On March 11, the Canada West Foundation hosted Moving goods, will this little piggy get to market? This session was the third in our Trade Ahead Series (register for the final session here). CWF Senior Fellow John Law, former Deputy Minister of Highways and Infrastructure, Government of Saskatchewan and former Chair of the National Council of Deputy Ministers of Transportation and President of the Transportation Association of Canada, was the keynote speaker. CWF’s Carlo Dade, Director, Trade and Investment Centre, and co-moderators Chris Dekker, President and CEO, Saskatchewan Trade Export Partnership, Patrick Mattern, Vice President, Business Development, Calgary Economic Development, Mariette Mulaire, President and CEO, World Trade Centre Winnipeg, Mustafa Sahin, Vice President, Investment & Trade, Edmonton Global, joined the conversation.
Similar to the second session in format, this session was a chat among colleagues with attendees invited to gain insights on the future of Canada’s trade infrastructure and issues that may affect their business or their work on trade policy.
Here are a few highlights from the talk:
- Western Canadian businesses have a head start over their American competitors thanks to better market access from multi-market trade agreements with the European Union, North America, and Asia that Canada has but American firms lack. However, these agreements are of little use if Canada cannot get goods to market, or (as is the case) customers do not believe that Canadian firms can get goods to market.
Three recent time periods that have affected Canada’s trade infrastructure
The context for Canada’s trade-based economy and associated infrastructure needs heading into 2021 can be better understood by recognizing the impacts of three distinct time periods attached to its recent history:
- A Decade of Growth: In the last decade leading up to the COVID-19 pandemic corporate globalization strategies contributed to ongoing annual growth in Canada which averaged 4.5% respectively for both imports and exports. This expansion of international customer bases was a major factor affecting the ability of both large companies as well as small and medium enterprises (SMEs) in Canada to grow their bottom-lines. However, the unintended consequence of this internationalization was an increase in Canada’s supply chain vulnerability by continuously adding volume pressures to the network and broadening the exposure of Canadian businesses to more points of contact across these interconnected trade networks.
- Growing Uncertainty and Accelerating Competition of the last three years: Trade challenges include more openly protectionist trade policies and tariffs from the Trump administration in the United States and a forced renegotiation of NAFTA. China invoked arbitrary trade sanctions attributable to political rather than trade issues and displaced Canada for as the first time as the largest trader with the US as just one example of growing challenges to Canada’s share of the international trade pie. Domestically, Canada had problems at home that harmed its international reputation such as rail blockades and labour disruptions.
- 2020 and the COVID-19 Pandemic: Globally, multiple phases to the spread of COVID-19 led to a pattern of “closing-shutdown-reopenings” that immediately induced a stop and go back-up of cargo traffic. This was accompanied by unprecedented drops in trade activity and major changes to consumer spending patterns which in combination with logistics interruptions produced freight rates which hit record levels amid a changing shipper and carrier relationship.
Key Developments to Watch for in 2021:
- Most economic forecasters are projecting a return from the major declines of 2020 to positive trade growth for Canada in 2021 and 2022 respectively, most likely beginning in the latter months of 2021. However, robust growth will only be realized when the pandemic is brought under control and a big part of when that can be expected to be tied to the success and timing of the vaccine roll-out.
- As Canada moves away from the pandemic crisis, economic recovery will be uneven both domestically, for example,different by industry, as well as internationally, depending on how, among other factors, foreign customers are able to distribute the vaccine. This will mean different rates and timing for economic re-openings. This will affect logistics and supply chain strategies and how, in the shortterm at least , trade patterns will look. Businesses in Western Canada will need to anticipate and plan for markets and sectors that will recover at different times and at different speeds. This implies that different sectors will need to develop much different strategies and similarly, that even for the same product within a sector, different foreign markets will require different approaches.
- Another key issue to pay attention to in the upcoming year will be whether countries and businesses choose to mitigate risks to their supply chains by significantly diversifying their customer bases or alternatively by “reshoring” in favour of increasing domestic self-sufficiency and reliance by moving closer to home.
- For Canada’s most valuable trade relationship by far, business decisions must carefully assess the emerging policy approach the new administration in the United States. As an early signal, pay attention to the results of President Biden’s already-launched 100 day review of the US supply chain.
Additional trade infrastructure challenges and opportunities
- To improve trade corridors, Canada should look back to its successes from what was our country’s Trade Infrastructure “Golden Age” circa 2005. The federal and provincial governments and industry collaborated to invest specifically in key trade corridor infrastructure projects incentivized under national programs, such as the Asia-Pacific Gateway and Corridor Initiative. Government and industry should adapt learnings from this model again to reverse Canada’s trajectory ranking in trade infrastructure back to our previous 2010 top ten in world trade ranking from the current ranking of 26 or 32, depending on which index used.
- On the issue of inland ports, the reopened port in Churchill, Manitoba is exciting despite the rail bed and weight issues. The challenge is in making inland ports competitive which will require a regional/national effort. Inland ports are also a source of intelligence, which CentrePort in Manitoba has shown, for source of information on opportunities and where businesses can leverage each other.
- Airports are another type of inland port key to the movement of goods and people, which COVID-19 has highlighted as companies used air to circumvent other barriers. Canada is not taking full advantage of airports when it comes to trade. Under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), those people key to business, such as investors and salespeople, can readily move around. Canada should capitalize on that opportunity post pandemic to attract business investment as the U.S. is no longer a member of CPTPP.
- For SMEs, there is plenty of advantage in trade agreements and free trade zones (FTZs) but many have difficulties accessing that information. Create one stop portals for businesses, much like in the U.S., to access the information they need from the groups working to address these issues.
- The potential of e-commerce came to the forefront during the pandemic but still waiting to see how traditional trade management and ecommerce unfold together.
- Canada needs to do more and can learn from other countries on how to integrate environmental and social solutions into its infrastructure projects. Infrastructure products “can be greener and smarter.” On hydrogen, there is plenty of opportunity but need to address trade infrastructure as part of development.