Duplications and cost due to regulations at the border,” and (3) "Too much time enroute from pick-up of goods to delivery to consignee." The problem of "Restrictive carrier equipment regulations in Michigan and Ontario" was ranked fourth by all companies. When ranking suggested solutions to the problems, the Michigan and Ontario companies were in agreement. All agreed that lower tariffs would be beneficial, and that more uniformity in regulations at the border, through serv— ice under joint rates, and more liberal reciprocity with respect to equipment regulations in Michigan and Ontario would help provide better transport service between the two jurisdictions. 201 Toronto and Cincinnati are located about the same distance from Grand Rapids, but the Toronto rates by motor carrier are from 21% to 28% higher than those to Cincinnati. A primary reason for the higher rates to Toronto is the necessity of using two or more lines, plus the extra costs due to crossing the border. Overnight service is available to Cincinnati, while fourth morning delivery is quoted for Toronto. The most recent major achievement in reciprocity between Michigan and Ontario has been the authorization of the use of the five—day, $20.00 trip permits for Mich- igan private carriers operating in Ontario, and the ten— day, $20.00 trip permits for Ontario carriers operating in Michigan. The present reciprocity agreement causes additional costs for the common carrier, higher rates and indetermin- able delays in-transit for the customer's merchandise. CHAPTER VI CONCLUSIONS AND RECOMMENDATIONS SUMMARY Michigan and Ontario are located in the interior of the North American Continent. Though contiguous and sharing similar economic interests and cultural development, they are separated by an international boundary. The major portion of this boundary divides Lakes Superior, Huron, St. Clair, and Erie, but over one hundred miles is along rivers and channels separating land forms. This common border is bridged at three gateways, Sault Ste. Marie, Port Huron, and Detroit, which allows trade to flow overland between the two sovereign areas. Geographically, the way in which Michigan and On— tario are located in relation to the Great Lakes affects all aspects of their economies. Because of their location, a large volume of commerce crosses Michigan and Ontario flowing both to and from various parts of Canada, the United States, and the world. This commerce moves on the overland route or by the Great Lakes waterway. The primary overland route is the corridor formed between Lake Huron on the north, and Lake Erie on the south, in which Michigan and Ontario are connected by two gateways, one at Port Huron, and the other at Detroit. This route 202 203 is used extensively by the railroads serving Michigan and Ontario, and by many United States and Canadian motor car— riers. TRANSIT TRAFFIC As shown in Chapter III, a large volume of transit traffic moves across Michigan, to and from Ontario and east- ern Canada. In 1963, the transit traffic crossing Michigan, eastbound for Ontario, was 27,421,226 tons. Of this, 25,265,000 tons were moved by pipeline, 2,112,019 tons by railroad, and 44,207 tons (estimate) by highway carriers. The tonnage moving westbound from Ontario, crossing Mich- igan, with a destination in the western states, or western Canada, was 3,071,127 tons. Of this, 2,843,913 tons were moved by railroad, and 227,214 tons by highway carriers (estimate). Thus, the total volume of transit traffic mov- ing in both directions across Michigan by railroad and high- way in 1963 was 5,227,353 tons. The transit traffic crossing Ontario, as shown in Chapter III, was slightly less than that crossing Michigan. In 1962, the railroads moved a total of 2,511,926 tons of freight through the Michigan gateways, across Ontario, to and from eastern United States and Canada. Of this, 846,061 tons moved eastbound out of Michigan across Ontario, and 1,665,865 tons moved westbound across Ontario into Michigan. In 1963, the total transit traffic moving in both directions across Ontario by highway carriers was 584,427 tons (estimate). 204 Assuming that the 1963 rail traffic was equal to that of 1962, the total tonnage moving in both directions in-transit across Ontario, by rail and highway, was 3,096,353 tons. This was slightly less than two-thirds of the volume that moved across Michigan for the year 1963. Clearly the Michigan and Ontario corridor is a very useful short-line route connecting important markets and production areas in both Canada and the United States. MICHIGAN-ONTARIO TRADE The direct trade between Michigan and Ontario was estimated in Chapter III to be just over $1 billion in 1963. About 2% of the Michigan shipments were exported to Ontario with an approximate value of $500 million. At the same time approximately 4% of the value of the Ontario shipments were exported to Michigan for a total of $525 million. In tonnage the Michigan shipments to Ontario amounted to 3,802,646 tons with 54% being hauled by waterborne car— riers, 22% by highway carriers, and 24% by rail. Michigan receipts from Ontario amounted to 3,222,698 tons, with 48% being hauled by waterborne carriers, 32% by rail, and 20% by highway carriers. However, only 56% of the Michigan receipts by rail originated in Ontario. The remainder of the rail receipts originated in eastern Canada. Considering manufactured products alone, highway carriers hauled 48% of the tonnage of Michigan's trade, rail carriers 47%, and water carriers only 5%. 205 For the year 1963, 15.3 million tons of freight moved through the Michigan—Ontario gateways by railroad, highway, and water carriers. Of this amount, 7,025,344 tons represented direct trade between Michigan and Ontario, while 8.3 million tons were moved as transit traffic. The five—year outlook for manufacturing companies in both Michigan and Ontario is generally optimistic on the border trades. About 53% of the Michigan companies expect shipments to increase at least 10% per year, while 30% expect an increase greater than 10%. In Ontario, 67% of the companies surveyed expect at least a 10% yearly increase in shipments with 28% expect- ing a yearly increase of greater than 10%. The exporters in both Michigan and Ontario were more Optimistic about increases in future shipments than were the non—exporters. There was some evidence that the exporters in both Michigan and Ontario were disinclined to regard trade be— tween the two jurisdictions as being international trade. They tended to view such trade in the context of domestic markets rather than foreign markets. MAJOR PROBLEMS Although the direct trade between Michigan and On- tario was over $1 billion (7 million tons) in 1963, the exporters in each jurisdiction experience some serious prob- lems when initiating or expanding exports. 206 1. TARIFFS The high Canadian and United States tariffs were considered by exporters in both Michigan and Ontario to be the most serious problem encountered when initiating or expanding trade between the two jurisdictions. In some instances, the tariff prohibits entry into the Michigan or Ontario market; in other instances, they are protective tariffs, seriously limiting the trade. All manufacturing companies contacted indicated that tariff relief through reciprocity, or other negotia- tions, would give them the opportunity to initiate or ex— pand trade in the Ontario and Michigan markets. This was one measure upon which all respondents in Michigan and On— tario agreed. 2. CUSTOMS AND ADMINISTRATIVE PROBLEMS The Michigan companies considered the "Complexity of Canadian Import procedures and regulations" as the sec- ond most serious problem affecting their trade with Ontario (high tariffs was first). "Complexity of the United States export procedure and regulations" was ranked 4th out of the six problems suggested as possible impediments to the expansion of trade with Ontario. The extensive paper work required by both United States and Canadian customs, on all shipments to Ontario was of concern to many companies. The problem of understanding and complying with the various customs regulations and administrative requirements was 207 : a serious factor in deterring many companies from entering the Ontario markets. The large exporters apparently had experienced and specialized personnel to cope with and alleviate the prob- lem. But for the small manufacturing company, such help 5 was not readily available and the problem took on greater proportions. The Ontario companies ranked "Complexity of United States import procedure and regulations" third, with the "Complexity of Canadian export procedure and regulations" fifth, out of the six suggested problems. They apparently were not as encumbered with the customs and administrative problems as were the Michigan companies. 3. MARKET INFORMATION The Michigan companies ranked the problem of "Lack of Ontario market information and services“ as third out of the six suggested obstacles to expanding trade with On— tario. The non-exporters considered it the second most serious problem confronting their initiation of trade with Ontario. All Ontario companies considered it the second most serious problem confronting their initiation or expansion of trade with Michigan. This problem is of vital concern to the manufactur- ing companies in both Michigan and Ontario and can be solved on the state (provincial) and local level. The problem is 208 primarily one of collecting and disseminating market infor— mation. Concentrated and organized effort on the part of both Michigan and Ontario in this informational area should be of special benefit to their exporters and aid in expand- ing trade. Specifically, the exporters want to know more about the products needed in the markets, potential size of the markets, sources of marketing data in each jurisdic— tion, available marketing channels, and the marketing and financial services that are, or can be, made available to exporters. 4. TRANSPORT In the overall evaluation of problems encountered in the initiation or expansion of trade between Michigan and Ontario, the respondents ranked the problems of trans- port service after the problems of high tariffs, customs regulations and procedures, and lack of market information. Specific problems of transport service to Ontario caused by the existence of the border were ranked by Mich- igan companies as follows: first, "Duplications and cost due to regulations at the border"; second, "Too much time enroute from pick-up of goods to delivery to consignee"; third, "Lack of efficient through service under joint rates"; and last, "Restrictive carrier equipment regulations in Michigan and Ontario." The Ontario companies ranked the same problems on service to Michigan in the following order: first, “Lack 209 of efficient through service under joint rates"; second, "Duplications and cost due to regulations at the border“; third, "Too much time enroute from pick-up of goods to de- livery to consignee“; and last, "Restrictive carrier equip— ment regulations in Ontario and Michigan." All Michigan and Ontario respondents agreed that more uniformity in regulations at the border, better through service, and more liberal reciprocity with respect to equip— ment regulations in Michigan and Ontario would provide better transport service between the two jurisdictions. In general, most respondents were concerned with the high rates on freight moving between Michigan and On- tario, and the problem of delays enroute to destination. But they had generally accepted the rate structure and de— veloped shipping schedules to allow for the delays occur- ring, for the most part, at the border. Such conditions were considered as normal costs and problems of doing bus— iness in these markets. TRANSPORT RECIPROCITY As has been stated in Chapter IV, the only formal transport reciprocity agreement between Michigan and Ontario covers motor carriers. Michigan makes no agreements, nor evidences any concern with reciprocity as far as air, pipeline, rail, and waterborne carriers are concerned. Reciprocity agree- ments or mutual understandings for these modes covering 210 international operations would have to be negotiated by the national governments of the countries involved in the traffic.1 The formal reciprocity agreement between Michigan and Ontario provides very limited reciprocity for commer- cial vehicles. The recent modifications in the agreement authorized the use of $20.00 trip permits allowing five consecutive days' operations in Ontario by Michigan private carriers, and $20.00 trip permits for 10 consecutive days' operations in Michigan by Ontario carriers. In Michigan, the trip permits may be used by any Ontario carrier that is certified to traverse the state, or Michigan carriers may use the permits to move Ontario registered trailers by Michigan registered tractors, beyond the port zone . In Ontario only Michigan private carriers may use the $20.00 permits. There is no provision granting recip— rocal privileges of this nature to Michigan common carriers. Full reciprocity is granted by Michigan for the operation of Ontario registered trailers a distance not greater than eight miles beyond the city limits of the ports- of—entry, i.e., Sault Ste. Marie, Port Huron, and Detroit, if drawn by a commercial vehicle registered in Michigan. Full reciprocity is not extended for the Operation of Ontario lNo federal reciprocity agreements covering these Inodes were found during the course of the study. 211 registered trucks or tractors anywhere within the state. Ontario grants full reciprocity to Michigan regis— tered trailers for a distance of 20 miles from the point of entry, provided they are hauled by an Ontario registered tractor. Trailers Operated beyond this point must be fully registered in Ontario, or moved by an Ontario registered tractor with a transferrable trailer (X) plate attached to the trailer. Trucks or tractors, owned by Michigan common carriers, must be fully registered in Ontario in order to operate within the zone. OFFICIAL VIEWS OF RECIPROCITY Michigan Officials have stated that they would wel— come an extension of transport reciprocity with Ontario leading towards full and complete reciprocity for motor carrier Operations. However, they are reluctant to grant further concessions to Ontario carriers until such time as Ontario will extend similar concessions to Michigan carriers. Ontario officials have stated that, because Of lim- ited highways and limited sources of revenue required to build and maintain the highways, they are not willing to grant more than limited reciprocity to Michigan for motor carrier operations in Ontario. As shown in Chapter IV, Ontario collected in 1963 approximately $300,000 from Michigan carriers as a result of limited reciprocity (including the revenue from the one- way trip permits used for the "in-bond" transit movement). 212 However, as a result of Ontario's limited reciprocity with all U.S. states and Canadian provinces, the sale of trans- ferrable trailer (X) plates to Ontario motor carriers re— sulted in $1,222,866 additional revenue for Ontario.1 Thus, directly and indirectly, limited reciprocity provided On- tario with $1.5 million for highway uses in 1963. Private carrier officials in both Michigan and On- tario view the limited reciprocity agreement as an improve- ment over past agreements if they Operate infrequently in the foreign state. Under these conditions, the use of the $20.00 permits allows substantial savings, without usually causing undue delays at the border necessitated by the pro- cedure for acquiring the permits. If they operate the same vehicles in the foreign state continually, it is more economical to register the vehicles in the foreign state, i.e., Michigan or Ontario. With this type Of operation the reciprocity agreement has no meaning for them. Full reciprocity would provide greater benefits for all private carrier operations. Michigan motor common carrier officials considered "Requirement of Michigan permits when using Ontario licensed trailers 8 miles beyond the city limits of the point-of- entry" as the most serious obstacle encountered when moving 1The (X) plates are used by Ontario motor carriers on all foreign registered trailers when pulled by Ontario registered tractors in the province. 213 freight between Michigan and Ontario. The second most seri- ous obstacle was "Michigan and Ontario regulations hamper free interchange of equipment between carriers." Both of these Obstacles are the direct results of the limited reci— procity agreement between Michigan and Ontario. The officials of the carriers stated that unrestricted interchange of equipment (especially trailers) between Mich— igan and Ontario carriers would shorten the elapsed time in-transit from pick-up to delivery to consignee, and reduce the costs of carrier Operations at the ports-of-entry. The anticipated outcome of unrestricted interchange would be improved service for the shipper with fewer delays enroute, less transferring of freight, and the possibility of reduc- tions in some rates. Another area of concern to the Michigan carriers was that of uniformity in Michigan and Ontario regulations regarding weight, length, and vehicle combinations.1 This has not been included in reciprocal negotiations, but is of considerable Operational importance for the carriers. Ontario motor common carrier officials ranked “Re- quirements of Ontario permits or special license when using Michigan licensed trailers beyond a 20-mile limit of the point of entry" as the most serious obstacle encountered 1A comparison of the Michigan and Ontario regula- tions is shown in Appendix A, Table A—7. Border Operations are restricted to the lowest weight limits, shortest lengths, and smallest vehicle combinations. 214 in moving freight between Ontario and Michigan. The next most serious problem was "Michigan and Ontario regulations hamper free interchange of equipment between carriers." As can be seen above, the selection of these two obstacles was identical to that made by Michigan carriers. Here again it should be pointed out that these obstacles could be over— come by extending reciprocity. The concensus of the officials of Ontario motor carriers was that unrestricted interchange of equipment (especially trailers) between Ontario and Michigan carriers would provide improved transport service to the shipper by reducing elapsed time enroute, decrease the handling of freight, and aid in lowering the carrier's cost of opera— tions. Generally, the Michigan and Ontario motor carrier Officials' views on transport problems and reciprocity as it exists between Michigan and Ontario were in accord. They would be receptive to changes in reciprocity that would reduce the present restrictions on carriage. For other modes of transport, such as railroads, airlines, pipelines, and waterborne carriers, there are no reciprocity agreements between Michigan and Ontario cover- ing their operations. The railroads' officials reported no problems with administrative procedures at the border, or in other areas, that could be alleviated by reciprocal negotiation on the state and provincial level. 215 The Michigan regulatory agency could envision no situation where reciprocity on the state level could have an influence on the railroad Operations between the two jurisdictions.l In the operations of the airlines, pipelines, and water carriers, there were no areas that could be directly influenced by reciprocal negotiations between Michigan and Ontario. Any operational problems caused by the existence of the international border must be resolved by reciprocal negotiations at the federal level of government. Because these modes are primarily controlled by federal regulations and agencies, Michigan and Ontario are limited to an indirect role in such negotiations. To sum up, if border restrictions on transport car— riers, particularly motor carriers, are reduced as a result of reciprocal negotiations between Michigan and Ontario, the carrier should be able to provide improved service at lower costs. If the carrier's reduced Operating costs are reflected in lower rates or improved service, the exporter may be able to reduce his distribution costs on shipments to Ontario. Reduced costs could mean lower prices to the Ontario consumer and greater market penetration. With in— creased sales, the exporter might realize economies of scale in production and distribution, thereby providing a basis 1Interview with Mr. O. F. Sonefeld, Director, Rail- road Division, Michigan Public Service Commission, February, 1964. 216 for further price decreases. Thus, the net outcome of im— proving carrier operations at the border through reciprocal negotiations could result in expanding Michigan's trade with Ontario. RECOMMENDATIONS RECIPROCITY RECOMMENDATIONS MOTOR CARRIERS The following recommendations are suggested as pos— sible courses of action for the State of Michigan, leading ultimately to full reciprocity with Ontario for motor car— rier operations. Any improvement in the reciprocal arrange— ments between Michigan and Ontario will be beneficial to the shipping public and the carriers in both jurisdictions. The alternatives for reciprocal negotiations, as set forth below, start with an immediate proposal, then continue through intermediate measures, and lead up to the long-run goal of full reciprocity with direct line service. IMMEDIATE PROPOSAL l. The Michigan Reciprocity Board should begin immediate negotiations with Ontario to secure full reciproc- ity for the operation of Michigan and Ontario registered trailers in both jurisdictions. This measure would allow free interchange of trailers between Michigan and Ontario motor carriers, alleviating (l) the necessity of securing Michigan permits for the Operation of Ontario registered trailers outside the port zones, and (2) the necessity for ||_— .—.—-—-———-~——n——_——_—_—_--.— - _..---_- .- ___ -. . -—I-I-'-——..l_-.__ - _. h— 217 Ontario carriers to use the transferrable trailer (X) plate when moving Michigan registered trailers in Ontario beyond the port zone, thus eliminating some of the delays enroute caused by the present methods of Operations. This change in reciprocity should provide an Oppor— tunity for the carrier to give better service, at reduced costs, which might serve as a basis for lowering rates on freight moving between Michigan and Ontario. The Michigan Department of State would lose approx- imately $25,800 in revenue, as shown in Chapter IV.1 On— tario would lose about $5,000, the amount of revenue col- lected from the sale of Ontario trailer registration plates to Michigan carriers,($4,980 in 1964). Unless Ontario ex- tended full trailer reciprocity to all U.S. states and Ca- nadian provinces, the Ontario carriers would still need to use the transferrable trailer (X) plate on other foreign registered trailers when Operated within Ontario. However, this would depend on the reciprocity agreements between Ontario and the other U.S. states and Canadian provinces. If Ontario extended full reciprocity to trailers registered in all foreign states and Canadian provinces, the necessity for using the transferrable trailer (X) plate would be eliminated. In this case Ontario would lose an 1This assumes the loss of all trailer registration revenue from Ontario for Ontario trailers ($22,800 in 1964) plus 10% of the revenue from the $20.00 permits, or $3,000 (assuming that these permits were used by Michigan carriers for the operation of Ontario registered trailers in Mich- igan . 218 additional $1,222,866 in revenue (based on 1963 figures as shown in Chapter IV). This loss might be made up by increasing the registration fee on highway tractors. From an Operational standpoint, this would be more desirable than the present system, as it would eliminate the need for shuttling (X) plates between terminals in the carrier's system. This would expedite the movement of foreign reg- istered trailers from the border terminals to destination. INTERMEDIATE MEASURES The following may be considered as intermediate measures for the State of Michigan to undertake in future reciprocal negotiations with Ontario. 1. Michigan and Ontario should take up the prob— lem of establishing a uniform system of regulations for the length, weight, and combinations of commercial vehicles. Although at present these laws are in the domain of the respective legislative bodies, uniformity gained through negotiation could be beneficial to both Michigan and Ontario. The present laws restrict the operations between the two areas to the minimum length, weight, or combination allowable in either Michigan or Ontario. Thus, in effect, the minimum requirement regulates all border transport Op- erations. For example, on all border operations the Mich- igan 40—foot limit on the length of semi—trailers curtails the operation of the 4S—foot semi—trailers that are legal in Ontario. 219 2. Another measure for future reciprocal negotia— tion is the operation of the Michigan and Ontario registered equipment of private carriers. The ultimate objective for negotiations should be the elimination of fees and special permits. Such a change in regulations would help to lower the carrier's cost of operations and improve the service offered the shipper. It is possible that the improved ef— ficiency in transport service could be reflected in lower distribution costs, allowing a decrease in the price of the export product, with the possibility of an expansion in trade between the two jurisdictions. 3. The next step in improving transport service between Michigan and Ontario through reciprocal negotiations might be the granting of full reciprocity for all tractor operations in both areas. This would facilitate the border operations at the ports—of-entry by allowing any power equip- ment as well as trailers to operate unrestricted across the border. Under the present reciprocity agreement, border operations of Michigan carriers are restricted to those units properly registered in Ontario. This limits the choice of Operational alternatives for the carrier with respect to power equipment and may be a contributing fac— tor in causing delays in the movement of freight at the border. 4. Another matter worthy of reciprocal negotiation is to effect a reduction, or elimination, of the fees and 220 permits required on the "L" license operation. This is the in—bond transit movement across the Ontario corridor by Michigan (and other U.S. carriers) motor carriers between Michigan and New York gateways. The 1963 cost of this Op— eration to Michigan carriers was approximately $300,000. Substantial benefits from reciprocal negotiation might be achieved here. 5. The long-run objective for Michigan should be the establishment of (one or more) single—line motor car— rier service connecting the major market areas in both On— tario and Michigan. Such a carrier would provide direct service between cities eliminating the need for the present joint carrier service (two or more carriers). As indicated by the data on motor carrier costs presented in Chapter V, a single-line carrier could Operate more economically, give much faster service with the pos— sibility of reduced rates to the shipper. A more dependable service, with fewer delays enroute, would allow the importer to decrease his inventory and still serve his customers. The overall cost of distribution should decrease in the long run, which, if reflected in lower prices for the mer— chandise, could result in an increased volume of trade be- tween Michigan and Ontario. Single-line motor carrier service could be devel- oped under single ownership, i.e., one carrier owning and Operating the "rights" in both Michigan and Ontario, or through joint ownership shared by Michigan and Ontario 221 transport companies. An example of foreign ownership exists with the railroads, where the Grand Trunk Western Railroad Company, operating in Michigan and other U.S. states, is owned by the Canadian National Railways. The question Of ownership may be incidental; how— ever, the need for an economical, efficient, direct motor carrier service between major markets in Michigan and On— tario is paramount if greater gains in trade between the two areas are to be realized. CONCLUSIONS From a practical standpoint, in the event that On— tario fails to respond to reciprocal negotiations, and does not grant full reciprocity to Michigan registered trailers (the proposal for immediate action above), then Michigan should take unilateral action and allow Michigan motor car- riers the privilege of unrestricted operation of Ontario registered trailers within Michigan. This action would greatly improve the present system of carrier Operations especially when inbound freight is loaded on Ontario reg- istered trailers. It would eliminate the necessity for the securing of a special permit or transferring the freight (to the Michigan carriers' equipment. The direct revenue loss to Michigan would be about $Z§000, based on the figures for 1964 presented in Chapter IV. The benefits to be gained by the motor carriers and their customers should be much greater than this. 222 For the Michigan motor carriers to gain the full benefits from such a state decision, it would be necessary for Michigan to encourage other U.S. states in the area served by Michigan motor carriers, i.e., mostly the great lakes states, to take similar unilateral action and thus allow the unrestricted movement of Ontario registered trailers within their borders. This would allow a greater use of trailers, owned by Ontario carriers, for all traffic going to, and from, Ontario. In short, it would increase the sup- ply of intercity trailers available to the Michigan carriers. The above prOposed steps are suggested as alterna- tive measures for reciprocal negotiations between Michigan and Ontario, leading ultimately toward the goal of full reciprocity, and the establishment of motor carrier single— line, direct service connecting the various major markets in the two areas. OTHER MODES Michigan and Ontario do not have complete jurisdic— tion and control over the/railroads, airlines, pipelines, and water carriers; therefore, direct action between the state and province alone cannot alleviate carrier operating problems caused by the existence of the international border. Reciprocal negotiations on the federal level of government must be obtained by Michigan working through her representa— tives and agencies. For example, Michigan could press at the federal 223 level for relief from the Jones Act to allow Canadian reg- istered vessels to participate in the interstate and intra- state traffic between Michigan ports and ports in other U.S. states. At the same time, the United States could seek Canadian authority to allow U.S. registered vessels to participate in Canadian intraprovincial and interprovin— cial Great Lakes traffic. A precedent for joint Canadian and United States participation in the Great Lakes Coastal Trade was estab— lished during the second world war, but the restrictions were reinstated again after the war. If the Canadian and United States vessels were granted freedom of movement within the Great Lakes, operational alternatives would be available for the carriers which could result in better utilization of transport resources and improved service for the shippers. How this would affect Great Lake carriers would have to be studied. Perhaps a subsidy might be necessary as relief from competition. A continuing program should be pursued to reduce the restrictions that now exist on transport service between Michigan and Ontario. To what extent the political boundary is used to justify the restrictions placed on transport service is difficult to determine. Certainly there is some element of "nationalism“ and political independence involved in the situation. However, if these can be set aside and the matter considered solely on economic grounds, unrestricted movement for transport carriers may yet be achieved. The 224 return would seem clearly to justify the effort. RECIPROCITY AND A FOREIGN TRADE ZONE One of the instruments and institutions that could be used to achieve and facilitate reciprocity might be a Foreign Trade Zone located between Michigan and Ontario. It is envisioned that such a zone would be similar to the Foreign Trade Zones located at New York City, New Orleans, San Francisco, and Seattle. It would be a joint Canadian and United States undertaking and presumably operate in the same manner as existing foreign-trade zones. The oper- ations of foreign-trade zones are explained in "Exporting to the United States," published by the United States Bureau of Customs.1 It states: Foreign exporters planning to expand or open up new American outlets may forward their goods to a foreign-trade zone in the United States to be held for an unlimited period while awaiting a favorable market in the United States or nearby countries without being subject to the customs laws and without entry or bond. Merchandise lawfully brought into these zones may be stored, sold, exhibited, broken up, repacked, assembled, distributed, sorted, graded, cleaned, mixed with foreign and domestic merchandise, or otherwise manipulated, or be manufactured. In most instances, foreign goods may also be manu— factured in a zone with other foreign goods or with domestic goods brought into the zone. The resulting merchandise may thereafter be either exported or transferred into customs territory. When foreign goods are transferred into customs lExporting to the United States, U.S. Treasury De- partment, Bureau of Customs, U.S. Government Printing Of— fice, Washington, D.C., p. 45. 225 territory of the United States from a foreign- trade zone, the goods must be entered at the cus- tomhouse. If entered for consumption, duties are ordinarily assessable on the goods at the rates in effect on the date Of entry and with respect to their condition at that time. With a Foreign Trade Zone, it is assumed that a particular segment of Detroit and Windsor would be enclosed by a fence, separating it from the surrounding city areas. This enclosure would then come under the joint control of the Canadian and United States governments. Foreign com— merce within the zone would be exempt from the customs reg- ulations of both countries. For such a zone to function properly, transport service within the enclosure should be able to Operate with- out governmental restrictions. A bridge joining the two areas would be necessary for rail and motor traffic. Un- restricted movement between the Ontario and Michigan zone areas would aid in the processing and manufacturing of prod- ucts. Under the existing conditions between Ontario and Michigan, there should be no problems with rail and water- borne operations either within, or to and from, the proposed zone. Both enjoy freedom of movement with respect to Mich— igan and Ontario governmental regulations. Michigan and Ontario should change their motor car- rier reciprocity agreement to allow freedom of movement for all commercial vehicles within the zone. Tractors and trailers, regardless of where registered, should be allowed 226 to haul goods within the zone, without having to purchase special permits, or additional registration plates. This could be done by the Michigan Reciprocity Board and the Ontario Department of Transport both extending full recip- rocal privileges to all commercial vehicles upon entry to the zone. Michigan could exempt such vehicles from the fuel tax regulations, and the Michigan Public Service Com- mission requirement for registration and mileage fees. If Michigan and Ontario were concerned with safety and insurance regulations within the zone, they might re- quire the carriers to post a bond with their respective governments for Operation within the zone. In turn, the Michigan and Ontario agencies could issue special tractor permits to indicate that such equipment was operating under proper safety and insurance regulations. These could be issued yearly. With the acceptance of the reciprocity recommenda— tions herein proposed, carrier Operations in the Detroit and Windsor area outside the Foreign Trade Zone would be equally easy. A Foreign Trade Zone could be viewed as an interim device used to promote reciprocity at the border. It could be dissolved in the event of the development of a free trade arrangement between Canada and the United States. INFORMATIONAL RECOMMENDATIONS l. The state should undertake an origin and 227 destination study of the movement of commodities by highway motor carrier. At present there are no statistics showing how much, of what, is moved where. Such a study could be accomplished by a state agency, or in conjunction with one of the state universities. The study should be done at least every third year, or if possible oftener, and might use one of the following methods: a. The present Truck Weight Study conducted yearly by the Traffic Division of the Highway Depart— ment could be expanded to furnish the necessary origin and destination information on commodities moved by motor carrier. Proper advance planning should be utilized to determine what data should be collected, where best to locate the interview stations, how to utilize the combined field force of the Michigan Public Service Commission and the Traffic Department, how to select the sample of vehicles to be interviewed, and the proper time of day to conduct the study. At the same time, the Michigan and Ontario govern- ments might work together on a joint project to collect data on the origin and destination of commodities cross- ing the border at the ports—of-entry. Michigan might interview all trucks entering Michigan, while Ontario could interview all trucks entering Ontario. This would give complete coverage, disclosing bridge or gateway traffic, not originating or terminating in Michigan or Ontario. By spreading out the interviewing stations, 228 a minimum of disruption to the normal flow Of traffic would take place. b. A second method for securing origin and des~ tination data might be a waybill analysis study using a 1% sample Of the waybills of all, or selected truck— ing companies. This method would require previous study to determine how to gather data on the gateway traffic that doesn't originate or terminate in Michigan. Such a study would require considerable cooperation on the part of the trucking companies. It could be patterned after the railroad waybill analysis made by the federal government. 2. The state should maintain a clearing house, or catalogue, in some department at the highest level of gov- ernment, showing brief information on present and past re- search studies and statistical data available at the various governmental departments. This would help to eliminate duplication of effort within and between departments and would be a valuable service for future state research proj— ects. ORGANIZATIONAL RECOMMENDATIONS Reciprocity is becoming increasingly more important to the state each year, as various interests and agencies establish laws and regulations that impinge on the freedom of carrier operations and trade across the border. The state must, therefore, maintain a comprehensive and ,mw_ ,,fi,_,/ 7,, 71 I 229 imaginative approach to reciprocal negotiations encompassing all public interests. Transport reciprocity for motor carriers should not be left wholly in the control of diverse governmental agencies where it is an appendage receiving part—time rec- ognition from officials who have other full—time duties and interests. It is, therefore, suggested that the membership of the Reciprocity Board be altered, or enlarged, to allow some representation of the shipper and carrier interests. The present composition of the Board (Secretary of State, who serves as the chairman, State Highway Commissioner, and the Chairman of the Michigan Public Service Commission) may reflect in its statements and negotiations the conserv— ative attitudes of agencies that are preoccupied with col— lection of revenue, highway safety and maintenance, and carrier regulation. At present, if shipper and carrier representation on the Board is impossible, then a member of the Michigan Economic Expansion Department should become a Board member, or act in the official capacity of advisor, to insure that the reciprocity agreements are in harmony with the efforts of the Economic Department toward trade expansion.l Economic 1If the anticipated Department of Commerce is or— ganized in the state government, its Manager should be in- cluded as a Board member, or as an official advisor. 230 growth cannot be achieved by promoting trade expansion while at the same time maintaining barriers to the movement of goods. TRADE RELATED MEASURES 1. While the focal point of this study has been transport reciprocity, it must be recognized that other measures have an important bearing on the trade and trans— port between Ontario and Michigan. In Chapter III, it was shown that the manufacturing companies in both Ontario and Michigan considered the Canad- ian and United States tariffs as the most serious obstacles to initiating or expanding trade between Michigan and On- tario. The magnitude of this trade in 1963 was over $1 billion and certainly is worthy of consideration by the state and province. As they are the major sources of the border trade, they might well press their respective fed- eral governments for reductions of the tariffs on products entering into such commerce. Tariff reductions through reciprocal negotiations can provide the stimulus and opportunity for expanding trade between the two areas. A first step towards freer trade has recently been taken by Canada and the United States with the elimination of tariffs on new automobiles and parts. 1"U.S., Canada to Abolish Auto Tariffs," Detroit Free Press, January 8, 1965, p. l. 231 This will provide immediate gains for the economies of both Michigan and Ontario and will serve as a source of infor- mation and a stimulant for evaluating further tariff reduc- tions in the future. 2. Many of the manufacturing companies in both Michigan and Ontario indicated a desire for more informa— tion on the market opportunities and services available in the respective export markets. It is suggested that the Michigan Economic Expansion Department work out a coopera— , tive program with the Ontario Department of Economics and Development whereby a mutual exchange of market information could be accomplished for the benefit of interested poten— tial and present exporters. At the same time a program could be developed to publicize the steps leading towards full reciprocity. The information could be disseminated through the local offices of the Chamber of Commerce, or other appropriate organizations. Michigan should provide its manufacturing companies with: (1) information on Ontario buyers, agents, industri— alists, and distributors, (2) a list of potential sales outlets for broad classes of products, (3) where possible, the names of specific Ontario companies interested in a particular product, (4) information necessary to engage in the export trade, including the mechanics of exporting, and (5) where to get specific help in solving problems con- nected with exporting to Ontario. 3. Michigan, either alone, or in conjunction with 232 the other regional states, should take immediate action to encourage the Bureau of Customs to increase the size and modernize the facilities at the Detroit port—of—entry. The present physical facilities at the bridge and tunnel are too small to handle the volume of commercial traffic crossing the border. As the volume of traffic increases in the future, especially that moving into Michigan across the bridge, lack of adequate facilities may cause a serious bottleneck in the border operations for motor carriers. 4. Michigan, either alone, or in conjunction with the other regional states, should take action to have the Bureau of Customs simplify the import and export procedures, and, if possible, reduce the number of required documents on shipments to and from Ontario and other Canadian areas. These states, along with Ontario, might use their influence with their respective national governments, to promote a cooperative undertaking on the part of Canada and United States to review the whole problem of customs clearance between the two countries. Such action would be welcomed by the exporters in both Canada and the United States. A study of procedures and documentation should cover at least the following items, which have proven to be problems encountered by exporters: a. Re—evaluate all current forms and develop standard forms acceptable to both Canada and the United States. This would simplify the procedure and help eliminate much of the duplication caused by the present 233 requirements. b. Find an easier way for handling shortages, overages, and the return of defective merchandise. c. Develop a simple method for clearing adver— tising matter through customs, especially such items as cutaway models which can be used only for display purposes. The present procedure is so difficult that it has discouraged some Michigan exporters from trying to enter the Ontario market. The procedure is somewhat easier when entering the United States. Some of the solutions to the problems of customs procedures and documentation may not require joint action by the two national governments; however, a discussion by their representatives of the problems encountered by all exporters, might yield some new ideas and stimulate a new approach to the problem of moving goods across a political boundary. Customs uniformity and simplification is being studied by various international agencies including the United Nations. With Canada and the United States involved in the world's largest border trade, they should provide active leadership in this area. FURTHER RESEARCH Research is a prerequisite to sound reciprocal nego— tiations and realistic policy revisions. And, further re— search is an implicit part of the preceding suggestions. However, a logical extension of this work would be to carry 234 CH1 additional investigation and research into other ways of expanding Michigan's trade. In this connection, Mich— igan should give priorities to studies in the following areas: First, Michigan should make a study of the proposed development of a Foreign Trade Zone to be located in the Detroit—Windsor area. The transhipment—gateway transit trade of 8.3 million tons is sufficiently large to warrant further study and investigation. At the same time Michigan received approximately 2.3 million tons of raw materials from Ontario. These are processed into manufactured goods and in some cases returned in the new form, for Michigan shipped Ontario about 1.3 million tons of manufactured prod- ucts in 1963. A Foreign Trade Zone would provide greater flexi— bility in the application of customs duties and regulations, and would help develOp the re—export trade and could prO- vide a stimulus for the expansion of industry in the area. Among other things this research should consider: (1) whether a joint Canadian—United States Foreign Trade Zone is desirable and feasible, (2) what area between Mich— igan and Ontario is best suited for the location of the prOposed zone, and (3) an estimate of how such a zone would affect the economies of Michigan and Ontario. In the event that a joint Canadian—United States Zone would not be feasible, then Michigan should concentrate its investigation on the feasibility of establishing a United States Zone somewhere in the Detroit area. 235 Second, Michigan should initiate a study to eval- uate the benefits to be gained by the state from the estab— lishment of branch offices of the Economic Expansion Depart- ment in Ontario. One or more offices might be located in the heavily industrialized area around Toronto and Hamilton. Specialists in foreign trade could serve as Michigan's trade representatives. The primary function of each office would be to promote the sale of Michigan—manufactured products in Ontario. Third, Michigan should undertake a comprehensive study to evaluate the consequences of the future develop— ment of a free trade arrangement between Canada and the United States. The automotive restrictions are to be aban— doned, and a full-scale removal of trade barriers may be forthcoming, either at the federal or regional initiative. Such an arrangement could stimulate a reallocation of out- put and lead toward specialization in production. It could alter competition and existing trade patterns, and Michigan should take steps now to determine in which direction to move. Among other things the Michigan study should con— sider: (l) the possible forms of a free trade arrangement and how each form would affect the trade policies of the member countries, (2) the effect of a free trade arrange— ment on Michigan's employment, production, and investments, (3) the effect on Michigan's competitive position, trade, and markets, and (4) the effect on public policy, social 236 and economic institutions, and human attitudes. A study of the theoretical consequences of a free trade arrangement would provide Michigan with the informa- tion and understanding necessary for formulating specific policies designed to further her economic expansion and social development. This research constitutes a first con— crete step in this direction by examining the basic trade and transport patterns between Michigan and Ontario, the existing status of reciprocity, and making suggestions toward improving reciprocity. APPENDIX A METHODOLOGY AND DATA COLLECTION The material for this research was gathered from all possible sources. Secondary data were used whenever they were available. However, due to the nature of the study, there were few secondary statistics applicable. Questionnaires were designed to obtain information on the markets of the manufacturing companies, mode of transport used to reach the markets, and additional data pertaining to problems encountered by the exporters. Ques- tionnaires were also used to secure information from the various carriers to determine, if possible, the origin and destination of the commodities hauled, plus some insight into the problems encountered by the carriers. To supplement the information Obtained by question- naire, interviews were conducted with Officials Of the ex- porting companies, carriers, and various governmental agen- cies and departments. In some interviews the questionnaire was used as a guide, while others proceeded as an informal discussion of operations and problems. A total Of over one hundred interviews were conducted in Michigan and On- tario. There were questions on each questionnaire request- ing the respondent to rank the seriousness of several 237 1" 238 problems, or proposed solutions to problems. The final ranking was determined by the sum of the weighted answers for each particular question. That is, if there were five answers to be ranked, the answer ranked first was given a weight of five; second rank received a weight of four, etc. Then by summing the weighted answers of all respondents, it was possible to rank the answers for each question. The following pages present a copy of each question— naire with a discussion of how the sample was selected, some information regarding the questionnaire, and a summary Of the returns. The results of each questionnaire are pre- sented in the text of the dissertation. These data are referred to in the text, and various tables, as “Survey of Michigan (Ontario) manufacturing companies." ONTARIO TRADE AND TRANSPORT QUESTIONNAIRE A sample of 1,008 Ontario manufacturing companies 1 Each was selected from the Canadian Trade Index for 1963. company had indicated in the Iggg§,that they were interested in exporting their products. It was extremely difficult to extract the names of the Ontario manufacturing companies, due to the manner in which they were listed in the Index. There was no way Of determining the total number of Ontario 1Canadian Trade Index, 1963, Canadian Manufacturers' Association, Toronto, Canada. 239 companies that were in the export business. There is no publication that lists the exporting companies by name and address. The questionnaire was designed in two parts. The first was to secure information regarding the markets that the company served, the mode Of transportation utilized in serving each market, the future outlook Of the company, and some of the Obstacles to initiation or expansion of trade with Michigan. The second part concentrated on the trade with Michigan, the mode Of transport utilized, some of the problems of transport caused primarily by the existence of the national border, and a consideration of measures that would improve the transport service to Michigan. The questionnaire was pre-tested by visiting sev- eral companies and asking them to complete the questionnaire. Based on this information, the final design was completed. For questions 5, 8, 9, and 10, the respondent was asked to rank several structured alternative answers. At the same time he was asked to specify any other answer to the question that was peculiar to his particular business or Operation. Structuring the answers in this manner allowed the researcher to weight the answers and make some comparisons on an industry and geographical basis. The Opened end part of the question helped to furnish some additional insight into special problems Of particular respondents. A total of 217 companies returned the questionnaires. 240 Of these, 173 completed the questions pertaining to markets served and mode of transport utilized. There were 79 com- panies that served the Canadian markets alone, and 94 that were actively engaged in the exporting business, of which 36 were exporting to the Michigan market. The questionnaires were identified only by code number so as to protect the identity of the respondent. Using the principal product of the company, the United States Standard Industrial Classification Manual1 was con- sulted to determine the S.I.C. number applicable to that product and company. For industry classification, only the first two digits of the SIC number were used. This uniform procedure provided a standard basis for the com— parison of the exporters in Ontario with the exporters in Michigan. lBureau of the Budget, Standard Industrial Classi- fication Manual, 1957; SupplemenE to 1957 Edition, publi§hed in 1963. ‘ 241 17 February 1964 Dear Sir: The enclosed questionnaire is part of a research study being conducted under the auspices of Michigan State University's doctoral programs in Business Administra- tion. It is a study of trade and transport reciprocity between Ontario and Michigan. As Such, it is designed to provide a better understanding Of the economies of each area. Specifically, it is intended to determine the present movement of commodities and investigate some impediments to inter-regional trade. It is hoped that the final results of the research will be of value to both Ontario and Michigan. Part Of the data and information for analysis is being provided by Ontario and Michigan manufacturing and transport companies. Therefore, your cooperation in completing the enclosed questionnaire is respectfully requested. Each questionnaire will be coded and your identity will be known only by the undersigned. Final reports and statistics will be in the form of aggre- gates. Census rules Of non-disclosure of individual firm's operations will be Observed. Informed estimates by your Marketing, Traffic or other executives will be sufficient. If you do not at present trade with Michigan will you please answer as much of the questionnaire as possible. Your answer to question NO. 5 will be extremely valu- able tO the research results. Participants will be supplied with a summary of aggre— gate findings On request. Thank you for your cooperation. Yours very truly, Cecil V. Hynes Research Director 242 Return in enclosed envelope to Mr. Cecil V. Hynes SIC Classification 560 Owen Graduate Center, MSU East Lansing, Michigan Confidential Code I. ONTARIO-MICHIGAN TRADE AND TRANSPORT QUESTIONNAIRE For Year 1963 DOMESTIC AND TRADE STATUS 1. Company initiated Ontario Operations in (year) and shipments reached $ in 1963 from estaB- lishments employing (NO.) in Ontario. 2. Shipments from Ontario were mainly the following prod- ucts: 3. Shipments from Ontario Operations moved: to the followin markets: py_the following carriers: (estIEEte percentageT ‘TShow per cent of time used for each market) Province Of Rail/ Truck/ Air/ water/ Other/ Ontario %..by.. % % % % % Other Canadian Provinces ..by.. MiChigan 6 O :Owby O 0 New York _- o obYo o Other U.S. ” “ ""' States .___ ..by.. Overseas Exports ..by.. TOTAL 116% 4. The five-year outlook is for shipments from Ontario operations to (check) Accelerate___Increase__ Stabilize___ Decrease__ Cease___ 5. What are the most serious problems confronting your expansion (or initiation) of trade with Michigan? (rank in order 1,2,3) Lack of Michigan market information and services. Inefficient transport service due to border reg— ulations and administrative practices. High cost Of transport and distribution. High U.S. tariffs and customs regulations. Complexity of U.S. IMPORT procedure and regula- tions. II. 6. Other (please Specify) 243 Complexity of Canadian EXPORT procedure and reg- ulations. TRANSPORT SERVICE What were your total shipments crossing the Michigan- Ontario border in 1963: a. Terminating in Michigan $ b. Moving through Michigan as a gateway to other U. S. states or Canadian provinces $ . What mode of transport (for shipments in question 6 above) did you use? (show per cent of time used) AIR / RAIL / WATER / TRUCK / OTHER privately commercial ' owned carrier % % % % % % How does tranSport service to Michigan compare with service to other Canadian Provinces? (enter (+) for favorable, (- ) for unfavorable, and (0) if no differ- ence in service) Speed Of pick-up and delivery, and time in transit. Freight rates and overall costs. Claim settlements. Availability Of adequate service. Availability of proper equipment. Other differential factors Of service (please specify) What are the most serious problems in transport serv- ice to Michigan caused by existence of the border? (rank in order of seriousness lst, 2nd, 3rd, etc.) TOO much time enroute from pick-up Of goods to delivery to consignee Duplications and cost due to regulations at the border Restrictive carrier equipment regulations in Michigan and Ontario Lack of efficient through service under joint rates Other problems (please specify) 10. 244 Which of the following measures would provide better transport service on shipments to Michigan? (rank lst, 2nd, 3rd, etc.) Through service under joint rates More liberal reciprocity with respect to equip- ment use in Michigan and Ontario Better cooperation between Michigan and Ontario carriers More uniformity in regulations at the border Other (please specify) 245 MICHIGAN-ONTARIO TRADE AND TRANSPORT QUESTIONNAIRE For this sample, 490 Michigan manufacturing companies were selected from the 1963 Directory Of Michigan Manufac- turers.l They were selected by taking the first company name that appeared in the first, third, and fifth columns on the double pages of the alphabetical listing of companies, by cities, in Michigan. The questionnaire, shown below, was based on the one used in Ontario. The wording was changed only to re- flect the Michigan point of view. The questionnaires were coded and those returned were classified by the Standard Industrial Classification number given the company by the Bureau of the Census of the Department of Commerce. A total of 152 questionnaires were returned but only 108 Of these gave sufficient answers to be of value to the research. Thirty-four of the companies responding were non-exporters, and sixty-eight of the remaining number exported to Ontario. Table A-1 shows the market orientation of the Mich- igan manufacturing companies that responded to the question- naire. Table A-2 shows the mode of transport used to reach the various markets. 1 Director Of Michi an Manufacturers, 1963, Manu- facturer PublIsHing Co., DeEEOIt 38, Michigan. 246 24 February 1964 Dear Sir: The enclosed questionnaire is part Of a research study being conducted under the auspices of Michigan State University's doctoral programs in Business Administra- tion. It is a study Of trade and transport reciprocity between Ontario and Michigan. As such, it is designed to provide a better understanding of the economies of each area. Specifically, it is intended to determine the present movement of commodities and investigate some impediments to inter-regional trade. It is hoped that the final results of the research will be of value to both Ontario and Michigan. Part Of the data and information for analysis is being provided by Michigan and Ontario manufacturing and transport companies. Therefore, your c00peration in completing the enclosed questionnaire is respectfully requested. Each questionnaire will be coded and your identity will be known only by the undersigned. Final reports and statistics will be in the form of aggre- gates. Census rules of non-disclosure of individual firm's Operations will be Observed. Informed estimates by your Marketing, Traffic or other executives will be sufficient. If you do not at present trade with Ontario will you please answer as much of the questionnaire as possible. YOur answer to question NO. 5 will be extremely valu- able to the research results. Participants will be supplied with a summary of aggre- gate findings on request. Thank you for your cooperation. Yours very truly, Cecil V. Hynes Research Director 247 Return in enclosed envelope to SIC Classification Mr. Cecil V. Hynes 560 Owen Graduate Center Michigan State University Confidential Code MICHIGAN-ONTARIO TRADE AND TRANSPORT QUESTIONNAIRE For year 1963 DOMESTIC AND TRADE STATUS 1. Company initiated Michigan Operations in (year) and shipments reached $ in 1963 from estaElIs - ments employing (No.) in Michigan. 2. Shipments from Michigan were mainly the following prod- ucts: 3. Shipments from Michigan operations moved: to the following_markets: by the following carriers: (estimate percentage) 5 ow per cent of time used for each market) Rail/ Truck/ Air/ Waterl-Other/ Michigan ..by.. E. North Central District (Ohio, ..by.. Ind., 111., Wisc., Minn.) Other U.S. States..by.. ILQ Province of Ontario ..by..____ __ __ _..__._. _._.._.. Other Canadian Provinces ..by.. ____, _____ _____.._____ Overseas Exports ..by.. _____ _____ ______ IUOE' TOTAL 4. The five-year outlook is for shipments from Michigan Operations to: (check) Accelerate__.Increase__ Stabilize___Decrease___Cease__ 5. What are the most serious problems confronting your expansion (or initiation) of trade with Ontario? (rank in order 1,2,3) Lack of Ontario market information and services. Inefficient transport service due to border regu- lations and administrative practices. High cost Of transport and distribution. High Canadian tariffs and customs regulations. 248 Complexity Of U.S. EXPORT procedure and regulations. Complexity of Canadian IMPORT procedure and regu- lations. Other (please specify) TRANSPORT SERVICE 6. What were your total shipments crossing the Michigan- Ontario border in 1963? a. Terminating in Ontario $ b. Moving through Ontario as a gateway to other U. S. States or Canadian Provinces $ . What mode of transport (for shipments in question 6 above) did you use? (show per cent of time used) AIR / RAIL / WATER / TRUCK / OTHER privately commercial owned carrier % % % % % % How does transport service to Ontario compare with serv- ice to other United States areas? (enter (+) for favor- able, (-) for unfavorable, and (0) if no difference in service) Speed of pick-up and delivery, and time in transit. Freight rates and overall costs. Claim settlements. Availability of adequate service. Availability of proper equipment. Other differential factors of service (please specify) What are the most serious problems in transport service to Ontario caused by existence Of the border? (rank in order of seriousness lst, 2nd, 3rd, etc.) Too much time enroute from pick-up of goods to delivery to consignee. Duplications and cost due to regulations at the border. Restrictive carrier equipment regulations in Mich- igan and Ontario. Lack of efficient through service under joint rates. Other problems (please specify) 249 10. Which Of the following measures would provide better transport service on shipments to Ontario? (rank lst, 2nd, 3rd, etc.) Through service under joint rates. More liberal reciprocity with respect to equip- ment use in Michigan and Ontario. Better cooperation between Michigan and Ontario carriers. More uniformity in regulations at the border. Other (please specify) 250 mm mm vN mm m ma m VVHa OH mum mmN mm mm oom OH” OCH 000.0H 000.0H 000.0 0H0 000.H 000.0 000.H mmm mud 0H0.0 000.0 0H0.0 00H.H oom.H 000.0 000.0 MHm OHN 000.0 000.0 000.H 00H.0 mNm 000.0 000.0 0N0 00m 000.00 oom0mN 000.0 000.0 000.0 000.0H 000.0 Nmmm vmm omN.H mom Nm mNm 000.H OVm UH unannoua H000 a anoflouumm 09050000 umHHHm e 0H00Hsono mausooum amHHHm a 00000 mausume 0 ousquuse muosooum 0003 a Honasq 00000000 umumH new a H0u0004 nausuoua HHHE THHuxoe mausooua OTHOCHR 0 000m mflmsm ummuxo 0H0 InocHE UHHHMHTE Icon mchHz .mm .mm .mm .mm .VN .mm .NN .om .VH 00Huucsou momch 0000H0>o umnuo OHumuco nonwhm uuHuumHa cmmH muses 00000 mmmH .mechEOU 00Husuumms 000000 Hmuudmu ucon -0000 Hence umosnz umruo nuuoz Aooovm MO 00E :mmHQUHZ m0 GOHHmucwHHO umxum: H050 00HcmmEOU uwnenz TOOU paw mesouw 030:0U noossz .HI< OHQMB 0.0 0. 0.H 0.00 0.00 H.H0 000H 0000000000 000.0H 0H0.0 000.0 000.00H 000.00H 0H0.00H 00H.000 0H0.00 00H H0009 000 000 000.H 0000H 00000 00 0 000a» 0H000Honz .00 0 0 000 000 000 000.H 00H 0 0000000000005 050000HH000HS .mm 000 000 000.H 000.0 000.00 000.00 000.00 000.0 HH 00020H000 cOHumuuommcmuB .0m 000 0 000 000.0 000.0 000.0 000.0 000 0 0000H000s H00H0000H0 .00 251 H00.0 000 000.H 000.00 00H.00 000.0H 000.00 000.0 00 H0000000H0 0000 1x0 .humcHrumz .mm 0H0.0 0H 000.H 000.00 000.00 000.0H HH0.00 000.0 0H 00000000 H0002 000000un00 .00 HHH H0 000.0 000.0 000.0 000.0H 000 0 0000009000 Hmums mumsHum .mm 0 0 000 000.H 000 000.0 00H 0 00000000 000H0 0 00H0 .00000 .00 000 000 000 000.00 000.0 000.H 000.00 000.0 H nauseoud 000000H 0 000000H .H0 00 000 000.0 000.0 000.0 000.0H 000.H 0 00050000 00H000H0 0 000000 .00 252 Table A-2. Mode of transport used by sample of Michigan manufacturing companies to reach various mar- kets, 1963 Per cent of companies From Michigan to the using each mode: following markets: Rail Truck Water Air Othera Michigan 3.7% 84.2% .3% .5% 11.3% East North Central District 7.4 80.8 1.5 10.3 Other U.S. States 11.5 78.5 .2 1.5 8.3 Ontario 12.2 78.6 .7 1.6 6.9 Other Canada 21.1 66.2 .4 2.9 9.4 Overseas 89.7 7.7 2.6 All Markets 8.2 73.3 7.8 1.9 8.8 Note: Not weighted by the value of shipments. aOther includes parcel post, railway express, bus, etc. Source: Data obtained from 108 Michigan manufacturing companies. 253 MICHIGAN-ONTARIO TRANSPORT QUESTIONNAIRE This questionnaire was used when it became evident that more answers were required to the questions dealing with reciprocity and transport service to Ontario. For this sample, 511 Michigan manufacturing companies were selected again from the 1963 Directory_of Michigan. Manufacturers. The companies selected all indicated an interest in eXporting their products, and some were known to be exporting to Ontario. The questionnaire was mailed to the Director of Traffic of each company. The questionnaire was based on the second section of the original Michigan-Ontario Trade and Transport Ques- tionnaire. It was a modified version of the original but included the question pertaining to problems confronting initiation or expansion of trade with Ontario. This was primarily to see how known exporters would answer the ques- tion. This questionnaire, as shown below, included a change in the structure of the last question. Two possible choices were added; one dealt with customs reciprocity at the bor- der; and the other with tariff reciprocity resulting in lower rates. A total of 204 questionnaires were returned but only 163 were completed and usable. 254 20 April 1964 Dear Sir : The enclosed questionnaire is part of a research study being conducted under the auspices of Michigan State University's doctoral programs in Business Administra- tion. It is a study of trade and transport reciprocity between Michigan and Ontario. As such, it is designed to provide a better understanding of the economies of each area. Specifically, it is intended to determine the present movement of commodities and investigate some impediments to inter-regional trade. It is hoped that the final results of the research will be of value to both Michigan and Ontario. Part of the data and information for analysis is being provided by Michigan and Ontario manufacturing and transport companies. Therefore, your cooperation in completing the enclosed questionnaire is respectfully requested. Each questionnaire will be coded and your identity will be known only by the undersigned. Final reports and statistics will be in the form of aggre- gates. Census rules of non-disclosure of individual firm's operations will be observed. Exact and precise answers are not necessary. Informed estimates by your Traffic, Marketing or other executives will be sufficient. If you do not at present trade with Ontario will you please answer as much of the questionnaire as possible. Your answer to question number 3 will be extremely valuable to the research results. Participants will be supplied with a summary of aggre- gate findings on request. Thank you for your cooperation. Yours very truly, Cecil V. Hynes Project Research Director 255 Return to Mr. Cecil V. Hynes SIC Classification 560 Owen Graduate Center, MSU East Lansing, Michigan, 48823 Confidential Code MICHIGAN-ONTARIO TRANSPORT QUESTIONNAIRE For Year 1963 What were your total shipments crossing the Michigan- Ontario border in 1963? a. Terminating in Ontario 3 b. Mbving through Ontario as a gateway to other U. 3. states $ or Canadian Provinces $ . What mode of transport (for shipments in question 1 above) did you use? (Show per cent of time used) AIR / RAIL / HATER / TRUCK / OTHER privately commercial owned carrier % % % % % % What are the most serious problems confronting your initiation or expansion of trade with Ontario? (rank in order 1,2,3) Lack of Ontario market infOrmation and services. Inefficient transport service due to border regu- lations and administrative practices. High cost of transport and distribution. High Canadian tariffs and customs regulations. Complexity of U.S. EXPORT procedure and regulations. Complexity of Canadian IMPORT procedure and regu- lations. Other (please specify) What are the most serious problems in transport service to Ontario caused by existence of the border? (rank in order of seriousness lst, 2nd, 3rd, etc.)_ Too much time enroute from pick-up of goods to delivery to consignee. Duplications and cost due to regulations at the border. Restrictive carrier equipment regulations in Mich- igan and Ontario. Lack of efficient through service under joint rates. Other problems (please specify) ~0— 256 How does transport service to Ontario compare with serv- ice to other United States areas? (enter (+) for favor- able, (-) for unfavorable, and (0) if no difference in service) Speed of pick-up and delivery, and time in transit. Freight rates and overall costs. Claim settlements. Availability of adequate service. Availability of proper equipment. Other differential factors of service (please spec- ify Which of the following measures would provide easier marketing and better transport service on shipments to Ontario? (rank in order lst, 2nd, 3rd) Through service under joint rates. More liberal reciprocity with respect to equipment use in Michigan and Ontario. Better cooperation between Michigan and Ontario carriers. Greater customs reciprocity with more uniformity in regulations at the border. Tariff reciprocity between United States and Canada resulting in lower rates. Other (please specify) 257 ONTARIO MOTOR CARRIER DATA The names and addresses of 56 Ontario motor carriers were selected from the list of carriers in the 1963 "Ship- by-Truck" directory published in Ontario by the Ontario Trucking Association.l Only carriers that were authorized inter-provincial and international Operations were selected. This means that each carrier could move Michigan registered trailers to and from the interior of Ontario. The questionnaire was the Ontario counterpart of the one used for the Michigan motor carrier survey. How- ever, the wording in several questions was changed to re- flect the Ontario situation. A copy is shown below. A total of 16 questionnaires were returned, but only 9 of these provided useful information. The others either did not participate in such traffic or else could not supply the data requested from their records. Some did answer one or two questions, while others provided some valuable information by written correspondence. 1”Shiprby-Truck"_girectory, 1963, The Automotive Transport Association of Ontario (Inc.), Toronto 28, Ontario. 258 2 March 1964 Dear Sir: The enclosed questionnaire is part of a research study being conducted under the auspices of Michigan State University's doctoral programs in Business Administra- tion. It is a study of trade and transport reciprocity between Michigan and Ontario. As such, it is designed to provide a better understanding of the economies of each area. Specifically, it is intended to determine the present movement of commodities and investigate some impediments to inter-regional trade. It is hoped that the final results of the research will be of value to both Michigan and Ontario. Part of the data and information for analysis is being provided by Michigan and Ontario manufacturing and transport companies. Therefore, your cooperation in completing the enclosed questionnaire is respectfully requested. Each questionnaire will be coded and your identity will be known only by the undersigned. Final reports and statistics will be in the form of aggre— gates. Census rules of non-disclosure of individual firm's operations will be observed. Informed estimates by your Marketing, Traffic or other executives will be sufficient. If your records are kept using a special classification of commodities, please substitute it for the classification used in question 10. If you can only give approximate tonnage and percentage figures for broad commodity classes, such as Products of Forest, etc., kindly do so. YOur answer to this question will be very valuable for the results of the study. Participants will be supplied with a summary of aggre- gate findings on request. Thank you for your cooperation. Yours very truly, Cecil V. Hynes Research Director 259 Return in enclosed envelope Classification Code to Mr. Cecil V. Hynes 560 Owen Graduate Center, MSU Confidential Code East Lansing, Michigan ONTARIO-MICHIGAN TRANSPORT QUESTIONNAIRE For Year 1963 1. What was your 1963 total tonnage moved and total revenue 3 ? OUTBOUND FROM ONTARIO TO UNITED STATES (direct or trans— shipment) 2. ‘What was your total tonnage that crossed the Ontario- Michigan border enroute to United States ? 3. What proportion (of #2 above) originated in Ontario' % and elsewhere in Canada %? 4. What proportion terminated in Michigan % and else- where in the United States %? 5. What proportion was shipped across Michigan to other Canadian Provinces %? INBOUND TO ONTARIO FROM THE UNITED STATES (direct or trans- shipment) 6. What was your total tonnage that crossed the Ontario- Michigan border enroute to Canada ? 7. What proportion (of #6 above) originated in Michigan % and elsewhere in United States %? 8. What proportion terminated in Ontario % and else- where in Canada %? ' 9. What proportion originated in other Canadian Provinces and was shipped across Michigan %? COMMODITIES CARRIED 10. What was the composition of the commodities carried inbound and outbound across the Ontario-Michigan border: 260 OUTBOUND INBOUND Tonnage Per cent Tonnage Per cent to U.S. originating to Canada terminating in Ontario in Ontario % Animals and.Animal % Products Crops, Vegetables & Fruits Food and Kindred Products TRANSPORT 11. What Rubber and Products Textile Misc. Prod. & Apparel Timber Pulp Lumber and WOod Products Paper and Allied Products Coal and Coke Petroleum & Products NOn—Metal Minerals Stone, Clay & Glass Products Metals Primary Metal Industries Fabricated Metal Products Machinery Except Electrical Electrical Machinery Transportation Equipment Chemicals and Allied Products Miscellaneous IHH lll lllllllltlllllllllll PROBLEMS are the most serious obstacles encountered in moving freight between Ontario and Michigan? (show most serious as 1, next serious as 2, etc., if no ob- stacle to operations use (0)). Delays enroute due to customs regulations and procedures. Canadian border administrative practices. United States border administrative practices. Michigan and Ontario regulations hamper free interchange of equipment between carriers. 12. 13. 261 Requirement of Ontario permits or special license when using Michigan licensed trailers beyond a 20 mile limit of the point of entry. Cost of operations due to border problems makes it difficult to compete with other types of transport. Other Operating problems (please specify) _— If unrestricted interchange of equipment between Mich— igan and Ontario was allowed how would it affect your operations with respect to the following? (use (+) for favorably, (—) for unfavorably, and (0) for no effect) Volume of freight moving between Ontario and Mich- igan. Elapsed time of movement from pick-up to delivery to consignee. Cost of Operations on shipments between the two areas. other effects on Operations (please specify) What improvement in transport service would you rec~ ommend for shipments between Ontario and Michigan? (rank in order 1,2,3) Through routing and billing between points in Ontario and Michigan. Uniform regulations in Ontario and Michigan re- garding weight, length and vehicle combinations. Non-restricted interchange of equipment between Ontario and Michigan thus eliminating necessity of securing a special license or permits. other areas of improvement (please specify) 262 MICHIGAN MOTOR CARRIER DATA The names and addresses of 110 Michigan motor car- riers were secured from the Michigan Public Service Commis- sion. Included in the sample were 87 regular route common carriers of general commodities, 7 contract carriers, and 16 common restricted carriers. Those selected held Oper- ating authority in the Detroit area. It was assumed that these carriers would participate in the Ontario traffic. The questionnaire was designed to secure comparable data to that requested from the railroads. Specific infor- mation was requested pertaining to commodities hauled, and problems encountered when moving freight between Michigan and Ontario. A copy of the questionnaire is shown below. A total of 41 questionnaires were returned, but only 10 of these were of value in the research. Some of the other questionnaires had one or two questions answered but for the most part they were incomplete. Many Of the carriers did not keep records that would supply the data requested. 263 2 March 1964 Dear Sir : The enclosed questionnaire is part Of a research study being conducted under the auspices Of Michigan State University's doctoral programs in Business Administra- tion. It is a study of trade and transport reciprocity between Michigan and Ontario. As such, it is designed to provide a better understanding of the economies of each area. Specifically, it is intended to determine the present movement of commodities and investigate some impediments to inter-regional trade. It is hoped that the final results of the research will be of value to both Michigan and Ontario. Part of the data and information for analysis is being provided by Michigan and Ontario manufacturing and transport companies. Therefore, your cooperation in completing the enclosed questionnaire is respectfully requested. Each questionnaire will be coded and your identity will be known only by the undersigned. Final reports and statistics will be in the form Of aggre- gates. Census rules of non-disclosure Of individual firm's Operations will be observed. Informed estimates by your Marketing, Traffic or other executives will be sufficient. If your records are kept using a special classification Of commodities, please substitute it for the classification used in question 10. If you can only give approximate tonnage and percentage figures for broad commodity classes, such as Products of Forest, etc., kindly do so. Your answer to this question will be very valuable for the results of the study. Participants will be supplied with a summary of aggre- gate findings On request. Thank you for your cooperation. Yours very truly, Cecil V. Hynes ResearCh Director 264 Return in enclosed envelope Classification Code to Mr. Cecil V. Hynes Michigan State University Confidential Code MICHIGAN-ONTARIO TRANSPORT QUESTIONNAIRE For Year 1963 1. What was your 1963 total tonnage moved and total revenue 3 7 OUTBOUND FROM MICHIGAN TO CANADA (direct or trans-shipment) 2. What was your total tonnage that crossed the Michigan- Ontario border enroute to Canada 3. What proportion (of #2 above) originated in Michigan % and elsewhere in the United States %? 4. What proportion terminated in Ontario % and else- where in the Canadian Provinces i? 5. What proportion was shipped across Ontario to Eastern United States ? INBOUND TO MICHIGAN FROM CANADA 6. What was your total tonnage that crossed the Ontario- Michigan border enroute to the United States ? 7. What prOportion (of #6 above) originated in Ontario % and elsewhere in Canada %? 8. What proportion terminated in Michigan ' % and else- where in the United States %? 9. What proportion originated in Eastern United States and was shipped across Ontario %? COMMODITIES CARRIED 10. What was the composition of the commodities carried inbound and outbound across the Michigan-Ontario bor- der: 265 INBOUND OUTBOUND Tonnage Per cent Tonnage Per cent to U.S. terminating to Canada originating in Michigan in Michigan % Animals & Animal Products % Crops, Vegetables & Fruits Food and Kindred Products Rubber and Products Textile Misc. Prod. & Apparel Timber Pulp Lumber & WOod Products Paper & Allied Products Coal and Coke Petroleum and Products Non-Metal Minerals Stone, Clay & Glass Products Metals Primary Metal Industries Fabricated Metal Products Machinery Except Electrical Electrical Machinery Transportation Equipment Chemicals and Allied Products Miscellaneous TRANSPORT PROBLEMS 11. What are the most serious obstacles encountered in moving freight between Michigan and Ontario? (show most serious as 1, next serious as 2, etc., if no ob- stacle to Operations use (0)). ' Delays enroute due to customs regulations and procedures. Canadian border administrative practices. United States border administrative practices. Michigan and Ontario regulations hamper free in- terchange Of equipment between carriers. Requirement of Michigan permits when using Ontario licensed trailers 8 miles beyond city limits of the point of entry. Cost of operations due to border problems makes it difficult to compete with other types of transport. Other operating problems (Please specify) 12:. 13. 266 If unrestricted interchange of equipment between Mich- igan and Ontario was allowed how would it affect your operations with respect to the following? (Use (+) for favorably, (—) for unfavorably, and (0) for no effect) Volume of freight moving between Michigan and Ontario. Elapsed time of movement from pick-up to delivery to consignee. Cost of Operations on shipments between the two areas. Other effects on operations (Please specify) ____ What improvement in transport service would you recom- mend for shipments between Michigan and Ontario? (Rank in order 1,2,3) Through routing and billing between points in Michigan and Ontario. Uniform regulations in Michigan and Ontario re- garding weight, length and vehicle combinations. Non-restricted interchange of equipment between Michigan and Ontario thus eliminating necessity Of securing special permits. Other areas of improvement (Please specify) 267 RAILROAD DATA COLLECTION There are five railroads that move commodities across the border between Michigan and Ontario. The railroads are: The Chesapeake and Ohio Railway Company, New York Central System, Grand Trunk Western Railroad Company, 500 Lines Railroad, and the Wabash Railroad. All five railroads were contacted by letter and were asked to answer the questions that are shown on the following pages. Three railroads submitted data on 1962 Operations and two submitted data on 1963 operations. The final sta— tistics were converted to both 1962 and 1963 by consider— ing the difference in tonnage moved for each commodity clas- sification by the particular railroad in 1962 versus 1963. Two of the railroads did not give the exact per cent of each commodity classification that originated or terminated in Michigan. They did, however, give a per cent of their total tonnage that originated and terminated in Michigan. This percentage was used to pro-rate the tonnage by commodity classification. Some distortion may have been incurred, but as the proportion of the total tonnage involved was small (10% Of the total shipments originating in Mich- igan and 15% of the total receipts terminating in Michigan) the procedure was accepted. Thus, it was possible to se- cure a fairly composite picture of the Ontario and Canadian trade that originated and terminated in Michigan, both in the aggregate and in twenty—one commodity classifications. 268 INFORMATION REQUESTED OF THE RAILROADS What was your total 1962 tonnage crossing the Mich- igan-Ontario border enroute to Canada ? What prOportion originated in Michigan %7 and elsewhere in the United States %? What proportion terminated in Ontario % and elsewhere in the Canadian Provinces ? What was your total 1962 tonnage crossing the Mich- igan-Ontario border enroute to the United States ? What proportion originated in Ontario % and elsewhere in Canada %? What proportion terminated in Michigan % and elsewhere in the United States %? What was the composition of the commodities carried inbound and outbound across the Michigan-Ontario border: INBOUND OUTBOUND Tonnage Per cent Tonnage Per cent to United terminating to Canada originating States Michigan Michigan % Animals and animal prod. % Crops, vegetables & fruits Food and kindred prod. Rubber and products Textile mill prod. & apparel Timber Pulp Lumber & wood products Paper & allied products Coal and coke Petroleum and products Non-metallic minerals Stone, clay & glass prod. Metals Primary metal industries Fabricated metal prod. Machinery except elect. Electrical machinery Transportation equipment Chemicals and allied products Miscellaneous Totals ll HHHHHHIH IHI ll IHHHHHIIH mu IIHIHIHHH 269 What difficulties are encountered in moving freight by rail between Michigan and Ontario? (list in order of importance 1,2, etc.) . Customs regulations Administrative procedures Reciprocity problems Equipment interchange Other (specify) If, in filling out the above, questions and comments come to mind, we would appreciate it if you would send them to us with the completed data. Census rules of non-disclosure will be Observed. All carrier figures will be aggregated so that no carrier returns will be identifiable. Thank you in advance for your cooperation in this study. Summary figures for all commodity traffic and forms of transport will be sent to respondents upon request. 270 Table A—3. Cross reference for code numbers used in summary table, transport tables and industry tables Transport Other Indus- Summary Tablgs Commodity Tables try Tables Code Numbers Name Code Numbers SIC Numbers 012 Crops, veg. and fruits 2 013 Animals and products 1 8 Timber, pulp & wood pdts. 6,7,8 24,25 10 Metallic minerals & metals 14,15 33 12 Coal & coke pdts. 10 13 Petroleum pdts. & nat. gas 11 29 14 Non-metallic minerals 12 14 20 Food & pdts. 3 20 22 Fibers & textile mill pdts. 5 22,23 26 Paper & allied pdts. 9 26,27 28 Chemicals & allied pdts. 20 28 30 Rubber & plastic pdts. 4 30 32 Stone, clay & glass pdts. 13 32 34 Fabricated metal pdts. 16 34 35 Machinery except electrical 17 35 36 Electrical machinery 18 36 37 Transportation equipment 19 37 39 Miscellaneous manufacturers 21 39 aUsed in Tables 21, 22, 23, 32, and 33. bUsed in all railroad and waterborne tables. cStandard Industrial Classification numbers used in all tables showing the results of the surveys of the manu- facturing companies for Michigan and Ontario. Note: The commodity groups in Summary Tables (see footnote a) aggregate the carrier data shown by the corres— ponding Transport tables code numbers. 271 Table A-4. Railroad commodity groupings Number Classification ICC Code numbers 1 Animals and pdts. 203-225,235-299 2 Crops, veg. and fruits OOl-Oll,025-199,013, 513—519,521,773 3 Food and kindred pdts. DIS-023,229,231, 745-767 4 Rubber and pdts. 523-525,627 5 Textile mill pdts. & apparel 723-733,735,74l 6 Timber 401-405 7 Pulp & pulpwood 409,653 8 Lumber & wood pdts. 407,411-499,677—679, 681,703,715,7l7,781 9 Paper & allied pdts. SSS-675,783 10 Coal and coke 301-307 11 Petroleum and pdts. 337,501-507,519 12 Non-metallic minerals 339-346,645 13 Stone, clay & glass pdts. 321-335,633-639,647- 649,651,693-697,721 l4 Metals 309-319,399 15 Primary metal industries 555-579 16 Fabricated metal pdts. 581-589,629,689,69l, 705,707-7ll,7l9,779 17 Machinery except electrical 591-597,60l 18 Electrical machinery 685-687 19 Transportation equipment 603—623,625 20 Chemicals and allied pdts. 527-553,769 21 Miscellaneous 509,631,641-643,683, 713,735,737,739,743, 777,785-799 Note: This classification was also used in the analysis of the Michigan Truck Weight Study. Source: Frei ht Commodity Statistics Classification, 1954 Edition, Association of AmeEICan Railroads, Ac- counting Div., Transportation Bldg., Washington, D.C. 272 Table A-5. Waterborne commodity groupings Waterborne Number Classification code numbers 1 Animals and products OOS-OZ0,040-O95,34O 2 Crops, veg. and fruits loo-104,108,110-185, 210—297,300,324,326, 328 3 Food and kindred pdts. 107,109,033—039, 190,195,199 4 Rubber and pdts. ZOO-207 5 Textile mill pdts. & 310,320,33l,335, apparel 350,381,390 6 Timber 400-408 7 Pulp 440-441 8 Lumber & wood pdts. 413—430 9 Paper and allied pdts. 445-457 10 Coal and coke 501-504 11 Petroleum and pdts. 507—520 12 Non-metallic minerals 522,548—556,851-859 13 Stone, clay & glass pdts. 523-547 14 Metals 600,613-617,620,640, 652,660,662,670,682 15 Primary metal industries 601-603,618,622-632, 642,665,675 16 Fabricated metal pdts. 605-612,69O l7 Machinery except electrical 710-770 18 Electrical machinery 700-701 19 Transportation equipment 780—796 20 Chemicals & allied pdts. 80l~849,860—865 21 Miscellaneous 900-999 Source: Waterborne Commerce of the United States, Part 3, Waterways and Harbors 00030 Lakes, Dept. of the Army, Corps of Engineers. 273 PROCEDURE FOR DETERMINING AIR FREIGHT STATISTICS The 1962 air freight tonnage figures used for this research were supplied by the Greater Detroit Board of Com- merce. Statistics for all of Michigan were not available, but it was estimated by most concerned that 80% of the ton- nage is handled through the Detroit port—of-entry. The volume of air freight moving between Michigan and Ontario was determined by the following procedure. 1. The Michigan shipments and receipts were divided among the geographic marketing areas1 with a distribution based on data derived from the Michigan Trade Expansion study, conducted by Professor J. L. Hazard, plus informa- tion developed by the survey of Michigan manufacturing com— panies discussed in Chapter III of this study. 2. Based on information derived from the two studies above, the tonnage was prorated among the Michigan indus— tries according tO their propensity to use air freight. This provided an industry distribution for both Michigan shipments and receipts. 3. Again using information derived from the above two studies, it was estimated that 15% of the Michigan re- ceipts from Other North America originated in Ontario, and 25% Of the Michigan shipments to Other North America, 1The marketing areas used were: Michigan, Other Great Lakes States, Other Mid-continent, Other United States, Other North America, and Overseas. 274 terminated in Ontario. The figures for the Michigan ship- ments are shown in Table 22, and the figures for the receipts are shown in Table 23. PROCEDURE FOR DETERMINING TONNAGE MOVED BY MOTOR CARRIER BETWEEN MICHIGAN AND ONTARIO MICHIGAN SHIPMENTS (ONTARIO RECEIPTS) The Michigan tonnage shipped to Ontario by motor carrier was determined as follows: 1. The dollar value of the total Michigan shipments to all markets was derived for 1963. These data were ob- tained from the Michigan Trade Expansion study conducted by Professor J. L. Hazard of Michigan State University. 2. The value of Michigan shipments exported to Ontario was determined for each SIC (Standard Industrial Classification) industry group. These values were derived by first determining the per cent of shipments, by industry groups, that was exported to Ontario. The percentages were obtained from the combined results of a Survey of Michigan Exporters, conducted by Professor J. L. Hazard (315 firms with half the State's shipments), plus the survey results of the Michigan manufacturing companies included in Chapter III of this study (231 firms). 3. From the above surveys, the per cent of exports to Ontario transported by motor carrier was determined for each SIC industry group. These percentages were then used to determine the value of Michigan shipments to Ontario transported by motor carriers. 275 4. The value of shipments for each SIC industry group was divided by the railroad U.S. national weighted average value per ton for the corresponding industry group, to determine the tons of each commodity shipped by truck. The weighted average values per ton were derived from Freight Revenue and Wholesale Value at Destination of Commodities Transported by Class I Line-Haul Railroads, 1959, Bureau of Transport Economics and Statistics, Interstate Commerce Commission, Statement No. 6112, Washington, D.C., October, 1951.1 The above method of determining the tonnage of Mich- igan shipments to Ontario transported by motor carrier was used because there were no statistics of any kind available on such traffic. This may only be an approximation of the actual traffic; however, it is believed that the figures thus derived (see Table 32) give a reasonable presentation of the composition and volUme of such motor carrier traffic. It should be viewed as a first attempt to learn something about the traffic, with further research necessary before accurate statistics can be obtained. MICHIGAN RECEIPTS (ONTARIO SHIPMENTS) The same procedure was used to determine the tonnage of Ontario shipments to Michigan transported by motor carriers. 1The weighted average values per ton are shown in Table A-6. 276 Table A-6. Weighted average values per ton of commodities transported by Class I Line-Haul Railroads, 1959 a-a--u-----------------—------u--n Value in Commodity classification dollars per ton 1. Animals and products $615.05 2. Crops, vegetables and fruits .104.02 3. Food and kindred products 268.68 4. Rubber and products 1,113.13 5. Textile mill products and apparel 1,948.23 6. Timber 22.79 7. Pulp and pulpwood 25.32 8. Lumber and wood products 759.80 9. Paper and allied products 198.57 10. Coal and coke 9.04 11. Petroleum and products 48.63 12. Non-metallic minerals 15.77 13. Stone, clay and glass products 13.23 14. Metals 26.62 15. Primary metal industries 305.69 16. Fabricated metal products 266.61 17. Machinery except electrical 919.31 18. Electrical machinery 2,141.06 19. Transportation equipment 932.94 20. Chemicals and allied products 202.33 21. Miscellaneous manufacturing 422.70 Source: Weighted average values computed from Frei ht Revenue and Wholesale Value at Destination of ‘ggmmodities Trans orted b Class I Line—haul Railroads, 1959, Statement No. 6112, I.C.C., Washington, D.C. 277 1. The dollar value of the total Ontario shipments to all markets was estimated by industry groups for 1963, by the Ontario Department of Economics and Development. These figures were taken from Ontario Statistical Review for 1963, published by the Department of Economics and De- velopment, Toronto, Ontario. 2. The per cent of Ontario shipments by SIC indus- try groups exported to Michigan was derived from the survey of Ontario manufacturing companies discussed in Chapter III (using 173 firms) of this study. Using these percentageS,’ the value of the shipments to Michigan was determined. 3. From the same survey the per cent of shipments to Michigan transported by motor carrier was determined. Using these percentages, the value of shipments transported by truck for each industry group was determined. 4. The value of shipments transported by truck for each industry group was then divided by the railroad U.S. national weighted average value per ton for each industry group, to determine the tonnage shipped by each industry. The U.S. railroad values were used because Canadian values per ton were not available. Again, lack of any kind of statistical data on the motor carrier border traffic necessitated the use of the above procedure. However, the figures presented (see Table 33) should provide some understanding of the com- position and volume of such traffic. It is a first attempt 278 and the figures should not be viewed as definitive. For the purposes of this research study, they must suffice, but secondary data on the total traffic would be much pre- ferred. 279 Table A-7. Comparison of the Michigan and Ontario limits on height, width, length, weight, and combina— tions allowable MICHIGAN ONTARIO Width 8 feet 8 feet Height 13% " 13% " Length V Single unit 35 feet 35 feet Semi-trailer 40 " 45 " Tractor-semi-trailer 55 " 60 ”a Gross Weights POUNDS Gross axle loads Single axle (9 feet or over apart) 18,000 18,000 With tandem axles 26,000 Tandem semi-trailer 32,000 Single unit 2—axle 36,000 28,000 3-axle 44,000 42,000 Tractor and semi-trailer 3—ax1e (all 9 ft. apart) 54,000 46,000 4-axle 52,000 60,000 5-ax1e 70,000 74,000 Combinations allowed Truck and trailer Yes Yes Tractor and semi—trailer Yes Yes Tractor and semi-trailer Yes Not after and trailer 31 December 1965 aCities can restrict to 50 feet. Sources: Michi an Vehicle Code, Lansing,Michigan; Highway Traffic Act of the Ontario Revised Statutes of 1965 and 1963. APPENDIX B MISSISSIPPI VALLEY MULTIPLE SCREENLINE STUDY Data were requested from the Planning Office of the Michigan State Highway Department to ascertain the geo- graphical movements of the interstate truck traffic moving into, and out of, Michigan. Data supplied were in tabular form as summarized by the IBM section of the Highway Department. It repre- sented one 24-hour period during the summer of 1960. The observations were collected for three different eight-hour periods on different summer days. Only the following vehicles were included: a) Commercial vehicles only, classified as either single unit trucks, trailer combinations, or truck trailer combinations. b) Only those commercial vehicles that passed through the border stations with either a destination or origin in Michigan were counted. No transit traffic was included.1 To be of value to the research study it was neces— sary to summarize the data by: a) The vehicles by type, by state of origin, with Michigan as destination. b) The vehicles by type, by state of destination, with Michigan as the origin. 1See the map following for location of the inter- view stations. 280 281 ‘ _., .. 1.5.0.".- Eigryxgxmivlfl' / * , ”.- ; -. . . i . b mmen/mtmzwm maxsmumwwmwsu * A ”OM’VWM NJ . my I”, mm. X memamm. ‘ W W. mm": ”VIM \ \l mit,/“1 .) m Source: Michigan State Highway Department. Figure 10. Mississippi Valley Screenline Interview Stations 282 The total number of vehicles transporting Michigan interstate traffic could then be estimated, and the Truck Weight Study which carried commodity data could be validated in part. There were certain limitations of the data: a) The data were limited to numbers of commercial vehicles within broad classifications giving origin and destination only. b) The traffic between Michigan and Ontario in De- troit was not included in the Screenline Study. However, stations were operating at both Port Huron and Sault Ste. Marie. c) Due to technical difficulties with the Screen— line Study, it was impossible to get a total count of the vehicles moving in Michigan intrastate commerce. The results of the screenline study are shown in Table C-l. APPENDIX C MICHIGAN TRUCK WEIGHT STUDY OF 1963 The Traffic Division of the Michigan State Highway Department conducts a Truck Weight Study yearly for the United States Bureau of Public Roads. The data were an- alyzed for this research study to determine what informa- tion it might provide on commodities moving by highway be- tween Michigan and Ontario. The Traffic Division supplied this research study with a duplicate deck of the IBM cards that contained the original information from the 1963 truck weight study. The Truck Weight Study is conducted on the same 12 days of June each year. Twelve stations were operated (see Figure 11) from 10 a.m. to 6 p.m. during each of the twelve days. An interviewer completed a questionnaire based on information obtained from the driver of each vehicle stopped. Vehicles were selected in such a manner as to allow an orderly flow of traffic at each station. This resulted in an approximation to a random sample. The information desired for this study was the type of carrier, description of commodity, net weight of the commodity, and its origin and destination. The type of carrier was classified as follows: a) PVT - Privately operated vehicle in general 283 284 who" svnnous AND ANNUAL tnucx wmour j svnnou LocA'nous I (mum. rough "shun Pun-u null-t lumen lnul cough! uvvdy onuhonl . > 'IOIOII‘ rough not-om . hope-ed troll-t div-non uni unghv Italy lot-non. a, flighugan Sun "whiny Buy-mum No- Ichlo _n ' . John C Mod». (O-IIIOIOHOI . COM-Ila! 0m“ .0 Damn _ I Figure 11. Weigh stations for the 1963 Michigan truck weight study 285 service. The load carried is the property of the owner of the vehicle. b) ICC — For hire operation under certification of the Interstate Commerce Commission. Such vehicles bear a plate displaying the "MC" number of permit or certificate. c) OFH - Other for hire operation. All vehicles not bearing ICC identification carrying cargo not the prop— erty of the owner of the vehicle. The commodities were coded using a three-digit code taken from ”Freight Cgmmpdity Statistics Classification," 1954 edition, with supplement number 6 effective January 1, 1960, published by the Association of American Railroads, Accounting Division, Transportation Bldg., Washington, D.C. The trip origin and destination was coded using the codes found in "Reference Manual, Numerical Code for States, Counties, and Citig§ of the United States," published by International Business Machines Corp., 1961. The gross weight of the vehicle combination was determined by the sum of all axle weights. This was the only weight provided by the data, but by subtracting a standard weight of the vehicle combination, the net weight of the commodity could be found. Although the net weight would not be exact, it would be a good approximation. The net weight of each commodity was arrived at by the following procedure: a) An IBM computer program was used which listed the commodity carried in numerical order by state of origin, 286 by state of destination, printing out the gross weight, vehicle combination code, and type of carrier code. b) An average empty weight for each vehicle com- bination was determined based on the particular type of equipment required to haul each kind of commodity. This average empty weight was then subtracted from the gross weight, yielding a net commodity weight. The net commodity weight was summarized for each commodity by state of origin and state of destination. Although this was the best available data the State could provide on the movement of commodities by highway carriers, it has real limitations, some of which are as follows: a) There was no way of determining the universe from which the sample was taken, except by a time prorate. Without knowing what proportion of the universe was included in the sample, a projection showing the total flow of com— modities was difficult. b) The origin and destination provided by the data was for the equipment only; however, it was assumed that it also represented the origin and destination of the com- modities carried. c) There were no stations located near the Ontario- Michigan border so it was impossible to determine the traffic moving to and from Ontario. d) There was very incomplete information of the transit truck traffic across Michigan to and from Ontario. 287 e) The study was conducted during the daylight hours but the general tendency is for most interstate and inter— city motor carrier traffic to move during the night time. f) The average empty truck weights were approxima- tions; therefore, the commodity net weights are not exact. The average empty weights were based on actual empty weights of vehicle combinations that were used to haul specific commodities. For example, a three—axle tractor and a two— axle semi-trailer used to haul steel weighs empty consider- ably less than a three-axle tractor and a two-axle refrig- erated semi-trailer used to haul perishables. However, for the truck weight study, the above combinations had the same code number, so that without some understanding of truck equipment and its use, even an approximate net com- modity weight could not be determined. The following tables present the results of the analysis of the 1963 Michigan Truck Weight Study. After completing the analysis, it was determined that the data did not provide sufficient information on the motor carrier traffic between Michigan and Ontario to be especially use— ful to this research study. But having made the analysis, it was decided to place it in the Appendix as reference is made to it at one point in the text of the dissertation. However, only three tables are included to show the type of information that can be derived from the Truck Weight Study. Table C-1. 288 Comparison of the geographical movements of trucks as shown by the 1963 Michigan Truck Weight Study and the 1960 Mississippi Valley Multiple Screenline Study Mississippi Valley Michigan Truck Multiple Screenline Weight Study Study Total Per Total Per Units Cent Units Cent Great Lakes States1 (Less Michigan) 636 87.2% 18,821 87.3% Mid-continent States2 19 2.6 572 2.7 Canada3 8 1 . 1 221 1 .o Other United States 67 9.1 1,937 9.0 Total 731 100% 21,551 100% Note: Movement of truck traffic includes all inbound and outbound vehicles having an origin or destination in Michigan. Transit movements are excluded from both studies. 1 Illinois, Indiana, Minnesota, Ohio, Wisconsin. 2Iowa, Kansas, Missouri, Nebraska, N. Dakota, S. Dakota, Kentucky. 3There were no stations at the Michigan-Ontario border for the Michigan Truck Weight Study. There were stations at Sault Ste. Marie and Port Huron for the Mis- sissippi Valley Screenline Study. 289 Table C—2. Results of the 1963 Michigan Truck Weight Study showing the number of interstate and intrastate truck movements by carrier TRUCK MOVEMENTS Number Per cent Interstate Emptya 258 12% Interstate Loadeda 508 23 Intrastate Empty 612 28 Intrastate Loaded 824 _£§L_ Totals 2,202 100% INTERSTATE INTRASTATE Number Per Number . Per Loaded Cent Loaded Cent Private 227 45% 685 83% I.C.C. 281 55 131 16 O.F.H. 0 8 1 Totals 508 100% 824 100% Number Per Number Per Empty Cent Empty Cent Private 120 47% 497 82% I.C.C. 138 53 106 177 O.F.H. 0 9 1 Totals 258 100% 612 100% Private--Privately Operated vehicle in general service. The load carried is the property of the owner of the vehicle. ' I.C.C. --For hire operation under certification of the Interstate Commerce Commission. O.F.H. -—Other for hire operation. All vehicles not bear- ing ICC identification carrying cargo not the property of the owner of the vehicle. aIncludes transit movements through Michigan. 290 Table C-3. Results of the 1963 Michigan Truck Weight Study showing the number of inbound, outbound, and transit commercial vehicle movements by carrier Loaded Empty Total Interstate Units Per Units Per Units Per Movement cent cent cent Inbound Private 129 46% 54 59% 183 50% I.C.C. 149 54 37 41 186 50 Total 278 100% 91 100% 369 100% Outbound Private 90 44% 60 38% 150 41% I.C.C. 113 56 99 62 212 59 Total 203 100% 159 100% 362 100% Transit Private 20 74% 6 75% 26 74% I.C.C. 7 26 2 25' 9 26 Total 27 100% 8 100% 35 100% BIBLIOGRAPHY Books Brainard, Harry G. International Economics and Public Pol- icy. New York: Henry Ho1t and Company, 1954. Chinitz, Benjamin. Freight and the Metropolis. Cambridge, Mass.: Harvard Un versity Press, 1 6 . _ Currie, A. W. Economics of Canadian Transportation. Uni- versity of Toronto Press, 1959. Dawson, R. 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