Friday, February 01, 2008

Canada Pursues Ambitious Gateway Strategy

Canada Pursues Ambitious Gateway Strategy

As global maritime commerce steadily grows, major trading nations have been paying special attention to expanding existing gateways or establishing strategic new transportation facilities on coasts and inland locations.

Canada is no exception, staking a great deal on the fact that, thanks to the Great Circle route, its west and east coast ports are the geographically closest in North America to both Asia and Europe.

This advantage could translate into an unprecedented opportunity to become the gateway of choice into and out of the continent as goods flow in ever-increasing volumes between Asian and North American supply chains.

“Canada's geographic position is, in fact, ideal all round,” notes the Conference Board of Canada think-tank in a recent report. “We are closest not only to U.S. consumer markets, but also to its other major trading partners.”

For example, Vancouver is more than a full day's sailing time closer to Shanghai than Los Angeles/Long Beach. Transit times are also shorter between Halifax/Montreal and Antwerp than U.S. east coast ports.

In light of the huge pressure of Asian trade on U.S. ports, can Canadian ports offer effective alternatives? The challenges are many not the least being the forging of a united, co-ordinated gateway strategy involving both industry and governments in such a vast country with strong regional rivalries.

Since coming to power in early 2006, the minority Conservative government of Prime Minister Stephen Harper has been allocating large sums for mainly port infrastructure projects.

First to benefit was the Asia-Pacific Gateway and Corridor Initiative, which committed C$591m ($592m) for investment in British Columbia, including C$30m in the new container terminal launched last autumn at Prince Rupert. A further C$233.5m has been promised for enhancing the flow of international trade through the west coast through road, rail and other improvements.

In addition, the 2007 budget committed C$2.1bn for more infrastructure investments for undertakings such as the newly-conceived Quebec-Ontario Continental Gateway and Trade Corridor and the Atlantic Gateway, built around the four maritime provinces of Nova Scotia, New Brunswick, Prince Edward Island, and Newfoundland and Labrador.

Shipping Federation of Canada president Michael Broad considers that the federal government is doing things right by integrating gateway and infrastructure initiatives.

“We support this approach,” he told Lloyd's List. “Rather than just pouring money into a problem, they are trying to ensure there is proper planning being done. Just as the transportation system is integrated, so should the planning and spending.

“The requirements for the west coast are more easily defined with the surge of traffic from Asia. In eastern Canada, border crossings with the U.S. have been identified as problem areas…. And all the requirements of the Atlantic Gateway have yet to be fully documented and finalised.”

Bob Ballantyne, president of the Canadian Industrial Transportation Association, the largest shipper body, whose members account for an annual freight bill of C$6b, commends the federal government for seeking gateway opportunities as capacity constraints build up.

On the other hand, Chamber of Shipping of British Columbia president Rick Bryant advocates more government action to ensure that port land and corridors are reserved to support future growth. He feels that collective action is also essential to bring Canada's Asia Pacific Gateway to another level.

“All the parties in the supply chain must move from optimising their operations to system-wide optimisation,” Capt Bryant stresses. “Ocean carriers, terminals and land carriers need to work more closely on co-ordinating cargo and conveyance planning and scheduling. A commitment is needed for realistic contingency plans for winter rail disruptions due to avalanches and washouts.”

For its part, the Conference Board asserts that 'soft issues' may be even more critical to Canada's long-term competitiveness than physical infrastructure spending. As well as US border congestion, it singles out the urgent need to alleviate a looming truck driver shortage in the tens of thousands, and a soaring gap in transportation management skills.

The board further says Canada must rapidly move away from the existing fully self-financing port models to level the playing field with US ports in particular. (In this connection, there has been progress through proposed regulatory amendments expected soon to receive parliamentary approval.)
Meanwhile, in the gateway race, the west coast has assumed the lead. The most visible component has been the formal amalgamation since January 1, 2008 of the ports of Vancouver, Fraser River and North Fraser into the Vancouver Fraser Port Authority. The merged entity has brought together three ports accounting for 130m tonnes of cargo. The integration will allow for better land-use planning and more efficient operations to compete with U.S. Pacific Northwest rivals.

Last year saw Vancouver's container traffic exceed 2.3m teu, surpassing the performances of Seattle and Tacoma. With Asia-Pacific box volume forecast to triple over the next 15-20 years, the British Columbia provincial government wants its west coast ports to boost their market share from today's 10% to 17% (9m teu) by 2020. Current plans provide for substantial capacity expansions at Vancouver and Prince Rupert.

Another sign of momentum is the offensive by the federal foreign affairs and international trade departments in promoting the use of the Canadian Pacific gateway to such large importers as Wal-Mart, Costco and Target as their entry point to North America.

In eastern Canada, in partnership with private industry, the federal, Quebec, and Ontario governments signed a Memorandum of Understanding last July to develop an Ontario-Quebec Continental Gateway and Trade Corridor.
Within two years, an advisory committee is to recommend ways of optimising the linkages between air, marine, road and rail to meet future demand and to target initiatives with big trade potential. The two central Canadian provinces represent approximately 60% of Canada's exports and GDP.

Drafting a masterplan will be a particularly complex task, but there is an impressive blue ribbon, private sector advisory committee led by Logistec president and chief executive Madeleine Paquin, Robert Transport president Claude Robert, and Ford Canada president William Osborne.

Arguably still more challenging will be the development of a cohesive gateway strategy in Atlantic Canada.

In this regard Nova Scotia MP Peter Mackay, the federal minister responsible for the Atlantic Canada Opportunities Agency, and ministers from the four Atlantic provinces in mid-October signed a MoU to transform the region into a key hub for international trade.

Under the accord, officials from Transport Canada, the Atlantic Canada Opportunities Agency and the Atlantic provinces will spend two years reviewing a number of gateway issues, including potential impacts on the transportation system and partnerships with private enterprises.

At the MoU signing, Newfoundland and Labrador's Innovation, Trade and Rural Development Minister Terry Taylor said that the advocates of the Atlantic Gateway face a greater challenge than those of the Pacific Gateway, which consists of only one jurisdiction.

“Dealing with four Atlantic provinces is something like herding cats on the best of days,” he said, in a remark that was clearly only part jest.

More seriously, while acknowledging that Halifax was the most logical place to bolster container traffic, Mr Taylor said it should not end there. “We must also bear in mind that building capacity in Atlantic Canada is important outside the Port of Halifax.”

Objectively speaking, the outlook in Atlantic Canada seems more dominated by competing interests than a common vision.

Striving to break out of a stagnant period and to recover from the loss of several large customers amidst global carrier restructuring, Halifax is operating at half container capacity and pushing hard to market itself in China and India to encourage shippers to send cargo to North America via the Suez Canal as an alternative to U.S. west coast ports.

At Nova Scotia's Strait of Canso, a private group is proceeding with plans for a C$300m deepwater terminal on the basis of forecasts that North America's East Coast will experience a dramatic increase in container traffic from Asia via the Suez and Panama canals.

The Port of Saint John, whose main business is bulk cargoes, is trying to carve out its own future by recently taking initial steps, with the City of Saint John, to form a Southern New Brunswick Gateway.

Then there is the small Port of Sydney in Cape Breton, which is now seriously looking at building a container terminal.

In short, it is quite a crowded landscape, with seemingly different agendas pleading the case for the Atlantic Gateway.

No comments: