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November 12, 2001,
U.S. Edition
Time to Save
'Just in Time'
Unless
we wise up about border inspections, America's economy could completely
stall.
By
Fareed Zakaria
The war is going badly. Not the war in Afghanistan. Unlike some commentators--who must have their own satellite reconnaissance--I don't see how one can make definitive judgments about a military campaign that is barely a month old. But it is clear that the war on the other front--at home--is in trouble, largely because it is being waged in a ham-handed manner with a basic approach that is utterly misguided. Our current home-front strategy is incompatible with an advanced free-market economy. One of the two will have to give.
To understand why, look at the Ambassador Bridge between Detroit and Windsor, Ontario, which is the world's busiest commercial land-border crossing. Or was. Last year 5,000 trucks entered the United States on that bridge every day. In order to prevent a crippling backup, Customs officers had to average two minutes' processing time for each truck. If they took longer, the pileup virtually closed down the border. Ever since September 11, Customs officers have been taking a lot longer than two minutes per truck. Since it takes five inspectors three hours to fully check out a loaded 18-wheel truck, the accumulated delays are massive.
As are the costs of the new inspection system. "Just in time" inventory management often requires that Canadian suppliers make their deliveries to the United States six hours after receiving an order. That isn't happening anywhere. Two days after September 11 Daimler Chrysler announced that it would close one of its assembly plants because its Canadian suppliers were caught in 18-hour traffic jams. Ford followed, announcing that five of its assembly plants would be idled the following week. Each assembly plant made $1 million worth of cars every hour.
Multiply these examples by the tens of millions of cars, trucks, boats, planes, people, goods and services that crisscross over America's borders, and you can imagine the aggregate effect the new system of controls and checks is having on the economy. We are moving from just-in-time delivery to just-in-case stockpiling. The CEO of a major American company said to me: "We spent the 1990s taking redundancies out of the system. We are going to spend the next decade putting them back in."
Our dysfunctional border controls are well described in an important essay by Stephen Flynn in "How Did This Happen: Terrorism and the New War" (forthcoming from Public Affairs). Flynn, currently a scholar at the Council on Foreign Relations, was an officer in the Coast Guard and has spent the last two years studying America's border controls. "There's been a sea change," Flynn says. "The attitude used to be 'let it all go.' Now it's 'stop and examine everything'." Both approaches are too clumsy--blunt strategies for a problem that needs a fine-tuned approach. Our vulnerabilities are the very things that make our economy the envy of the world--the lifelines of commerce and communication. We cannot slow them to a crawl.
Flynn believes that the new controls are imposing a horrendous economic cost. Even worse, they are ultimately unworkable. "We will never have the manpower to keep this up. We're inspecting in the dark. We have no sense of what's high risk and what's low risk."
He argues for a new system, one that has at its heart good information, not constant inspection. "What we need is reverse profiling. Legitimate actors and goods should provide the government with identification before they arrive at borders. That way inspectors can focus their energies on the smaller set of people and goods coming into America who don't have advance clearance." In such a system, when you buy an airline ticket you would also have to give the airline your passport number, which would get fed into government data banks to be checked out. When Ford sends trucks across the border, it would have already provided information about them to the border police.
This new approach will require a major investment in technology and management systems, ranging from biometric identification (fingerprint or retina scans) to sophisticated data banks and servers. A few places--Hong Kong and Singapore--have smart systems that we should study as possible models. We also have to recognize that the people who undertake this crucial task are low-paid, low-prestige federal employees. The agencies involved in homeland defense must be upgraded. (Homeland Security czar Tom Ridge could start by hiring Mr. Flynn.)
The 1990s were exclusively focused on openness, speed and accessibility--with huge economic benefits. The Institute for International Economics estimates that about half of the productivity boom of the late 1990s was produced by the ease and openness of transportation, communication and distribution--globalization.
Other studies seem to concur, adding to these factors managerial innovations like supply-chain management and inventory control. We will never return to that carefree world. But we must find intelligent ways to combine legitimate security concerns with an open, fast-paced, free-market economy. Otherwise we will have to get used to permanently lower growth rates, decreased standards of living and economic stagnation. In many ways this is the most important front of the long war on terrorism. And we are losing.