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            S.O. L.E.C
  1994 State of the Lakes Ecosystem
             Conference
         Background Paper
  A Changing Great Lakes Economy:
Economic and Environmental Linkages

             August 1995
          Environment Canada
United States Environmental Protection Agency
           EPA 905-R-95-017

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State of the Lakes Ecosystem Conference
          Background Paper


 A CHANGING GREAT LAKES
 ECONOMY: ECONOMIC AND
 ENVIRONMENTAL LINKAGES
          David R. Allardice
      Federal Reserve Bank of Chicago
           Chicago, Illinois


            Steve Thorp
        Great Lakes Commission
          Ann Arbor, Michigan
            August, 1995

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Table of Contents


Acknowledgements	 iv

EXECUTIVE SUMMARY  .			1

1.0 THE GREATER REGIONAL ECONOMY - HISTORICAL
DEVELOPMENT	5

2.0 THE GREAT LAKES BASIN - POPULATION AND EMPLOYMENT  7
     2.1 Population	  7
     2.2 Employment 	  13
3.0 U.S. - CANADA TRADE  	 15

4.0 SELECTED SECTOR PROFILES	 17
     4.1 Manufacturing	  17
     4.2 Transportation	  19
     4.3 Agriculture	 23
     4.4 Energy	 25
     4.5 Travel, Tourism and Outdoor Recreation	 28
     4.6 Information and Communications	 31

5.0 INFRASTRUCTURE ISSUES		33

6.0 SUSTAINABLE DEVELOPMENT 	35
     6.1 Public Policy	 35
     6.2 Institutional Arrangements	 35

7.0 RECOMMENDATIONS	39

8.0 CONCLUSION	41

9.0 REFERENCES	43

Figures	 46
A changing Great Lakes Economy - SOLEC Background Paper

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ACKNOWLEDGEMENTS
Several individuals have contributed material for this paper or have offered comments.  The
authors appreciated their contributions.

Mike Donahue, Great Lakes Commission
Carol Ratza, Great Lakes Commission
John Hankins, CICNet
Linda Aguilar, Federal Reserve Bank of Chicago (FRBC)
Bill Testa, FRBC
Eric Hartman, Northeast-Midwest Institute
Ted Cowan, Environment Canada
Angela Zeiler, Environment Canada
Tom Muir, Environment Canada
Sally Lerner, University of Waterloo
                                                                    IV

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                               NOTICE TO READER
These Background Papers  are  intended to provide a concise  overview of the status  of
conditions in  the  Great Lakes.   The  information  they present has  been  selected  as
representative of the much greater volume of data.  They therefore do not present all research
or monitoring information  available.  The Papers were prepared with  input from  many
individuals representing diverse sectors of society.

The  Background Papers were first  released as  Working Papers to provide the basis for
discussions at the first State of the Lakes Ecosystem Conference  (SOLEC) in October, 1994.
Information provided by SOLEC discussants was incorporated into the these final SOLEC
background papers.  SOLEC was intended to provide key information required by managers
to make better environmental decisions.
A changing Great Lakes Economy - SOLEC Background Paper                              V

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EXECUTIVE SUMMARY
The Great Lakes Basin, containing the world's largest system of fresh water, is the resource
centerpiece of a major industrial and agricultural region of North America. Although the region
straddles an international border which separates distinct political traditions and national cultures,
an integrated resource base and manufacturing complex has developed. This binational regional
economy with its historical ties to the  Great Lakes and its manufacturing sector strengths is
continuing  to evolve.   Increased  competition within  the domestic and global economies, a
maturing industrial and  supporting infrastructure, continued urbanization and the environmental
impacts of economic and social activity have placed the region at a strategic and  historic
crossroads. A new development path is inevitable.

In the development of the Great Lakes region, water was not just important; it was the most
important factor guiding settlement and establishing the economy.  The natural water routes and
canal links channeled territorial expansion, and with it came the underpinnings for economic
development, including water-dependent transportation and industrial operations.  From this water
genesis, an agricultural-industrial complex was created, and it continued to expand abetted by a
productive labor force and an entrepreneurial business class. Technological  innovation was the
rule-of-the-day  as  new  manufacturing  methods were pioneered, resulting in a  profusion  of
products.  Standardization of goods and mass production combined with relatively high wages
created a consumer society. The region with its concentration of steel and iron production and
metal fabricating naturally spawned a large cluster of durable goods manufacturing  operations.
Machinery, transportation  and  other equipment, appliances,  motor vehicles and construction
materials became manufacturing mainstays. Through this production bonanza, the region helped
build the rest of Canada and America.

Within the Great Lakes region, the  Canadian and U.S. economies reveal  strong present-day
linkages and many similarities to  one another.  They are not, though,  mirror reflections,  but
portray significant differences in economic performance and structure.  For example, as  the
greater regional economy becomes more diversified and less concentrated in the manufacturing
sector,  Ontario  and  parts of the western  Great  Lakes region continue  to  industrialize.
Nevertheless, the flow of resources, merchandise and information between Ontario  and the Great
Lakes states inextricably binds the two sides of the regional economy together and makes it an
economic force in the global arena.

The Great Lakes Basin represents  nearly 11%  of total employment and  15% of manufacturing
employment for the two nations. Total Basin employment increased between 1970  and 199,0 but
it should be noted that on the U.S.  side of the border the growth rate of total employment in the
Basin was  less than half the growth rate  for total  employment in the U.S. (25% vs. 53%).
Similarly,  while total  employment in Canada during this period grew at a  15% rate, total
A changing Great Lakes Economy - SOLEC Background Paper

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employment in the Canadian counties in the Basin grew by only 6%.

The most dramatic employment change that has occurred in the region is the redistribution of
jobs among industries as is demonstrated by the decline in manufacturing jobs. Nearly 21% of
the Basin's manufacturing jobs were lost between 1970 to 1990, with the greatest number of jobs
being lost in the manufacturing industries within the Lake Michigan  basin.  In contrast, while
hardly robust, total manufacturing jobs in the U.S. actually increased by only .3%, whereas in
Canada, they grew strongly by 22%.

The transboundary integration of the regional economy has had much to do with making U.S.-
Canada trade the largest such bilateral relationship in the world. The United States and Canada
are each other's most  important trading  partners in terms  of value.   U.S.  exports to Canada
comprise more than one-fifth of total U.S. exports, and Canada's exports to the U.S. make up
more than two-thirds of its total exports. Trade between Canada and the eight Great Lakes states
in 1992 was  valued at $106  billion, or 56.2% of the U.S.-Canada total.  Much of this trade
volume and value has an Ontario connection with nearly three-fifths of that amount concentrated
in autos, automotive parts and engines. Commodity movement via land crossings predominate
in total transits and merchandise value, all of which is focused on only 27 highway crossings,
11 rail crossings and 6 ferry crossings.

People, as well as goods, cross the international border in great numbers.  The purpose of such
trips is quite varied, including job  commuting, retail shopping and a wide range of leisure travel.
As for U.S.-Canada travel,  the Great Lakes states generated 20.4 million person trips to Canada
in 1992, or 63%  of all such U.S. trips.  Great Lakes state travelers accounted for 4.7  million
overnight visits to Ontario, which represented about 75% of all such visits to the province.  On
the other hand, nearly  half of Canadian visitors to the United States report a  "presence" in the
region, but such travel is dominated by day-only stays and pass-through travel. Ontario travelers
account for about three-quarters of all Canadian visits to the Great Lakes states.

A region's economy and employment characteristics have a connection to demographic patterns.
Great Lakes Basin population figures vary because of different methodologies used to sort out
metropolitan and  urban county populations that overlap the  hydrologic boundary.  A reasonable
estimate for 1991 is 33.4 million people for the combined Canadian and U.S. Basin populations,
including that portion of northeastern  Illinois within the original watershed prior to that created
with the inter-basin diversion at Chicago. The  most populous individual Lake basin is Lake
Michigan's, with  more than 10 million people, or nearly a third of the total Great Lakes Basin
population.

In recent years, compared with its  earlier heyday, the Great Lakes Basin population has seen very
little growth relative to the rest of the U.S. and Canada.  While the combined population of the
U.S. and Canada grew by 22% from 1970 to 1990, rising from 225 million to 275  million, the
binational population  of the Great Lakes Basin grew by less  than 1%.  Much of the region's
population is concentrated  in metropolitan areas and most of the Basin metropolitan areas have
coastal locations.  On the Canadian side, only six metropolitan areas, ranging in size from

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Oshawa to Toronto represented 75% of the 1991 Canadian Basin population.  The eleven largest
U.S. metro areas located completely or partially in the Basin accounted for 81% of the 1990 U.S.
Basin population.  These 17 Basin metropolitan areas represent nearly 26 million  residents.

The Great Lakes' coastal population and  areas of concentration reflect the Basin's historical
connection to its shorelands.  However, the U.S. Great Lakes coastal population overall has not
been growing in recent decades. As a percent of the eight-state population, the coastal population
dropped a percentage point in each of the last two decades and the total number of residents in
these counties has also declined since 1960. This pattern of decline masks a dispersal from the
large urban counties to  suburban shore counties  where  "coastal amenities" and growing
employment opportunities have combined  to increase these  county  populations. Nevertheless,
building  activity  in Great Lakes  coastal counties has been  relatively light compared to other
coastal regions.  According to the U.S. National Oceanic and Atmospheric Administration, the
Great Lakes  counties, between 1970 and  1989, ranked  last in residential, retail  and office
construction and accounted for only 17% of industrial building during that period. In the region,
as elsewhere, industry and service business development have been decentralizing from built-up
city locales to suburban—exurban fringe areas and connecting corridors between metropolitan
areas.  Land and  water availability, lower wage scales, transportation access, proximity to new
residential markets and other cost/service factors are propelling this kind of sprawl.

The most significant population and  related development issue in the Great Lakes Basin and
surrounding region is the continuing growth of major metropolitan  areas and  the virtually
uncontrolled sprawl of lower density  residential areas and other development.  The detrimental
consequences  of  these trends are well-known.  Increased water and air pollution generation,
higher transportation and residential energy use, increasing encroachment on agricultural lands
and natural areas, higher housing costs,  disinvestment in older communities and related social
disruption and burdensome physical infrastructure requirements portend a more difficult, if not
unsustainable, future  for the Great Lakes  Basin ecosystem. However, the escalating cost of
extending utilities and other basic urban  services to these lower density regions may  ultimately
slow the process and stimulate a more  sustainable pattern.  This new  land stewardship  ethic
would rely more on intensification of development within prescribed boundaries and existing
infrastructure capacity.

The Great Lakes Basin, with more than 100,000 square miles of navigable water and 10,579
miles of Great Lakes and connecting channels shoreline anchors  an important  and growing
marine and coastal recreation industry.  On the U.S. side of the Basin,  of the  178 state parks,
110 have  coastal locations.   On  both  sides  of  the  border, coastal  parks represent  a
disproportionate large amount of park  system visits.  The natural beauty of the Great Lakes shore
with large tracts of relatively undeveloped land, coupled with  good highway access and proximity
of population  centers have  promoted recreation and tourism-related travel.   The recreational
boating industry in the Great Lakes is represented by boat manufacturers  and retailers, marina
operators, marine business suppliers as well as the millions  of recreational boaters and anglers.
For the Great Lakes alone, it is estimated that between 900,000 and 1 million U.S. and Canadian
boats operate each year with a direct spending impact of more than $2 billion.  With a strong

A changing Great Lakes Economy -  SOLEC Background Paper                                 3

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connection to boating, the Great Lakes sport fishery is a major part of regional fishing activity.
U.S. federal surveys projected 2.55 million U.S. anglers fished the Great Lakes in 1991 and had
total trip-related and equipment expenditures of $1.33 billion.  Expenditures per angler  were
figured at about $500 for the year.  These examples of coastal and marine recreation activity
illustrate the key role the Great Lakes play in the regional economy.

The Great Lakes Basin and surrounding region faces a future filled with opportunities as well as
uncertainties.  Contending with its historical economic and environmental legacy, the region's
next development path can be one that both supports the economy and preserves the environment.
This "sustainable development" course will require new measures to enhance economic growth
as well as institutional  mechanisms among the public and  private sectors designed to  foster
cooperation and coordination in environmental protection.

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1.0       The   Greater   Regional   Economy   -
             Historical  Development
The province of Ontario and the eight Great Lakes states comprise a major industrial and
agricultural region of North America.  Although the region straddles an international border
which separates distinct political traditions and national cultures, an integrated resource base and
manufacturing complex has developed.  The substantial economic activity nurtured in the Great
Lakes region has had much to do with making U.S.-Canada trade the largest such bilateral
relationship in the world.

Economic development created the modern Great Lakes region. Employment opportunities paved
the way for a relatively  high standard of living and associated quality of life. But with these
good times of ever-increasing prosperity, came the seeds of future challenges.  The industrial and
supporting infrastructure matured and competition within a developing global economy sharpened.
Hundreds of thousands of high-paying jobs disappeared resulting in severe economic dislocation
for some communities and families.

Environmental degradation was another outcome of the pell-mell industrial era.  The binational
region's bountiful natural resources which helped sustain economic growth also were depleted,
in some cases recklessly.  The  Great Lakes, the region's resource centerpiece and the world's
largest system of freshwater, was  damaged by Basin development and is still threatened.

In the development of the Great  Lakes region, water was not just important;  it was  the most
important factor for guiding settlement and establishing  the economy.  A  growing  seaboard
population and the  19th-century influx  of immigrants spurred westward movement toward the
Great Lakes. The natural water routes and canal links channeled territorial, expansion and with
it came the  underpinnings of  economic development.   The passenger and  freight network
distributed people and goods throughout the waterway system.  Localized  services for  shore
communities gradually expanded to support larger markets and hinterlands.  The first major
"gateway"  cities in the region began as ports, such as  Montreal, Cincinnati, Toronto, Pittsburgh,
Buffalo, Cleveland,  Detroit, Chicago, Milwaukee, and Minneapolis-St. Paul. When the railroads
came, they connected the cities of the water-based  urban system.

An early dependence on water characterized these developing cities  of the North American
interior.   The major settlement period  of  the Great Lakes region coincided with the  rapid
development of industrial technologies and processes.  Proximity to productive agricultural land
and access to important  raw materials, coupled with a growing labor force, gave the region an
unparalleled advantage in domestic and overseas markets. Direct application of water power had
a more  limited  role in the Great Lakes cities compared with places inland; rather,  water
transportation was the foundation of shore-based manufacturing and related activities. Water-
intensive industrial operations, whether located on the waterfront or nearby, were a natural result
A changing Great Lakes Economy - SOLEC Background Paper

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of water availability. In many cases, the waterborne shipment option for raw material delivery
and movement of finished goods was a major location determinant.

One of the first major water-connected industries to make use of the Great Lakes was logging
and sawmilling,  with gigantic log rafts  moved around the system as the extensive white pine
forests surrounding the upper Lakes were logged.  Coal made its way overland to the eastern
Great Lakes ports  and from there was distributed by vessel for heating and, later, steelmaking
and  electricity generation.   Massive  movements of iron ore from northern  Minnesota and
Michigan to lower Lakes steel mills and grain flows to eastern flour mills made the Great Lakes
transportation system the busiest in the world for many years. This shipping "backbone" of Great
Lakes commercial navigation was made possible with the construction of a ship canal and lock
system, opened in 1855 at Sault Ste. Marie, Michigan and upgraded several times over the years.
The iron ore and coal movements coupled with grain flows to eastern flour mills made the Great
Lakes transportation system the busiest  in  the world  for  many years.  These  commodity
movements  materialized in response  to the  developing  continental industrial base that was
concentrated in the Great Lakes region.

This agricultural-industrial complex continued to expand, abetted by a productive labor force and
an entrepreneurial business class.  Technological innovation was the rule-of-the-day, as new
manufacturing methods were pioneered resulting in a profusion of products.  Standardization of
goods and mass  production combined with relatively high wages created a consumer society.
The  region with its concentration of steel and iron production and metal fabricating naturally
spawned a large  cluster of durable goods manufacturing operations.   Machinery, transportation
and other equipment, appliances, motor vehicles and construction materials became manufacturing
mainstays.  Through this production bonanza, the region helped build the rest of Canada and
America.

Within the Great Lakes region  the Canadian and U.S.  economies reveal strong  present-day
linkages and many similarities to one another.  However, both sides of the border are not mirror
reflections, but portray significant differences in economic performance and structure.  For
example, as the greater regional economy becomes more diversified and less concentrated in the
manufacturing sector,  Ontario and  parts of the  western  Great  Lakes region  continue  to
industrialize. Nevertheless, the flow of resources, merchandise and information between Ontario
and the Great Lakes states inextricably binds the two sides of the regional economy together and
makes it an economic force in the global arena.

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2.0       The Great Lakes Basin - Population

            and  Employment


2.1 Population

The Great Lakes Basin is the principal geographical feature of the binational region. See Figure
1, Encompassing nearly 300,000 square miles, including 95,000 square miles in the Great Lakes
and connecting waters themselves, the Basin forms the central core of the region with more than
a third  of the area's population and a substantial portion  of its industrial activity.  The
magnificent water resources of the Basin,  which make up 20% of the surface freshwater on earth,
have had a key role in supporting the Basin population and area industrial development.

Great Lakes Basin  population figures vary because of different methodologies used to sort out
metropolitan and urban county populations that overlap the hydrologic boundary.  A reasonable
estimate for 1991 is 33.4 million people for the combined Canadian and U.S. Basin populations.
Table 1 and Figure 2 show the population for the individual Great Lakes basins.

                                  TABLE 1
                  POPULATION OF THE GREAT LAKES BASINS
STATES
Indiana
Illinois
Michigan
Minnesota
New York
Ohio
Pennsylvania
Wisconsin
U.S. TOTAL*
Canada TOTAL**
Great Lakes Basin
TOTAL
Lake
Superior


142,606
212,796



70,146
425,548
181,573
607,121
Lake
Huron


1,502,687





1,502,687
1,191,467
2,694,151
Lake
Michigan
1,087,494
3,494,115
3,007,954




2,467,463
10,057,026
Not
applicable
10,057,026
Lake
Erie
339,264

4,646,843

765,537
4,023,625
242,261

10,017,530
1,664,639
11,682,169
Lake
Ontario




2,702,065

2,219

2,704,284
5,446,61 1
8,150,895
Basin Totals
for
Jurisdictions
1,426,758
3,494,115
9,300,090
212,796
3,467,602
4,023,625
244,480
2,537,609
24,707,075
8,487,210
33,384,157
*     U.S. total is based on 1990 census data
**     Canada total is based on 1991 census data
Source: Great Lakes Commission and Environment Canada
A changing Great Lakes Economy - SOLEC Background Paper

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One area of the Great  Lakes Basin  that presents special problems for determining Basin
population is  in  the Chicago  metropolitan area where substantial alteration  of the natural
hydrologic basin  and direction of water flow has occurred. As a water quality  measure, Lake
Michigan water is diverted through the Illinois waterway at a long-term average rate of 3,200
cubic feet per second. This diversion, which has been in effect since 1989 along with a more
recent one affecting the Calumet River, has  converted 673 square miles of original Lake
Michigan watershed into part of the  Illinois River-Mississippi River drainage basin.  By using
the original Lake Michigan basin boundary rather than the present "man-made" one which
demarks a drainage area only 11 percent of its former size, the population of the Lake Michigan
basin is increased by nearly 3  million persons, almost all residing in Cook county.

In recent years, compared with its  earlier heyday, the Basin population has seen very little growth
relative to the rest of the U.S. and Canada. For example, while the combined population of the
U.S. and Canada  grew by 22% from 1970 to 1990,  rising from 225 million to 275 million, the
binational population of the Great  Lakes Basin grew by  less than  1%.  This disparity  in
population growth  rates indicates a redistribution  in  regional economic activity with older,
industrialized regions, such as the Basin, losing population in favor of newer, expanding regions.
In the U.S. this has taken the form of people relocating to the South and Southwest as the rapid
growth  of these economies has become a  magnet for migration.  Climate-influenced retirement
moves have added to the outbound numbers.

Both sides of the border reflect similar and divergent population trends.  Ontario, with more than
a third  of Canada's  population, has been  gaining population nearly twice as fast as  the Great
Lakes states but its rate of growth is also slowing. By 1990, the Great Lakes States' population
increased by only 1.7% since 1970 whereas Ontario's 1991 population increased by nearly a third
or 31% from 1971.  Both Canada and the United States are experiencing  similar age structure
changes as the post-war baby boom bulge advances. A new baby boom is likely to kick in by
the end of the 21st century's first  decade when births are expected to increase steadily. Fertility
patterns by race and ethnicity  are expected to remain varied.

Household structure is another major demographic factor that is affecting society and the
economy.  American household size has  declined to record low levels (2.6 persons in 1990).
Fewer children, more one-person households  and one-parent families have  contributed to the
decline. A major socio-economic problem is the increase in one-parent households and its effect
on family income—these families represent three-fifths of all families living below the poverty
level. A "cycle of poverty" among these households has contributed to increasingly violent and
dysfunctional urban environments, particularly in the large U.S. cities including those in the Great
Lakes region.  Another ominous portent for the region linked to the increase in relatively poor
single-parent households as well  as  the general aging of the population,  is the dampening of
demand for  durable goods and its  consequent  effect  on  one  of the region's  strengths,
manufacturing  employment.
Much of the region's population is concentrated in metropolitan areas.  With the exclusion of

                                                                                       8

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New York and Pennsylvania, two-fifths of the binational region's population is concentrated in
just seven urban areas: Chicago, Cleveland, Detroit, Indianapolis, Milwaukee, Minneapolis-St.
Paul and Toronto. Within the Great Lakes Basin, the urban dominance is even more pronounced.
On the  Canadian side only six metropolitan areas, ranging in size from Oshawa to Toronto,
represented about 67% of the 1991 Canadian Basin population. The 11 largest U.S. metro areas
located  completely or partially  in  the  Basin accounted  for 81% of the 1990 U.S. Basin
population.  These 17 Basin metropolitan areas represent nearly 26 million residents.  Table 2
shows population and labor force data for selected Basin metropolitan  areas.

                                      TABLE 2
POPULATION, TOTAL BASIN EMPLOYMENT AND LEADING ECONOMIC SECTORS
                    FOR SELECTED METROPOLITAN AREAS*
UNTTEDj STATES
Chicago
Detroit
Cleveland
Milwaukee
Buffalo
Rochester
CANADA
Toronto
Hamilton
London
Kitchener
Windsor
Oshawa
POPULATION
6,069,974
4,665,236
2,102,248
1,432,149
1,189,288
1,002,410
POPULATION
3,893,046
599,760
381,522
356,421
262,421
240,104
LABOR FORCE
3,176,270
2,326,077
1,359,901
742,474
584,658
519,059
LABOR FORCE
2,229,090
322,875
211,690
200,715
133,445
131,990
RETAIL/
WHOLESALE
TRADE
634,884
459,629
276,344
150,153
124,118
92,289
RETAIL/
WHOLESALE
TRADE
389,555
58,290
37,965
35,600
21,820
21,296
MANUFACTURING
552,686
517,267
292,728
168,746
101,947
132,954
MANUFACTURING
384,815
70,330
33,425
51,830
36,580
31,605
COMMUNITY
SERVICES2
672,938
500,172
309,772
166,568
148,058
128,640
COMMUNITY
SERVICES
451,835
74,645
55,900
41,755
29,915
25,595
   U.S. data is from 1990 census.
   Canada data is from 1991 census
   Listed city is the principal city for metropolitan statistical area which may have a multiple city designation
   Community services includes such occupations as health, education, religion etc.
A changing Great Lakes Economy - SOLEC Background Paper

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Coastal Development
Most of the Basin metropolitan areas have coastal locations.  Other coastal areas represent a
sizable portion of the remainder Basin population. The 85 coastal counties in the Great Lakes
states have about 19 million residents, which represents about 17% of the U.S. coastal population.
With only 25%  of the total Great Lakes  states'  population located  in  coastal counties, this
attribute is not a hallmark of the region compared to other coastal areas, but it is particularly
significant for several states.  Michigan  and Illinois have about half of their states' populations
residing in coastal counties and Wisconsin has more than  a third.  Nevertheless, the coastal
county population is spread quite unevenly.  For example, coastal population density ranges from
a paltry 22 people per square mile in Minnesota to 4,040 in Illinois but  averages 275 persons
throughout the region compared to 183  persons per square mile for the entire eight state area.
Another measure of coastal population entails a calculation based on shoreline mile and on this
basis the Great Lakes county shorelines  in 1988 had the highest average number of persons per
mile (3,835) for a major coastal area in the U.S. Illinois' two coastal counties lead the nation
with more than 91,000 persons per mile of shoreline and Indiana's three counties with nearly
16,000 persons per shoreline mile is second highest in the region.  If Indiana's Lake Michigan
basin population is used which represents  only parts of the  three coastal counties, then the
population per shoreline mile is more than  24,000.

The Great Lakes'  coastal population and areas of concentration reflect  the Basin's historical
connection to  its shorelands.  However,  the overall U.S. Great Lakes coastal population has not
been growing in recent decades. As a portion of the eight-state population, the coastal population
dropped a percentage point in each of the last two decades, and the total number of residents in
these counties has also declined since 1960. This pattern of decline masks a dispersal from the
large urban counties  to suburban shore  counties  where  "coastal amenities" and growing
employment opportunities have combined to increase these county populations.

As  for outlying  counties, the  heyday for second-home development  appeared to peak in the
1960s, and the National Oceanic and Atmospheric Administration (NO A A) projects relative slow
population growth for most of these counties from 1988 to 2010, with a few exceptions. In the
binational Great Lakes region, the tens of thousands of inland lakes within the Basin and nearby
have acted to  "deflect", to a certain extent, interest in residing on a Great Lakes shore.  This
factor combined with already extensive  second-home development and retirement living within
the coastal zone have probably blunted Great Lakes development pressure  from what might have
occurred had the inland resort areas not been available.  According to NOAA, between 1970 and
1989 building  activity in Great Lakes coastal counties was particularly light compared with other
coastal areas.  As reflected in  the number of building permits  issued, the  Great Lakes counties
ranked last in  residential, retail and office construction and accounted for only 17% of industrial
building during that twenty-year period.  In the region as elsewhere,  industry and service business
development have been decentralizing from built-up city locales to suburban—exurban fringe
areas and connecting corridors between metropolitan areas.  Land  and water availability, lower
wage scales, transportation access, proximity to new residential markets  and other cost/service
factors are propelling this kind of sprawl.
Immigration


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A population issue that is receiving increasing attention in the region is the level of immigration
and related pattern of settlement and lifestyles.  Ontario is presently a destination for more than
50% of immigrants to Canada, and two thirds of these new residents, or about 100,000 a year,
have been locating in the Greater Toronto Area.  For the Great Lakes states, immigration is also
concentrated geographically but less so within the Basin. The U.S.  Bureau of Census projects
that between 1995 and 2000 net immigration to the Great Lakes states will total to 898,000 with
more than half of this amount entering through New York City,  Illinois, the other leading region
state for immigration, is expected to  have 178,000 new  arrivals with most  of these people
residing in the Chicago metro region. Some major metropolitan areas receive particular attention
by one or more ethnic or racial groups.  For example, the Chicago metropolitan  area is attractive
to persons of Hispanic origin whereas the Detroit area has the largest Middle Eastern contingent
in the United States.  Asian and Pacific Islander immigration to both Canadian and U.S. places
in the Great Lakes Basin is reasonably strong.

In the U.S. an emerging political issue concerns the estimated 3.85 million illegal immigrants in
the country and the associated cost of social welfare programs. Several southern states have sued
the federal government seeking reimbursement for some of these costs.  In Canada, public debate
about the government's immigration policy concerns the level  and impact  on the national
economy. During recent recession  periods, sensitivity about these issues increased with concern
expressed particularly about the number  of non-working persons admitted under  the family
reunification category. Recent studies of immigrant households in the U.S., may assuage some
of these concerns—that average household income of legal immigrants surpasses that of natives
over time.  Immigrants present new challenges and opportunities for their communities  and  the
Great Lakes Basin.  Immigrants infuse spirit in their new locales with distinct cultural traditions
and entrepreneurial propensities. However, they also add to the total population pressures on  the
environment and can strain health, welfare and education  systems.  Lifestyles of immigrants
though, may resist ready incorporation of "western" resource consumption habits and associated
environmental impacts but  relentless acculturation processes usually narrow the gap over time.

Urban Sprawl
The most significant population issue in the Great Lakes Basin and surrounding region is  the
continuing growth of major metropolitan areas and the virtually uncontrolled  sprawl of lower
density residential areas. The negative consequences of these trends are well known.  Population-
related  pollution generation,  higher  transportation  and  residential  energy  use,  increasing
encroachment on agricultural lands and natural areas  and  burdensome physical infrastructure
requirements portend an unsustainable future.

The northern shore of western Lake Ontario exemplifies these current population  growth and
distribution pressures within the Basin.  Anchored by the Greater Toronto Area (GTA), the area
has experienced a 50%  population increase since 1970 and contains 10 of Canada's 25 largest
municipalities.  Urban sprawl has spread more than 100 kilometers from central Toronto making
surrounding counties the fastest growing in the province. This settlement pattern in the GTA  has
resulted in a substantial cumulative loss of productive agricultural land, now estimated at 5,000
hectares per year. From 1981 to 1986 urban development in the GTA consumed nearly 21,000
hectares.

Development is impacting  all elements  of the region's ecosystem from degraded water and air


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quality to increased costs for managing the  urban services infrastructure.  The provision  of
adequate transportation services is particularly stressed by increasing urban  sprawl.  Traffic
volume in the GTA is expected to increase about 6% per year straining the area's transportation
system with increasing road congestion, pollution and longer commuting times and distance. By
2011, commuter trips for Metro Toronto, based on current trends, could nearly double to around
500,000 each day but this level may be impossible to achieve unless transit use is dramatically
increased.   The GTA already has  a high level  of transit  use by commuters for a major
metropolitan area at 25%, but much  of this  is concentrated in the City  of Toronto where the
population density is 6000 people per square kilometer (15,540 per square mile). Beyond the city
boundary, population densities  are less than  half this figure—not enough to support a viable
transit system.

Another area of the Western  Lake Ontario region that is confronting particular land use issues
is the City of Hamilton and  its harbor area which supports the largest concentration of heavy
industry in Canada.  The bulk of Canada's steel manufacturing, with two large integrated mills,
is based on  the south shore of the harbor. Of the 45 kilometers of harbor shoreline, more than
half are occupied by industrial facilities.  Residential use is 11% and only 2% is public  open
space, mostly marinas and parks. Public access to the waterfront has become a major concern
for the residents of the Hamilton metropolitan area.  Hamilton  harbor water  quality is also a
public concern and certainly has broad land use implications.  The area of the harbor  itself
represents only 4%  of its watershed and water conditions in the harbor are significantly  affected
by natural runoff and agricultural land use practices (two-thirds of the watershed is agricultural).
Pollutants also  enter the harbor from combined sewer overflows, atmospheric deposition and
loadings  from harbor sediments.  A Remedial Action Plan  process is underway for Hamilton
Harbor to address water quality problems and restore beneficial uses.

Northwestern Indiana, northeastern Illinois and southeastern Wisconsin are  part of the greater
Lower Lake Michigan Megalopolis,  the third largest  greater  metropolitan area in the United
States after the  Northeast Corridor and Southern California. Lake Michigan is this metropolitan
region's defining natural resource, serving as  a principal source of drinking water and industrial
water supply and shaping transportation routes and population settlement as well as having a
major influence on the  natural environment.   Population growth for  all  these  geographic
components  has stabilized but distribution characteristics reflect the decentralizing trend in
evidence throughout the Basin.

In Northwest Indiana, the three-county population actually decreased about 4% from 1970 to
1990 but all of the loss was in the most urban and industrialized county. In northeastern Illinois,
the overall  population of the  six-county area increased only 4.1% from  1970 to 1990 but
residential land consumption increased by an estimated 46%.  One hundred and sixty-five
municipalities,  mostly in  outlying   areas gained  more than 1  million residents while  90
municipalities nearer to the region's center had a net loss of 771,000, A disturbing consequence
of this decentralization pattern is the impact  on the tax base for those communities not part of
the growth  picture and associated  impact on the  provision of basic infrastructure and  social
services.
In the seven-county Wisconsin area, which includes the Milwaukee metropolitan area, population


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increased by less than 1% from 1970 to 1980 and by about 3% from 1980 to 1990. Although
only a quarter of this area has an urban land use classification, the  rate of urbanization is
accelerating.  From  1970 to 1985 urban land uses increased by 20% totaling an additional  100
square miles.  Much of this land consumption has been at the expense of prime agricultural land
which is now the focus of targeted preservation programs.
2.2  Employment

Employment trends in the Great Lakes Basin are influenced by demographic factors and many
sector-specific  issues.  The Basin represents nearly  11% of total employment in the U.S. and
Canada.

As Figure 3 shows, total employment has increased, but it should be noted that on the U.S. side
of the border the growth rate in the Basin was less than half that of the U.S. (25% vs 53%).
Similarly, while total  employment in  Canada  during this period grew  at a  15% rate,  total
employment in the Canadian counties in the Basin grew by only 6%.

The Basin represents 15% of manufacturing employment for the two nations. The most dramatic
change that has occurred in  the region is the distribution of jobs among industries. It  is the
economic core of the Basin that has been hardest hit over this period as is demonstrated by the
decline in manufacturing jobs (see Figure 4). Domestic and global competitive pressures have
led to significant employment decline and a heavy emphasis  on enhanced productivity.  While
the Basin's manufacturers have been able  to make  great strides  to enhance their competitive
position through important gains in productivity, the manufacturing employment base has been
significantly altered. Nearly  21% of the manufacturing jobs from 1970 to 1990 have been lost,
with the  greatest number of jobs being  lost in the  manufacturing industries within the Lake
Michigan drainage basin.  In contrast, while hardly robust, total manufacturing jobs in the U.S.
actually increased by .3%.  In Canada they grew by  22%.

Growth in service-sector employment  has been dramatic.  Since 1970,  more than 2 million
"service" jobs were added in the Basin,  with a growth rate slightly greater than 100% (see Figure
5). However, these jobs have often been lower paying than those in manufacturing that they are
replacing. Furthermore, even this impressive rate of growth is behind the combined national
growth rates for service jobs  from 1970-1990.  Given this, it is not surprising to find that as the
number of manufacturing jobs declined,  personal income growth also slowed.  From 1970 to
1980 personal  income in the Basin grew by 140%, while from 1980 to 1990 the growth rate fell
to 83%.

This restructuring of the Great Lakes Basin economy has been a painful process  as jobs have
been lost and  key industries have seen their economic significance dissipate.  However, this
difficult and continuing process is producing more efficient competitors who are succeeding in
meeting global competition.  However, it is this very competition which will provide the ongoing
challenge to the region.  Current  economic research  has  shown  that in economic regions,
industries are found to be arranged in clusters, where the productivity of many of the region's
firms both big and small, service and manufacturing, reinforce the competitive position of the
area economy.  An important finding of this research is that  regions, not nations or individual


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states,  will compete  for jobs and economic growth in the 1990s.   The Great Lakes  Basin
possesses economic and geographic/resource advantages that are enviable.  The Basin, despite
considerable economic change, still represents a personal income total of more than $520 billion,
nearly  11% of total employment and 15% of manufacturing employment for the two nations.
These strengths give the region a base from which to launch its future.
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3.0       U.S.  -  Canada  Trade
The United States and Canada maintain the largest bilateral trade relationship in the world, and
are each other's most important trading partners.  U.S. exports to Canada comprise more than
one-fifth of total U.S. exports and Canada's exports to the U.S. make up more than two-thirds
of its total exports.  Trade between Ontario and the Great Lakes states accounts for more than
half of this binational trade, with three-fifths of the amount concentrated in autos, automotive
parts and engines.

The eight Great Lakes states in 1992 exported $45.191 billion in goods and services to Canada,
and imported $61.036 billion from Canada. The states' $15.845 billion deficit is nearly twice
as big as the overall U.S. deficit of roughly $8 billion with Canada. Table 3 shows the state-by-
state trade totals for 1992.

                                    TABLE 3
               CANADA - GREAT LAKES STATE TRADE FOR 1992
   Illinois
$5.789 billion
$5.234 billion
   Indiana
2.157
2.903
   Michigan
25.707
15.100
   Minnesota
2.252
1.775
   New York
14.817
6.955
   Ohio
4.819
7.638
   Pennsylvania
3.524
3.536
   Wisconsin
1.971
2.050
   TOTALS
61.036
45.091
A changing Great Lakes Economy - SOLEC Background Paper
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U.S.-Canada trade policy has evolved over many years.  One significant development along the
way was the 1965  Auto Pact,  which ended certain  Canadian export subsidies and imposed
performance requirements on U.S. auto producers in exchange for the privilege of selling autos
in Canada.  These requirements led American manufacturers to establish a large assembly base
north of the border.  More recently, the U.S.-Canada Free Trade Agreement (FTA), which took
effect on January 1,  1989, was designed to ratchet down all bilateral tariffs to zero by 1998, with
provisions to further enhance trade liberalization including a dispute settlement process.

Because of the FTA's phase-in process and the fact that the great majority of U.S.-Canada goods
trade already crossed the border duty free, a quick and substantial trade  stimulus was not
expected. Although FTA implementation coincided with economic slowdowns in both countries,
bilateral trade has increased since  1989, and Canada's  significant trade surplus with the U.S.
increased.  Despite these developments, public opinion, particularly in Canada, reveals a deep
reservoir of skepticism about the FTA's benefits. The agreement has been widely blamed for
plant shutdowns and significant job losses in manufacturing that have occurred in Canada since
1989. Public concern on both sides of the border has also transferred to the North American Free
Trade Agreement (NAFTA), which took effect on January 1, 1994 and seeks to fully incorporate
Mexico in continental trade liberalization.

Canada's economic woes since the FTA took effect were caused far less by the FTA than by high
interest rates and a recession that hit Canada hard, with gross domestic product falling 0.5% in
1990 and 1.7% in 1991.  The FTA actually helped to keep merchandise exports to the United
States  strong even during that recession, rising 19%  from 1988 to 1991.  By 1992, the U.S.
market absorbed Canadian merchandise exports worth $98.5 billion, out of total Canadian exports
of $125 billion. The C.D. Howe Institute of Canada found in a 1992 study that Canada's export
gains to  the  United States were especially rapid in  those  sectors  where trade rules  were
liberalized by the FTA.  In the category of office, telecommunications and precision equipment,
for example,  exports to the United States rose by 74% from 1988 to  1991,  at a time when
Canada's exports  of these  goods to  the rest of the  world  fell by 5.5%.   To be sure, some
Canadian industries have faced  far keener competition as the FTA opened up the Canadian
market to more U.S. goods. U.S. bilateral export gains,  like Canada's, have been rapid in many
sectors affected by the FTA, with increases of 100% or more recorded between 1988 and 1992
in categories such as furniture, chemical products, plastics, paper products, apparel, and electric
machinery.

One of the FTA's most recognized achievements is in the area of dispute settlement.  For the first
time, binational panels were given the power to make binding rulings on each nation's use of
laws against below-cost "dumping" and unfair subsidization of exports. Canada has prevailed
in most of the cases heard by such panels. The issue of subsidization has become the focal point
of concern  about the FTA and even NAFTA. Critics argue that the scope of binational reviews
is too narrow.  In a challenge to a U.S. anti-subsidy ruling, for example, the tribunal can decide
only if U.S. law was correctly applied, not whether the law's definition of unfair subsidy was
sound. Others also argue that dispute resolution takes too long and is too inconclusive, as cases
are repeatedly remanded to each nation's trade  agencies for reconsideration.  Hence, agreement
on a common definition of trade-distorting subsidies and dumping is at the top of the agenda as
North American trade policy develops and the  NAFTA  process sorts itself out.
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4.0       Selected Economic  Sector  Profiles
4.1  Manufacturing

The eight Great Lakes states comprise more than one-third of the national manufacturing output
while the province of Ontario accounts  for more than 50% of Canada's manufacturing activity.
The manufacturing sector's  share of total  employment in both the province and the states is
similar at more than 20%.  For 1990, 6,770,000 Great Lakes state residents were employed in
manufacturing enterprises, and 966,000 Canadians were so employed in Ontario.  The binational
region's manufacturing share of employment significantly exceeds that of their respective nations.
The region's manufacturing sector also illustrates the interconnected nature of industries on both
sides  of the border.   For example, in the  mid-1980s,  U.S.  corporate affiliates  in Ontario
comprised more than a third of the province's manufacturing employment and an even  higher
share  of related value-added.   Canadian direct investment in the Great Lakes states  is less
pronounced but still accounted for 55,000 more jobs in 1987 than in 1977.

Among individual manufacturing industries, the two parts of the binational regional economy
have  similar concentrations of  jobs in such  "metal bending" activities as primary  metals
production, metal fabrication and transportation equipment. For example, the Great Lakes states
account for more than 70% of U.S. steel production, and Canada's four large integrated mills are
all in Ontario.  In vehicle and related parts production the region also stars, with the Great Lakes
states producing 6 out of every  10 automobiles made in the U.S., and more than  half of the
national truck and bus total.  Ontario has  more than four-fifths of Canada's vehicle assembly
work.

Ontario and the Great Lakes states differ, though, with respect to other major industry groupings.
Ontario firms are more concentrated in labor-intensive and resource-intensive industries such as
paper, lumber, furniture, textiles and apparel than are firms on the U.S. side of the border. The
U.S. region  tends to have greater representation in industries where capital and  technology
intensity characterize the production processes, as in pharmaceuticals, machinery, instruments and
electronics.

Substantial changes are occurring in Ontario's and the Great Lakes states' manufacturing sectors.
Ontario's share of Canada's manufacturing output has been growing slowly over the  longer term
— up around 4% since the 1970s. On the other hand, the U.S. Great Lakes region compared
with the  nation,  has suffered a decline over the same  period.   Since 1970,  manufacturing
employment has declined significantly, with the Great Lakes states experiencing approximately
a 15 to 20% sector job loss.  American manufacturing is  decentralizing throughout the U.S. in
response to such cost factors as wages, energy and land prices. In Canada, industry is continuing
to expand  in Ontario, building on such  advantages as access to population centers and markets
and Toronto's burgeoning financial center status.

The Great Lakes region's abundant water supply is an important resource connection for industry.
Water use in manufacturing  operations  is concentrated in five major sectors:  steel  production,


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food processing, petroleum refining, chemicals/allied products and paper—all of which are well-
represented in the regional economy.  This intensity of water use is illustrated by the fact that
the Great Lakes states account for 40% of U.S. industrial water use, and much of this demand
is  based  in the Basin.  Great Lakes water satisfies more than three-quarters of total industrial
demand in the Basin.  In Ontario, the degree of dependency is even more pronounced at nearly
85%. Indiana and Michigan are the top states for industrial water use in the Great Lakes Basin,
while Ontario, at 2,058 million gallons per day, leads all jurisdictions.

On both sides  of the border,  the  region's  manufacturing  sector has been pruning inefficient
operations and investing in new technology. These aggressive modernization programs have not
been  launched across-the-board,  but  key industries have  benefitted, resulting in significant
productivity improvements.  One  key factor in the region's continuing strong manufacturing
performance is the implementation of so-called lean or agile manufacturing techniques, which
emphasizes quality and speedy response to market conditions based on technologically advanced
equipment and a flexible production process. Teamwork and participatory management are also
important to lean manufacturing.

The manufacturing workplace is gradually transforming itself from one of mass production with
its traditional hierarchical management and stress on total output to one of customized production
and employee empowerment.   This process of "re-engineering"  a company's way  of doing
business  also has the potential for new collaborative industry arrangements.  Temporary alliances
among businesses where each company may specialize in design, manufacturing or marketing
with respect  to  a particular product are  possibilities spawned from the Great Lakes region's
cluster of durable goods manufacturing enterprises.

Along with industrial restructuring has come the loss of high-paying jobs and disruption of family
and community  life in the region,  particularly, in areas where major industrial operations were
concentrated.  One such area, stretching from southeast Chicago into northwest Indiana (Calumet
Crescent Corridor) has become an incubator of ideas and demonstration projects designed to both
revitalize the local  economy and aggressively address environmental  problems by relying  on
inherent  community strengths and opportunities.  For  example, a major regional project, the
Environmental Technology Network, has been proposed by two organizations, City Innovation
(based in Minnesota) and the Employment  Research and Development Institute of Wilmette,
Illinois.  Four major outcomes are projected:

       Create a sense of  ownership in the future of what the  Calumet region is  now and can
       become.
       A collaborative regional vision that helps grassroots leaders relate community interests
       to the larger interests  of industries,  workers, residents and investors throughout the
       Corridor.
       Development of entrepreneurial skills and small business opportunities in environmental
       cleanup technology for a profit to  help establish international leadership for the Corridor
       in this industry.
       Community-led  strategies for attracting and mobilizing resources  to the  advantage of
       communities throughout the Corridor.
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The  Calumet  Crescent  Corridor  project offers  a unique opportunity  to  fuse  the technical
capabilities of existing businesses with the availability of skilled workers to tackle, among other
problems, the  issue of remediating polluted inactive industrial sites.  The  Great Lakes Basin
contains thousands of such sites or "brownfields" where once thriving industrial operations have
now become,  not  only  blighted areas of neglect, but  in many cases,  sources  of  continuing
pollution.  For example,  Cuyahoga County in Ohio has between 10 and 14% of its land area or
roughly 40,000 acres categorized as brownfield.  For the three Lake Michigan-adjacent counties
in Indiana, polluted groundwater and contaminated soils and sediments at manufacturing locations
have resulted in the designation of 8  Superfund cleanup sites, one Area  of Concern  designated
by the International Joint Commission and more than  200 toxic waste sites warranting some
level of cleanup. These problem places particularly  in the central urban areas within the Great
Lakes Basin, have handicapped efforts at redevelopment.  New development is deferred because
of cleanup costs and lingering uncertainty over liability issues thus encouraging such development
to migrate to outlying areas or undeveloped "greenfields."  Legislation and other remedies have
been proposed to address the issue through targeted and expedited cleanups as well  as new
business recruitment  strategies that wisely match  sites with appropriate uses.
4.2 Transportation

Transportation was a pivotal factor in the development of the Great Lakes-St. Lawrence region.
The combination of a natural water transport infrastructure and a strong resource base promoted
settlement, agricultural development and a manufacturing economy.

As a trade route among native peoples and a corridor of discovery and commerce for the
Europeans, the Great Lakes-St.  Lawrence  River system, along with other rivers,  formed an
established transport system long before the United States and Canada became nations.  Over
time, an extensive rail, road and pipeline grid was laid out and eventually a  high-capacity air
transportation network was built.

Today, the region's strong multi-modal transportation system compares favorably with any in the
world. Much of modern transportation technology was either invented or first implemented on
an efficient scale in this region.  Freight movements in the binational region serve both domestic
markets and international trade.

Among the principal vehicle freight modes, a competitive and yet complementary relationship
has evolved.  The region's relatively high freight generation level is attributable, in part, to the
system's transport efficiencies.  Particular modal patterns are evident in commodity movement
and route  structure.  Historically, east-west freight routes have had  more capacity and volume
compared  to north-south links.  However, in recent years, cross-border "north-south" commodity
flows have been increasing and the infrastructure to support this trend is receiving more attention.

The  Great Lakes-St. Lawrence transportation system, stretching more  than 3,700 kilometers, is
a unique  deep-draft navigation route unlike  any other  in the world.  Recent studies of the
system's economic impact indicate that more than 60,000 Canadian and U.S. jobs are dependent
on the cargo movements and these activities generate more than $3  billion  in business revenue


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and personal income.

Great Lakes and St. Lawrence River commodity  movements are dominated by relatively low
value bulk commodities.  Total annual U.S. and Canadian tonnage (shipments and receipts) for
the 145 ports and terminals in the system has averaged around 200 million tons (181 million
metric tons) in recent years. Grain flows have been quite variable as the world grain market is
continually adjusting in terms of supply and demand.   North American steel production and
related raw materials movement have been affected by recession periods and fluctuating levels
of imported  steel. Coal shipments, particularly those to electricity generating stations are more
stable but utility decisions on fuel contracts have dramatically altered some supply patterns. Salt,
which is used primarily for road de-icing, represents 5 to 8% of Canadian Great Lakes tonnage.
Petroleum products  movement is significant for St. Lawrence River ports and Sarnia, Ontario,
a major Great Lakes refinery center. Movement of general cargoes (higher value containerized,
palletized and other processed  or manufactured goods) is declining on the Great Lakes and such
traffic now constitutes  only a small percentage of St. Lawrence Seaway tonnage.

Since 1959,  the modern Seaway with its seven river locks coupled with the older Welland Canal
has transitted more  than 1.4 billion metric tons with an estimated  value of $200 billion.  With
few exceptions, annual  tonnage for the Montreal-Lake Ontario Seaway section increased until the
peak year of 1977, when over 57.4 million  metric tons were reported.  While there have been
year-to-year fluctuations since the late  1970s, the 31.9  million metric tons recorded in 1993
indicate a substantial overall decline in average Seaway tonnage.

Rail and motor carrier freight transportation complement waterborne commerce in the  Great
Lakes-St. Lawrence region but both maintain well-established service profiles while engaging in
intermodal operations and head-to-head competition in some instances.  Although annual truck
and rail freight fluctuate in response to business cycles, two trends are significant. The combined
modes account respectively for three-fifths and two-thirds of Canadian and U.S. intercity tonnage,
but highway use, particularly  for the movement of manufactured  goods, is expanding rapidly.
For example, U.S. highways carried a third more total tonnage in 1990 than in 1980, whereas
U.S. rail movement of manufactured goods declined by about 15% during the decade.  Intermodal
operations (rail haul of truck trailers and containers) have also been increasing in both countries
as shippers and carriers emphasize coordination in an effort to create a "seamless" transportation
system.

As the hallmark of the region's  manufacturing economy, the personal  motor vehicle also
dominates passenger transportation.  A relatively dense road network, encompassing around one
million miles of right-of-way, represents a mobility asset, though also a tremendous maintenance
and land use burden.   Rail passenger transportation plays a commuter role for several cities in
the region.  Although  the region accounts for nearly 75% of U.S. and Canada station activity
(arrivals and departures), intercity rail travel is not growing.  On the  other hand, air travel has
been  expanding its mode  share.   The  region,  because  of its  concentration of corporate
headquarters, generates a higher amount of business-related air travel.
Within the Great Lakes Basin, commodities move across the international border by all modes
(air, water, rail and highway) but land crossings predominate in total transits and merchandise
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trade value.  Minnesota, Michigan and New York, the three Great Lakes states with Canada
border crossings, accounted for 82% of 1992 U.S.-Canada trade value associated with the land
crossings or $123.2 billion.  Table 4 indicates these shipments were handled through 27 highway
crossings, 11 rail crossings  and  6 ferry crossings (3  vehicular and 3 railroad).  A growing
integration of the region's binational transportation system is evident.  For rail operations this is
indicated by the substantial amount of Canadian carrier-owned line located in the Great Lakes
states and the fact that half of Canadian rail revenues derived from movements between Canada
and the U.S. has an Ontario or Quebec connection.  Such transborder rail traffic is growing, now
accounting for 18% of total Canada-U.S. merchandise trade value and representing 23% of total
Canadian rail tonnage.  Scheduled improvements to Michigan-Ontario rail crossings, including
a new tunnel at Port Huron-Sarnia, will enhance this trend. Cross-border truck movements have
keep pace with increasing  trade flows and for Ontario, one-quarter of its  trucking industry
revenues are tied to such movements.

                                       TABLE 4
             GREAT LAKES STATE AND PROVINCE BORDER CROSSINGS

 STATE - PROVINCE HWY             RAD.            FERRY           TOTAL

 Michigan - Ontario   4                 3                6                 13

 Minnesota - Ontario  8                 4                0                 12

 New York - Quebec  8109

 New York - Ontario  7                 3                0                 10

 Total              27               11               6                44

       Source: Michigan Department of Transportation

Each of the transportation modes faces a unique set  of challenges  that will guide its future
development  and use.   The  region's  overall transportation  system is a  dynamic network
continuing to change in response to  new challenges as well as opportunities.  Even though the
private marketplace is the main  arena for transportation decision-making, public policy,  as
expressed through regulations, taxation and land use policies, has played a  major role in the
movement of people and goods. The region's commodity movement patterns have developed not
only in response to  geography  and the  orientation  of population  settlement  but  also  from
government policy. National goals for transportation sufficiency and economic  development have
fostered regulatory regimes  and  subsidy programs for various commodities  and the transport
modes themselves. This  welter of rules and practices has undeniably shaped  the flow of goods
throughout the region.

For the region's deep-draft maritime  sector, several issues pose serious problems. A nine-month
navigation season for through  traffic,  vessel  size limits, Canadian Seaway tolls and the
cumulative impact of pilotage costs  for long-distance system movements have all combined to
dampen growth prospects for Seaway general cargo shipping. Bulk cargo, prone to much annual
variability, also faces long-term threats from increasing tolls, various  government cost recovery
initiatives, dredging problems, rail competition and changes in supply sources.
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The dredging issue illustrates the complexity of maritime sector challenges.  Periodic dredging
to maintain authorized project depths is essential for Great Lakes commercial navigation.  For
example, for a  1,000-foot bulk carrier, the loss of one inch of vessel draft translates into a loss
of 270 tons of cargo carrying capacity. Siltation levels are high for many ports, especially those
at the outlets of rivers where the drainage basin is characterized by heavy agricultural activity.
Most of the 119 U.S. commercial harbors in the Great lakes are maintained by the Army Corps
of Engineers, with the others under private control. In recent years, an average of 3 to 5 million
cubic yards of material have been dredged each year at a cost of up to $33 million.  Some of this
dredged material is polluted, particularly that from industrialized harbors  and must be disposed
of in confinement  facilities. In the United States, of the 26 such sites built  since the  1970s, a
few are completely filled and all but two will be full or at design capacity by the year 2006.  The
difficulty in finding suitable sites for new disposal facilities coupled with a need to remediate
existing sites and the lack of adequate future financing for  this aspect of the  Great Lakes
dredging program  are critical issues to be addressed for not only commercial maritime interests
but also for governments at all levels.

Another significant issue relates to border crossings. Vehicular traffic at border crossings in the
Great Lakes region exhibits a wide range in volume from a few thousand vehicles to more  than
8 million autos, trucks and busses annually for a particular crossing. For example, in 1992  only
four border crossings—2 bridges and a tunnel in eastern Michigan and a bridge in  western New
York—accounted for nearly 30 million  vehicle crossings, or 50% of the total crossings in the
region.  These  facilities also handled about three-quarters of all truck crossings on the region's
international border.  The fact that most of the region's international border is comprised of the
Great Lakes and connecting channels, the St. Lawrence River and other smaller rivers and lakes,
tunnel and bridge border crossings  are more limited, which tends to concentrate traffic and
creates  particular  congestion,  inspection/processing  and  physical  infrastructure  investment
challenges. Unimpeded flow of cross-border traffic, whether it relates to personal travel or goods
movements especially with growing trade volumes and development of just-in-time delivery and
inventory systems, is vital to the region's economy.

Other important issues for the region's transportation system are pollution generation potential,
energy use and land  use impacts.   These issues were not high priority concerns during the
system's intensive development period.  Since the  1970s,  with the periodic energy crises and
advent of concerted environmental regulation, these issues have become  more salient, both for
government and private business.  Pollution elimination  and reduction  policies  coupled  with
energy conservation measures are beginning to drive transportation  activities,  but land  use
planning as a means to control transportation impacts has not progressed very far.  Awareness
of the problems and the need for comprehensive transportation planning is growing. As this new
transportation policy direction takes  hold,  society is challenged to devise  effective and practical
means to institutionalize this aspect  of ecosystem management and sustainable development.
4.3 Agriculture

The Great Lakes region encompasses a significant portion of the United States* and Canada's
farm sector and is a major part of the overall economy of the two nations and the region.  As

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part of the greater region, Great lakes  Basin agriculture is also diverse and productive, even
though it represents only 5.3% of total agriculture employment for both Canada and the U.S.

With respect  to  value and volume, dairy,  cash grain and livestock  sales are the region's
mainstays.  Unique climatic-production niches have also  contributed to a wealth of specialty
crops.  The high level of agricultural productivity is partly  a function of geography.  The part of
the region located between 39° and 45° latitude has a combined soil and climate regime that
makes it a prime  agriculture area.   With  the exclusion of the podzolic soils of  the Canadian
Shield, the northern tier states, and mountain districts in New York and Pennsylvania, most of
the region is suitable for large-scale farming.  Average annual precipitation within the prime area
ranges between 24 and 42 inches.  Along with an average 145-day growing season, the prime
area has moderate levels of potential evapotranspiration and solar radiation. These characteristics
make the region suitable for production of eight of  the ten top food crops in the world.

Estimates for  1990 show the Great Lakes states contain about 136 million acres of farmland,
representing a seventh of all land in farms in the United States and more than half the nonfederal
total land area of the states. U.S. Basin cropland and pasture area is estimated at about 28 million
acres. With almost 600,000 farms in the eight states (a quarter of the national total), the size of
the average farmstead is less than half of that for farms elsewhere. From an income perspective,
farmers in the region received more than $36 billion in cash receipts from farm commodity sales
with several billion dollars more in direct government farm program payments in 1989, or about
23% of the nationwide total.  Eighty percent of farm sales are tied to five commodities: milk,
corn, soybeans, cattle and calves and hogs.

With less than 10% of Canada's farmland, Ontario accounts for more than a quarter of the total
value of Canadian agricultural sales. The  1991  Census of Agriculture found  68,633 Ontario
farms, a 6% decrease since 1986. Total farmland amounted to 13.5 million acres,  a decrease of
4%  over  five years.   At  62% of total Ontario farmland, land devoted to crop production
decreased only slightly from the previous census, but it represents a substantially smaller relative
share of land  use  compared with that in the Great  Lakes states.  Much of Canada's  corn and
soybean production is  based in the province which  also grows about half  of the nation's
vegetables. Significant production niches in Southern Ontario exist for grapes, tobacco, tree fruits
and nursery products.

Great Lakes Basin agricultural productivity  and the quality of its forestry resources  could be in
jeopardy if significant climate change occurs. More so than for most occupations, farming entails
gambling  on the vagaries of weather and  climate.  Prolonged dry spells and seasonal droughts
have occurred throughout the Great Lakes region and disrupt agriculture and harm forests on a
periodic basis.  But the possible threat posed to area agriculture by CO2 -driven  global warming
and ozone depletion caused by man-made  gasses is  serious. There is evidence that over the last
100 years the average  surface temperature in the Northern Hemisphere  has increased 1° F and
the rate of warming is accelerating.  Another degree or two of increase may result in significant
climate change.  Interior continental areas  could experience longer, more persistent droughts,
rainfall patterns may change precipitously,  and on a positive note, the growing  season could
increase north of the 45th parallel.   For the Great Lakes region, a lengthened  growing season
might  be  offset by more  instability in rainfall amounts  and  planting/harvesting dates.  The
possible depletion of the ozone layer could compound the  impact on agricultural productivity if
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it parallels the "greenhouse effect." An increase in ultraviolet radiation may cause some food and
non-food  plants  to  lose  their tolerance to sunlight with disastrous  consequences  for the
environment.

A major agriculture-related problem for the Great Lakes  Basin is  soil erosion and related
sedimentation.   Exacerbated by  inefficient  and conflicting land management  practices and
policies, runoff and wind erosion result in substantial economic costs  and environmental harm.
Agricultural productivity  is reduced, resulting  in  lower yields  and/or  greater  fertilizer use.
Sediment transport and deposition degrades  water  quality, limits uses of water  resources and
incurs significant infrastructure costs, including harbor dredging. According to the 1987 National
Resources Inventory conducted by the U.S. Department of Agriculture, more than 63 million tons
of soil erode annually in the U.S. portion of the Great Lakes Basin. Much of this erosion comes
from the more than 20 million acres of Basin cropland.  In recent years more responsible land-
use practices in agricultural areas have  gained  only modest ground, but future prospects are
brighter as more demonstration  programs and  assistance  are directed to the problem.  The
Conservation Reserve Program and Great  Lakes  Basin Program  in the U.S.  and Ontario's
Conservation and Environment Protection Assistance Program, along with an array of other
measures  such as contour plowing, conservation  tillage,  vegetative and woodland cover in
erosion-prone areas, filter strips,  and sediment detention ponds,  have proved that progress is
possible.

Agricultural chemical use in the Great Lakes  Region is a difficult issue with both economic and
environmental consequences.  From row and field crop monoculture to specialty crops vulnerable
to disease and infestation, many  North American and Basin farmers are hooked  on chemical
pesticides, herbicides and fertilizers as a means to enhance yields  and maintain product quality.
Agricultural chemicals are ubiquitous in the rural landscape but are also  linked to urban areas:
the producing plants, the transportation  system, at distribution points and in the  human  food
chain.  Toxic contamination of food and water supplies and personal exposure to such hazardous
substances are  fast becoming major issues in agricultural  policy.   Even  though  modern
monoculture is dependent on chemicals, alternatives do exist. Reducing chemical concentrations
may affect yield but can also reduce input costs.  Mechanical weed control that concentrates on
emergent weeds is an option.  Time release and faster degradation formulations for chemicals can
reduce some risk to the environment. Integrated pest management  strategies and biotechnologies
that rely on natural control mechanisms such as enhancing predator/prey dynamics, sterilization
of breeding populations,  hormone control meshed with natural growth cycles and development
of disease and pest resistant corps and livestock are receiving increased  research attention and
are gradually being introduced in day-to-day agricultural practice.

Over the last two decades, the farms in the region have become more specialized, with domestic
production for export increasingly tied to larger-size farms.  Also, farm receipts from crop sales
have increased in response to export market growth. The vagaries of export demand, though,
have challenged producers. When farm income declines, rural areas and part of the nonfarm
economy also suffer because a large share of the farm sales are recycled  as a result of farmers'
purchases of manufactured inputs, labor and services. Although the marketplace is the principal
arbiter  of  agricultural   production,   government  policy   relating  to  trade,  commodity
production/price supports, soil conservation, habitat preservation, and rural development will play
a critical role in the future prosperity of the Great Lakes region's agriculture sector.
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4.4 Energy

As is characteristic of modern industrial societies, Canada and the U.S. are energy-dependent.
In the Great Lakes region, energy sources and consumption by end-use sector reveal particular
economic strengths and vulnerabilities.  Although all conventional energy resources are found in
the region, most of the area's  energy  is derived from  imported  fuel sources.   For example,
petroleum is the principal energy source for the Great Lakes states, representing about a 37%
share in the late 1980s, whereas regional production amounted to only 4% of consumption. More
than three-fifths of this petroleum use is consumed by the transportation sector, which accounts
for nearly one-quarter of all U.S. regional energy use. The sector's almost total dependence on
petroleum-based fuels raises serious questions about related pollution and future availability as
well as cost.  This level of petroleum consumption is likely to grow because of increasing use
by the transportation sector, coupled with decreasing use in other sectors.

Coal has the next largest energy share  at 30%.  It is the dominant energy resource available in
the Great Lakes states where nearly 29% of U.S. coal reserves are located.  Mining in the region,
which has been declining, is 20% of U.S. production, but the area consumes a third of national
production. Ontario has no coal mining, but imports low-sulfur Canadian coal and U.S. coal for
electricity generation and other  industrial production.  Coal usage  throughout the United States
has been  undergoing a  dramatic change  over the last two decades, primarily because of
environmental regulation that restricts the use of high-sulfur coal, the dominant coal found in the
Great Lakes region. To meet demand, the Great Lakes states must import coal, mainly from the
low-sulfur sources in the West.

Natural  gas and nuclear power are the  other principal energy sources in the region. The Great
Lakes states  use eleven times more  natural  gas than  they  produce.  The  commercial  and
residential sectors are more dependent on gas than other sectors, accounting for 49 and 60%
respectively of their total energy requirements.

Nuclear power as an  energy  source has grown dramatically in  the region. In the late 1980s,
nuclear power represented 8.6% of the Great Lakes states' total energy requirements, an increase
from just  0.4% in 1970.  With 41 of the nation's 110 operable nuclear generating stations, the
Great Lakes states have lessened dependence on fossil fuels for producing electricity. In Illinois,
13 nuclear plants produce about 50 percent of the state's electricity needs, highest for any Great
Lakes state. Ontario has  18 of Canada's 20 nuclear power plants. These plants generate more
than 50% of the  electricity used in the province, and new stations will increase the figure to
around 60% during the  1990s.  The region's use of nuclear power has eliminated the need for
an equivalent amount of electricity derived from other fuel sources—mainly coal and natural gas.
The proportionate reduction in  sulfur dioxide  and to a lesser extent carbon dioxide has had a
beneficial effect  on the environment, but problems with  radioactive waste disposal, particularly
for the used nuclear fuel, may offset air quality benefits.

The  principal renewable energy source used commercially in the Great  Lakes region is
hydropower tied  to  electricity  generation.  In Ontario, hydropower  represented 29%  of the
province's electricity output in  1992.   Among the Great Lakes  states, New York ranks first in
hydroelectricity production with three large facilities, an 800 megawatt (MW) plant on the St.
Lawrence River,  a  2400 MW plant on the Niagara River and a 1000 MW pumped storage


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facility, all  which supply  about 10% of the state's power demand.   New York, because of
electricity imports from Canada, also ranks highest in use of electricity derived from hydro
facilities—around 18% of total state use.  Michigan is second in production with most of its
hydropower output coming from a pumped storage plant at Ludington  on Lake Michigan.  This
facility, opened in 1973, is one of the largest in the world rated at 1872 MW and it complements
"baseload" coal fuel and nuclear generation capacity by providing electricity at peak periods.
Wisconsin, in contrast, relies on a system of more than 70 hydropower sites to generate about
4% of the state's electrical production.   Wisconsin's stake in hydroelectricity  is historic; the
world's first such central generating station was built there in 1882.

The Great Lakes states' industrial sector is the largest energy-consuming sector, with petroleum,
coal and natural gas all supplying between 25 and 30% of basic fuel needs along with electricity
at around 17%. Even though  the Great Lakes states have a concentration of energy-intensive
manufacturing such as steel, petrochemicals and automobiles, its usage in this  sector on a per
capita basis is less than that for the nation because of large energy efficiency improvements made
during the 1980s.  Changes in production processes and waste heat utilization have helped region
manufacturing operations maintain their competitive position as well as reduce their energy-use
impact on the environment.

The transportation sector's almost total  dependence on petroleum-based fuels raises serious
questions  about related pollution  and future availability as well as cost.  In  Canada and the
United  States, road transport  is the dominant mode  for fuel use dwarfing all other modes
combined (See Table 5).
                                        TABLES
                       TRANSPORTATION ENERGY USE - 1988
                                   (percentage  by mode)

                       MODE               Canada       U.S.*

                       Air                 8.4           8.7

                       Marine               5.4       .   5.9

                       Pipelines             7.1           3,9

                       Road                74.5          72.5

                       Rail                 4.6           2.3

       *      U.S. figures do not include off-highway use (2.9%) and military use (3.5%)

       Sources: Transportation Energy Data Book: Edition 11, Oak Ridge National Laboratory and Martin Marietta Energy
              Systems, Inc., U.S. Dept. of Energy, 1991, and Energy and Environmental Factors in Freight Transportation,
              Transport Canada, A.M. Khan, 1991.

Transportation is  also a major contributor to  air pollution, particularly for certain  pollutants.
According to the Organization for Economic Cooperation and Development, the transport sector
in Canada and the United States accounts for the following portions of total  North American
emissions:  71% of carbon monoxide; 47% of nitrogen oxides; 39% of hydrocarbons and 14%
of particulates.  Transportation vehicles contribute only a small percentage of another important
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pollutant, sulfur dioxide, and the amount varies  greatly depending on the sulfur content of a
particular fuel.  For the principal air pollutants, gasoline-fueled automobiles are the major sources
and urban areas the most heavily affected places.  However, freight transportation, dependent on
diesel fuel, makes a significant contribution to pollution levels but the impacts vary according
to mode and operations.

Fuel efficiency and emission control improvements across all modes are taking place spurred by
the relatively high cost of petroleum-based fuels and environmental regulation.  Also operational
changes such as optimal  routings for trucks and trains and better load management resulting in
fewer empty running miles have improved energy use and thereby reduced related pollution.
Automobile use remains the  most difficult transportation energy issue.   Principal  goals  are to
continue to increase  auto fuel economy, dampen  the growth in vehicle miles travelled through
increasing vehicle occupancy levels and more mass transit use and the gradual introduction of
alternative fuel vehicles with supporting infrastructure.

The region's electric utility industry is adapting to a new environment where the enormous costs
of installing new generating capacity have stimulated great interest not  only in conventional
demand-side management programs but in  securing alternate and flexible electricity supplies.
Matching generating capacity with demand is fraught with uncertainty  as evidenced  by  the
region's recent experience of capacity expansion coupled with periodic economic downturns with
less industry electricity use.  Regional per capita  use though, shows a steady upward trend.  In
the Great Lakes states, per capita electricity use increased 47.4% between 1970 and 1988 and in
Ontario for the period of 1970 to 1992, such use increased 49.9%. Utilities have aggressively
developed special rate programs to encourage less  peak period  electricity use  and  have
undertaken other efforts to support electro-technologies to improve efficiency of electricity use
by all  types of customers.  Arranging  for  flexible electricity  supplies  is a widespread effort
among utilities through a variety of mechanisms  including linkages with  nonutility generators,
building peak-load response facilities and retail "wheeling" of supplies from outside of service
territories. Cross border movement of electricity  between Canada and the Great Lakes states is
an important part of the region's supply picture. Electricity  trade between Canada and the U.S.
began  in 1901  at Niagara Falls, reached  a peak in  1987 and  for 1992,  Canada's exports
constituted 5.2% of total electricity generation.  U.S. exports are relatively small.  In 1992  the
Great Lakes states accounted for 30% of Canadian exports or 7.3 million megawatts.

The region's use of nuclear power has eliminated the need for an equivalent amount of electricity
derived from other fuel sources—mainly coal and natural gas.   The proportionate  reduction in
sulfur dioxide and greenhouse gases such as carbon dioxide has had a beneficial effect on  the
environment but radioactive  material disposal, particularly  for used nuclear fuel, has created
problems. The method of disposal and/or storage  of "spent fuel", the highly radioactive material
removed from  nuclear reactor  cores generated during periodic refueling, is a current issue at
several Great Lakes Basin nuclear plants. Eventually all plants will need to cope with mounting
quantities of spent fuel that have exceeded limited on-site, in-water storage capacity.  Because
of great uncertainty  as to availability of a national storage site, the nuclear power  industry  has
resorted to above ground, dry fuel storage facilities at nuclear generating stations. These facilities
are seen as only temporary  and as with nuclear power plants themselves there  is  a  risk of
radiation  release resulting  from natural calamities or sabotage as well as during removal and
transportation  of material.  A long-term issue of ensuring safe plant decommissioning with its
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complex planning requirements is another serious challenge for the utility industry.

4.5 Travel,  Tourism and Outdoor  Recreation

The Great Lakes, as a world-class freshwater resource, contribute to the region's global identity
and a comparable reputation for outstanding tourism and recreation opportunities. Business and
leisure travel along with  outdoor recreation make a substantial contribution to the region's
economy and quality of life.  Although travel and tourism respond to the business cycle and other
variables such as weather and gasoline prices, associated employment, personal expenditures and
tax revenue have been growing faster than for most other sectors in the region.  Such activity has
led to the establishment of a wide range of attractions, facilities and services.

The Great Lakes region benefits from a large intraregional travel flow, with nine out of ten non-
local trips completed within the province of Ontario or the  eight Great Lakes state region for trips
originating in their respective jurisdictions.   The proximity of the  international border  and
presence of major air transportation gateways also result in significant numbers of international
travelers in the  region: for example, more than half of Canada's international  visitors arrive by
way of Ontario.  The Great Lakes states account for around 40% of the U.S. foreign visitor total.

As for U.S.-Canada travel, the Great Lakes states generated 20.4 million person-trips to Canada
in 1992 or 63% of all such U.S. trips.  Great Lakes state travelers accounted for 4.7 million
overnight visits to Ontario, which represented about 75%  of all such U.S. visits to the province.
On the other hand, Statistics Canada data indicate that while nearly half of Canadian visitors to
the United States report a "presence" in the region, such  travel is dominated by day-only stays
and pass-through travel. Ontario travelers account for about three quarters of all Canadian visits
to the Great Lakes states.

For residents of the Great  Lakes region and visitors to the area, outdoor recreation is more than
a quality-of-life issue—it  is a way of life.  Many natural and cultural assets  of the  region  are
preserved and managed through separate state/provincial and national  park systems.  Of the 637
state parks in the Great Lakes states, 178 are located within the Great  Lakes Basin and of these,
110 have coastal locations.  On both sides of the border,  coastal parks represent a high amount
of park system destinations.  The natural beauty of the Great Lakes shore, with large tracts of
relatively undeveloped land, coupled with good highway access and proximity of population
centers,  have  promoted  recreation  and tourism-related  travel.    Through state-provincial
cooperation  in  the establishment of the  successful Great Lakes Circle Tour, a 6,500-mile
designated scenic road system, and the "North America's Fresh Coast" overseas visitor attraction
campaign, governments and  businesses have found unique ways  to tap into the Great Lakes
scenic attributes and coastal recreation potential.
The Great Lakes Basin, with more than 100,000 square miles of navigable water, anchors an
important and growing marine recreation industry.  The number of registered recreational boats
in the Great Lakes states was 3.84 million in 1992, or 349c of the U.S. total.  The number of
boats has increased by more than 570,000 since 1986.  No comprehensive, system-wide data on
Great  Lakes  recreational  boating activity  is available.   However,  using the  results  and
methodology of several university studies which addressed state-specific boating activity,  it is


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estimated that between 900,000 and 1 million U.S. and Canadian registered boats are operated
on the Great Lakes each year,  Michigan has the largest number of registered recreational boats
in the U.S. and surveys indicate that nearly a third of its "boat days" are tied to the Great Lakes,
even though less than a fifth of the boats are dedicated to exclusive Great Lakes use.  For the
Great Lakes alone, it is estimated that recreational boater direct spending is more than $2 billion
per year.

The recreational boating industry in the Great Lakes is represented by boat manufacturers and
retailers, marina operators,  marine business  suppliers as well as the millions  of recreational
boaters/anglers.  Retail boat/trailer, outboard  motor, and marine accessories sales for the Great
Lakes states amounted to more than $3 billion in the late 1980s, or more than a third of national
spending. In 1993, total sales were $1.5 billion or only 13.6% of the national total.  According
to the  U.S. Bureau of Labor Statistics, the eight Great Lakes states  account for about 6,000
private sector, marina-related jobs and 10,000 boat dealer and supplier jobs. Marina development
and related facilities in the Great Lakes have been expanding to keep pace with recreational boat
usage.   In Michigan, more than 750 marinas had been developed by the late 1980s along its
3,200 miles of Great Lakes  shoreline, representing a 20% increase from the late 1970s.  Many
of the boat facilities are part of residential waterfront developments. For lower Lake Michigan
these developments are accounting for around 1,000 new boat  slips a year.  A survey undertaken
by The Center for the Great Lakes indicated that 13,000 new slips were added around the Great
Lakes between 1986 and 1991 as part of waterfront projects.   Annual boat shows also play an
important part in industry promotion and local economic impact.

Another regional boating activity is the significant passenger vessel sector on the Great Lakes
and St.  Lawrence  River.  At present, several million people take these day excursions and ferry
trips during the navigation season. Overnight cruise passengers visiting Canadian ports on the
St.  Lawrence River reached a modern-day record of 51,000 in 1991. Passenger capacity for the
approximately  150 regularly  scheduled U.S.   and  Canadian  operations is  nearly  60,000.
However, passenger movement by vessel  mode is substantially  less than what  it  was when
immigrants boarded boats for westward  destinations and millions of travelers embarked on trips
during the famed "Resort Era" in the early twentieth century.  In the wake of current interest in
reviving the  overnight cruise  business, feasibility  studies  and marketing surveys  have been
completed indicating substantial demand for multi-day cruise service for the Great Lakes/St.
Lawrence System.

With a strong connection to boating, the Great Lakes sport fishery is a major part of regional
fishing  activity.    The 1991 National  Survey of Fishing, Hunting  and Wildlife-Associated
Recreation, conducted by the U.S. Departments of Interior and Commerce, indicated that 2.55
million U.S. anglers fished the Great Lakes that year.  Previous U.S. and Ontario  fishing surveys
indicate that the number of  freshwater anglers on the Great Lakes is declining overall but slowly.
The aging of the population  is a factor. The trend also appears among younger age groups partly
attributable to fewer people  in this population group. In 1991, Lake Erie had 35% of all Great
Lakes  anglers followed closely  by Lake Michigan at 34%.   Great Lakes connecting waters
attracted  10% of the anglers.  The U.S. survey projected  25.3  million days of fishing or an
average of 10 days per angler.  Michigan Great Lakes waters  accounted for 9.9 million days of
fishing or nearly 44% of the Great Lakes total. Two types of fish, walleye and perch, dominated
fishing activity together comprising about  70% of the time  spent fishing.  Great Lakes sport
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fishing results in a substantial economic impact, particularly for coastal communities that are near
the "hot spots."  For 1991, total U.S. Great Lakes fishing expenditures were projected at $1.33
billion. Trip-related expenditures, including food, lodging, transportation and guide/package fees
amounted to $869 million with equipment-related costs the remainder.  Expenditures per angler
were figured at about $500  for the year.  It is estimated that about half of Great Lakes sport
fishing is done from boats, some of which make up a growing charter fishing industry. Within
the last 20 years, roughly paralleling the growth in sport fishing, the number of fishing boats-for-
hire increased from 500 to more than 3000.

The Great Lakes Basin's tourism and outdoor recreation sectors are well-established, but face
many challenges. Climate change that translated into more seasonal temperature and precipitation
variability could have short or long term negative impacts for susceptible activities and places.
Other factors such as relatively low wage rates and benefits for many tourism jobs, particularly
in the accommodation and restaurant business and long-term and place-specific labor shortages
may significantly influence employment opportunity and small business stability.  Successful
planning by both the public and private sectors will be needed to meet these and other challenges.

One current issue with ramifications for the future concerns local and system-wide water quality
conditions  and  its impact  on  fishing  resources  and  the  perception  of marine recreation
opportunities.  For example,  the rapidly improving clarity of Lake Erie water, due, in part, to the
zebra mussel infestation, has made swimming, boating and fishing more enticing, but the mussel
may threaten the Lake's celebrated fishery. This nonindigenous bivalve  mollusc is an efficient
filter feeder and is altering levels of plankton and thereby could affect the Lake's food chain.
These problems along with  the mussel's colonization of hard surfaces, including  rocky shoals
important for walleye spawning, could create serious future fish resource problems.

The recreational boating sector has experienced long-term growth in the Great Lakes region but
particular issues may alter this trend.  Cyclical  swings in the national economy  tend to have
pronounced impacts on boat and equipment  sales.  These impacts reverberate  throughout the
coastal recreational economy.  Fewer trips or ones of shorter duration  translate into  fewer
restaurant meals and overnight lodgings as well as less gas and supplies purchased.  The current
smaller baby bulge compared with the parents  (baby  boom) generation may  dampen  future
boating trends and will  likely  manifest itself in different boating activities. For example, with
fewer young people fishing, recreational boating may lose some of its fishing connection and
larger boats used for cruising  may increase demand for transient slip usage.  Also, increasing
marina congestion tied  to transient boaters and new restrictions on shore home  building  and
marina construction could dampen Great Lakes boating  trends.

Other important issues relate to sufficient investment in and proper management of game/wildlife
and habitat resources and park lands in order  to maintain current levels of hunting and camping
activity, each with their significant economic benefits.   Many state and provincial parks in the
Great Lakes region have inadequate staffing  and funding for needed maintenance as well as
improvements.   Great Lakes-adjacent parks  are particularly vulnerable to funding problems
because of generally higher  visitation levels.  For example, in Michigan, coastal parks account
for 50% of total system attendance. As for hunting, habitat and game management practices are
becoming increasingly  important.  One forest managernent/deer habitat  issue that generates
controversy is old-growth forest versus traditional timber harvest policies. Ecologists are arguing
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for retention of more continuous acreage of post-mature forest to create greater environmental
diversity.  Unfortunately, this type of habitat does not support large deer populations.

The region's travel, tourism and outdoor recreation sectors have many unique challenges but also
opportunities for public and private sector cooperation. The region's natural features and cultural
heritage provide a solid base from which to develop diverse  and quality travel and recreation
facilities to serve visitors and residents alike.  As the prominent geographic feature and natural
resource for the region, the  Great Lakes represent an  invaluable asset for environmentally-
compatible recreation and tourism development.
4.6  Information and  Communications

Telecommunications services and facilities have played an important role in the Great Lakes
region since their introduction in the early part of this century. Initially limited to voice services,
telecommunications vendors today provide an increasing  amount of data and video services
utilizing  digital switching  and  fiber  optic  transmission  technologies.   The growth  of
telecommunications services and infrastructure in the region has been heavily influenced by both
advances in technology and policy, particularly on the U.S. side  of the Great Lakes.

The   breakup  of   AT&T  created  a  climate  of  greatly  increased  competition  in  the
telecommunications industry beginning in 1984,   Canada has  seen a similar trend towards
deregulation and increased competition, though the pace has been  slower. The divestiture of
AT&T's local Bell  operating companies led to greatly  increased competition in long distance
services but maintained government-regulated monopolies for local access.  At this writing, both
Congress and the Clinton administration appear determined to end the local access monopolies
and to bring the same level of competition in this area  that has  been seen in  the long distance
arena.

The trend towards  the use of digital  facilities for  data and video networking has accelerated
rapidly in the past  decade and is now the focus of a series of national,  state, and provincial
initiatives.  The most well-known of these, the National Information Infrastructure, introduced
by the Clinton administration, is aimed at nothing less than  transforming some of the most basic
ways  in which individuals and organizations access, process, and utilize information.  While
telecommunications and  information  initiatives have,  in  the past, typically centered on  the
telecommunications industry, the cable television industry is playing an increasingly larger role
in this area and is  likely  to be a strong  contributor to the  region's networking activities in the
future.

The Great Lakes region has been particularly strong in the development of data networking  and
Internet services.  These activities have their roots in a number of academic consortia but today
include regional and national telecommunications vendors,  cable TV companies, and a growing
number of entrepreneurial organizations.  Beginning  with the Merit Computer Network in
Michigan, which became operational  in 1972, today every state and province has at least  one
state-wide data networking organization. This has resulted  in the phenomenal  growth of sites in
the region connected to the Internet from less than  150 in 1990 to almost 1,000 today. Internet
services are supported by  a combination of customer fees and state, provincial, and federal grants


A changing Great Lakes Economy - SOLEC Background Paper                                31

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with total spending exceeding $30 million.

One notable use of the region's Internet capabilities was the establishment of the Great Lakes
Information Network (GLIN) in 1993. GLIN is used to link the region's environmental scientists
and policymakers and is operated by the Great Lakes Commission and CICNet under a grant
from Ameritech Foundation.  Currently, GLIN provides access to data at numerous state and
federal agencies, the International Joint Commission, the USEPA's Great Lakes National Program
Office, and other organizations. Information housed on GLIN is accessible by anyone on the
Internet.

The use of telecommunications technology in support of distance education and curriculum  is
another important trend  that  is quickly  gaining momentum throughout the region.   At the
community, provincial, and state level there are numerous projects underway using data and
video networks to bring  a wide variety of educational resources into  schools, businesses, and
homes. These activities range from the use of electronic mail for international pen pal programs
to access to full-color, real-time weather images for high school science classes,  to the offering
of entire  graduate programs in the workplace.

Telecommunications and computing  technology  continues to grow in  its potential to influence
the lives  of residents in the Great Lakes region. With this growing potential comes a number
of important issues that merit careful attention.  Perhaps the most important is the delivery  of
information to the home.  Until now, information  and telecommunications vendors have been
divided into local and long-distance  telephone services  and cable TV  services.   As a result  of
continued deregulation and technological advances, these divisions are likely to disappear quickly
during the last half of this decade leaving the consumer with the advantage of a more competitive
marketplace but the disadvantage of a much more confusing set of services and, potentially, less
assurance of uniform service offerings in rural areas of the region.

Another issue that is of critical importance is the use of these new telecommunications services
in educational activities.  Two-way video and access to the global Internet hold the potential for
a greatly expanded slate  of educational resources for students in both  urban and rural settings.
At the same time, the region's educators  and policymakers need to understand  the most cost
effective way  to  deploy  these services in  order to avoid large expenditures on technological
services  that do not deliver the necessary educational improvements.  Finally, the business
community's incorporation of telecommunications technologies as strategic tools that can provide
the Great Lakes region with a competitive edge in a wide variety of business sectors is expected.
Data networking, in particular, as well as video and voice services, hold  the potential to transform
the way in which business is conducted.
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5.0        infrastructure  Issues
Adequate  infrastructure  is the foundation that supports and  sustains most economic activity.
There is widespread recognition of the importance of infrastructure for economic growth, but
questions regarding the magnitude of the effect remain.  Studies have shown that infrastructure
stimulates local development and also acts as an ingredient in the business attraction recipe. The
environmental benefits and  costs  that  accrue from infrastructure  development  underline the
important connection between the economy and environment.

Concern about the level  of investment in public works infrastructure such as roads, sewers and
water supply systems,  has become a major public policy issue.  An aging infrastructure, coupled
with tightening governmental budgets, has produced a widening gap between needs and existing
facilities.  During the 1980s, several U.S. infrastructure needs studies were completed.  The
general findings were:

      •      the nation's vast infrastructure has been maintained unevenly;

      *      many public  facilities have not been maintained adequately and are in  such
             disrepair as to pose risks to public health  and safety;

      •      the problem is widespread, not confined to a few categories, or certain cities or
             geographic areas; and

      •      the cost of meeting future demands  for public infrastructure will be very high.

All levels  of government have a role in providing  and maintaining  public works projects.  The
guiding  policy for infrastructure investment has  been  to  assure an equitable distribution of
services through the efficient use of resources. These  "services"  not  only support economic
activity but are an important factor in enhancing the quality of life. Public works expenditure
trends over the past two decades indicate that the growth of such investment has slowed due to
shifting public expenditure priorities. Today, infrastructure investment as a percent of total public
expenditures is less than half of what it was in the mid-1960s. A fall-off in capital spending,
coupled with rapidly increasing expenditures for maintenance of the existing capital base, reflects
the gradual maturing of  the public works capital plant.

Overall infrastructure investment requirements are growing. Although infrastructure needs vary
from place to place and according to category, future investment decisions will be constrained
by fiscal limits and political considerations concerning environmental and social  equity  issues.
Replacement and rehabilitation costs will account for most of the needed  investment.  Continuing
dispersal of economic activity, abetted by population growth  and migration along with new safety
and environmental standards, will contribute to escalating investment requirements. For example,
a study funded by the Clean Water Council, a lobby organization, estimated that $167 billion will
be needed  between 1990 and the year 2000 to  achieve  U.S. water quality and waste water
treatment standards currently in force, as well as those expected to be adopted over the period.
About half of this amount is  expected to be available through the usual capital expenditure
channels.  For the eight Great Lakes states, the total shortfall is S36.7 billion, or more than 46%
A changing Great Lakes Economy - SOLEC Background Paper                               33

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of the national total.

The transportation sector encompasses a major part of the infrastructure picture.  Other than the
freight rail and pipeline modes, much of the transportation sector's infrastructure is publicly
funded and accounts for between two-thirds and three-fourths of the identified U.S. infrastructure
investment requirements.  Construction  and maintenance  of the national  road system is  an
immense  task not only dollar-wise, but in terms of  manpower deployment and  materials
requirements.    Seventy-three  percent  of  all  government  expenditures  for transportation
infrastructure are spent on the road system. The Great Lakes states, with 923,000 miles of public
roadway, have a relatively dense road network compared with the nation as a whole.  Seventy-
eight percent of the road miles is concentrated in rural  areas, and reflects the influence of the
township and range land survey system as well as the historical development of  farm-to-market
access.   The region's road  and bridge  system has a  continuing  need for  repair  including
replacement.  An estimated one-third of the  region's bridges are deficient.  Freeze-thaw cycles
wreak  havoc on road and bridge  structures.   Damage to vehicles  and weight restrictions,
particularly for rural farm areas, add up to significant costs for the transportation system.

Transportation services depend on an adequate infrastructure base, one well-suited for its intended
purpose. More pavement and roadway mileage has been the traditional means through which this
need was met for  the highway mode. The relentless growth in  vehicle miles traveled and the
number of vehicles is creating significant capacity problems. Improved road system efficiency,
including more  traffic  monitoring  and control, use of "smart  vehicles" and  congestion fee
policies, has been a major planning tool.  Such  an efficiency approach can work for all other
transportation modes.  Multimodal and intermodal operations have become commonplace in
freight transportation, recognizing the inherent efficiencies and cost advantages for individual
transport options.   With transportation  as an energy intensive  activity,  a  major  generator of
pollution  and a  big consumer of land,  the  need to seek  environmentally  friendly  movement
alternatives is required if the  goal of a sustainable  society  is to be realized.

Technology is transforming the production, consumption and distribution of goods  and services.
The rapidly changing circumstances of economic activity necessitates a more flexible approach
to infrastructure development.   Market mechanisms,  as they are gradually introduced to the
infrastructure decision-making process, show promise in making efficiency a major criterion for
infrastructure investment. No longer should political muscle be the chief determinant of the what
and  where of  infrastructure.   Building  infrastructure to last  with a  greater emphasis  on
maintenance  and  design efficiency  will channel and preserve  capital flows.    Long-term
management  strategies are needed to preserve  system integrity and maintain environmental
benefits.
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6.0       Sustainable  Development
6.1  Public Policy

The abundant natural resources on which the regional economy was founded continue to sustain
it, even though resource depletion and degradation have taken their toll.  Excessive timber
harvest, overfishing in the Great Lakes, extensive cropland development, destruction of wildlife
habitat, air pollution, soil and water contamination and other man-induced challenges to nature
are all part of the region's history of development.  Over the past twenty years, the regional
economy has changed considerably, becoming more diversified but less robust in many sectors.
During this time, concern about environmental conditions  in the Basin came to  the fore.
Increasing public awareness of environmental issues and aggressive  environmental  regulation
combined to focus attention on environmental - economic linkages and have led some to explore
"sustainable development" concepts.

Sustainable development, based on the interdependence of the economy and the environment and
aimed at  achieving their mutual sustainability, is both a policy and practice.  It calls for a way
of life that meets the needs of the present without compromising the ability of future generations
to meet their own needs.  The basic concept was nurtured through  countless individual and
organizational efforts, but it received full-fledged expression with  publication of Our Common
Future, the 1987 report of the World Commission on Environment and Development.  Under the
leadership of Norway's Gro Brundtland, the Commission's efforts focused world attention on the
reality of accelerated population growth,  a limited resource  support  base, and environmental
degradation.

The  global implications of "business as usual"  were reemphasized at  the  United Nations
Conference on Environment and Development held in Brazil in 1992.  Following these efforts,
individual countries have identified  sustainable development as a goal and are beginning to
develop appropriate policies.  In the United States, a President-appointed  Council  has been
established with a mandate to recommend federal sustainable development policies by summer
1995. In December 1990, Canada released its environmental action plan or "Green Plan" which
expressly identifies sustainable development as a government and society objective. In releasing
the Green Plan, the Prime Minister said:   "The challenge we now face is to build  upon  our
economic strengths in  harmony with our environment,  the basis of our health and prosperity.
Every Canadian has a role to play in achieving this goal of sustainable development."

6.2  Institutional  Arrangements

The evolution of the region's  socio-economic status has both shaped and been shaped by an
elaborate system of governance that transcended traditional political boundaries to recognize, on
a binational basis, shared environmental and economic characteristics. In fact, the Canada-United
States  boundary within the  Great Lakes  region  has long been  the  locus  for  extended
experimentation in political, diplomatic and institutional endeavors.
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The origin of such experimentation is found in the earliest years of U.S. constitutional history
and relations with Great Britain and, for the  most part, was motivated by shared interest  in
economic development. For example, in  1895  the two countries established a Deep Waterways
Commission to investigate the feasibility of constructing a seaway to permit transportation access
from the Great Lakes to the Atlantic.  This entity later developed into the International Joint
Waterways Commission (1903)—a precursor of the International Boundary Waters  Treaty  of
1909 and its implementing agency, the International Joint Commission. More recently, interstate
deliberations in the mid-1900s leading to the formation  of the Great Lakes Commission were
promoted by an emerging sense of regionalism brought about in  large  part by the impending
opening of the St. Lawrence Seaway. The formation of the binational Great Lakes  Fishery
Commission during that same period was  the culmination of a long-standing economic concern:
the decline of the commercial fishery. More  recently, the formation of the Council of Great
Lakes Governors in the early  1980s was fueled in part by the  midwest's shared  economic
recession and recognition pf the benefits of collective action.

While resource management and environmental protection issues  have been of concern at the
binational level for many  decades, it is generally  agreed that issues of economic development
were the  principal  catalyst  for early binational  institution-building  efforts.  Recognition  of
environmental/economic linkages,  in fact, is explicit in  the  enabling legislation for  all of the
above mentioned institutions.  Thus, it can be argued  that the conceptual basis for sustainable
development has been established for some time, although its emergence as a pre-eminent guiding
principle in Basin governance is a  recent  phenomenon.

The decade of the 1980s distinguished itself as a turning point for sustainable development at the
basin level. A renewed regional consciousness was sparked and sustained by the emergence  of
complex resource policy and environmental issues (e.g., diversion and consumptive  use, toxic
contaminants), and a sense of desperation brought on by prolonged economic recession.  The
latter found the region's leaders as unwitting shareholders in an economy characterized by the
decline of the industrial base, high  unemployment, and poor future prospects due, in part, to the
strength of overseas industrial  competition and  the competitiveness of the "sun  belt" states.
These same leaders—most notably the governors and premiers—found in the Great Lakes a hope
for the  future.   A  shared resource with unique  and under-utilized  characteristics,  the lakes
represented a common bond between  the jurisdictions, symbolizing the strength and  resiliency
of the region as  well as its untapped potential.   It was recognized that the region  could not
support a strong economy without  a well-managed, high-quality natural resource base.  In turn,
it was recognized that the region could not afford a well-managed resource without a strong
economy and associated tax base.

As Ecosystem management principles and practices have become  increasingly important in the
Great Lakes Basin, a parallel need for sustainable development has also been identified by a wide
range of organizations  and groups.  For example:

       In late  1992, the  Ontario  Round  Table on Environment  and Economy submitted  its
       strategy for sustainable development to the Premier and  the people of Ontario.  This
       farsighted  plan proposed   many  innovative   ideas  on  how  to develop a  more
       environmentally-responsive  economy  and  emphasizes industrial and  governmental
       accountability as sustainability goals are established and achieved.
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       In 1993 the Chairman of the Council of Great Lakes Governors, Ohio Governor George
       Voinovich said in his Annual Chairman's Report:  "Over the last decade, the Great Lakes
       Governors have articulated a vision of the region as a world leader in natural beauty and
       economic might. It is a vision that recognizes that the restoration and protection of the
       Great Lakes is dependent upon a world-class economy. A vibrant manufacturing base,
       utilizing advanced  technologies and highly  skilled workers,  is essential to meet  the
       ultimate environmental objectives  of  the region.  At the same time, the  Governors
       recognize that the health of the Great Lakes  is central to the region's economic future.
       The region's industries will be not be competitive in the world economy, unless they are
       world leaders in clean, sustainable production."

       The International Great Lakes St. Lawrence Mayors' Conference adopted a sustainable
       development resolution  at its  1993  Annual  Meeting in  Montreal.  This binational
       organization urged  the regional leadership in the Great Lakes-St.  Lawrence Basin "to
       develop a plan  to convert the concept of sustainable  development into  an agenda for
       action"  and to identify  a "regional  laboratory"  to  demonstrate  the application  of
       sustainability principles.

       In January 1993, the Regional Council of Hamilton-Wentworth, Ontario, adopted the final
       report  of the Chairman's  Task Force  on  Sustainable  Development as a basis for all
       decision making.  Entitled, VISION 2020: The Sustainable Region, this report was the
       result of 2-1/2 years of study, involving more than 1,000  citizens.   VISION 2020 is an
       expression  of a desired future for the  community and provides  everyone,  including
       citizens, elected representatives, business leaders, public servants, and local agencies with
       a common  goal.  The report is  wide ranging with more than  400 recommendations
       covering topics  such as, natural areas,  water  and  air quality, waste reduction, economic
       change, transportation, agriculture, and community empowerment.

       The Environmental Defense Fund's Great  Lakes Pollution  Prevention  Alliance has
       targeted its current  collaborative efforts toward  the fostering of sustainable activities
       including reducing  toxics use, increasing transportation efficiency and promoting social
       justice and  safe employment in livable communities.

       The Minnesota  Sustainable Development Initiative launched in early 1993 is  a broad-
       based effort with strong state agency support. The goal of the Initiative is to assist the
       state's Environmental Quality Board as  it develops a Minnesota Strategic Plan for the
       Environment and the Department of Trade and Economic  Development as it revises its
       Economic Blueprint for Minnesota.  Seven Initiative Teams have been  designated, each
       responsible for  a specific  economic sector. A "Congress" was held in early 1994 where
       interested individuals and organizations advised the Initiative teams.

       Surveys and reports from around the Great Lakes region indicate  growing private and
       public  sector  interest  in sustainable  development,  particularly   at  the  local  level.
       Neighborhood projects and community-wide activities are experimenting with selected
       sustainable  development  practices ranging from waste reduction  to  zoning  changes.
       Futuristic models and visioning exercises have also become part of these efforts.
A changing Great Lakes Economy - SOLEC Background Paper                               37

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       One manifestation of strengthening environmental economic linkages in the region is the
       emergence of a substantial "environmental industry" sector.  Many new firms have been
       established that specialize in resource conservation, pollution remediation and reduction
       technology and other goods and services intended to help the economy reduce its negative
       impact on the physical and social environment.  In Ontario  alone, these industries are
       already the third largest employer.

       The Great Lakes Commission,  in  cooperation with  many  regional organizations, is
       coordinating development of an Ecosystem Charter for the  Great Lakes-St. Lawrence
       Basin, The charter sets forth a series of principles and commitments to improve  and
       sustain the environmental health and  economic viability of the world's greatest freshwater
       system. Signatories  will use the charter as guidance in the development of their work
       plans and priorities, as a means to enhance communication and cooperation with other
       stakeholders,  and as a benchmark for assessing  progress toward a shared vision for the
       Great Lakes-St. Lawrence Basin Ecosystem.

Recognition of economic/environmental linkages in resource management and protection is
increasing within the Great Lakes  "institutional ecosystem,"  and  is generally  reflected in
Remedial Action Plans, Lakewide Management Plans and a host of other initiatives.  While such
recognition is a necessary condition for sustainable development, it is not a sufficient one.  Many
agencies and  organizations  at  various levels  have  embraced  the concept of  sustainable
development, however defined, but have found the leap from concept to application to be a
formidable one.  Sustainability, as an outcome, can be achieved when environmental protection
is fully integrated with economic activity so that a sound basis exists for future development.
Wise and efficient use of resources and emphasis on pollution prevention, quality production and
effective information dissemination are considered necessary measures if harmony between the
economy and environment is to be established.

The  relative sophistication  of  the Great Lakes  institutional  ecosystem  has   provided  a
supportive—albeit sometimes painstaking—vehicle for the gestation of management innovations.
Within this arena, principles of sustainable  development will be formulated, tested  and applied
over time.   Case  studies to date suggest  that sustainable development principles are most
effectively applied at a local level, either on a small watershed or community basis. Ensuring
that an adequate institutional infrastructure  exists at these levels is a priority concern.
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7.0       RECOMMENDATIONS
Based on informal peer review of this paper and comments received from participants at the
SOLEC meeting in October 1994, the authors believe some changes to the paper are warranted
if another version is prepared for the next SOLEC meeting.  These recommendations are made:

Data
Although this paper takes  a broad view of the binational regional economy with an emphasis on
descriptive economic data, more information and analysis of demographic trends and land use
should be included.  Settlement patterns and trends particularly for suburban and urban areas
should be discussed in greater detail as this information is pertinent to the overarching trend of
urbanization within the Great Lakes Basin.  More discussion  of trends  in agricultural  land
conversion and loss of open space and natural habitat would be appropriate.

With respect to  industry sector profiles, several  additions are recommended and more in-depth
discussion of particular industry  clusters within sectors is  needed.  Selection criteria should
include but not be limited to industry's relative  importance to the Great Lakes region in terms
of employment,  production share, value-added factors, utilization of natural resources inputs and
regional environmental impact.  Particular industry clusters within the broad sector categories to
be considered are: chemicals and petroleum refining, pulp and paper, mining, fisheries and the
commonly referred  to  category "green industries"  covering both manufacturing  and service
companies  engaged in  pollution  prevention/control, remediation,  response  and  resource
conservation activities etc. All of these industry groups have a substantial presence in the Great
Lakes region and connection to natural resources.  Pollution issues and related trends associated
with these industries are  closely  tied to implementation of the binational Great Lakes Water
Quality Agreement and deserve more attention in the next SOLEC paper.

Discussion of industrial and municipal water use should to be expanded. Industry water use in
the Great Lakes Basin is intensive because of the particular industry mix and availability.   Also
major changes are occurring in industry water use such  as more recycling which have significant
implications for  Great  Lakes water quality.  Discussion of municipal water treatment issues
including levels of infrastructure  investment and treatment concerns should be expanded.   For
example, some  review of Great Lakes water  supply for  non-industrial  purposes would be
appropriate.  Also, examples such as the cryptosporidium outbreak in Milwaukee in 1993 and
zebra mussel infestation of water intakes could be  used to illustrate investment requirements
related to water supply  and treatment.

Native American Authorities/First Nations
Several SOLEC participants indicated that more discussion of tribal  economic activities on
reservations is needed.  Business/industry recruitment  efforts and employment levels could be
addressed.   Gaming and casino development  should be  addressed.  The "information  and
communications" sector discussion in this paper could be expanded to include a description of
the Great Lakes Regional  American Indiana Network, a current project designed to promote and
support Internet connectivity on regional reservations.

Public Policy and Sustainable Development

A changing Great Lakes Economy - SOLEC Background Paper                               39

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A more thorough review of activities intended to foster sustainable development that are under
way or planned in the Great  Lakes Basin would be desirable. These activities would include
discussion of major pollution prevention initiatives involving key industry sectors and innovative
public-private  partnerships.  Waste generation, at all levels of society and activities  aimed at
reducing it, should be discussed.  Coverage of federal policy developments on this issue would
be appropriate. The President's Council on Sustainable Development policy recommendations
scheduled for  summer 1995  and related federal agency  efforts will provide much additional
information  of value  for the  next SOLEC meeting.  For example, appropriate economic and
environmental data sets by which to measure progress toward sustainable development are being
developed as part of  this effort.   Also, the Department  of Commerce's Bureau of Economic
Analysis is developing economic and environmental satellite accounts which will consider natural
and environmental resources as productive assets, therefore providing a means to measure their
contributions to national income, production, consumption and wealth.

The  issue of cost effectiveness of environmental regulations relates to sustainable development
polices but may need to be addressed in a separate section. A review of the basic arguments for
and against  cost  benefit analysis of such regulations would be appropriate.  Perhaps the Great
Lakes Water Quality Initiative could be used as a case study example of how this issue could be
applied.  Also, more discussion of the impact of environmental regulation of key region industries
along with its  effect on interregional competitiveness would be appropriate.
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8.0       CONCLUSION
With all its diversity, strength, and common ground, the Great Lakes region is a remarkable and
unique place.  This impressive economic region, rich in resources—people,  industry, natural
resources and institutions—is challenged by the need to maintain its strengths and pursue new
opportunities.  Throughout the region's notable history, challenges  were met and difficulties
overcome.  Now, the continual quest  for economic growth and prosperity reckons with the
realities of the international marketplace and environmental protection.  Uncertainty, whether it
pertains to personal economic circumstances, the welfare of community or the flux of national
politics, is ever-present.  Faith in the future may be an age-old expression, but for Great Lakes
region residents, it is as  fresh and forceful as the new day it heralds.
A changing Great Lakes Economy - SOLEC Background Paper                             41

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Congress  of the  United States. Office  of  Technology  Assessment.   Delivering  the Goods:   Public  Works
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Dawson, Chad P. (Syracuse University) and Brown, Tommy L. (Cornell University). The Demand for Great Lakes
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                          The  Great  Lakes Basin
        . MINNESOTA,'
                ; WISCONS
                                              N
     -75 0
             MO ton
                                                            Legend
                                                           H Great Lakes Basin
                                                           ~~ Sub-Basin Boundary
                                                           •  Provincial and State Boundaries
Figure 1. The Great Lakes Basin

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        United States
        Canada
Figure 2. Population of the Great Lakes Basins

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                                                                          1990
Figure 3. Total Employment by Lake Basin.

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                                                                                              WO    -i 1980     1990
                                                                  1970     1990     1990
Figure 4.  Manufacturing Employment by Lake Basin,

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Figure 5.  Service Employment by Lake Basin.

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