Canada-United States Law Journal Volume 37 Issue 1 Article 8 2012 Public-Private Partnerships for Promotion of Cross-Border Trade and Transportation David Lick Roger E. Hamlin Follow this and additional works at: https://scholarlycommons.law.case.edu/cuslj Part of the International Law Commons, and the Transnational Law Commons Recommended Citation David Lick and Roger E. Hamlin, Public-Private Partnerships for Promotion of Cross-Border Trade and Transportation, 37 Can.-U.S. L.J. 171 (2012) Available at: https://scholarlycommons.law.case.edu/cuslj/vol37/iss1/8 This Article is brought to you for free and open access by the Student Journals at Case Western Reserve University School of Law Scholarly Commons. It has been accepted for inclusion in Canada-United States Law Journal by an authorized administrator of Case Western Reserve University School of Law Scholarly Commons. PUBLIC-PRIVATE PARTNERSHIPS FOR PROMOTION OF CROSS-BORDER TRADE AND TRANSPORTATION By: David Lick & Roger E. Hamlin I. INTRODUCTION Although a simple concept at its core, implementing public-private part- nerships ("P3s") can be complex legally, financially, and organizationally. While expertise, power, and financial capabilities on each side complement one another, the cultural differences between public participants and private participants are great.' Now, more than ever, cross-border trade between Canada and the United States and between Mexico and the United States is imperative for North America to compete in the global marketplace. 2 Use of public-private partnerships holds out great promise for promoting the crea- tion of the infrastructure and facilities needed to promote cross-border trade. Yet this approach adds a new layer of complexity due to the interfacing of differing business cultures and public approaches.4 This is really the first time in history that Canada and the United States are jointly pursuing the implementation of public-private partnerships for this purpose.s This en- deavor will require a rich blend of innovative thinking and diligence. Some old approaches to promoting trade may need to be set aside. Some recent experiences suggest that the great possibility of public- private partnerships can be realized for the benefit of both countries, albeit with many lessons learned along the way. The broad purpose of this paper is to organize knowledge about this subject so as to offer guidance, promotion, See generally ROGER E. HAMLIN & THOMAS S. LYONS, ECONOMY WITHOUT WALLS: MANAGING LOCAL DEVELOPMENT IN A RESTRUCTURING WORLD 3 (1996) (stating the goals sought by public and private participants). 2 See generally N. AM. COMPETITIVENESS COUNCIL, ENHANCING COMPETITIVENESS IN CANADA, MEXICO, AND THE UNITED STATES 12 (2007), availableat http://coa.councilof theamericas.org/files/editor/image/grpl 0_4.pdf (stating that encouraging cross-border trade through the North American Free Trade Agreement is essential to protecting the citizens of Mexico, Canada, and the United States). See generally MICHAEL KERGIN & BIRGIT MATrHIESEN, CAN. INT'L COUNCIL, BORDER ISSUES REPORT: A NEW BRIDGE FOR OLD ALLIES 8-9 (2008), available at http://www.open canada.org/wp-content/uploads/2011/05/A-New-Bridge-for-Old-Allies-Michael-Kergin- Birgit-Matthiesen.pdf (stating that public-private partnerships are a useful means of improving infrastructure, specifically for cross-border facilities). 4 See, e.g., id. at 8 (stating that the future of the Detroit River International Crossing may be subject to various cultural differences between Canada and the United States). 5 Press Release, Fact Sheet: Security and Prosperity Partnership, U.S. Dep't of Homeland Sec. (June 27, 2005), available at http://www.dhs.gov/xnews/releases/press_ re- lease_0695.shtm. 172 CANADA-UNITED STATES LAWJOURNAL [Vol. 37, No. I] and prudence to all who might benefit from the use of public-private partner- ships for the promotion of United States-Canadian and United States- Mexican cross-border trade through infrastructure and facility development. A. Public-Private Partnerships: The General Concept The concept of public-private partnership is a simple one with a long his- tory.6 It has been used in nearly every realm of community activity, from business promotion7 to health care to public service privatization8 to infra- structure development.9 At its core, the concept simply means public entities and private entities working together for mutual benefit.'o The mutual benefit on the public side is defining and achieving public goals." On the private side, rewards may include public relations, financial, and ego benefits. A desire to find win-win situations is the most important motivator of public-private partnerships, and, therefore, a zero-sum-game mentality is one of the greatest enemies of pub- lic-private partnership success.12 Perhaps the two most important aspects of successful public-private partnerships are: (1) the sharing of complementary powers and expertise and (2) the sharing of risks and rewards.' 3 In essence the public sector must define the goals of the community and look for ways in which partnering with one or more private entities might promote those goals.14 Often this means creating inducements for private 6 See THOMAS S. LYONS & ROGER E. HAMLIN, CREATING AN ECONOMIC DEVELOPMENT ACTION PLAN 42-43 (2001) (stating the history of public-private partnerships). 7 See generally HAMLIN & LYONS, supranote 1, at 69-70 (stating that public-private part- nerships are used to assist in business development) (1996). 8 See generally Roger E. Hamlin & Bogdana Neamtu, Policy Tools for Urban Redevel- opment: Public-PrivatePartnerships, 15 TRANSYLVANIAN REV. ADMIN. SCl. 107, 107-120 (2005) (stating ways in which public-private partnerships could be used to revitalize urban areas). 9 See, e.g., WILLIAM REINHARDT, THE ROLE OF PRIVATE INVESTMENT IN MEETING U.S. TRANSPORTATION INFRASTRUCTURE NEEDS (2011) (stating the various uses of public-private partnerships in the United States for transportation infrastructure). 10 RESEARCH & POLICY COMM., COMM. FOR ECON. DEv., PUBLIC-PRIVATE PARTNERSHIP AN OPPORTUNITY FOR URBAN COMMUNITIES 2 (1982). 1 See id. at 2-3 (stating that the policy dimension of public-private partnerships are based on civic foundations). 12 See id. at 2 (stating that the purpose of public-private partnerships is to facilitate public goals with private resources by allowing private entities to simultaneously promote their goals). '3 See LYONS & HAMLIN, supra note 6, at 16, 20 (stating that risk and reward sharing is imperative to development, and that efficient public-private partnerships require the allocation of skills and resources). 14 See RESEARCH & POLICY COMM., supra note 10, at 2 (stating that the public sector must define community goals, and utilize the private sector in ways that will result in an effective public-private partnership that mutually benefits both parties). Lick & Hamlin-Public-PrivatePartnerships 173 entities to behave in ways that promote the public interest while achieving their own ends.' 5 P3s are often seen as the carrot side of a government's "carrot and stick role." Inducements are not always financial and do not nec- essarily have to cost the general public anything.' 6 But on the financial side, the best inducement is the promise of a revenue stream. A revenue stream enables the private entity to either benefit over time, or to capitalize and sell to others in the present. This facilitates a way of raising revenues for the project. 17 Ultimately, the revenue stream is the source for paying back both private debt and equity capitalists for providing financing.' 8 All activities carry some risk.'9 At the same time, investors, developers, and private business operators are always looking for opportunities. These private entrepreneurs are naturally attracted to activities where the potential revenue stream, or rate of return on investment, is sufficient for the amount of perceived risk.2 0 Therefore, capital will flow to activities where the per- ceived reward-to-risk ratio is best. Since: (a) the flow of capital around the entire globe is very fast and liquid; 2 1 (b) substantial capital is currently avail- able world-wide, but is often pinned down by a risk averse global posture; 2 2 (c) many excellent and important projects, programs, and business ventures are in need of capital; 23 and (d) implementing these projects is critical to in- 15 See Julia Paschal Davis, Public-PrivatePartnerships, 44 PROCUREMENT L. 9, 9-10 (2008) (stating that public-private partnerships are used to achieve public goals while allowing private entities to profit). 16 See Nestor M. Davidson, Values and Value Creationin Public-PrivateTransactions, 94 IOWA L. REv. 937, 953 (2009) (stating that there are a wide range of private sector induce- ments). 17 See CAN. COUNCIL FOR PUB.-PRIVATE P'SHIPS, BUILDING A BETTER TOMORROW THROUGH PUBLIC-PRIVATE PARTNERSHIPS 10 (2004), available at http://www.pppcouncil. ca/pdflontgov.pdf (stating that revenue is essential to attract the private sector). See e.g., Davis, supra note 15, at 10 (stating that legislatures have allowed debt to be paid from future revenue). 9 See e.g., CORRIGAN ET AL., URBAN LAND INST., TEN PRINCIPLES FOR SUCCESSFUL PUBLIC- PRIVATE PARTNERSHIPS 13 (2005), availableat http://www.uli.org/ResearchAndPublications /Reports/-/media/Documents/ResearchAndPublications/Reports/TenPrinciples/TPPartnershi ps.ashx (stating the various risks associated public-private partnerships). 20 Id. at 14. 21 See e.g., WORLD BANK, MULTIPOLARITY: THE NEW GLOBAL ECONOMY 133 (2011), available at http://siteresources.worldbank.org/INTGDH/Resources/GDH_ Com- pleteReport201 I.pdf (stating that the United States has a liquid and at times rapid flow of capital). 22 See generally EMILIA ISTRATE & ROBERT PUENTES, MOVING FORWARD ON PUBLIC- PRIVATE PARTNERSHIPS: U.S. AND INTERNATIONAL EXPERIENCE WITH PPP UNITS 1 (2011) (stating that the enthusiasm to invest has declined due to less resources and political unwill- ingness to search for other resources). 23 See e.g., GREAT LAKES COMMISSION, FEDERAL SUPPORT NEEDED TO ADDRESS WASTEWATER INFRASTRUCTURE DEFICIT IN THE GREAT LAKES-ST.