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A Strategic Context for Competitive Advantage

strategic
transportation
& tourism
solutions

Prepared for
Transport Canada

Prepared by
InterVISTAS Consulting Inc.

March 2007
TABLE OF CONTENTS

GLOSSARY OF TERMS..................................................................................... 1

EXECUTIVE SUMMARY..................................................................................... 2

1.0 INTRODUCTION................................................................................................ 4

2.0 CANADA IN THE GLOBAL ECONOMY................................................................. 6


2.1 Economic Growth and Trade............................................................................ 6
2.2 International Trade........................................................................................... 7
2.3 International Travel.......................................................................................... 8
2.4 Transportation Trends...................................................................................... 10

3.0 CANADA’S ASIA PACIFIC GATEWAY AND CORRIDOR............................... 11


3.1 Existing Gateway and Corridor.......................................................................... 11
3.2 Potential Opportunities for the Asia-Pacific Gateway and Corridor................... 13
3.3 Gateway and Corridor Vision............................................................................ 13
3.4 Economic Significance of the Gateway and Corridor......................................... 15
3.5 Performance Targets and Measuring Success................................................... 16

4.0 STRATEGIC ISSUES AND CHALLENGES............................................................. 18


4.1 Gateway and Corridor Capacity......................................................................... 18
4.2 Effective Governance and Coordination............................................................ 21
4.3 Security and Border Efficiency.......................................................................... 22
4.4 Human Resources............................................................................................. 24
4.5 Pro-Competitive Policy Framework.................................................................. 25

5.0 TOWARDS COMPETITIVE ADVANTAGE............................................................. 28


.0
Glossary of Terms HRSDC – Human Resources and Social Development
Canada
ALR – Agricultural Land Reserve
ICAO – International Civil Aviation Organization
APEC – Asia Pacific Economic Cooperation
IMO – International Maritime Organization
APGC – Asia Pacific Gateway and Corridor
ITS – Intelligent Transportation Systems
APGCI – Asia Pacific Gateway and Corridor Initiative
NAFTA – North America Free Trade Agreement
BNSF – Burlington Northern Santa Fe Railway
NEXUS/FAST – Border facilitation partnership programs
between CBSA and U.S. Customs and Border Protection
CANPASS – CBSA program for expedited clearance of
prescreened travellers
PILT – Payment in Lieu of Taxes
CATSA – Canadian Air Transport Security Authority
PSEPC – Public Safety and Emergency Preparedness
Canada
CBRN – Chemical/Biological/Radiation/Nuclear
P3 – Public-Private Partnership
CBSA – Canada Border Services Agency
RFID – Radio Frequency Identification
CN – Canadian National Railway Company
RO/RO – Roll-on/Roll-off
CP – Canadian Pacific Railway
RPK – Revenue Passenger Kilometres (number of passen-
EDC – Export Development Canada
gers on flight X distance of flight in kilometres)
FTZ – Foreign Trade Zone
SPP – Security and Prosperity Partnership of North
America
GDP– Gross Domestic Product
TEU – Twenty-Foot Equivalent Unit
G8 – Members include U.S., Canada, France, Germany,
Italy, U.K., Russia and Japan
TWOV – Transit Without Visa
GVGC– Greater Vancouver Gateway Council
VPA – Vancouver Port Authority

YVR – Vancouver International Airport


Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007 1
EXECUTIVE SUMMARY
The history of Canada is closely tied to the development of trade, and the Target 3: Increase the APGC’s share of North America
development of our cities as gateways for trade. bound traffic from Asia, as measured by:
Today, building Canada’s Asia-Pacific Gateway and Corridor (APGC) is a top Measure 3a: Canada’s APGC share of Asia-NAFTA container
priority. As a small, open economy, dependent on trade, Canada’s future traffic.
success will be determined in large measure by our ability to move goods Measure 3b: Canada’s APGC share of Asia-NAFTA air
and people reliably and efficiently in global supply chains and routings. passenger traffic.
While the U.S. has been Canada’s primary trading partner in the past, Measure 3c: Canada’s APGC share of Asia-NAFTA air cargo
rapidly developing economies in China, India and Southeast Asia represent traffic.
the greatest opportunities for the future. These countries can generate
significant new markets for our products and services, as well as inbound
Target 4: Improve the efficiency and reliability of
tourism to Canada. the APGC for Canadian and North American
exports.
Situated between Asia and the U.S., our ports and airports on the west Measure 4a: Delivery reliability from the APGC to both
coast are also ideally situated to capture a portion of the growing traffic Central Canada and the U.S. Midwest.
between these major trading partners. Capturing a larger market share of
Measure 4b: Shipment transportation times through the
this gateway traffic would generate significant economic benefits for all of Lower Mainland, Prince Rupert and Pan-Western corridors.
Canada.
Measure 4c: Work stoppages.
Vision
Core Elements
The proposed vision for the Aisa-Pacific Gateway and Corridor is intended
to capture all of these elements: In order for the APGC to realize its vision, long term improvements must
me made in several core and integrated areas.
Canada’s Asia-Pacific Gateway and Corridor will be the
preferred transportation network for connecting a
significant share of the transpacific flow of global
commerce between the growing markets of Asia and
Optimizing and Establishing
North America, well into the 21st century. Expanding Secure and
Gateway Seamless
Corridor Borders
Performance Targets and Measuring Success Capacity

The suggested performance measures for the four specific targets of the
APGCI are:

Target 1: Boost Canada’s commerce with the Asia-


Fostering a
Pacific region, as measured by: Market-Driven Promoting
Measure 1a: Canada’s Asia-Pacific import trade volume. and Pro- Effective
Competitive Corporate
Measure 1b: Canada’s Asia-Pacific export trade volume. Policy Governance
Framework
Measure 1c: Canada’s Asia-Pacific tourism receipts.
Enhancing
Target 2: Increase Canada’s traffic volumes to/from the Human
Resources and
Asia-Pacific region, as measured by: Collective
Measure 2a: Canada’s Asia-Pacific two-way sea container Bargaining
traffic flow.
Measure 2b: Canada’s Asia-Pacific two-way air passenger
traffic flow.
Measure 2c: Canada’s Asia-Pacific two-way air cargo traffic
flow.
2 Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007
The strategic initiatives that should be pursued in each core area to realize the vision of the APGC are summarized in the table below.

The Government of Canada should consider:

Gateway and Corridor Capacity Security and Border Efficiency


ƒ Developing a comprehensive simulation program to deter- ƒ Aggressively pursuing opportunities to implement new
mine relative impacts of different infrastructure investments approaches to minimize or eliminate dual clearance pro-
and strategies in the APGC. cesses.
ƒ Continuing to promote innovative processes to expand ƒ Taking a lead role in encouraging harmonization and mutual
capacity and efficiency of the APGC, including working with recognition of transport and border security policies in the
industry to implement 24 hour operations. Asia Pacific region.
ƒ Adding a selection criteria that explicitly includes projects ƒ Aggressively pursuing perimeter clearance with the U.S.
that improve the processing of goods and passengers at
border points.
Human Resources
ƒ Continuing to develop new financing mechanisms to fund
ƒ Facilitating targeted immigration to address current and
infrastructure.
anticipated chronic labour shortages.
ƒ Working with provincial governments to develop a
ƒ Working with provincial governments to establish transpor-
harmonized accelerated environmental impact assessment
tation, logistics, and supply chain management as a national
mechanism for high-priority gateway projects.
priority for skills training and education.
ƒ Developing new, innovate forms of mediation and arbitration
Effective Governance and Coordination to prevent work stoppages in the transportation sector.
ƒ Working with provincial governments to establish “Trans-
portation Land Reserves” to protect critical gateway land
and rights of way for future development. Pro-Competitive Policy Framework
ƒ Incorporating APGC performance measures in all relevant
ƒ Undertaking a global review of best practices in governance
departments, or take other steps to achieve internal align-
structures to determine if further changes are required to ment of goals.
port, airport, and related transportation entities to enhance
the competitiveness of the APGC. ƒ Working with provincial and municipal governments to
review all relevant taxation policies to ensure that they do
ƒ Developing pilot projects for APGC facilities which would not impede the competitive position of the APGC.
increase the role of the private sector and investors in the
delivery of infrastructure and services. ƒ Overhauling Canada’s EDC program to make Canada more
attractive for foreign investment in value-added gateway
ƒ Continuing to work with the three lower mainland Port activity.
Authorities to amalgamate them in 2007.
ƒ Reviewing airline foreign ownership limit.
ƒ Working with municipalities to consider changing the cur-
rent property tax structure for gateway facilities from a PILT
model to one based on throughput.

Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007 3
1.0 INTRODUCTION
The history of Canada is closely tied to the development of trade, and the While the U.S. has been Canada’s primary trading partner in the past, and
development of our cities as gateways and corridors for trade. From the will continue to be important, rapidly developing economies in China,
early days of settlements that developed to serve the fish and fur trades, India and Southeast Asia represent the greatest opportunities for the
to the emergence of communities to support the gold rush, to the growth future (see Figure 1-1). Much of the projected growth in global trade will
of cities supporting the development of the vast agricultural lands of the be generated from this region in the next 20 years. These countries can
west and the developing resources industries of Canada’s far north, Cana- generate significant new markets for our products and services, provide
dian history is in many ways the history of gateways and corridors. import goods for our citizens and industries, and increase tourism to
Today, building Canada’s Asia-Pacific Gateway and Corridor is a top prior- Canada.
ity. As a small, open economy, dependent on trade, Canada relies on its Situated between Asia and the U.S., our west coast ports and airports, and
transportation system to access critical offshore markets. Our future suc- their supporting corridors, are also well positioned to capture a portion
cess will be determined in large measure by our ability to move goods and of the growing traffic between these major trading partners. Capturing a
people reliably and efficiently in global supply chains and routings. larger market share of this gateway traffic would generate significant eco-
nomic benefits for all of Canada. However, Canada will have to compete
Figure 1-1: Key Economic Indicators of Select Asia-Pacific aggressively with other gateways and corridors for this traffic.
Countries

Country Population GDP GDP per Capita GDP Growth Canada


Canada 32.2 $1,132 $35,133 3.0%
United States 296.6 $12,456 $42,000 2.6%
Mexico 105.3 $768 $7,298 2.7%
NAFTA Total 434.1 $14,357 N/A 2.8%
Korea United States
Japan
Taiwan Country Population GDP GDP per Capita GDP Growth
India China 1,307.6 $2,234 $1,709 9.4% Mexico
Hong Kong SAR 7.0 $178 $25,493 5.3%
India 1,094.3 $772 $705 6.2%

Singapore Japan
Korea
127.7
48.3
$4,567
$788
$35,757
$16,308
1.7%
5.2%
Singapore 4.4 $117 $26,836 5.0%
Taiwan 22.8 $346 $15,203 3.6%
Asia Pacific Total 2,611.9 $9,002 N/A 5.3%

4 Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007
On October 11, 2006, the Prime Minister, along with Minister of Inter- Initiatives to Build the Asia-Pacific Gateway and Corridor
national Trade and the Minister for the Pacific Gateway and the Van-
1987 Port of Vancouver, Fraser Port, CN, CP Rail, Interna-
couver-Whistler Olympics, David Emerson, and Minister of Transport,
tional Longshore and Warehouse Union, B.C. Maritime
Infrastructure and Communities, Lawrence Cannon, announced Canada’s
Employers Association and Western Economic Diversi-
Asia-Pacific Gateway and Corridor Initiative (APGCI). The mission is to
fication established Roundtable on Transportation
establish Canada’s Asia-Pacific Gateway and Corridor (APGC) as the best
to increase throughput of cargo moving through Lower
transportation network facilitating global supply chains between North
Mainland of Vancouver.
America and Asia.
Early 1990s The Asia Pacific Foundation created the Asia Pacific
The specific goals of the APGCI are to:
Trade and Transportation Forum to bring foreign
• boost Canada’s commerce with the Asia-Pacific region; shipping lines and shippers to Canada.
• increase the APGC’s share of North American bound container 1994 The Greater Vancouver Gateway Council (GVGC)
imports from Asia; and was established by merging the Roundtable on Trans-
• improve the efficiency and reliability of the APGC for Canadian and portation and the Asia-Pacific Trade and Transportation
North American exports. Forum. Several initiatives were undertaken including a
comprehensive Vision in 1999 to build the Gateway.
The APGC is a network of critical transportation infrastructure including:
2001 The GVGC developed a Major Commercial Transpor-
• ports in the B.C. Lower Mainland and Prince Rupert; tation System Plan for the Lower Mainland which
• principal road and rail connections extending across western Canada identified the need for $7 billion in capital investments
and into the U.S.; over 20 years.
• key border crossings; and 2005 Government of B.C. developed a British Columbia
Ports Strategy which presents a vision for the port
• the Vancouver International Airport and other Western Canadian system in 2020 and strategies to achieve it.
airports with service to Asia.
Previous Federal Government introduced Pacific
Gateway Act which included a commitment to provide
additional funding and establish a new advisory
council. (Bill not passed)
2006 Government of B.C. announced a $3 billion Pacific
Gateway Program to build three major infrastructure
projects.
Government of B.C. released a Pacific Gateway Strat-
egy Action Plan in April which identified a number of
specific infrastructure and policy initiatives that must
be pursued.
Government of Canada tabled Budget in May which
included $591 million in funding for new APGCI.
This APGCI is the culmination of many years of work. For two decades, Government of Canada formally announced APGCI in
concerned stakeholders in western Canada have been promoting the October.
gateway concept as a way of bringing governments, business and public While there has been some real progress made in recent years improving
interests together to look at challenges and opportunities in an integrated and building the APGC, much work remains to be done. Several significant
manner (see adjacent table). challenges and strategic decisions remain.
The purpose of this document is to provide additional background on
the APGC, a vision to guide future planning and priority setting, along
with a summary of some of the key strategic issues which will have to be
addressed by the Federal Government and other key stakeholders.
Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007 5
2.0 CANADA IN THE GLOBAL ECONOMY

2.1 Economic Growth & Trade The world’s economy is also undergoing other shifts. The relative economic
significance of Western Europe and Japan has declined due to their aging
The demand for transportation services is highly dependent upon eco- populations and structural economic issues. In turn, large emerging
nomic activity. The most widely used measure of global economic activity markets in other parts of the world, particularly Brazil, Russia, India and
is GDP, and a strong correlation exists between world GDP, international especially China (commonly referred to as the BRIC nations) are driving
trade, and the demand for transportation. growth and shaping future investment, trade, and commerce (see Figure
Since the 1980’s, there has been a structural shift in the global economy, 2-2).
with an increased reliance by nations on international trade as a primary In 2005, for example, China’s exports increased by 27%, while its economy
driver of their economic growth and development (see figure 2-1). As a grew nearly 10%. China’s entry into the World Trade Organization (WTO),
result of this shift, world trade volume is now outpacing economic activity. its appetite for resources, and its continuing urbanization all point to
The value of trade is now growing at around 2.5 times the rate of growth further trade growth.
of the overall world economy. This trend is not expected to change in the
short term. However, China is only one part of the Asian success story. About 45% of
world trade now takes place in or with Asia. India is also experiencing a
Figure 2-1: International Trade as a % of World GDP sustained period of relatively high growth, while other economies such as
$50 Indonesia and South Korea continue to grow in importance. For example,
58%
Canadian merchandise exports to South Korea increased by 23% in 2005.
$40 Furthermore, Vietnam is currently constructing a port in Ho Chi Minh City
that will have greater capacity than the Port of Vancouver when it comes
GDP (US$, trillions)

54%
43%
$30
38%
online, and further expansion plans are already in place.
33%
$20 32% Here in Canada, our recent economic performance has been both healthy
and steady. However, as figure 2-2 illustrates, our economy is relatively
$10 small, ranking only larger than Russia amongst the G8 group of countries.

$0
1980 1985 1990 1995 2000 2005

Source: World Bank. International Trade Total

The figure below highlights global economic performance, worldwide and


for select countries, between 2000 and 2005. As the table illustrates, the
U.S. and Canadian economies performed in line with the world averages.
By comparison, China and India posted the highest GDP growth rates.

Figure 2-2: GDP Growth Rates (% per annum)


Year World U.S. Canada China India
2000 4.0 3.7 5.3 8.4 4.0
2001 1.5 0.8 1.8 8.3 5.3
2002 1.9 1.9 3.4 9.1 3.6
2003 2.8 3.1 2.0 10.0 8.3
2004 4.2 4.2 2.9 10.1 8.5
2005 3.6 3.5 2.9 9.9 8.5
Source: World Bank.

6 6 Canada’s
Canada’s Asia-Pacific
Asia-Pacific Gateway
Gateway & Corridor:
& Corridor: A Strategic
A Strategic ContextContext For Competitive
For Competitive Advantage
Advantage - March- March
2007 2007
Figure 2-3: Size of Canadian Economy Relative to G8 Figure 2-5: Canada’s Exports to Select Asia-Pacific Countries
Countries (2005) (CDN dollars,millions)
Billions of dollars
Total G8 = $28,785 US $25,000
$13,446
$20,000 India
Taiwan
$15,000
Hong Kong
South Korea
$10,000
China
$5,000 Japan
UK
$2,201 Canada Other
$1,130 $0
Russia
$766 France Source: Industry Canada 1995 2005
$2,106

Japan Germany 2.2 International Trade


$4,571 Italy $2,797
$1,766 Maritime Trade
Source: International Monetary Fund, World Economic Outlook, April 2006
The economic activity and trade described above creates demand for
Canada’s economy is very open and reliant on trade. In fact, Canada intercontinental goods distribution, and to this extent, shippers only
consistently exports more goods than it imports, resulting in an annual have two modal choices – sea or air. Maritime transportation is the more
merchandise trade surplus. Overall, our exports of goods and services popular of the two modes by volume and is fundamental to international
represent over a third of our GDP (38% in 2005). When compared to the trade because it represents the most practical and cost effective means of
U.S., our economy is more than three times as reliant on exports (see transporting large volumes of commodities and finished goods. As figure
Figure 2-4). 2-6 illustrates, world maritime trade has grown steadily in the last 15
years and topped 7.2 billion metric tones in 2005.
Figure 2-4: Exports of Goods and Services as a Proportion of Figure 2-6: World Maritime Trade
GDP (2005)
Percent of GDP
1
8.0
7.2
40%
0 38% 5.9
6.0
Metric Tonnes (billions)

4.9
0 27% 4.2
26% 26%
4.0

13% 2.0
10%
0

0.0
0 1990 1995 2000 2005
Germany Canada Italy France UK Japan US Source: Clarkson Research.

Source: Department of Foreign Affairs and International Trade, “Seventh Annual Report Within the marine transportation sector, a major shift has also taken
on Canada’s State of Trade,” 2006
place - containerization. Between 1980 and 2005, maritime traffic grew
From a regional perspective, Canada’s exports to Asia-Pacific nations have an annual rate of 2.4%. During this same period, global container traffic
increased consistently over the last decade, from $25.2 billion in 1995 to increased an average of 8.6% per annum. This trend is also expected to
$26.4 billion in 2005. During this period, exports to China, India and South continue for the foreseeable future (see figure 2-7).
Korea rose considerably, while exports to Japan, Taiwan and Hong Kong
declined (see figure 2-5).
Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007 7
Figure 2-7: Growth of World Maritime Trade Figure 2-9: World Intercontinental Air Cargo Traffic
800 20.0
18
17
700
15 15 15
16.0
Index (1980 = 100)

14
600

Metric Tonnes (millions)


500 12.0
400
Containers 8.0
300
All Maritime Trade
200
4.0
100
0 0.0
1980 1985 1990 1995 2000 2000 2001 2002 2003 2004 2005
Source: United Nations. Source: MergeGlobal.

Global container activity can be classified into four main routes. The The traffic distribution amongst these routes is summarized in the figure
traffic distribution amongst these routes is summarized in the figure below. Transpacific container traffic is the second most important driver of
below. Transpacific container traffic is the most important driver of global intercontinental air cargo activity, generating roughly 18% of total trade
container trade activity, generating 17% of total trade in 2004. This figure in 2005.
is projected to increase in the future. As shown in figure 2-8, transpacific
seaborne container trade is subject to significant directional imbalances Figure 2-10: World Intercontinental Air Cargo Traffic by
(72% eastbound versus 28% westbound) Region
World Intercontinental Air Cargo Traffic
Figure 2-8: Distribution of World Maritime Trade by Region (tonnes, millions)
Estimated World Seaborne Container Trade
(million, TEUs) 2005 %
2004 % 2005 % Est. 2006 %
Transpacific 3.2 18.0%
Transpacific Eastbound 42.2 11.9% 48.1 12.3% 54.8 12.7%
Westbound 18.1 5.1% 19.9 5.1% 21.6 5.0%
Far East-Europe 3.9 22.0%
Far East-Europe Eastbound 27.9 7.9% 31.4 8.0% 35.4 8.2%
Westbound 13.0 3.7% 13.8 3.5% 14.7 3.4% Transatlantic 2.4 13.3%
Transatlantic Eastbound 12.1 3.4% 12.1 3.1% 12.9 3.0%
Westbound 9.2 2.6% 9.8 2.5% 9.9 2.3% Intra-Asia 3.9 21.7%

Other 232.5 65.5% 255.6 65.4% 282.2 65.4% Rest of World 4.4 25.0%
Total 355.0 100.0% 390.9 100.0% 431.5 100.0%
Total 17.7 100.0%
Source: MergeGlobal.
Source: Clarkson Research and InterVISTAS.

Air Cargo 2.3 International Travel


Air cargo represents the other part of the intercontinental goods distribu- Another spin-off of increased global economic activity and trade is passen-
tion network. While the primary benefit of maritime transportation is ger air travel. Since 2000, global air passenger traffic has increased from
lower costs, the benefits of air transportation are speed and reliability. 3,381 billion RPKs to 4,018 billion RPKs. As Figure 2-11 illustrates, air traffic
Since 2000, world intercontinental air cargo traffic levels have increased has now fully recovered from the impacts of September 11.
continuously, reaching 17.7 billion metric tonnes (see Figure 2-9). The only
exception to continuous growth was in 2001 which was
negatively affected by 9/11.

8 Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007
Figure 2-11: Global Air Passenger Traffic Figure 2-13: International Air Traffic as a Percentage of Total
5,000 Air Traffic
Revenue Passenger Kilometres (billions)

4,018 35%
3,754 2,100
4,000
3,381 3,290 3,279 3,304 1,800 32%

Total Traffic (passengers, millions)


3,000
1,500
29%
24%
2,000 1,200
22%
900 22%
1,000
600

0 300
2000 2001 2002 2003 2004 2005
Source: Boeing. 0
1980 1985 1990 1995 2000 2005

The air passenger traffic distribution by region is summarized in the figure International Total

below. Transpacific is the third most important intercontinental air pas- Source: International Civil Aviation Organization
senger market, generating over 10% of total global passenger activity in
2005. Since 2005, there has been a major shift in the global markets that gener-
ate tourists (see Figure 2-14). Fifteen years ago, 10 countries generated
Figure 2-12: Distribution of Global Air Passenger Traffic by 70% of total tourism expenditures worldwide. This meant that marketing
Region organizations could target marketing and sales efforts in only 10 markets
and access 70% of the total market. Today, the top 10 markets account for
World Air Passenger Traffic Traffic
(RPKs, billions) only 54% of tourism expenditures. Many emerging countries, like China
and Russia, are generating new sources of travellers and creating opportu-
2005 %
nities for destinations.
Transpacific 240.0 10.3%

Far East-Europe 270.0 11.6%

Transatlantic 390.0 16.7%


Figure 2-14: Changing Source Markets (International Tourism
Expenditures)
Europe-Latin America 150.0 6.4%
1990 2005
Rest of World 1280.0 54.9%
United States, Germany, Japan, United Kingdom, Germany, United States, United Kingdom, Japan,
Italy, France, Canada, Austria, Netherlands, Sweden France, Italy, Netherlands, Canada, Russia, China
Total 2330.0 100.0%
Source: Boeing.

According to the International Civil Aviation Organization, international 70% 54%


56%
travel as a percentage of total traffic has increased steadily since 1980, and
Canada
in 2005 represented 35% of total passenger travel worldwide, compared Canada 30% 3% 46%
4%

to 22% in 1980. This reality underscores the need for efficient processes to
facilitate passenger movements across borders. Other Other
Source: World Tourism Organization

Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007 9
2.4 Transportation Trends • Greater consolidation in the transportation sector – The
needs of modern business have spurred the transportation and logis-
In response to these developments, some key trends are emerging in tics sector to build truly global networks. This trend has forced many
transportation, both with respect to the movement of goods as well as to smaller companies to consolidate and merge into larger entities in
the movement of people. These include: order to compete effectively. The parcel delivery business, where
• Growth in containerization – One of the most important trends courier giants such as UPS, FedEx, and DHL have emerged, is a prime
in maritime trade in recent decades has been the growth in contain- example. Rail, trucking and maritime carriers have also experienced
erization. In the U.S., for example, over 18 million TEUs moved in and major mergers. Going forward, the business landscape will continue
out of U.S. container ports in 2001, up 36% from 13 million in 1995. to change, and it is projected that mergers and acquisitions will
Going forward, the use of containerization will continue to increase, continue across many transportation sectors.
even for traditional bulk commodities like grains and forest products. • Development of strategic alliances – Where consolidation has
• Growth in the size of transportation vehicles – Over the past not been possible due to limits on foreign ownership, such as in the
few decades, another visible trend has been the increase in trans- airline industry, strategic alliances have been developed to expand
portation vehicle size across all modes, including the introduction of network size, increase efficiency, and improve customer service (e.g.
wide-body aircraft, longer trains, heavier trucks, and most remark- through-ticketing, baggage transfers, and frequent flyer mileage
ably, the rapid increase in container vessel sizes. credits between alliance partners).

• Increased importance of logistics and gateways/corridors in


supporting emerging trade and tourism demand – The rise
of the China and India manufacturing economies means that supply
chains are becoming more international in scope. Since most of
today’s supply chain activity flows through key geographic locations
or gateways, the efficient functioning of these trade related regions
will play a key role in supporting emerging growth from the Asia
Pacific region.
• Growth of intermodal transportation – The changing require-
ments of global supply chains has created a renewed focus on
intermodal freight transportation. With the development of contain-
erization in the mid-1900s, the reorientation toward deregulation
near the end of the century, and a new focus on logistics and global
supply chain requirements, the stage appears to be set for continued
intermodal transportation growth.
• Increased use of technology/innovation – The past two
decades have been witness to remarkable advances in informa-
tion, communication, and other technologies. The application of
these technologies has brought considerable change to nearly every
sector of the economy, including transportation. New technologies
are being applied to transportation infrastructure, equipment, and
supply chain management in an effort to make them work smarter
and more efficiently. Examples include the application of ITS, RFID,
etc. This trend shows no sign of slowing down, and in fact, is likely to
accelerate as the public and private sector adjust to new operational
environments.

10 Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007
3.0 CANADA’S ASIAPACIFIC GATEWAY AND CORRIDOR
Figure 3-1: B.C. Port System
3.1 Existing Gateway and Corridor Vancouver
V Area Ports
Po
Fraser Port Authority Jurisdiction
North Fraser Port Authority Jurisdiction
Fraser PortPort
Vancouver Authority Jurisdiction
Authority Jurisdiction

North Fraser Port Authority Jurisdiction


Legend
Vancouver Port Authority Jurisdiction
Canada Port Authority Ports
Other Significant Ports
Major Roads
Vancouver
Va Port
Marine System North
th Fraserr Port
BNSF System Network
CPR System Network
CN System Network
British Columbia is a maritime province. The main trading ports – the Port Fraser Port
of Vancouver, Fraser River Port, and the Port of Prince Rupert – account
BRITISH COLUMBIA ALBERTA
for more than 95% of the international trade moving through B.C.’s port Stewart

system. Other ports, such as Squamish, Powell River, Kitimat, and Stewart
also play important roles in Canada’s resource economies (see Figure 3-1). Prince Rupert
Ruper
per
pert

Kitimat
Prince George
G
Geo
eo
orge
o
Port of Vancouver
The Port of Vancouver is the country’s largest seaport with annual cargo BC Port Traffic

movements of over 76 million tonnes valued at roughly $35 billion. It International Imports
handles more cargo tonnage than any other port on the west coast of 10-11 million tonnes per year
Powell
Powell
Po
Campbell River River Squamish
North America, and connects Canada to more than 90 international trade
International Exports Port Alberni Vancouver
partners around the world. The port’s terminals provide container, bulk, 70-80 million tonnes per year
Nanaimo ES
ATE
AT S
E STTA
UNITED
and break-bulk cargo handling, and integrated services for a wide range of Victoria

users including cruise operations.


Bridge. Major common user facilities are available at Fraser Surrey Docks,
The Vancouver Port Authority is responsible for the port’s assets along 150 Annacis Terminals, and Fraser Richmond. Numerous private facilities also
kilometres of coastline, including all of the waters of English Bay, Burrard exist within the port, including a major CN railyard and Canadian Pacific
Inlet and Indian Arm, and the area around Roberts Bank south of the Railway’s RO/RO terminal at Tilbury Island.
Fraser River. Port operations include 24 different terminals, most of which
are located on crown-owned lands along Burrard Inlet. The Deltaport and Port of Prince Rupert
Westshore Terminals are located at Roberts Bank. The Port of Prince Rupert is located along the north coast of British Colum-
bia and is closer to Asia than any other port in North America.
Fraser River Port
Fraser River Port is the second largest port in Canada by volume, with The Port of Prince Rupert handles both international and domestic traffic.
annual cargo movements exceeding 38 million tonnes. The port handles In 2005, the port moved just under 4.5 million tonnes of international
containers, forest products, and steel. Its terminals provide container cargo. The same year, total cargo reached nearly 9 million tonnes. The
and break-bulk handling, and integrated services for the coastal forest port’s primary commodities include forest products and coal.
industry. The port also served nearly 100,000 cruise passengers in 2005.
The Fraser River Port Authority manages 100 kilometres of the main arm Port facilities include three major terminals and two cruise ship terminals.
of the Fraser River from Sandheads at the mouth to upstream at Kanaka Four smaller terminals are managed by private operators. Rail service to the
Creek and Pitt Lake. Fraser River Port can handle ships with a maximum port is provided by CN Rail.
draft of 12 meters and an air draft up to 56 meters under the Alex Fraser
Road and Rail System
As figure 3-2 illustrates, the APGC’s port facilities are linked to key markets
by well developed road and rail corridors. Specifically:

Canada’sCanada’s
Asia-Pacific GatewayGateway
Asia-Pacific & Corridor: A Strategic
& Corridor: ContextContext
A Strategic For Competitive Advantage
For Competitive - March- 2007
Advantage March 2007 11
11
Lower Mainland Rocky Mountains. Port facilities feed directly into the Northwest Transpor-
• The Port of Vancouver and Fraser River Port enjoy good road access tation Corridor, a modern road and rail network engineered and built to
to key markets via the Trans-Canada Highway and the U.S. Interstate carry large volumes of traffic.
Highway System (with interconnecting service provided by major
trucking lines). Airport System
The Gateway’s ports, roads, and railways are complemented by the west-
• Locally, the facilities of both ports are connected to each other via a ern Canadian airport system.
well-developed regional road network.
• Vancouver is the only west coast port with service by three major Vancouver International Airport
transcontinental railways – Canadian National Railway Company The Gateway’s primary aviation facility is the Vancouver International
(CN), Canadian Pacific Railway (CP), and Burlington Northern Santa Fe Airport (YVR). YVR is Canada’s second busiest airport, with 16.4 million
Railway (BNSF). Excellent rail connections are available at both the passengers, approximately 224,000 tonnes of cargo, and 280,000 take-offs
Port of Vancouver and Fraser River Port. These port facilities are also and landings in 2005. YVR is the second largest international passenger
served by a short line railway - Southern Railway of British Columbia. gateway on the west coast of North America and offers over 500 non-stop
flights and 142,000 seats monthly to destinations in Asia.
Prince Rupert
Other Airports
The Port of Prince Rupert is served by CN’s high capacity northern mainline The Calgary International Airport is linked to Asia-Pacific via freighter
and the Trans-Canada Yellowhead Highway, which provide strong land service, while Toronto Pearson International Airport is linked by non-stop
connections to the rest of North America via the lowest grades through the passenger services. (It should be noted that the latter is not considered a
part of the APGCI).

Transportation Services
Figure 3-2: Pacific Gateway Rail and National Highway Canada’s Gateway system is highly dependent upon several service part-
System ners. These include:

Legend
Major Roads
BNSF System Network
CPR System Network
CN System Network

12 Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007
• Government agencies – customs and border services, agricultural 3.2 Potential Opportunities for the Asia-
inspection services, security services, etc.
Pacific Gateway and Corridor
• Airport and port authorities in Vancouver, Prince Rupert, plus at criti-
cal inland facilities along the major transportation corridors at Prince As we look to the future, Canada’s Asia-Pacific Gateway and Corridor has a
George, Kamloops and Cranbrook. significant opportunity to expand its role in global supply chains and the
rapidly evolving Asia-Pacific trade corridor. That said, the question that
• Private terminal operators – own and operate port terminals for often arises is “Why us?”
passengers and cargo.
Simply put, Canada’s Asia-Pacific Gateway and Corridor strategically links
• Railways – major carriers include CN, CP, and BNSF. CN and CP are the Asia-Pacific region to North America via the shortest sea, land, and air
federally regulated (as are BNSF operations in Canada) and all three routings (see figure 3-3). The ports of western Canada are one to two days
carriers have extensive transcontinental networks that link ports to closer sailing time to Asia-Pacific ports than their competitors in the U.S.,
inland markets. and our airports are several hours closer flying time than similar facilities
• Airlines – the Vancouver International Airport’s network includes south of the border. This puts shippers closer to their intended markets, be
intercontinental service (by Air Canada, several foreign air carriers, it in Asia or North America, and enables transportation service providers to
and numerous charter operators), continental connections (by Air turn their vehicles (ships/airplanes) around faster and realize benefits from
Canada, WestJet and many U.S. carriers), and regional services (by faster transit times between Asia-Pacific and North American markets.
Jazz and others). For example, sea journeys between Shanghai and North America are:
• Shipping and cruise lines. • 68 hours faster through Prince Rupert than through Los Angeles; and
• Other carriers - truck and tugboat operators, shortline rail carriers. • 32 hours faster through Vancouver than through Los Angeles.
• Labour (union, non-union) – longshore, railway, trucking, airline,
inspection agencies, etc. Figure 3-3: Geographic Advantage of Pacific Gateway
• Local governments - provide and maintain local roads and other
community services and regulate use of municipal lands.
• B.C. provincial government - has regulatory control over land use
(except federal lands) and owns the majority of riverbeds and port Shanghai

sea beds (the one exception to this is the Port of Vancouver). The
provincial government also have responsibility for highway infra-
structure.
• Other western provinces - APGC is a strategic asset for the flow of
western provincial exports.
• Translink – the Greater Vancouver Transportation Authority has
Prince Rupert
responsibility for funding certain road and bridge infrastructure in Vancouver
the busy Vancouver port/airport region, and for parts of the Canada
Manzanillo
Line transit system linking the airport to the port and the central
business districts and tourism attractions of Vancouver and Rich- Los Angeles

mond.
The combination of western Canada’s geographic advantage, the country’s
• Private sector operators – of warehousing, vehicle and vessel repair, well-developed transportation network, existing infrastructure capac-
trade exhibition and business facilities, etc. ity, and planned new facilities leaves Canada’s Asia-Pacific Gateway and
Corridor well positioned to pursue several potential opportunities. These
include:

Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007 13
• Increasing Canada’s participation in transpacific container Figure 3-4: Transpacific Container Markets
trade (includes imports and exports between Asia-Pacific and North
America) – Worldwide container traffic is projected to nearly double
between 2005 and 2015. During this period, transpacific container
movements are projected to increase by 100% from 68 million
TEUs to 136 million TEUs (see figure 3-4). Canada presently captures
roughly 9% of this market. With proactive action, it is possible that
Canada could capture a significantly larger share of this market.

Global Container Traffic Transpacific Container Traffic


1,000 (TEUs, millions) 200 (TEUs, millions)
762.0
750 150 136.0

500 391.0 100


68.0
250 50

0 0
2005 2015 2005 2015

• Increasing our participation in transpacific air cargo trade Figure 3-5: Transpacific Air Cargo Markets
(includes imports and exports between Asia-Pacific and North
America) – Global air cargo traffic is projected to nearly double
between 2005 and 2015. During this period, transpacific cargo traffic
is projected to increase by over 110% from 3.2 million tonnes to 6.8
million tonnes (see figure 3-5). At present, Canada captures a modest
share of this traffic. Through the introduction of appropriate strate-
gies, an opportunity exists for Canada to participate more aggres-
sively in this market.
Global Air Cargo Traffic Transpacific Air Cargo Traffic
40 (tonnes, millions) 10 (tonnes, millions)
34.0
8 6.8
30
6
20 17.7
4 3.2
10 2
0 0
2005 2015 2005 2015

• Increasing our participation in the transpacific air passenger Figure 3-6: Transpacific Air Passenger Traffic
market (includes inbound and outbound between Asia-Pacific and
North America) – Global air passenger traffic is projected to grow
by roughly 65% between 2005 and 2015. During this timeframe,
Transpacific passenger traffic is projected to increase by over 300%
from 240 million RPKs to 750 million RPKs (see figure 3-6). Similar
to air cargo, Canada’s share of this traffic is fairly modest. Through
the introduction of appropriate strategies, an opportunity exists for
Canada to capture a larger share of this market. Global Air Passenger Traffic Transpacific Air Passenger Traffic
8,000 (RPKs, billions) 1,000 (RPKs, billions)
6,659.2
750.0
6,000 750
4,018.0
4,000 500
240.0
2,000 250

0 0
2005 2015 2005 2015

14 Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007
• Developing value-added processing – With increased volumes expansion of capacity to handle future growth, but also a transportation
of both maritime container cargo and air freight, an opportunity system that is efficient, reliable, secure and cost competitive.
exists to establish value-added processing centres in western Canada.
Goods moving through the Gateway could potentially be stored for The proposed vision for the Asia-Pacific Gateway and Corridor is intended
distribution or undergo some form of processing to add value such to capture all of these elements:
as customization of personal computers or affixing customer logos to
sports apparel. All activities would be free of GST and duties prior to Canada’s Asia-Pacific Gateway and Corridor will be the
onward shipment to the U.S. under the export distribution program. preferred transportation network for connecting a
This is considered a high growth opportunity. significant share of the transpacific flow of global
commerce between the growing markets of Asia and
While geography leaves Canada well positioned to exploit these opportu-
North America, well into the 21st century.
nities, it must be emphasized that location alone will not be sufficient to
ensure success of the APGC. Canada’s natural advantage can be under-
mined by issues related to reliability (e.g. trans-shipping times, border Figure 3-7: Canada’s Asia-Pacific Gateway and Corridor
clearance delays, congested corridors) and by high costs.

3.3 Gateway and Corridor Vision


Western Canada has been blessed by geography, giving its ports and
airports a strategic competitive advantage as the closest North American
points of entry by sea and air.
Canada’s connection to the Pacific region can be traced back to the late
1700’s when the first sea-otter pelts from the west coast were conveyed
across the Pacific to China to be traded. With the extension of the Cana-
dian Pacific Railway to Vancouver in 1887, Canada’s trade with the nations
of East Asia and other countries of the Pacific Rim expanded dramati-
cally. The Port of Prince Rupert was first established at the terminus of
the Grand Trunk Railway in the early 1900s as part of a vision to develop
a North Pacific gateway and corridor for Canadian exports. In 1931, the
Vancouver International Airport officially opened and was hailed as the
gateway to the Pacific.
Vancouver has served as Canada’s largest Pacific Gateway for over 100
years. As we further develop Canada’s Pacific Gateway and Corridor, it is
essential that we lay the foundation for a future transportation network 3.4 Economic Significance of the Gateway
that will take Canada through to the next century. This means not only and Corridor
addressing the important infrastructure and capacity needs for the next
The Gateway is a major source of economic activity in British Columbia. It
20 years, but also ensuring that land use planning and protection for the
generates over 75,000 direct jobs and roughly $4.6 billion in GDP economic
Asia-Pacific Gateway and Corridor does not preclude its ability to respond
activity. A breakdown by mode is provided in the table below.
to the long term opportunities of what is now becoming known as the
Pacific Century.
Figure 3-8: Gateway System Statistics – Transport Activity
Therefore, the vision for the Asia-Pacific Gateway and Corridor Initiative
Maritime Air Truck Rail Total
needs to be anchored on a grander scale, both in terms of scope and plan-
Direct Jobs 33,527 23,385 14,214 4,064 75,190
ning horizon. The APGC vision also needs to capture the strategic objective
GDP (B$/yr) 1.9 1.5 0.9 0.3 4.6
of making Canada’s Asia-Pacific Gateway and Corridor a magnet for Economic
Output ($B/yr) 5.4 2.4 1.9 0.7 10.4
attracting a greater share of trade and travel across the Pacific. To succeed
as the preferred transportation network over the long term, the Asia- Source: Economic Impact Analysis of the Major Commercial Transportation System,
Pacific Gateway and Corridor needs to capitalize on its strategic geographic Delcan/Economic Research Group, July 2003
location and provide a complete package that includes not only phased
Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007 15
The impact of the APGC stretches well beyond its direct activities. The Measure 2a: Canada’s Asia-Pacific two-way sea container traffic flow.
economic health of the municipalities surrounding these facilities stems, in Measure 2b: Canada’s Asia-Pacific two-way air passenger traffic flow.
large part, from the employment of people engaged in related port/air-
Measure 2c: Canada’s Asia-Pacific two-way air cargo traffic flow.
port activities. As well, these facilities have direct impacts beyond the
Lower Mainland, with employment supporting the Gateway’s corridors These measures focus on increasing Canada’s traffic volumes with Asia.
and the export sector extending throughout the prairies and even further Over the coming decade and a half, the APGC is poised to facilitate the
afield. A 2001 study by the Vancouver Port Authority found that almost expansion of Canada’s sea container, air passenger, and air cargo traffic
40% of the port’s direct jobs were outside of the Lower Mainland. to and from the Asia-Pacific region. Canada’s airports and air navigation
infrastructure providers are making the needed investments in capacity.
The gateway system also support several key sectors such as forestry,
Canada’s ports and railways are also investing in capacity and operational
mining, agriculture, manufacturing, and tourism that account for a signifi-
efficiencies. Canada’s airlines are vigorously pursuing the development of
cant portion of the provincial economy and a majority of B.C.’s exports.
new routes and frequencies. The Government of Canada is committed to
3.5 Performance Targets and Measuring improving the competitiveness of Canada’s airports by increasing oppor-
tunities for air access by pursuing open skies agreements to stimulate new
Success travel and trade opportunities. Provincial governments are making road
The APGCI constitutes a significant investment of public and private funds, infrastructure investments to support the APGC, and the tourism industry
as well as dedication of human capital. The Results-based Management is marketing Canada as a destination for leisure, conventions, trade exhibi-
and Accountability Framework of the Federal Government requires that tions, education, and other activities.
strategic outcomes be defined, performance measures be determined, While the primary objective is increased traffic, other measures should also
and a sound performance measurement strategy be developed that allows include relative performance in the number of destinations and service
progress to be tracked, with outcomes measured and reported. Here, frequencies.
some potential performance measures are suggested for the APGCI. Addi-
tional, or alternative measures, should be determined by APGC program Potential metrics include data that is already collected by the Federal
managers in conjunction with information management specialists and Government, such as origin/destination sea container, air passenger, and
Treasury Board Secretariat analysts. Consideration must also be given to air cargo volumes. Data timeliness and comprehensiveness will continue
the interdependencies that may exist across the performance measures. to pose challenges, however. For example, air cargo data is collected by
Statistics Canada but the data as collected does not show true origin and
Target 1: Boost Canada’s commerce with the Asia-Pacific destination of the goods.
region, as measured by:
Measure 1a: Canada’s Asia-Pacific import trade volume. Target 3: Increase the APGC’s share of North America
bound traffic from Asia, as measured by:
Measure 1b: Canada’s Asia-Pacific export trade volume.
Measure 3a: Canada’s APGC share of Asia-NAFTA sea container traffic.
Measure 1c: Canada’s Asia-Pacific tourism receipts.
Measure 3b: Canada’s APGC share of Asia-NAFTA air
These measures focus on trade and commerce with Asia, rather than traffic passenger traffic.
or market share (Targets 2 and 3, respectively). Measure 3c: Canada’s APGC share of Asia-NAFTA air cargo traffic
Potential metrics include data that is already collected by the Federal British Columbia has set a target to raise its market share of Asia-NAFTA
Government, such as the value of imports and exports between Asia- sea container traffic from 9% to 17% by 2020. This target represents an
Pacific nations and Canada as well as tourism expenditures in Canada by increase from an annual volume of two million TEUs to an estimated nine
Asia-Pacific source economies. million TEUs. While this may or may not be the final target set for the
One issue that needs to be addressed is the timeliness of data availability. APGC, it offers a starting point for consideration. The measurement of this
In particular, data on tourism expenditures in Canada is characterized goal would include the combined activity of the three ports in Vancouver
by lengthy delays. A review of the type and timelines of data currently and the Port of Prince Rupert. In measuring achievement of this goal, no
collected is necessary to ensure that Canada has the data available to differentiation would be made among the ports. Federal investments will
measure progress in this and other areas. be made where they provide the greatest benefit for Canada, and it is the
collective achievement of Canada’s ports which is the measure of success.
Target 2: Increase Canada’s traffic volumes to/from the TEU volumes are tracked by the four APGC ports. U.S. west coast ports also
Asia-Pacific region measured by: track TEUs, although the measure of market share is complicated by the

16 Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007
fact that some Asia-Pacific container traffic is routed via U.S. Gulf of Mexico Measure 4b: Shipment transportation times through the Lower
state ports as well as eastern U.S. ports. This data is not readily accessible Mainland and Prince Rupert.
and Transport Canada should work with industry and the U.S. government One of the key nodes of the Asia-Pacific Gateway and Corridor is the
to collect and exchange this data. combined operations of the Ports in Vancouver and on the Fraser River.
Other measures should include the APGC’s market share of Asia-NAFTA air These vital facilities must share regional highways, bridges and rail
passengers and air cargo. infrastructure with commuters and other users in the B.C. Lower Mainland.
Gateway competitiveness will be impeded by (and potentially contribute
Target 4: Improve the efficiency and reliability of the to) regional congestion. The Government of British Columbia has made a
APGC for Canadian and North American exports, as major commitment in its Pacific Gateway Strategy Action Plan to improve
measured by: and expand key links from the ports and the Vancouver International
Measure 4a: Delivery reliability from the APGC to both Central Canada Airport to the corridor from Vancouver, including new highway linkages,
and the U.S. Midwest. road capacity and bridges. Several elements of the Action Plan are being
Gateway competitiveness depends on high performance logistics systems. developed as public-private-partnerships (P3s) to increase the scope of
In the field of supply chain management, one of the most important per- investment and reduce the time to delivery of the needed capacity.
formance measures is delivery reliability. Logistics reliability facilitates the Success with Lower Mainland transportation times should be measured
reduction of inventories across the supply chain (including retail outlets, for key corridor routes from the various port (and airport) locations. It is
distributors, in-transit inventories and source of supply inventories), which recommended that Transport Canada work with the Greater Vancouver
in turn, reduces costs for producers and consumers. The achievement of Transportation Authority (Translink) in the development and publication
high reliability is a goal for both surface transportation modes (road and of these measures.
rail) as well as the air mode.
Measure 4c: Work stoppages.
Developing measures of supply chain reliability can be a challenging task.
Work stoppages have a significant negative impact on the APGC, not only
The types of statistics usually collected for transportation and port/airport
in the short run as traffic is diverted to competing ports, but in the long
systems are typically focused on traffic and operational measures. New
term as well, since reliability is critical for gateways to attract and retain
measures will have to be developed, and new statistical data collection
customers. This measure is not limited to the ports themselves; labour
and reporting will need to be put in place. This will need to be a co-opera-
disruptions at railways or trucking firms, by border/security officers or by
tive effort with the transportation and logistics industry.
any other component of the supply chain would have an impact. The ideal
It will not be sufficient to simply measure Canada’s performance, as suc- target for this would be zero work stoppages. Measures could include
cess depends on relative performance. Hence, measures will necessarily labour days lost or hours of closure. More sophisticated measures that
have to include measurement of gateway and corridor competitors. deal with “work to rule” incidences should also be developed.
One possibility would be to task the Centre for Transportation Studies at
the University of British Columbia (UBC) with the development of these
measures, as a co-operative effort with the Van Horne Institute at the
University of Calgary, the University of Manitoba Transportation Institute
(UMTI), the Western Transportation Advisory Council (Westac) and Statis-
tics Canada, with the latter assuming responsibility for reporting. UBC has
been the home of transportation and logistics expertise and research since
1926. It is the home of Canada’s Centre of Excellence for Intelligent Trans-
portation Systems. The Van Horne Institute at the University of Calgary
has been a leader for two decades in the development of transportation
policy across all modes. Meanwhile, UMTI has been a leader in corridor
transportation development and has specialized in the logistics of several
Canadian export industries. Finally, Westac has been a model for three
decades in facilitating dialogue between industry, government and labour
in the transportation sector.

Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007 17
4.0 STRATEGIC ISSUES AND CHALLENGES
In order to realize the vision and achieve the targets identified in the Figure 4-1: Core Elements of APGCI Strategy
preceeding section, critical progress must be achieved in several core and
inter-related areas (see figure 4-1), including:
• Gateway and Corridor Capacity – In developing an integrated Optimizing and Establishing
Expanding Secure and
long-term plan for APGC infrastructure, improvements must be made Gateway Seamless
Corridor Borders
to address emerging bottlenecks and multi-modal transfer points, Capacity
and cement the reputation of the APGC as a reliable, efficient and
secure connection between North America and Asia.
• Effective Governance and Coordination – New approaches to
governance, reflecting an outward-looking perspective on global Fostering a
Market-Driven
commerce, will be required to ensure maximum efficiency of the and Pro-
Promoting
Effective
APGC’s existing assets. Competitive Corporate
Policy Governance
Framework
• Security and Border Efficiency – Canada already has some of the
world’s safest and most secure transportation systems and border
Enhancing
programs, however, the security and border environment is not Human
Resources and
static, and constant improvement is imperative. Collective
Bargaining
• Human Resources – A well-trained and reliable workforce will be
essential for the efficient operation and growth of the APGC. Due
to existing market conditions, several challenges will need to be 4.1 Gateway and Corridor Capacity
addressed to ensure a reliable supply of labour.
Issues and Challenges
• Pro-Competitive Policy Framework – Since goods and people
At the present time, much of the port and rail systems within the APGC are
can move between Asia-Pacific and the U.S. via several alternative
at or nearing capacity. A comprehensive capacity and demand analysis
gateways, policies and regulations will be required across all levels
was completed in 2005 as part of the B.C. Ports Strategy. At the end of
of governments and departments that ensure the efficiency and
2005, total container terminal capacity stood at 2.26 million TEUs (twenty-
competitiveness of the APGC.
foot equivalent units); actual container volume was 2.14 million TEUs. Sev-
eral container terminal projects in the Lower Mainland and Prince Rupert
are currently under construction and/or in the planning stage. Any delay
or cancellation of these projects could create a significant capacity shortfall,
severely restricting Canada’s ability to capitalize on growth opportunities.
Rail capacity is also a major issue. Broad estimates of capacity utiliza-
tion (train movements) on key rail corridors show that system capacity
constraints presently exist along the Canadian Pacific Railway’s Nepa to
Revelstoke route east of Kamloops and Canadian National Railway’s main-
line north of Kamloops. Rail networks throughout the Lower Mainland are
also nearing capacity.

18 Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007
Road capacity in the Lower Mainland is another major impediment. Major • The Vancouver Port Authority has recently completed several capac-
truck routes serving the Lower Mainland ports, including Highway 1, High- ity expansion projects at Vanterm and Centerm, an environmental
way 99, Knight Street and River Road, are at or above capacity and traffic review has just been completed for Deltaport’s third berth project, a
congestion is consistently identified as one of the major regional issues. new Terminal 2 is being proposed for Roberts Bank, and the possibil-
This congestion impacts not only local residents, but also the smooth flow ity of converting Lynnterm from break-bulk to container operation is
of APGC traffic. being assessed.
Going forward, a key challenge for Canada will be to ensure it has suf- • The first phase of Prince Rupert’s Fairview container terminal will
ficient capacity to accommodate the anticipated long term future traffic open at the end of 2007.
growth. Investment and close collaboration will be required by both the • Efforts are underway by the Lower Mainland Trucking Forum to
public and private sectors. improve the efficiency of the current system, including considering
To address this issue, the Government of Canada and its transportation expanding operations to a 24 hour basis.
partners will need to: • The Vancouver International Airport Authority has commenced
• Maximize efficiency and capacity of the existing system; a 10-year $1.4 billion capital program to expand its international
• Facilitate new investment in infrastructure; and passenger terminal building, along with other improvements. A new
Canada Line Rapid Transit project, funded jointly with the Federal
• Plan more effectively for the future and preserve land and right of and B.C. Governments and TransLink, is also under construction.
ways for future requirements.
It should be noted that Canada is not alone in this endeavour. Other coun-
Recent Developments tries like the U.S. and Mexico are also investing heavily in their gateways
There have been several positive developments in recent years to improve and corridors.
the efficiency and capacity of the APGC, including funding commitments
of over $6.2 billion for infrastructure in B.C., Alberta, and Saskatchewan.
Key Questions and Strategic Choices
• The Federal Government committed $591 million in the May, 2006 Expanding Capacity
Budget for investment in strategic pan-western infrastructure for As previously noted, port terminals and facilities face several capacity
the APGC, including: $321 in immediate commitments (upgrading challenges. With so many alternative uses for waterfront land, it is also
Pitt River Bridge and Mary Hill interchange, Roberts Bank Railway difficult to prevent such land which may be required for future expansions
Corridor overpasses and underpasses, Twinning of the Trans Canada from being developed for other uses. Several new initiatives have been
Highway in Banff National Park, South Fraser Perimeter Road, and raised as options to improve freight throughput and capacity and reduce
dredging along the Fraser River). The March 19, 2007 Federal Budget congestion in and around ports.
increased the Federal Government’s committment to the APGC to $1 • Inland Terminals - Inland container terminals are cargo-transfer
billion. facilities built away from existing marine infrastructure that can be
• The Government of B.C. announced a $3 billion Gateway Program used as inter-modal transfer points for the shipment of both inbound
in January, 2006 that will support both local residents and APGC and outbound goods. The experience in other jurisdictions is that
traffic (this includes Federal Government contributions of up to $192 large volumes of traffic are required to warrant the double handling
million). Key Program components include twinning of the Port of containers but there are also opportunities to introduce a broad
Mann Bridge, a new South Fraser Perimeter Road and North Fraser range of value-added services (e.g. Foreign Trade Zones) and cost
Perimeter Road, and a new Pitt River Bridge. efficiencies.
• Improvements are also being made by the government of B.C. to the
Kicking Horse Canyon, a major connection/link between B.C. and The Federal and B.C. Governments have been working with industry
Alberta. to complete a feasibility study to determine location characteris-
tics and identify critical success factors required for efficient and
• CN and CP plan to invest $1.2 billion in rail infrastructure between cost-effective inland container terminals. These terminals could be
2004 and 2010. These funds will be used to improve infrastructure built anywhere along the Western Canada corridor at locations with
in B.C., Alberta and Saskatchewan (Northern and Southern Rail established intermodal linkages.
Corridor upgrading). These railways have also entered into several
co-production agreements which have resulted in improved flows
and efficiency during the past several years.
Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007 19
• Shortsea Shipping - Shortsea shipping involves the local move- view to improve the international and inter-provincial flow of goods.
ment of goods and passengers by water transport. With many 24 hour operations have been identified as a solution which could maxi-
potential water routes, some believe that this strategy could provide mize the capacity of our ports and terminals. A Lower Mainland Trucking
significant additional capacity. From an environmental perspective, Forum has been established to pursue this objective. However, one major
shortsea shipping could also reduce road traffic congestion, improve issue remains unresolved: since most of the delivery points are not open
air quality, and mitigate noise pollution. 24 hours, truckers leaving the terminals must wait until morning to unload
their cargo. As a result , while there are clear benefits for terminals, there
Several companies currently provide shortsea shipping services along may not be corresponding benefits for truckers.
the B.C. coast and the Fraser River, primarily transporting logs, wood
chips, gravel and crushed stone. Some believe that marine contain- The Government of Canada should consider continuing to
ers could be moved from the deep-water terminals to less expensive promote innovative processes to expand capacity and efficiency
and congested off-dock locations by shortsea shipping. This could of the APGC, including working with industry to implement 24
simplify the movement and storage of empty containers and reduce hour operation.
congestion on the road network. There are some major limitations
however, relative to other shortsea shipping routes in other parts of Infrastructure Investment
the country (Great Lakes, the Saint Lawrence Seaway, and Atlantic The Federal Government has committed significant amounts of fund-
region) where there are greater traffic densities and potentially ing during the past few years to gateway infrastructure projects. Many
longer distances. communities, aware of this funding support, are now lining up to seek
Going forward, the Federal Government will be faced with a list of projects funding for other infrastructure initiatives they claim to be gateway-
which will exceed its fiscal capabilities. There have been several simula- related projects. In response, the Government of Canada has identified the
tions which have considered modal improvements (e.g. a recent trucking following criteria that must be met in order to qualify for APGCI funding
study examined improvements to the road system). However, there has (see figure below). While this represents a comprehensive list, the federal
not been any comprehensive network analysis to consider the relative government should consider adding a criteria to explicitly include projects
impacts of pursuing alternative strategies. This information is critical to that improve the processing of goods and passengers at border points.
establishing new transportation priorities, both modally (road, rail, etc.) as
well as regionally (Lower Mainland versus Prince Rupert). APGC Infrastructure Funding Selection Criteria
The Government of Canada should consider developing a • The project responds to a demonstrated (qualitative and quan-
comprehensive simulation program to determine the relative titatively) need to address capacity constraints and bottlenecks
impacts of different infrastructure investments and strategies in support of Asia-Pacific international trade flows;
in the APGC. • The project has demonstrated benefits, such as economic/social
impacts, congestion reduction and a greater than one benefit-
Operational Efficiencies & Innovation cost ratio;
Gateway capacity can also be expanded by increasing operational efficien- • The project improves safety, security and reliability;
cies. The Port of Vancouver has realized throughput increases as a result
of its capacity to handle larger vessels and berth window corridor system. • The project fosters local support for important transportation
However, other capacity-enhancing mechanisms are being introduced at corridors/infrastructure;
ports elsewhere in the world that could have application at APGC facilities. • The project promotes sustainable transportation principles by
These include increased automation, 24/7 operations (terminal and truck- reducing environmental impacts including criteria air contami-
ing) and improved and/or more flexible labour practices. nant emissions and greenhouse gas emissions; and
Innovation is also crucial to maximizing efficiency and expanding capacity • The project leverages public and private funding, where appro-
of current facilities. Intelligent Transportation Systems (ITS) are a promis- priate, including alternative financing mechanisms.
ing new field of communication and information technology which can be
used to improve throughput and avoid congestion.
Source: APGCI T.I.F. Application Guide.
A Bureau of ITS and Freight Security was established at UBC in 2005. The
Federal Government has contributed $2 million for a traffic management
centre in the Lower Mainland to implement such a system, with a specific
20 Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007
Other jurisdictions utilize different approaches to promote significant Recent Developments
capital investments in their transportation systems. In the U.S., funding is During the last 15 years, Canada has been a leader in the development
made available through dedicated mechanisms to provide a steady stream of new governance structures for airports, ports, air navigation services
of investments. Tax-exempt bond financing is also available to stimulate and the St. Lawrence Seaway. However, going forward, new governance
investment by other partners. models may need to be adopted to better respond to global competitive-
The Government of Canada should consider adding a selection ness. Key issues include the potential for different ports and/or corridors
criteria that explicitly includes projects that improve the to duplicate investments, the ability to finance needed investments, the
processing of goods and passengers at border points. overall competitiveness of Canada’s supply chain, and marketing effective-
ness.
The Government of Canada should continue to consider
developing new financing mechanisms to fund infrastructure. Canada developed its governance structure for infrastructure and
transportation service providers at a time when few other nations had
moved away from government operation of transportation facilities and
Environmental Reviews
carriers. At the time, Canada acted as an exemplar to many other nations.
Currently, environmental review processes are a serious impediment to Since Canada’s initial policies, new business models have emerged in the
the development of the APGC, both with respect to uncertainty and cost. infrastructure sector. The UK and Australia have fully privatised their ports
Some projects require both federal and provincial approvals, each utilizing and airports. The Netherlands is using state owned corporations for its key
a different process. Approval processes need to be streamlined, harmo- infrastructure facilities. France has partially privatised Aéroports de Paris
nized and consolidated. as a means of raising capital through equity markets.
Some processes include a time limit for a decision, which significantly
helps in the planning process. Timely approvals for critical transportation Key Questions and Strategic Choices
projects are critical to the APGC’s ability to handle the projected volumes.
Land Use Planning
The Government of Canada should consider working with A critical issue for the long-term vision and development of the APGC is
provincial governments to develop a harmonized accelerated land use planning. Adequate land and rights of way must be identified
impact assessment mechanism for high-priority gateway and protected for future development. At the present time, although
projects. Official Community Plans in B.C. identify rights of way, there is no formal
mechanism to prevent these corridors from being used for other purposes.
4.2 Effective Governance & Coordination In B.C., land can be designated as an “Agricultural Land Reserve” which is a
provincial zone where agriculture is recognized as the priority use. Farm-
Issues and Challenges
ing is encouraged and non-agricultural uses are controlled. The ALR covers
An effective and efficient Asia-Pacific Gateway and Corridor requires co- approximately 4.7 million hectares in B.C., effectively preserving them for
ordination among numerous stakeholders. If the Gateway is to optimize it farming. This innovative policy has protected a significant amount of land
operations and enhance its competitiveness, a means must be established for future agricultural production, helping to ensure the sustainability of
to align disparate interests, policies, and approaches between: the region.
• All levels of governments;
The Government of Canada should consider working with
• The public and private sectors; provincial governments to establish “Transportation Land
• Competing modes; Reserves” to protect critical gateway land and rights of way for
• Competitors within modes; and future development.
• Between Canada and the U.S.

Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007 21
Effective Governance • A Transition Committee (made up of directors and CEO’s of the three
Canada has successfully privatised its nationally owned air and rail carriers. port authorities along with a representative of the Federal Govern-
While Canada has transferred its major ports and airports to not-for-profit ment) should be established to develop and implement a transition
authorities, many other nations have fully privatised to finance infrastruc- plan.
ture and improve access to equity capital. Some Canadian airports have The phase was completed and approved by the boards of all three authori-
suggested privatization would be the logical next step in the evolution of ties in November. Specific recommendations were made on a number of
our system. issues believed to be critical in permitting the new entity to achieve its
While Canada’s airport and port authorities have made major investments vision – to become a Global Competitor, Community Partner.
in needed capacity, airlines and other users have raised concerns with A Transition Committee has subsequently been established and work is
governance, transparency and the level of charges. Some believe now underway in developing the Transition Plan.
users and gateway competitiveness would be enhanced with a new
The Government of Canada should continue to work with the
governance structure, such as for-profit private operation, with legislated
three Lower Mainland Port Authorities to amalgamate
regulation of fees and charges to provide greater accountability and
them in 2007.
transparency.
P3 models have been used for major Canadian transportation investments Cooperation and Support
such as the Confederation Bridge between New Brunswick and PEI, the
To help control congestion, municipalities may impose various measures,
407 Highway bypass around Toronto, and the Canada Line transit system
such as sales taxes and tolls, which also generate revenue. However, the
linking Vancouver International Airport to Vancouver and Richmond.
development of the Pacific Gateway and Corridor presents a particular
These business models provide access to private equity for financing
challenge for municipalities, which have property taxes as their chief
needed infrastructure while retaining important policy
source of revenue. While they benefit from revenues as a result of pay-
direction for government.
ments in lieu of taxes from airports and ports, and property taxes of ten-
The Government of Canada should undertake a global review ants, it does not come without some costs – traffic congestion, potential
of best practices in governance structures to determine if for reduced quality of life in some neighbourhoods, road maintenance and
further changes are required to port, airport and related investing in road-rail grade separations, services such as water, sewer, and
transportation entities to enhance the competitiveness of the policing, and land that may be underperforming in terms of tax revenues.
APGC. A major issue with the current financial arrangement is that, as traffic
increases, municipalities do not benefit from increased revenues to offset
The Government of Canada should consider pilot projects for
their increased expenses.
APGC facilities which would increase the role of the private
sector and investors in the delivery of infrastructure and Failure to balance these costs and benefits forces municipalities to increase
services. property taxes, and consider converting industrial land to more profitable
uses. Resolving the sharing of these costs could significantly reduce local
Lower Mainland Port Integration opposition to gateway and corridor projects in the national interest.
On July 7, 2006, the Vancouver Port Authority (VPA), Fraser River Port The Government of Canada should consider working with the
Authority (FPA) and the North Fraser Port Authority (NFPA) agreed with Province of B.C. and municipalities to consider changing the
the Federal Government to explore the opportunities for a new integrated current property tax structure for gateway facilities from a PILT
port entity for the lower mainland. model to one based on throughput.
Phase One of this initiative was to determine the business case for
integration and to recommend an organizational model. Key findings and 4.3 Security & Border Efficiency
recommendations included:
Issues and Challenges
• There is strong support for integrating the three Lower Mainland
As discussed in Chapter 3, Canada’s geographic proximity to Asia is a key
port authorities. Several major benefits are anticipated, including
strategic advantage for the Gateway and Corridor. The flow of goods and
improved land use planning, improved efficiency and more effective
people across the Pacific depends, however, on good security and border
marketing.
processes. Failure to do so could result in the so-called thickening of the
• The three Authorities should be amalgamated into one new Port border (see figure 4-2) or worst yet, consequences from security incidents.
Authority, established through Supplementary Letters Patent.
22 Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007
Gateway efficiency is impeded by the need for these flows to navigate Figure 4 2: Effect of Border Delays
through multiple borders to reach final destinations. Consequently,
Canada faces four main issues with respect to border and transportation
security in the context of the Gateway and Corridor initiative:
• Security Re-screening: Governments throughout the Asia-Pacific
region are investing billions of dollars to augment technologies and
processes for the secure movement of goods and people. Detection
of explosive threats, for example, is a key imperative under ICAO
Annex 17. Chemical/Biological/Radiation/Nuclear (CBRN) threats are
emerging, and need to be interdicted. Yet in spite of these invest-
ments, differences in standards have prompted nations to re-screen
goods, baggage and people. For the Gateway this potentially dilutes
the advantages of transiting through Canada due to additional costs
and time required. Security is everyone’s first priority. But enhancing transportation and
border security need not be a zero-sum game in the facilitation of travel-
• Dual Clearance: A comparable issue exists for border clearances.
lers and goods. The adoption of risk management techniques, process
The Gateway and Corridor initiative positions Canada’s west coast as a
re-engineering, new technologies and international cooperation can
crossroad between Asian markets and the North American economy.
all contribute to the mitigation of delays and bottle-necks that are the
As with aviation security measures, the double clearance of contain-
unintended result of new security measures. Fostering a secure Asia-
ers, passengers and cargo transiting through Canada on to the US or
Pacific gateway will require key choices to be made within the context of
Asia risks mitigating the natural advantage Canada hopes to capture
individual modes and inter-modal transfers requisite for efficient transpor-
through gateway development. Land border delays are the most
tation of goods and people.
visible manifestation of this issue, but there are clear implications for
air cargo, container trans-shipping, and air travellers as well. Recent Developments
• Time Delays: Security and border processing for all modes of Canada is an important global leader in advancing border and security
transportation typically requires review by officials in a checkpoint related initiatives. Due to the tragic events of the 1985 Air India attacks,
environment. This approach has, since 9/11, grown in time per trans- Canada was thrust into this role in the mid-1980’s and has further
action due to new equipment deployment and risk management pro- advanced new models of security and border processing since 9/11. The
cesses. These chokepoints demand a sustainable model of processing following provides a summary of some recent developments:
so that delays are reduced. For goods, this is critical for managing
• Strengthened Cooperation with United States: through the 2001
supply-chain costs and time (e.g. reliability, on time delivery). For
Smart Border Action Plan, and since 2005 the Security and Prosperity
passengers, the hassle factor and time spent idling in line-ups are key
Partnership.
issues. One estimate puts the annual cost to the Canadian economy
due to border delays at $13.6 billion; more important to the gateway • Substantial Security Investments: in response to key international
is that any delay at the border is equivalent to relocating key markets conventions (e.g. ICAO, IMO) for securing major sectors of transporta-
such as the United States further away from Canada. tion
• Changing Threats: The security environment is ever-evolving • New Technological and Legislative Tools: including advanced com-
with varying threats to both goods and people movement. To mercial information, advanced passenger information, creation of
address risks and vulnerabilities in this dynamic environment, there new government entities (PSEPC, CBSA, CATSA) and the passage of
is a need to identify and address challenges to the security of key Counter-Terrorism legislation.
infrastructure and conveyances. For example, it will be important to • Improved Facilitation of Goods and Passengers: such as CANPASS,
prevent the use of Asia-Pacific Gateway and Corridor infrastructure bilateral NEXUS/FAST and Partners in Protection programs.
and systems as conduits for goods or people that could be used to
threaten Canada or other countries. While the security of the Asia-
Pacific Gateway and Corridor is addressed as part of Canada’s national
approach, there will be a need to address specific security require-
ments based on geography, types of movements and threats faced
from increased traffic.
Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007 23
Key Questions and Strategic Choices this may itself be a detriment to North American competitiveness, such
a response could emerge given the asymmetric development of interna-
Dual Clearance tional terrorism.
As previously noted, a significant amount of Canada’s gateway traffic
An important element of reducing border congestion is to “push-out”
involves movements between Asia and the U.S. The challenge of multiple
the screening of goods and people away from the border. Canada and
borders within a Gateway environment requires creative changes to in-
the U.S. have been quite successful in implementing pre-screening and
transit flows. The present requirement for dual clearance represents one
pre-registration programs for people and especially for goods. The regular
of the APGC’s greatest challenges.
exchange of airline passenger data, information on container traffic,
Programs such as a permanent Transit Without Visa and U.S.-to-Interna- and trusted traveller programs all contribute to reductions in border
tional Transfer Departures Facilities at airports are examples of initiatives delays. More screening and information gathering can be done through
that will enhance transit passenger processes through Canada. Cargo biometrics, information technology, and voluntary pre-registration. Put
in-transit programs in Prince Rupert might also serve as a platform with another way, frequent border users should be offered more opportunities
applications in other markets. to participate in voluntary programs that allow for pre-screening and pre-
The Government of Canada should consider aggressively registration facilitated by new technologies. Volountary frequent traveller
pursuing opportunities to implement new approaches to programs like NEXUS offer the opportunity to facilitate flows of people.
minimize or eliminate dual clearance processes. One challenge facing government is how to maximize participation in such
programs and market effectively to a non-English/French/Spanish-speak-
Multilateral Cooperation ing market.
Canada has made excellent progress in redefining its border security The ultimate solution to achieving a seamless border process is for Canada
relationships with the United States and Mexico through the North and the U.S. to focus on joint clearance of passengers and goods at the
American Security and Prosperity Partnership (SPP). This co-operative perimeter (e.g. first point of entry) and eliminate the need for an obtrusive
and holistic approach to managing flows of people and goods should be clearance process for transborder movement of people and goods.
extended to our trading partners in Asia. Greater trade facilitation efforts The Government of Canada should consider aggressively
with our largest trading partners in the region should be augmented with pursuing perimeter clearance with the U.S.
expanded co-operation between our respective transportation, security,
immigration and border services agencies. 4.4 Human Resources
The equivalency and comparability of security systems is an emerging
area relevant to gateways. Recently, Canada, Europe and the United States Issues and Challenges
moved to one standard for screening gels and liquids for passengers on An adequate, well-trained and reliable workforce remains essential for
commercial flights. Working through the G8, APEC, the International the smooth and effective functioning of the APGC. There are, however, a
Maritime Organization, the International Civil Aviation Organization, and number of challenges related to human resources for an expanded APGC.
other groups, Canada should continue to advocate for the establishment of
Western Canada is suffering a labour shortage. The Royal Bank of Canada’s
common approaches to security issues. In particular, a focus on maritime
January 2006 Provincial Outlook noted that across Canada, concerns were
and air travel security is essential. Whether this involves implementing
highest in Alberta, Manitoba and B.C, with Saskatchewan not far behind.
transportation related deliverables under the SSP or new programs with
The Canadian Trucking Human Resources Council estimates an additional
APEC, a co-operative framework will assist in opening new route opportu-
37,000 drivers are needed each year, while the Chartered Institute of Logis-
nities while minimizing frictions and choke points.
tics and Transport notes that the shortage of skilled logisticians is a serious
The Government of Canada should consider taking a lead role concern for firms operating global supply chains. Moreover, shortages in
in encouraging harmonization and mutual recognition of the automotive and repair, tourism, construction and maintenance sectors
transport and border security policies in the Asia Pacific region. will all put increasing pressure on various aspects of the APGC.
Education and training are another issue. While post secondary institu-
Coordinated Clearance
tions are increasing the amount and quality of training options in the fields
The importance of ready access for goods/people to the U.S. market is a of transportation, logistics and supply chain management, the numbers of
critical success factor for the Gateway and Corridor Initiative. Yet contin- students enrolled continues to lag anticipated demand.
ued evolution of the U.S. threat-risk environment and associated policy
responses threaten to create a “Fortress America” response. Although
24 Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007
Reliability of labour supply is key to success; conversely, an inadequate, The Government of Canada should consider facilitating
unreliable labour force can significantly limit the potential of the APGC. targeted immigration to address the current and anticipated
Asian shippers still raise past labour disputes at the Port of Vancouver as chronic labour shortages.
cause for concern about the reliability of the port. Reliability is becoming
the key in global logistics, and concerns about reliability increasingly drive Education and Training
supply chain decisions. The problems the U.S. west coast port and rail sys- Post-secondary and industry options for training in transportation, logis-
tems experienced in 2004 led key big box distributors and logistics service tics and supply chain management are increasing. Nevertheless, enrol-
providers to use east coast gateways such as Savannah and Charleston to ment lags in part since these sectors have a relatively low profile among
move Asia-Pacific goods in order to reduce the risks presented by west Canadian youth and are not seen as strategic career paths. The industry
coast port and rail reliability. Labour issues potentially threaten the is attempting to improve marketing to prospective employees to attract
reputation of the APGC in a similar manner. them for training, but it is in competition with other sectors for labour.
Recent Developments The Government of Canada should consider working with
Canada’s new government has made improvements to the Temporary provincial governments to establish transportation, logistics,
Foreign Worker Program to make it easier for employers in B.C. and Alberta and supply chain management as a national priority for skills
to hire foreign workers when no Canadian citizens or permanent residents training and education.
are available. This has the potential to address immediate shortages. In
the longer term, the new government’s plan to reduce the tax burden to Collective Bargaining
attract and retain highly skilled workers will also address this shortage. Initiatives planned and underway by labour and management to improve
Industry Canada’s Lean Logistics Technology Roadmap outlines a number labour assignments, forecasting and training and conduct joint marketing
of initiatives by industry organizations, HRSDC, provincial education illustrate the mutual recognition of joint responsibility for improving the
ministries and educational institutions to address the provision of trained labour environment and selling a reliable service. Nevertheless, as recent
logisticians, but notes that more needs to be done to enable Canada to events show, labour disruptions are still an issue.
“move rapidly into the future.” The Federal Government has on occasion been drawn into the midst of the
Partnerships between labour and employers are developing at APGC ports, issue in the national interest and has responded with back-to-work legisla-
and joint marketing efforts are emerging to show customers a united front tion. After-the-fact interventions, however, do not instill confidence in
and address reliability concerns. This is an important start, although it will the on-going reliability of the APGC. Reliability continues to be raised as a
take considerable concerted effort to change the negative perceptions that major issue by offshore shippers. More needs to be done to prevent labour
exist. While much of the focus has been on the various long-shore labour disputes (e.g., mediation, final offer arbitration) before they occur.
disputes in the past, the summer 2005 withdrawal of trucking services by The Government of Canada should consider new, innovate
owner-operators also had a serious impact. The Final Report of the Task forms of mediation and arbitration to prevent work stoppages
Force on the Transportation and Industrial Relations Issues Related to the in the transportation sector.
Movement of Containers at British Columbia Lower Mainland Ports noted
that importers in Ontario and Québec were affected and that containers 4.5 Pro-Competitive Policy Framework
and vessels were diverted to Seattle and Tacoma to avoid Vancouver.
Issues and Challenges
Key Questions and Strategic Choices Canada’s APGC is not the only alternative for moving goods and people
Immigration between markets in Asia-Pacific and the U.S. In fact, it is not even the
only alternative for moving goods and people between Asia-Pacific and
Canadian demographics suggest that the developing labour shortage will
Canada, since many U.S. and even Mexican gateway corridor alternatives
not be addressed by natural growth of the Canadian population. While
are seeking to handle North American traffic to and from Asia. In order to
achieving increased workforce participation by Canada’s growing Aborigi-
preserve Canadian jobs and ensure adequate direct transportation service
nal population could deal with part of the anticipated shortage, this likely
levels to serve Canadian needs, APGC-based supply chains need to be
will not suffice to address the issue. Immigration is a means of addressing
competitive on a global level.
the labour shortage, but this raises other social and economic issues.

Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007 25
Governments must ensure that policies and regulations across various Key Questions and Strategic Choices
departments and levels of government are consistent with this objective.
These include economic regulation and taxation policies. Policy Alignment
Establishing a true pro-competitive policy environment requires a multi-
Recent Developments departmental effort. Transportation policy alone can not produce the
Canada’s new government has taken a key step in the development of the necessary pro-competitive environment. The APGC needs to be a factor in
APGC by creating a separate Ministerial portfolio for the initiative. This the policy development of key departments with responsibility for finance,
identifies the APGC as a government priority and indicates its multi- taxation, international trade and exports, tourism, industry, customs
departmental relevance. and duties, public safety and security, inspection services, labour, human
The invitation by the Federal Government for participation of all level of resources, immigration, training and education, research and develop-
government is a key step to alignment of the entire policy environment. ment, environment, competition, public health, and statistics.

Canada’s new government has recently announced a number of initiatives A national pro-competitive policy environment requires alignment of
such as the elimination of the federal net debt by 2021, a review of capital provincial and federal policies. Federal progress in this area potentially
cost allowances, and other measures to improve competitiveness and could be undermined by provincial policy, such as those limiting truck-
encourage investment. These will help establish a competitive tax regime ing weights and dimensions, imposing road charges on key APGC links,
for the APGC. or imposing uncompetitive fuel taxes on trucking, rail, and aviation. The
participation and support of western provinces is also critical to the success
To make Canada’s duty deferral and other customs programs more of the APGCI.
competitive with the U.S. FTZ program, Canada introduced the Export Dis-
tribution Centre program in 2001. While it has elements that are superior The creation of a separate Ministerial portfolio for the APGC will raise
to the U.S. version, limitations on value-added activity and export ratios the profile of the initiative in the policy-making activities of the various
have made it less attractive than anticipated. Additional planned features relevant departments. The question is whether this will be sufficient to
such as the operators certificate have not yet been implemented, further change historically ingrained behaviors wherein staff tend to view their
hindering program take-up. responsibilities within narrow departmental “silos.”

Canada has also taken significant strides in international air policy.


Recently signed open skies agreements with the U.S. and the U.K. hold The Government of Canada should consider incorporating APGC
the potential to expand air services. New liberalized air service agree- performance measures in all relevant departments, or take
ments with China and India are also important for the APGC. Canada’s new other steps to achieve internal alignment of goals.
international air policy, which seeks open-skies type agreements as a
primary objective when in the overall interest of the country, is a positive Taxation
development. Transport Canada intends to pay special attention to key Canada’s tax regime needs to be reasonably competitive with respect
Asia-Pacific markets as it implements its new approach. to the United States. Canada and Canadians have different social and
economic priorities from the U.S., so the tax regimes will continue to
differ. The challenge is to ensure the competitiveness of the APGC while
maintaining government service expectations of Canadians. Issues have
been raised with respect to federal and provincial fuel taxes, property
taxes, capital cost allowances, and advantages of the tax status of certain
U.S. municipal bond interest payments.

26 Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007
Canada’s tax structure is continually evolving. The recent fiscal update Air Policy
indicates the new government clearly has a long-term perspective on tax Canada’s new Blue Sky international air policy is a key step in the direction
policy with the objective of achieving lower taxation levels and a more of improving access for air carriers, both foreign and domestic, to Canada’s
equitable tax regime. The key is preserving this over the short-to medium gateway airports. The nation’s approach to air services negotiations has
term in order to keep a correspondence with the long-term vision of the moved from an incremental one to a more proactive stance to seek more
APGC. open skies type agreements, when in the overall interest of the country.
The Government of Canada should consider working with Canada’s new approach is also to seek more flexibility for all cargo opera-
provincial and municipal governments to review all relevant tions. In this sense, this new policy supports the goals of the APGCI.
taxation policies to ensure that they do not impede the It should be noted that the world is gradually changing its position on
competitive position of the APGC. foreign ownership of air carriers, and some nations are taking steps to
amend air service agreements to replace the ownership and control provi-
Foreign Trade Zones sions with principle place of business provisions. To this end, the Minister
Provision of value-added services is a key function of gateways. The of Transport, Infrastructure and Communities has undertaken consultation
Foreign Trade Zone program of the U.S. has been an effective tool for with stakeholders on potential changes to airline ownership restrictions.
attracting foreign investment and economic activity to the U.S. that might Canada does not impose foreign ownership restrictions on bus, trucking or
otherwise take place overseas. The Canada Border Services Agency and rail companies.
Canada Revenue Agency have a number of programs that offer FTZ-like The Government of Canada should consider reviewing airline
benefits, but these programs do not provide as attractive an environment foreign ownership limits.
for this activity.
EDC take-up has been limited in part by its relatively restrictive param-
eters, due to concerns about domestic export manufacturers being
negatively impacted by EDC operations. Some might question whether
this needs to be addressed given that some elements of FTZs have become
less important over time as duties continue to fall. However, U.S. FTZs are
now using security concerns, supply chain evolution, and customs filing
requirements to generate new interest in their program.
The Government should consider overhauling Canada’s
EDC program to make Canada more attractive for foreign
investment in value-added gateway activity.

Canada’s
Canada’sAsia-Pacific
Asia-PacificGateway
Gateway& &Corridor:
Corridor:A Strategic
A StrategicContext
ContextForForCompetitive
CompetitiveAdvantage
Advantage- March
- March2007
2007 27
5.0 TOWARDS COMPETITIVE ADVANTAGE
Canada’s Asia-Pacific Gateway and Corridor has a number of strategic The next step is to develop a Strategic Action Plan for the Asia-Pacific
advantages over competing gateways and transportation networks Gateway and Corridor that addresses the strategic issues and challenges
including its geographic location and a modern and efficient transporta- outlined in the previous chapter and takes the action necessary to:
tion system. The fundamental issue is that the relentless growth of trans- • Optimize and expand the capacity of the Gateway and Corridor for
Pacific trade and travel, driven to a large extent by the massive expansion the short and long term.
of the China and India economies, will overload the current transportation
system to the point that congestion and delays will nullify the advantages • Promote effective corporate governance that facilitates private
of shorter shipping and flight times across the Pacific. Investment in investment, improves coordination and enhances accountability.
transportation infrastructure in Asia will provide a quantum increase • Establish more secure and seamless border processes.
in export capacity which needs to be matched on the North American
• Enhance human resource skills and labour reliability.
continent to handle the expected inflow of goods. The U.S. and Mexico are
responding with major investments in ports, rail, highway and airports to • Foster a market-driven and pro-competitive policy framework.
deal with this growing market demand and are poised to capture a larger In conclusion, Canada has a tremendous opportunity to capture a
share of the Asia-Pacific trade and travel market. Canada needs to respond significant share of the transpacific flow of global commerce between the
quickly to ensure that the competitiveness of the Asia-Pacific Gateway and growing markets of Asia and North America. While there has been a focus
Corridor is enhanced or risk being relegated to a secondary role in serving on transportation infrastructure funding, it is important to remember
the needs of global commerce. that this is only part of the equation and that establishing the right
By launching the Asia-Pacific Gateway and Corridor Initiative, Canada “policy infrastructure” can be even more important in creating competi-
has given itself the opportunity to overtake competitive initiatives to the tive advantage for the Asia-Pacific Gateway and Corridor. Canada’s new
south. Although other jurisdictions and transportation authorities are government has a bias for action and a strong commitment to enhancing
investing in new infrastructure and technology to increase capacity, most Canada’s competitiveness. Moving quickly to develop and implement a
of these efforts are being undertaken independently by mode and not Strategic Action Plan for the APGCI and establishing an interdepartmental
as part of a coordinated and integrated plan. To realize the vision of the task force to develop an integrated policy framework will ensure the suc-
Asia-Pacific Gateway and Corridor Initiative, the Federal Government will cess of the Asia-Pacific Gateway and Corridor Initiative and realization of
need to act quickly or the economic benefits of capturing a larger share of its long term vision.
trans-Pacific commerce will be lost to competing transportation networks.
As new shipping and air routes become established along other gateways
and corridors, it will be much more difficult to re-route them to Canada’s
APGC.

28 Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007