The substantial economic impact of the closure will reverberate for quite some time, according to a new report issued by the Border Policy Research Institute:
“Cross-border flows of goods, trucks, and people typically move in a predictable pattern. In 2020, these flows were impacted in ways never before experienced. The overall health of border states’ economies, as measured by their GDP, was also rattled.”
Monica Haynes, director of the Bureau of Business and Economic Research, was part of the team that researched how travel and trade fared during restrictions. Haynes focused on the upper midwest and says Minnesota is among the communities that suffered unique adverse impacts from the border restrictions. “The impacts of COVID-19 affected nearly every aspect of Minnesota’s relationship with Canada.”
1. The shipping industry is a large part of our economy. How did it fare over the COVID-19 closure?
Our region has a very strong presence when it comes to commodity shipments across the border. In 2019, 31.5 million tons of waterborne commerce was shipped through the Duluth–Superior port, nearly 20% of which (5.9 million tons) was either on its way to or coming from Canada.
In 2020, the Duluth–Superior port saw a reduction of approximately 30 Canadian vessels (20%) in 2020 over the previous November’s annual statistics. However, according to Port representatives, this decline in shipments was due not to border restrictions but rather to shifts in consumer demand, supply chain issues, and shifts in global demand for food products.
The main reason for the shipping decline was a drop in iron ore exports to Canada. The drop in demand for iron ore was the result of a decline in auto manufacturing, increased concentration placed on employee safety, and supply chain issues.
2. How did the border closure impact tourism?
Passenger vehicle traffic was hugely impacted by the border closure. In 2020, passenger vehicle crossings were down, on average, 96% each month compared with 2019 levels. This had a direct impact on tourism in our area.
During our research, we found that resorts and vacation home owners were most negatively impacted by the border closures. For example, Minnesota’s Northwest Angle is part of Minnesota but can only be reached via Canada or across Lake of the Woods. It’s home to a number of fishing resorts that were severely impacted by the lack of tourism.
However, it’s important to note that the volume of crossings that we see in Northern Minnesota represent a small fraction of the country’s busiest ports of entry. Compared to some of the other border regions, there isn’t a lot of movement happening across the border in the Upper Midwest.
3. What are the results of railway traffic between the US and Canada being curtailed?
The border point-of-entry just east of International Falls (Ranier) sees the most railroad cars—both imports and exports—of any port-of-entry in the United States. In 2019, these rail cars shipped a combined $11.7 billion of imports and exports across the border. Of that total, 75% of shipments ($8.7 billion) were imports from Canada.
In 2020, the total value of shipments moved across the border at the International Falls port-of-entry was $8.4 billion (USD), 28% lower than the value in 2019. When comparing month by month, shipments began to lag in April 2020 compared with the previous year and did not fully return to normal levels until about October.
According to David Woodruff, Assistant Vice President & Head of U.S. Public & Government Affairs at Canadian National Railway, CN saw volumes decrease considerably in the early days of 2020 due to the economic downturn caused by the pandemic. “Overall, volumes came down to a pretty significant trough.” Much of the decline in shipments during the early part of 2020 was the result of the shuttering of the automobile manufacturing industry in Detroit. “So many of CN’s movements are tied to the automobile industry. Roughly 25% of automobiles produced in Michigan leave on a CN train,” said Woodruff. When the automobile industry turned back on, CN volumes began to increase as a result.
4. Is there anything else you'd like to add?
Our region is a huge hub for cross-border trade and transportation, and we did see significant declines in border activity in 2020. But based on our research, it seems that most of that decline was not due to the border closure but rather the result of the overall economic downturn that the country experienced due to COVID-19. Because trade and commercial transportation was not directly impacted by the border closure, our region was spared some of the worst impacts of the closure. The industries that were most negatively impacted were tourism and resorts in the northern part of the state.
About Monica Haynes
Monica Haynes is the director of the Bureau of Business and Economic Research, which collects, analyzes, and disseminates information regarding the economy of Duluth, Northeast Minnesota, the State of Minnesota, and Northwest Wisconsin. Haynes’s expertise includes regional economics, energy, tourism, local industry, and economic impacts.
Contact
Monica Haynes
Director of the Bureau of Business and Economic Research
[email protected] | 218-726-7895