Exporting through a fire hose, importing through a straw

In his column for Macleans magazine this week, Paul Wells explores the prospects of Asian trade through Canada’s Pacific Ports and suggests that in order to capitalize on the booming Asian economy, Canada needs to make its ports much larger and do it rather quickly.

With the amazing statistic that Shanghai exported more containers in one month (July) than Vancouver received in a year, you begin to understand the scope of the situation that is unfolding on our doorstep.

Wells says that Canada’s west coast ports will have to get bigger and be prepared for the continuing wave of trade; otherwise that trade will migrate to those ports that are ready for it.

Part of the problem is the limitations on borrowing that the federal ports face, and Wells suggests if Canada is going to get serious about its Pacific Gateway there will have to be changes made in the way we finance our gateways.

It’s an interesting look at the world that is soon to come to the shores of Prince Rupert and reading the article makes you realize that Phase II and even a Phase III of the Fairview Container Port may not be as far off as one might think.

Macleans
October 24, 2006
Trying to unclog Canada's gateway to riches
Harper's $591 million for B.C. port expansion won't be enough to lure the Pacific Rim's lucrative cargo trade
PAUL WELLS

Stephen Harper popped up in Vancouver last week to confirm the Conservative government's commitment to a $591-million British Columbia port expansion originally planned by Paul Martin's Liberals. The next day, I telephoned a prominent Vancouverite who likes to keep an eye on Canada's relations with Asia. Excellent announcement, this person said. Great news. Good on Harper for seeing the opportunity in a British Columbia that's open to the world.

"Now," he said, "can we go off the record?" Sure. I'm easy.

"There's nothing surprising or new here," my source said. "This investment is about two decimal points too small" -- that is, one one-hundredth -- "to catch the attention of major players in Asia."

Whoa. We're supposed to regard half a billion dollars as chump change?

But when some Vancouverites talk this way, it's only because they've been looking west, across the Pacific, and paying closer attention than some of us in Canada's landlocked centre. One direct result of the stampeding growth in Asian economies, especially China's, is a massive expansion of cargo exports. Those exports are a direct source of considerable wealth for whichever port can handle them -- a central theme of one of the year's most surprisingly readable books, The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger, by New York economist Marc Levinson.

It is exceedingly difficult for Canadians, used to comparatively poky changes in the pattern and scale of our trade relationships, to wrap our heads around what's happening off our left coast. Container-port traffic in the Asia Pacific is growing by about two million tonnes per year -- which happens to be the total current capacity of the port of Vancouver. More cargo traffic went through the port of Shanghai in July than the entire Canadian Pacific coast sees in a year. And that's just Shanghai. Busan, in South Korea, quintupled its port capacity -- starting about where Vancouver is today -- between 1990 and 2004.

So some people in British Columbia worry that, while the Asians are sending cargo out of their ports through a firehose, Canada is drinking it in through a straw. And while nobody is willing to say a harsh word about the very substantial federal investment, they worry that widening the drinking straw may not be quite enough. It makes tremendous sense for that traffic to come to Vancouver and Prince Rupert, the closest North American ports to Asia. But Asian shippers, too, are easy: if Vancouver and Rupert aren't ready, the cargo will simply go to ports that are.
One of the people pointing this out is Gordon Campbell, the premier of British Columbia, who ventured east to Toronto this week and stopped to chat with Maclean's reporters and editors while he was there. "I'm pleased to have the money," Campbell said of Harper's investment. "But we need a lot more. For sure we need a lot more."

Let's be clear. I intend no specific criticism of Harper's government, which has gone substantially further than Martin's did in putting the so-called "Pacific Gateway" money to real use. During his visit to Vancouver, Harper committed $321 million of the total $591-million envelope to specific projects, twice as much as Martin committed. Again, that's largely because we're a year further along and more road, rail and port projects are ready to receive federal cash. (I also intend no criticism of Martin's government, you see. I'm trying to be a nice guy this week.) Taxpayer money simply can't account for investment on the scale that's needed to transform our Pacific coast.

Indeed, as Marc Levinson pointed out when I interviewed him, taxpayers shouldn't be on the hook for most of a container port's cost, because a port will always be a somewhat risky investment. A collapse in the Asian economy or another change in shipping patterns could empty a once-bustling port. Mostly you need private investment, with risk carried by private investors. But public seed money can help greatly. So can close attention from all governments, to straighten out regulatory and jurisdictional kinks that would otherwise simply make British Columbia too much of a hassle for foreign investors to bother. Up at Prince Rupert, for instance, the Port Authority's main worry is the Canada Marine Act, which allows a port to borrow only up to $22 million for capital expansion. Raising that limit could radically increase the scale of port expansion in Prince Rupert.

That'd be nice for two reasons. First, it's already getting congested farther south. The Delta Optimist newspaper has become a twice-weekly chronicle of the way traffic out of Deltaport, near Vancouver, complicates local residents' lives. Second, there's a hint of destiny involved. Charles Hays founded Prince Rupert in 1906 in hopes of making it a key port of trade with Asia. Hays drowned on the Titanic. But maybe he was just a century or so ahead of his time.

Read Paul Wells's weblog Inkless Wells