MMD

Message to Canada: Develop a North American logistics gateway

Asia Pacific Foundation calls for investment and collaboration


prince_rupert

VANCOUVER, British Columbia—Saying Canada doesn’t do enough to capitalize on the movement of goods between Asia and North America, the Asia Pacific Foundation is calling for the public and private sectors to come together and turn the country into a major logistics hub.

In a report entitled “Seizing the Continent: Opportunities for a North American Gateway”, the foundation calls for a unified approach to better utilize already existing capacity and capability and build up the existing infrastructure to create efficiencies and encourage more North American-bound trade to enter the market through Canadian facilities.

According to the report:

“The NAG has immense possibilities for Canada. Companies along the global supply chain—exporters, manufacturers, retailers, shippers, terminal operators, ocean ports, airport authorities, railways, trucking firms, and senior transportation officials at the federal, provincial, and municipal levels—understand that being ahead of the competition gives Canada an edge. US logistics gridlock is real, and even with the best of intentions in the political realm, it cannot be solved quickly. This is Canada’s opportunity. In practical terms, it requires a clear understanding of the importance of Canada’s trade position, the need to link transportation issues with trade flows, and the necessity to position Canada for future developments in overseas markets, especially with the likelihood of new free-trade arrangements with the European Union, Japan, and the Trans-Pacific Partnership in Asia.”

The report emphasizes what it calls the looming crisis with the logistics infrastructure in the US, and points out the harm it will cause trade across the continent.

“This explosion in North American trade with Asia is crashing into increasingly difficult physical barriers. Infrastructure in the United States—ports, railroads, and highways—is nearing capacity. In some sections of the country, the demand is above capacity. The United States is facing a logistics infrastructure crisis whose arrival is only a matter of time. In North America the bones, muscles, and nerves that keep freight in motion are not being maintained, much less invested in, to keep up with the ever-increasing demands placed on them.

“The infrastructure crisis is a megatrend, one that will sweep over everything in its path. The growing strain on capacity associated with increasing demand can be found at the world’s container ports, cost-effective railroads that move goods inland, and on the roads where many urban centres struggle daily with gridlock.”

To combat the negative effects of the US-based problems, the report suggests Canada—specifically Canadian politicians—take action to get ahead of the upcoming problems and to give Canada a competitive edge.

“A choice must be made: policymakers can be swept along with the tide of increasingly clogged, long, and unreliable logistics infrastructure or they can take decisive action at the expense of competitors. Politicians, among many others, are nowhere near thinking of infrastructure as a competitive opportunity and a weapon of economic policy. Many of the actions executives discuss today are tactical and of the type found in any competent supply-chain report. These actions are usually followed by everyone in the industry, reducing everyone’s costs and intensifying instead of relieving pressures on profits.”

The report calls for major investments in four specific areas: at the Port of Prince Rupert, along rail corridors throughout the country, in Halifax, and along the St Lawrence Seaway.

Port of Prince Rupert

The report wants investment in the cargo handling capacities at the port. The report’s authors—George Stalk, senior fellow at the Asia Pacific Foundation and senior advisor of The Boston Consulting Group, and Charles McMillan, professor of international business at York University and former director of the foundation—would like to see the port increase its cargo handling capacity from its current level of 500,000 TEUs to five million TEUs. To achieve this, rail capacity at the port would need to be improved, and services would need to be extended beyond the existing terminals.

St Lawrence

To ensure goods are more efficiently moved inland from the east coast, the report says efforts need to be made to increase the water depth in the St Lawrence Seaway, especially in the portion of the river that approaches Montreal and in the berths and harbours at the Port of Montreal.

Halifax

The report points out the problem of congestion in the Halifax area and calls for the construction of better (and additional) by-passes so container traffic can avoid being transported directly through the city.

Rail

To move goods across the country more efficiently, the report wants to see more investment made in rail infrastructure and capacity. Specifically it singles out Western Canada as the region most in need of improvements to its rail system.

The report suggests that if its recommended actions are taken, it could result in a significant increase container traffic in the country. At the same time, it warn that increasing the Canadian share would likely provoke a reaction from the US.

“North American inbound and outbound containers for both coasts totaled about 46.3 million TEUs in 2010, with Canadian containers accounting for more than 10 percent of this amount. If the North America Gateway is competitive enough and the flow of containers to North America is diverted from the US West Coast through Canada, boosting traffic to domestic ports by five percent, Canada would experience an increase of about a million containers per year at constant total-North-American-container volumes. The United States would experience a three percent decline in total volume.

“We believe the NAG could readily take 10 percent of the volume from US ports, even during the current recession. This would result in a 50 percent increase in container volumes through Canadian ports. The US ports would then lose six percent of their volume. This is probably the number at which the United States would take protectionist action.”