Atlantic Canada's Small Business Blog

I am "CA" Atreya (PMP, MBA), the author of this blog. I help businesses in Atlantic Canada achieve their BHAG successfully. You may subscribe to this blog using a feed reader (RSS). Note: We have moved the blog to a new domain to better reflect this blog's objectives.

Recently there has been a lot of talk about promoting Halifax as Canada’s Atlantic Gateway for trade. In fact, Dr. Mary Brooks (William Black Chair of Commerce at Dalhousie University, Halifax), one of the transportation experts, believes it is important for Atlantic Canadians to realize that the Atlantic Gateway Initiative is not a Halifax-only initiative. It has positive implications for the entire region. But, is transforming Halifax to a global trade hub possible for a province that screwed-up the 2014 Commonwealth Games? Also, this region does not have a history of taking long-term strategic view. Policies in this region aim for quick pay-offs. But first what is the Atlantic Gateway and why do we need it?

Trends

Japan and the Pacific Rim (APEC) countries dominated international trade in the past. Hence, it was natural for the Canadian government to focus their transportation priorities along the Pacific Coast. Trade from the APEC countries, across the Pacific, accounts for 47% of the total world trade. Today, China and India combined have a population of over two billion and global trade is now focused on these markets. Moreover, these Asian economies are moving up the value chain to provide more sophisticated products and services. Their continued growth provides opportunities for Atlantic Canada. But these markets cannot be serviced in a cost effective manner via the Pacific Ocean. The Suez Canal offers an alternative quicker route and geography places Atlantic Canada at a trade focal point. Hence the need for an Atlantic Gateway.

The Shipping Industry

Of all the sectors that make up the global transport infrastructure, shipping has the lowest public profile. Today, air, rail and road transportation are simply a part of life in most countries around the world. However, most people never encounter a container ship - except perhaps when on a cruise or those living around sea ports. Shipping is unmatched by any other transport sector in terms of efficiency, safety and contribution to global trade for the last 200 years. Today, the global shipping industry transports about 96% of the world’s trade and container shipping is 60-70% of the total trade value. This is expected to triple in the next two decades.

A shipping company’s profitability is based on three parameters: speed, size and low cost. Speed is the reduction in time to transport goods from one port to another. Size means few BIG ships to carry more cargo. Low cost means low fuel consumption AND a fully loaded ship traveling both ways. The shipping companies have always sought bigger ships in a hope to reduce overall costs; both cost per voyage and cost per container. But big ships require deep water ports like that available in Halifax or a port that needs constant dredging. A port is quite useless without a good rail and road transportation system. The port also needs to cater to the smaller size domestic sea routes for onward distribution. The objective is to move goods in a relatively straight line, on time, on cost with minimal scheduling delays or losses.

The implication of using big ships is whether or not the infrastructure of ports are able to adapt quickly to keep pace with the changes in global trading patterns. Big ships will bring is more containers and container terminals require space. Most vessels today are old and can carry 4,200 forty foot containers. These vessels form the basic bread and butter for ports like Montreal, New York and Vancouver. The newer ones can carry more than 9,500 forty foot containers. These ships are so large that they exceed the maximum capacity of most ports, even the Panama Canal (and hence the name Post-panamax [PPM] ships). There is no way these ships can go up the St. Lawrence River. So we need an alternative port along the Atlantic Coast.

The shipping industry is also moving towards a hub and spoke network. What this means is that larger container loads are being shipped to small number of ports capable of accommodating such giant vessels. These containers are then transported to their final destinations via road and rail links. This port which acts like a hub - a central meeting point of large and small ships, rail road, air and road transportation - is the Atlantic Gateway.

The Halifax Advantage

Let us see some of the advantages of Halifax port:

• One of the deepest and largest natural harbors in the world that remains ice-free in winter months
• Check out this route: China-India-Suez Canal-Atlantic Ocean. What is the first port you pass? Halifax. And that is also is true for 40% of the world trade that takes place between the European Union and North America.
• Today these vessels call on New York/New Jersey. But the US is spending billions dredging the harbor to accommodate the PPM ships.
• Vessels as large as 5,000 TEU already call on Halifax
• Two large container terminals each of around 70 acres with a total of 10 cranes
• 10 cranes (for PPM ships 5 berths)
• Canadian National Rail offers daily double-stack departures to Montreal, Toronto and Chicago
• Low cost when compared to the other North American terminals; cheap land for expansion, lower cost of living translates to lower wages
• Both the Canadian National Rail infrastructure and the Halifax ports are underutilized
• Even Canadian exporters use Montreal or Toronto ports as embarkation points
• Some of the leading road transportation and logistic companies are located in Atlantic Canada (New Brunswick)

The Challenges

However, policies in this region are geared towards achieving short-term payoffs rather than long term. Each political party focuses on issues that provide them with immediate pay-off and such a stance is harmful. Introducing and promoting Halifax as the port of entry for North American goods requires promoting value of Halifax to the global transportation industry.

More than that, we first need cooperation at all levels of the government - both federal and provincial. As mentioned earlier by Dr. Brooks, it is important for Atlantic Canadians to realize that the Atlantic Gateway Initiative is not a Halifax-only initiative. It helps the broader national transportation grid.

But Halifax does not have the luxury of time. It will be soon when New York finishes the dredging to allow PPM ships and more rail and road capacity added. What then will be its competitive advantage? The truth today is that none of the Atlantic ports can match the export of trade goods to that of Montreal, New York, or the Pacific ports. In fact containers bound for Toronto are routed via New York.

The question that begs answering is: Do the Atlantic Provinces have the inclination to become a global player in world trade? Or will we just let one of the greatest economic opportunities for Atlantic Canada slip by?

Resources:

1. Atlantic Business Magazine: Dr. Brooks on the Atlantic Gateway and who stands to benefit.

2. For those interested in reading the 90 page report on Atlantic Gateway and Canada’s trade corridor sponsored by ACOA and CN Rail

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