Loonie falters, but optimism remains for cross-border business

While the recent weakening of the Canadian dollar against the U.S. dollar has raised concerns over potential impacts to Whatcom County’s tourism and retail industries, one Ferndale-based company sees the loonie’s drop a bit differently.

For the past two decades, International Market Access Inc. has offered Canadian firms U.S.-based warehouse and business services, allowing them to sell products to American consumers while saving money on cross-border transportation and brokerage fees.

Jim Pettinger, the company’s president, said most of his Canadian clients who make sales in the U.S. still think of money in terms of Canadian dollars. When the U.S. dollar is stronger, he prepares for a run on business. And Canadian firms with an established foothold in Whatcom County are poised to benefit, he said.

“When the loonie came back, our business kind of slowed down,” Pettinger said. “We see now, in the last year or so, kind of a swing back.”

The Canadian dollar averaged 94 cents on the American dollar at market closing last December, according to the Bank of Canada. The monthly average exchange rate between the two currencies steadily declined in 2013. The loonie’s highest monthly average over the past two years was in September 2012, when it was worth $1.02 in the U.S.

In day-to-day rates, the loonie slipped to just below 90 cents toward the end of last month, the first time it has sunk to that level since 2009.

Amid the money talk, southbound border travel from British Columbia into Whatcom County is reaching highs not seen since the 1990s.

The total number of people crossing into Whatcom County rose by 5.7 percent to 16.2 million in 2013, compared to the previous year, according to data from Western Washington University’s Center for Economics and Business Research. Southbound border traffic has risen steadily over the past five years.

The travel rebound following heightened border security measures after 9/11 and exchange-rate fluctuations over the past decade has been stronger than anticipated, said Don Alper, a WWU professor and the director of the school’s Border Policy Research Institute and the Center for Canadian-American Studies.

The increase has fueled growth in Whatcom County’s tourism and retail industries, particularly in Bellingham. The city’s airport has also seen annual jumps in business, as low-budget airlines such as Allegiant Air and Frontier Airlines use Bellingham as a cheap base to attract vacation travelers from the Vancouver market.

While the recent drop in the loonie’s value is probably not enough to cause significant changes right now, Alper said he believes if the Canadian currency remains low compared to the U.S. dollar, changes to cross-border travel and shopping habits should be expected.

“That’s going to start to take a toll,” Alper said.

The Border Policy Research Institute collaborated with the Whatcom Council of Governments in a study that surveyed more than 10,000 travelers at Whatcom County border crossings last summer, noting various aspects of their cross-border trips, including a trip origin, destination and purpose.

The research team released an interim report of findings in October 2013 (a final report should be completed one a second wave of surveys is done in February).

A few notable observations from the interim report include:

– Most travelers surveyed made a cross-border trip and returned within the same day. One-quarter of cross-border trips lasted for one hour or less.

– The number of travelers crossing the border to shop or buy gas is increasing.

– An increase in NEXUS users’ trip frequencies appears to be a significant source of traffic growth between 2007 and 2013.

– American travelers cross into Canada more frequently for vacation or recreation, while Canadian travelers cross into the U.S. more for shopping and gas. Alper said: “I don’t think that’s a surprise to anyone.”

Alper said he believes there is still a lot of potential for Whatcom County to attract more trade and business activity from Canada. Business travelers driving from British Columbia into Whatcom County has become a growing trend, he said.

The research institute plans future study on the habits of business travelers and their experiences getting across the border, Alper said.

Rob Fix, the executive director of the Port of Bellingham, also believes Whatcom County has untapped potential in attracting Canadian companies looking to expand into the U.S.

The port is continuing to market Whatcom County at trade shows and expos in British Columbia as a location for international business expansion. Fix said recent efforts have focused on marine-related businesses.

With its proximity to British Columbia’s population and economic centers, Whatcom County has a lot to offer as a gateway for Canadian companies looking for an American foothold, Fix said

“We think we are ideally situated to be that presence,” he said.

Evan Marczynski, associate editor of The Bellingham Business Journal, can be reached at 360-647-8805, Ext. 5052, or evan@bbjtoday.com.

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