Protection Without Protectionism: Reconciling Trade and Homeland Security

April 8, 2004 • Trade Policy Analysis No. 27

For decades, criminals have used cargo containers, trucks, and train cars to illegally bring narcotics, weapons, and people across U.S. borders. The vulnerabilities that smugglers exploit are also available to terrorists.

The attacks on the USS Cole in the port of Yemen in 2000 and the French oil tanker Limburg in 2002 illustrate the direct threat that terrorism poses to seagoing vessels. Another prospect is that ships, trains, or trucks could be used in conventional suicide attacks, much like hijacked airliners were used on 9/11. A cargo ship or train car could also be exploded or sunk in a port or rail yard, damaging the facility and blocking commercial traffic. The worst‐​case scenario would involve a weapon of mass destruction entering the country via trade channels. Even a relatively modest nuclear weapon detonated in a major seaport would kill between 500,000 and 1 million people, directly destroy up to $500 billion worth of property, cause losses due to trade disruption of $100 to $200 billion, and impose further indirect costs of up to $1.2 trillion.

The Department of Homeland Security has begun implementing programs and procedures designed to safeguard the transportation and supply chains. States, shippers, port authorities, exporters, manufacturers, and foreign governments all have important roles to play in that effort. Federal rules and regulations are necessary but should be as open‐​ended as possible. They should set security goals and verify how well the private sector meets them, rarely mandating specific technologies or processes. Securing the trading system against terrorism is a regrettable but real cost of doing business internationally, and consumers and companies should not be insulated from those costs.

The challenge for U.S. policymakers is to improve security while minimizing the loss of liberty and the benefits of economic openness. The task is made more difficult by domestic interests that press for measures that unfairly hinder their foreign competitors without appreciably improving U.S. security.

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