Western New York - A Hub for International Business

Sunday, October 4, 2009 - 01:00
Frederick G. Attea

Editor: Would you please describe your professional background for our readers?

Attea: I have been in practice with Phillips Lytle for 45 years, and for 40 of those years I have focused on corporate work with an emphasis on mergers and acquisitions and securities law. We routinely assist Canadian and other foreign businesses in their U.S. activities. In recent years, I have worked closely with businesses in implementing and monitoring legal compliance and risk management programs, an area that has become an essential part of a corporate practice.

Editor: How has the current economic climate affected how Canadian companies invest in the U.S. and particularly in New York State?

Attea: The current economic climate certainly has caused a downturn in cross-border business. Late in 2007 the Canadian dollar hit an all-time high of $1.10 U.S., and Canadian companies were eagerly looking for more acquisition and investment opportunities here. But, due to the recession, trade has generally been down in virtually all sectors. The Department of Commerce and most of the local trade groups that look closely at Canadian-U.S. business have confirmed the downturn, but because of the apparent signs of stabilization of the U.S. economy, they are optimistic and see signs of increased economic activity. The new passport requirements brought on by the Western Hemisphere Travel Initiative have been especially troublesome in the Western New York region. Just today there was a report that travel, tourism and retail trade is down about nine to twelve percent in Canada's Niagara Peninsula and in Western New York, which includes Rochester. Hotel occupancy rates are down. I frequently visit Niagara-on-the-Lake, one of Canada's famous resort communities, and I have seen a lower volume of pedestrian traffic and several shop vacancies. This is the first time that I can remember seeing a decrease in activity in that community.

Editor: Do you think that is attributable to the general economic malaise or to the travel restrictions?

Attea: Clearly the economic conditions have been the primary factor in the lessening of cross-border activity, but the travel restrictions have been a real problem. People had become accustomed to crossing the border with virtually no documentation other than a driver's license. Now the passport or enhanced driver's license requirement creates a serious impediment for many people. The introduction of the passport-enhanced drivers license requirements has created terrible traffic conditions during holiday weekends on the four bridges spanning Buffalo and Ontario. This has discouraged tourism; however, the problem seems to be leveling off and the customs-immigration authorities are handling it smarter and better - but that requirement has had a negative effect. While Europe is attempting to eliminate borders, ours are becoming more difficult to cross. This dramatically affects our tourism and local retail industries in particular. For example, tour bus operations have ceased because a demand for the service is no longer there.

Editor: What efforts are being made to address these issues?

Attea: Regional groups are developing plans to deal with these problems and help with cross-border trade and they are having some success. The U.S. Chamber of Commerce and the Canadian Chamber of Commerce have made suggestions. Several other trade groups and government agencies are doing things to help. There have been a number of programs to help ship goods across the border more efficiently. Trusted shipper clearance programs and the use of NEXUS (a joint venture established by the Canadian Border Services Agency and U.S. Customs and Border Protection to simplify border crossing) have been especially effective in expediting transportation of goods and cross-border travel.

Editor: With New York State located in such proximity to the U.S.-Canadian border, what do Canadian companies seek to gain by cross-border movement?

Attea: The U.S. is the largest trading partner for Canada, and vice versa. We are the obvious prime market for Canada. The same language, the same time zone, common customs and geographical proximity promote and facilitate cross-border trade. New York has been a great place for establishing a foothold in the U.S. because Canadians feel they still have control of their enterprise, being just an hour-and-a-half drive from their offices, in many cases. Visas generally have not been a problem for Canadians tending to their business in the U.S. Although other states have vigorously promoted their own advantages to attract Canadian businesses, New York's reputation for over regulation and its high tax structure and traditionally dysfunctional legislature have been a problem. The counterbalance is the tremendous history of dealings between the Canadian business people and the Western New York region that has created a professional talent pool here that can best handle a Canadian company's expansion efforts in the U.S. The lawyers, accountants, bankers, insurance agents and Customs brokers in this area are extremely familiar with how to best address the difficulties or problems that Canadians have in establishing businesses in the U.S.

New York has also established Empire Zones which effectively minimize one of the biggest concerns about New York - its tax structure. The Empire Zone program offers a variety of tax credits, abatements and exemptions and has been a very effective device in attracting businesses, and particularly Canadian businesses, to expand into New York. Other states have comparable programs, but New York's Empire Zone program has been particularly effective.

Western New York is especially attractive for business. The labor force here is highly respected, and we have a tremendous number of prestigious colleges and universities. Western New York combined with the Toronto/ Ontario corridor is considered the third largest Metropolitan Statistical Area in North America. Western New York probably has more in common with Toronto than with New York City. There is a great intertwining on both a macro-social level and a business level.

Editor: What role have financial institutions played in addressing cross-border opportunities?

Attea: They have played a vital role. There are a number of banks, such as HSBC, that have a prominent presence in both Canada and the U.S. The U.S. banks definitely want to foster Canadian business entry into the U.S. Banks in Western New York will regularly prospect in Canada. Our commercial banks have a very good working knowledge of the financial needs of the Canadian entrepreneur, and they just do a superb job in facilitating cross-border activity.

Editor: What differences, if any, in cross-border trade have you noticed or experienced since NAFTA was introduced?

Attea: I am not aware of any significant difference in cross-border trade since NAFTA. We already had the U.S.-Canada Free Trade Agreement. Groups like the World Trade Center Buffalo Niagara do a great deal to promote cross-border trade and provide educational programs on both sides of the border. If anything, the impression I have from businesses and local government development agencies is that NAFTA may have been a negative for both Western New York and Canada by diverting business opportunities to Mexico.

Editor: What may we expect in terms of harmonization in terms of U.S. and Canadian laws relating to business?

Attea: Certainly the laws of Ontario and the U.S. are reasonably similar and are not considered a factor inhibiting cross-border trade. While laws governing trade and antitrust differ substantially, my understanding is that Canadian antitrust law is developing rapidly. On another front, substantial steps have been taken to ease the ability of Canadian and U.S. businesses to tap each other's financial markets. One giant historical step was the Multi-Jurisdictional Disclosure Act of 1991, which harmonized securities disclosure requirements of both countries. The securities regulators of the U.S. and Canada have been continuously working toward accommodating the needs of each country's publicly traded companies to comply with the laws of the other. This spirit of cooperation reflects the desire of both countries to facilitate cross-border business.

Please email the interviewee at fattea@phillipslytle.com with questions about this interview.