The latest U.S. budget time bomb is ticking, but it won’t explode for several weeks, leaving Washington time to defuse the blow that $85-billion (U.S.) of indiscriminate spending cuts would deal to cross-border commerce.
Canadian companies that rely on trade with the United States are watching the fight over the “sequester” warily, as U.S. Customs and Border Protection has said it would have to furlough the equivalent of more than 2,700 inspectors and some 5,000 agents.
That could only make it harder to get across the Canada-U.S. border, slowing commerce worth more than $1-billion a day.
“We’re telling our people to prepare for the worst,” said David Bradley, the president of the Canadian Trucking Alliance, who met Thursday with U.S. border officials. “It wouldn’t take much. Slow each truck by 30 seconds or a minute, and you could create wait times of hours.”
In all, the “sequester” represents $1.2-trillion in spending cuts over a decade. While Washington broadly is in agreement on the need to shrink a bloated budget deficit, sequestration was never intended to pass.
It was assumed that the prospect of across-the-board cuts to discretionary spending and the Defense Department would force Democratic and Republican leaders to find a better way. But that hasn’t happened. Instead, ahead of a meeting Friday at the White House between President Barack Obama and congressional leaders, each side was digging in for a protracted fight.
“How much more money do we want to steal from the American people to fund more government,” Republican House Speaker John Boehner said at a press conference Thursday, a reference to Mr. Obama’s demand that the “sequester” be diluted by substituting some of the spending cuts for tax increases. “I’m for no more.”
Gary Doer, Canada’s ambassador to the United States, advised Canadian businesses and travellers to keep calm. While furloughs will be announced, they won’t take effect for a month. That could be enough time to rework the “sequester,” perhaps as part of negotiations over a new budget, which must be renewed by the end of March.
“We still don’t know the full impact,” Mr. Doer said in an interview. “The $1.2-trillion will happen, but how it happens, and when it will happen, is unknown.”
Government procurement contracts also could be affected by sequestration. Daniel Friedmann, chief executive of Vancouver-based MacDonald Dettwiler and Associates Ltd., a maker of space and satellite technology, told analysts on a conference call Thursday that he expects a “revenue impact” from sequestration, and from efforts to cut the deficit more broadly. “It is hard to tell what’s going to happen other than we’re going to have a multimillion-dollar impact on revenues,” he said. “That seems inevitable.”
Lorne Gorber, a spokesman for Montreal-based CGI Group Inc., the back-office-service provider that is Canada’s biggest employer in Washington, said the budget cuts are “not something you can ignore.” But he said much of the work the company does for the U.S. government agencies is “mission critical,” such as operating web pages and processing passports. “The web sites don’t black out if the government shuts down,” Mr. Gorber said.