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Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context for Competitive Advantage by InterVISTAS: Specifically see the following subjects: see page 21; after citing the ALR it is recommended that government should set aside TLR –transportation land reserves: page 25; the need for Temporary Foreign Workers so employers in BC can hire: see page 25; and, Foreign Trade Zones needing overhaul, see page 27.
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strategic transportation
& tourism solutions
A Strategic Context for Competitive Advantage
Prepared forTransport Canada
Prepared byInterVISTAS 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............................................................. 184.1 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
1 Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007
Glossary of Terms
ALR – Agricultural Land Reserve
APEC – Asia Pacific Economic Cooperation
APGC – Asia Pacific Gateway and Corridor
APGCI – Asia Pacific Gateway and Corridor Initiative
BNSF – Burlington Northern Santa Fe Railway
CANPASS – CBSA program for expedited clearance of
prescreened travellers
CATSA – Canadian Air Transport Security Authority
CBRN – Chemical/Biological/Radiation/Nuclear
CBSA – Canada Border Services Agency
CN – Canadian National Railway Company
CP – Canadian Pacific Railway
EDC – Export Development Canada
FTZ – Foreign Trade Zone
GDP– Gross Domestic Product
G8 – Members include U.S., Canada, France, Germany,
Italy, U.K., Russia and Japan
GVGC– Greater Vancouver Gateway Council
HRSDC – Human Resources and Social Development
Canada
ICAO – International Civil Aviation Organization
IMO – International Maritime Organization
ITS – Intelligent Transportation Systems
NAFTA – North America Free Trade Agreement
NEXUS/FAST – Border facilitation partnership programs
between CBSA and U.S. Customs and Border Protection
PILT – Payment in Lieu of Taxes
PSEPC – Public Safety and Emergency Preparedness
Canada
P3 – Public-Private Partnership
RFID – Radio Frequency Identification
RO/RO – Roll-on/Roll-off
RPK – Revenue Passenger Kilometres (number of passen-
gers on flight X distance of flight in kilometres)
SPP – Security and Prosperity Partnership of North
America
TEU – Twenty-Foot Equivalent Unit
TWOV – Transit Without Visa
VPA – Vancouver Port Authority
YVR – Vancouver International Airport
2 Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007
EXECUTIVE SUMMARY
The history of Canada is closely tied to the development of trade, and the
development of our cities as gateways for trade.
Today, building Canada’s Asia-Pacific Gateway and Corridor (APGC) is a top
priority. As a small, open economy, dependent on trade, Canada’s future
success will be determined in large measure by our ability to move goods
and people reliably and efficiently in global supply chains and routings.
While the U.S. has been Canada’s primary trading partner in the past,
rapidly developing economies in China, India and Southeast Asia represent
the greatest opportunities for the future. These countries can generate
significant new markets for our products and services, as well as inbound
tourism to Canada.
Situated between Asia and the U.S., our ports and airports on the west
coast are also ideally situated to capture a portion of the growing traffic
between these major trading partners. Capturing a larger market share of
this gateway traffic would generate significant economic benefits for all of
Canada.
Vision
The proposed vision for the Aisa-Pacific Gateway and Corridor is intended
to capture all of these elements:
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 North America, well into the 21st century.
Performance Targets and Measuring SuccessThe suggested performance measures for the four specific targets of the
APGCI are:
Target 1: Boost Canada’s commerce with the Asia-Pacific region, as measured by:Measure 1a: Canada’s Asia-Pacific import trade volume.
Measure 1b: Canada’s Asia-Pacific export trade volume.
Measure 1c: Canada’s Asia-Pacific tourism receipts.
Target 2: Increase Canada’s traffic volumes to/from the Asia-Pacific region, as measured by:Measure 2a: Canada’s Asia-Pacific two-way sea container 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.
Target 3: Increase the APGC’s share of North America bound traffic from Asia, as measured by:Measure 3a: Canada’s APGC share of Asia-NAFTA container traffic.
Measure 3b: Canada’s APGC share of Asia-NAFTA air passenger traffic.
Measure 3c: Canada’s APGC share of Asia-NAFTA air cargo traffic.
Target 4: Improve the efficiency and reliability of the APGC for Canadian and North American exports. Measure 4a: Delivery reliability from the APGC to both Central Canada and the U.S. Midwest.
Measure 4b: Shipment transportation times through the Lower Mainland, Prince Rupert and Pan-Western corridors.
Measure 4c: Work stoppages.
Core Elements
In order for the APGC to realize its vision, long term improvements must
me made in several core and integrated areas.
Optimizing and ExpandingGatewayCorridorCapacity
Fostering a Market-Driven
and Pro-Competitive
PolicyFramework
EnhancingHuman
Resources and CollectiveBargaining
PromotingEffective
CorporateGovernance
EstablishingSecure and SeamlessBorders
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 CapacityDeveloping a comprehensive simulation program to deter-
mine relative impacts of different infrastructure investments
and strategies in the APGC.
Continuing to promote innovative processes to expand
capacity and efficiency of the APGC, including working with
industry to implement 24 hour operations.
Adding a selection criteria that explicitly includes projects
that improve the processing of goods and passengers at
border points.
Continuing to develop new financing mechanisms to fund
infrastructure.
Working with provincial governments to develop a
harmonized accelerated environmental impact assessment
mechanism for high-priority gateway projects.
Security and Border Efficiency
Aggressively pursuing opportunities to implement new
approaches to minimize or eliminate dual clearance pro-
cesses.
Taking a lead role in encouraging harmonization and mutual
recognition of transport and border security policies in the
Asia Pacific region.
Aggressively pursuing perimeter clearance with the U.S.
Human ResourcesFacilitating targeted immigration to address current and
anticipated chronic labour shortages.
Working with provincial governments to establish transpor-
tation, logistics, and supply chain management as a national
priority for skills training and education.
Developing new, innovate forms of mediation and arbitration
to prevent work stoppages in the transportation sector.Effective Governance and CoordinationWorking with provincial governments to establish “Trans-
portation Land Reserves” to protect critical gateway land
and rights of way for future development.
Undertaking a global review of best practices in governance
structures to determine if further changes are required to
port, airport, and related transportation entities to enhance
the competitiveness of the APGC.
Developing pilot projects for APGC facilities which would
increase the role of the private sector and investors in the
delivery of infrastructure and services.
Continuing to work with the three lower mainland Port
Authorities to amalgamate them in 2007.
Working with municipalities to consider changing the cur-
rent property tax structure for gateway facilities from a PILT
model to one based on throughput.
Pro-Competitive Policy FrameworkIncorporating APGC performance measures in all relevant
departments, or take other steps to achieve internal align-
ment of goals.
Working with provincial and municipal governments to
review all relevant taxation policies to ensure that they do
not impede the competitive position of the APGC.
Overhauling Canada’s EDC program to make Canada more
attractive for foreign investment in value-added gateway
activity.
Reviewing airline foreign ownership limit.
3 Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007
4 Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007
The history of Canada is closely tied to the development of trade, and the
development of our cities as gateways and corridors for trade. From the
early days of settlements that developed to serve the fish and fur trades,
to the emergence of communities to support the gold rush, to the growth
of cities supporting the development of the vast agricultural lands of the
west and the developing resources industries of Canada’s far north, Cana-
dian history is in many ways the history of gateways and corridors.
Today, building Canada’s Asia-Pacific Gateway and Corridor is a top prior-
ity. As a small, open economy, dependent on trade, Canada relies on its
transportation system to access critical offshore markets. Our future suc-
cess will be determined in large measure by our ability to move goods and
people reliably and efficiently in global supply chains and routings.
While the U.S. has been Canada’s primary trading partner in the past, and
will continue to be important, rapidly developing economies in China,
India and Southeast Asia represent the greatest opportunities for the
future (see Figure 1-1). Much of the projected growth in global trade will
be generated from this region in the next 20 years. These countries can
generate significant new markets for our products and services, provide
import goods for our citizens and industries, and increase tourism to
Canada.
Situated between Asia and the U.S., our west coast ports and airports, and
their supporting corridors, are also well positioned to capture a portion
of the growing traffic between these major trading partners. Capturing a
larger market share of this gateway traffic would generate significant eco-
nomic benefits for all of Canada. However, Canada will have to compete
aggressively with other gateways and corridors for this traffic.
1.0 INTRODUCTION
IndiaJapan
Korea
Singapore
Taiwan
Canada
United States
Mexico
Figure 1-1: Key Economic Indicators of Select Asia-Pacific Countries
Country Population GDP GDP per Capita GDP Growth
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%
Country Population GDP GDP per Capita GDP Growth
China 1,307.6 $2,234 $1,709 9.4%
Hong Kong SAR 7.0 $178 $25,493 5.3%
India 1,094.3 $772 $705 6.2%
Japan 127.7 $4,567 $35,757 1.7%
Korea 48.3 $788 $16,308 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%
On October 11, 2006, the Prime Minister, along with Minister of Inter-
national Trade and the Minister for the Pacific Gateway and the Van-
couver-Whistler Olympics, David Emerson, and Minister of Transport,
Infrastructure and Communities, Lawrence Cannon, announced Canada’s
Asia-Pacific Gateway and Corridor Initiative (APGCI). The mission is to
establish Canada’s Asia-Pacific Gateway and Corridor (APGC) as the best
transportation network facilitating global supply chains between North
America and Asia.
The specific goals of the APGCI are to:
• boost Canada’s commerce with the Asia-Pacific region;
• increase the APGC’s share of North American bound container
imports from Asia; and
• improve the efficiency and reliability of the APGC for Canadian and
North American exports.
The APGC is a network of critical transportation infrastructure including:
• ports in the B.C. Lower Mainland and Prince Rupert;
• principal road and rail connections extending across western Canada
and into the U.S.;
• key border crossings; and
• the Vancouver International Airport and other Western Canadian
airports with service to Asia.
This APGCI is the culmination of many years of work. For two decades,
concerned stakeholders in western Canada have been promoting the
gateway concept as a way of bringing governments, business and public
interests together to look at challenges and opportunities in an integrated
manner (see adjacent table).
Initiatives to Build the Asia-Pacific Gateway and Corridor
1987 Port of Vancouver, Fraser Port, CN, CP Rail, Interna-
tional Longshore and Warehouse Union, B.C. Maritime
Employers Association and Western Economic Diversi-
fication established Roundtable on Transportation
to increase throughput of cargo moving through Lower
Mainland of Vancouver.
Early 1990s The Asia Pacific Foundation created the Asia Pacific
Trade and Transportation Forum to bring foreign
shipping lines and shippers to Canada.
1994 The Greater Vancouver Gateway Council (GVGC)
was established by merging the Roundtable on Trans-
portation and the Asia-Pacific Trade and Transportation
Forum. Several initiatives were undertaken including a
comprehensive Vision in 1999 to build the Gateway.
2001 The GVGC developed a Major Commercial Transpor-
tation System Plan for the Lower Mainland which
identified the need for $7 billion in capital investments
over 20 years.
2005 Government of B.C. developed a British Columbia
Ports Strategy which presents a vision for the port
system in 2020 and strategies to achieve it.
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.
Government of Canada formally announced APGCI in
October.
While there has been some real progress made in recent years improving
and building the APGC, much work remains to be done. Several significant
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.
5 Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007
6 Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007
2.1 Economic Growth & Trade
The demand for transportation services is highly dependent upon eco-
nomic activity. The most widely used measure of global economic activity
is GDP, and a strong correlation exists between world GDP, international
trade, and the demand for transportation.
Since the 1980’s, there has been a structural shift in the global economy,
with an increased reliance by nations on international trade as a primary
driver of their economic growth and development (see figure 2-1). As a
result of this shift, world trade volume is now outpacing economic activity.
The value of trade is now growing at around 2.5 times the rate of growth
of the overall world economy. This trend is not expected to change in the
short term.
Figure 2-1: International Trade as a % of World GDP
Source: World Bank.
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 India2000 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.
The world’s economy is also undergoing other shifts. The relative economic
significance of Western Europe and Japan has declined due to their aging
populations and structural economic issues. In turn, large emerging
markets in other parts of the world, particularly Brazil, Russia, India and
especially China (commonly referred to as the BRIC nations) are driving
growth and shaping future investment, trade, and commerce (see Figure
2-2).
In 2005, for example, China’s exports increased by 27%, while its economy
grew nearly 10%. China’s entry into the World Trade Organization (WTO),
its appetite for resources, and its continuing urbanization all point to
further trade growth.
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
sustained period of relatively high growth, while other economies such as
Indonesia and South Korea continue to grow in importance. For example,
Canadian merchandise exports to South Korea increased by 23% in 2005.
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
online, and further expansion plans are already in place.
Here in Canada, our recent economic performance has been both healthy
and steady. However, as figure 2-2 illustrates, our economy is relatively
small, ranking only larger than Russia amongst the G8 group of countries.
Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007
$0
$10
$20
$30
$40
$50
1980 1985 1990 1995 2000 2005
GDP
(US$
, tril
lions
)
International Trade Total
58%
54%43%
38%33%
32%
2.0 CANADA IN THE GLOBAL ECONOMY
6
Figure 2-3: Size of Canadian Economy Relative to G8 Countries (2005)
Source: International Monetary Fund, World Economic Outlook, April 2006
Canada’s economy is very open and reliant on trade. In fact, Canada
consistently exports more goods than it imports, resulting in an annual
merchandise trade surplus. Overall, our exports of goods and services
represent over a third of our GDP (38% in 2005). When compared to the
U.S., our economy is more than three times as reliant on exports (see
Figure 2-4).
Figure 2-4: Exports of Goods and Services as a Proportion of GDP (2005)
Source: Department of Foreign Affairs and International Trade, “Seventh Annual Report
on Canada’s State of Trade,” 2006
From a regional perspective, Canada’s exports to Asia-Pacific nations have
increased consistently over the last decade, from $25.2 billion in 1995 to
$26.4 billion in 2005. During this period, exports to China, India and South
Korea rose considerably, while exports to Japan, Taiwan and Hong Kong
declined (see figure 2-5).
Figure 2-5: Canada’s Exports to Select Asia-Pacific Countries (CDN dollars,millions)
Source: Industry Canada
2.2 International Trade
Maritime Trade
The economic activity and trade described above creates demand for
intercontinental goods distribution, and to this extent, shippers only
have two modal choices – sea or air. Maritime transportation is the more
popular of the two modes by volume and is fundamental to international
trade because it represents the most practical and cost effective means of
transporting large volumes of commodities and finished goods. As figure
2-6 illustrates, world maritime trade has grown steadily in the last 15
years and topped 7.2 billion metric tones in 2005.
Figure 2-6: World Maritime Trade
Source: Clarkson Research.
Within the marine transportation sector, a major shift has also taken
place - containerization. Between 1980 and 2005, maritime traffic grew
an annual rate of 2.4%. During this same period, global container traffic
increased an average of 8.6% per annum. This trend is also expected to
continue for the foreseeable future (see figure 2-7).
Germany $2,797
Japan $4,571
Russia $766
UK $2,201
US $13,446
Italy $1,766
Canada $1,130
France $2,106
Billions of dollarsTotal G8 = $28,785
13%10%
26%27% 26%
40%38%
0
0
0
0
0
1
Germany Canada Italy France UK Japan US
Percent of GDP
7.2
5.9
4.94.2
0.0
2.0
4.0
6.0
8.0
1990 1995 2000 2005
Metri
cTon
nes (
billio
ns)
$0
$5,000
$10,000
$15,000
$20,000
$25,000
1995 2005
IndiaTaiwanHong KongSouth KoreaChinaJapanOther
7 Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007
8 Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007
Figure 2-7: Growth of World Maritime Trade
Source: United Nations.
Global container activity can be classified into four main routes. The
traffic distribution amongst these routes is summarized in the figure
below. Transpacific container traffic is the most important driver of global
container trade activity, generating 17% of total trade in 2004. This figure
is projected to increase in the future. As shown in figure 2-8, transpacific
seaborne container trade is subject to significant directional imbalances
(72% eastbound versus 28% westbound)
Figure 2-8: Distribution of World Maritime Trade by Region
Source: Clarkson Research and InterVISTAS.
Air Cargo
Air cargo represents the other part of the intercontinental goods distribu-
tion network. While the primary benefit of maritime transportation is
lower costs, the benefits of air transportation are speed and reliability.
Since 2000, world intercontinental air cargo traffic levels have increased
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.
Figure 2-9: World Intercontinental Air Cargo Traffic
Source: MergeGlobal.
The traffic distribution amongst these routes is summarized in the figure
below. Transpacific container traffic is the second most important driver of
intercontinental air cargo activity, generating roughly 18% of total trade
in 2005.
Figure 2-10: World Intercontinental Air Cargo Traffic by Region
Source: MergeGlobal.
2.3 International Travel
Another spin-off of increased global economic activity and trade is passen-
ger air travel. Since 2000, global air passenger traffic has increased from
3,381 billion RPKs to 4,018 billion RPKs. As Figure 2-11 illustrates, air traffic
has now fully recovered from the impacts of September 11.
Estimated World Seaborne Container Trade(million, TEUs)
2004 % 2005 % Est. 2006 %
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 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 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%
Other 232.5 65.5% 255.6 65.4% 282.2 65.4%
Total 355.0 100.0% 390.9 100.0% 431.5 100.0%
17 18
15151415
0.0
4.0
8.0
12.0
16.0
20.0
2000 2001 2002 2003 2004 2005
Metri
cTon
nes(
mill
ions)
World Intercontinental Air Cargo Traffic(tonnes, millions)
2005 %
Transpacific 3.2 18.0%
Far East-Europe 3.9 22.0%
Transatlantic 2.4 13.3%
Intra-Asia 3.9 21.7%
Rest of World 4.4 25.0%
Total 17.7 100.0%
Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 20078
0
100
200
300
400
500
600
700
800
1980 1985 1990 1995 2000
Inde
x (19
80 =
100)
Containers
All Maritime Trade
Figure 2-11: Global Air Passenger Traffic
Source: Boeing.
The air passenger traffic distribution by region is summarized in the figure
below. Transpacific is the third most important intercontinental air pas-
senger market, generating over 10% of total global passenger activity in
2005.
Figure 2-12: Distribution of Global Air Passenger Traffic by Region
Source: Boeing.
According to the International Civil Aviation Organization, international
travel as a percentage of total traffic has increased steadily since 1980, and
in 2005 represented 35% of total passenger travel worldwide, compared
to 22% in 1980. This reality underscores the need for efficient processes to
facilitate passenger movements across borders.
3,7544,018
3,3043,2793,2903,381
0
1,000
2,000
3,000
4,000
5,000
2000 2001 2002 2003 2004 2005
Reve
nue P
asse
nger
Kilo
metr
es (b
illion
s)
9Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007
Figure 2-13: International Air Traffic as a Percentage of Total Air Traffic
Source: International Civil Aviation Organization
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
70% of total tourism expenditures worldwide. This meant that marketing
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
only 54% of tourism expenditures. Many emerging countries, like China
and Russia, are generating new sources of travellers and creating opportu-
nities for destinations.
Figure 2-14: Changing Source Markets (International Tourism Expenditures)
Source: World Tourism Organization
World Air Passenger Traffic Traffic (RPKs, billions)
2005 %
Transpacific 240.0 10.3%
Far East-Europe 270.0 11.6%
Transatlantic 390.0 16.7%
Europe-Latin America 150.0 6.4%
Rest of World 1280.0 54.9%
Total 2330.0 100.0%
0
300
600
900
1,200
1,500
1,800
2,100
1980 1985 1990 1995 2000 2005
Total
Tra
ffic (
pass
enge
rs, m
illio
ns)
International Total
35%
32%
29%24%
22%22%
United States, Germany, Japan, United Kingdom,Italy, France, Canada, Austria, Netherlands, Sweden
1990United States, Germany, Japan, United Kingdom,
Italy, France, Canada, Austria, Netherlands, Sweden
Other
Germany, United States, United Kingdom, Japan,France, Italy, Netherlands, Canada, Russia, China
70%56%
Canada3%
Germany, United States, United Kingdom, Japan,France, Italy, Netherlands, Canada, Russia, China
Other
2005
46%
54%
30%Canada4%
2.4 Transportation Trends
In response to these developments, some key trends are emerging in
transportation, both with respect to the movement of goods as well as to
the movement of people. These include:
• Growth in containerization – One of the most important trends
in maritime trade in recent decades has been the growth in contain-
erization. In the U.S., for example, over 18 million TEUs moved in and
out of U.S. container ports in 2001, up 36% from 13 million in 1995.
Going forward, the use of containerization will continue to increase,
even for traditional bulk commodities like grains and forest products.
• Growth in the size of transportation vehicles – Over the past
few decades, another visible trend has been the increase in trans-
portation vehicle size across all modes, including the introduction of
wide-body aircraft, longer trains, heavier trucks, and most remark-
ably, the rapid increase in container vessel sizes.
• 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.
• Greater consolidation in the transportation sector – The
needs of modern business have spurred the transportation and logis-
tics sector to build truly global networks. This trend has forced many
smaller companies to consolidate and merge into larger entities in
order to compete effectively. The parcel delivery business, where
courier giants such as UPS, FedEx, and DHL have emerged, is a prime
example. Rail, trucking and maritime carriers have also experienced
major mergers. Going forward, the business landscape will continue
to change, and it is projected that mergers and acquisitions will
continue across many transportation sectors.
• Development of strategic alliances – Where consolidation has
not been possible due to limits on foreign ownership, such as in the
airline industry, strategic alliances have been developed to expand
network size, increase efficiency, and improve customer service (e.g.
through-ticketing, baggage transfers, and frequent flyer mileage
credits between alliance partners).
Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 200710
11 Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007 11 Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007
3.1 Existing Gateway and Corridor
Marine SystemBritish Columbia is a maritime province. The main trading ports – the Port
of Vancouver, Fraser River Port, and the Port of Prince Rupert – account
for more than 95% of the international trade moving through B.C.’s port
system. Other ports, such as Squamish, Powell River, Kitimat, and Stewart
also play important roles in Canada’s resource economies (see Figure 3-1).
Port of VancouverThe Port of Vancouver is the country’s largest seaport with annual cargo
movements of over 76 million tonnes valued at roughly $35 billion. It
handles more cargo tonnage than any other port on the west coast of
North America, and connects Canada to more than 90 international trade
partners around the world. The port’s terminals provide container, bulk,
and break-bulk cargo handling, and integrated services for a wide range of
users including cruise operations.
The Vancouver Port Authority is responsible for the port’s assets along 150
kilometres of coastline, including all of the waters of English Bay, Burrard
Inlet and Indian Arm, and the area around Roberts Bank south of the
Fraser River. Port operations include 24 different terminals, most of which
are located on crown-owned lands along Burrard Inlet. The Deltaport and
Westshore Terminals are located at Roberts Bank.
Fraser River PortFraser River Port is the second largest port in Canada by volume, with
annual cargo movements exceeding 38 million tonnes. The port handles
containers, forest products, and steel. Its terminals provide container
and break-bulk handling, and integrated services for the coastal forest
industry.
The Fraser River Port Authority manages 100 kilometres of the main arm
of the Fraser River from Sandheads at the mouth to upstream at Kanaka
Creek and Pitt Lake. Fraser River Port can handle ships with a maximum
draft of 12 meters and an air draft up to 56 meters under the Alex Fraser
Figure 3-1: B.C. Port System
Bridge. Major common user facilities are available at Fraser Surrey Docks,
Annacis Terminals, and Fraser Richmond. Numerous private facilities also
exist within the port, including a major CN railyard and Canadian Pacific
Railway’s RO/RO terminal at Tilbury Island.
Port of Prince RupertThe 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.
The Port of Prince Rupert handles both international and domestic traffic.
In 2005, the port moved just under 4.5 million tonnes of international
cargo. The same year, total cargo reached nearly 9 million tonnes. The
port’s primary commodities include forest products and coal.
The port also served nearly 100,000 cruise passengers in 2005.
Port facilities include three major terminals and two cruise ship terminals.Four smaller terminals are managed by private operators. Rail service to the
port is provided by CN Rail.
Road and Rail SystemAs figure 3-2 illustrates, the APGC’s port facilities are linked to key markets
by well developed road and rail corridors. Specifically:
3.0 CANADA’S ASIAPACIFIC GATEWAY AND CORRIDOR
BRITISH COLUMBIABRITISH COLUMBIA ALBERTAALBERTA
TATESED STAUNITEUNITED STATES
Prince RuperpertperPrince Rupert
KitimatorgePrince GeoG oeoPrince George
VancouverSquamish
PPowellPowellPoPowellRiver
VictoriaNanaimo
Port Alberni
Campbell River
Stewart
Major RoadsBNSF System Network
CN System NetworkCPR System Network
Canada Port Authority PortsOther Significant Ports
LegendNorth Fraser Port Authority Jurisdiction
Fraser Port Authority Jurisdiction
Vancouver Port Authority Jurisdiction
V PoVancouver Area PortsVancouver Area PoVancouver Area PortsNorth Fraser Port Authority JurisdictionFraser Port Authority Jurisdiction
Vancouver Port Authority Jurisdiction
Fraser Port
r PortPortPortNorth Fraser Portth Fraser PortNorth Fraser Port VaVancouver PortVancouver PortVancouver PortVancouver Port
BC Port Traffic
International Exports70-80 million tonnes per year
International Imports10-11 million tonnes per year
12 Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007
Lower Mainland
• The Port of Vancouver and Fraser River Port enjoy good road access
to key markets via the Trans-Canada Highway and the U.S. Interstate
Highway System (with interconnecting service provided by major
trucking lines).
• Locally, the facilities of both ports are connected to each other via a
well-developed regional road network.
• Vancouver is the only west coast port with service by three major
transcontinental railways – Canadian National Railway Company
(CN), Canadian Pacific Railway (CP), and Burlington Northern Santa Fe
Railway (BNSF). Excellent rail connections are available at both the
Port of Vancouver and Fraser River Port. These port facilities are also
served by a short line railway - Southern Railway of British Columbia.
Prince Rupert
The Port of Prince Rupert is served by CN’s high capacity northern mainline
and the Trans-Canada Yellowhead Highway, which provide strong land
connections to the rest of North America via the lowest grades through the
Rocky Mountains. Port facilities feed directly into the Northwest Transpor-
tation Corridor, a modern road and rail network engineered and built to
carry large volumes of traffic.
Airport SystemThe Gateway’s ports, roads, and railways are complemented by the west-
ern Canadian airport system.
Vancouver International Airport
The Gateway’s primary aviation facility is the Vancouver International
Airport (YVR). YVR is Canada’s second busiest airport, with 16.4 million
passengers, approximately 224,000 tonnes of cargo, and 280,000 take-offs
and landings in 2005. YVR is the second largest international passenger
gateway on the west coast of North America and offers over 500 non-stop
flights and 142,000 seats monthly to destinations in Asia.
Other Airports
The Calgary International Airport is linked to Asia-Pacific via freighter
service, while Toronto Pearson International Airport is linked by non-stop
passenger services. (It should be noted that the latter is not considered a
part of the APGCI).
Transportation Services
Canada’s Gateway system is highly dependent upon several service part-
ners. These include:Figure 3-2: Pacific Gateway Rail and National Highway
System
Major RoadsBNSF System Network
CN System NetworkCPR System Network
Legend
13 Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007
• Government agencies – customs and border services, agricultural
inspection services, security services, etc.
• Airport and port authorities in Vancouver, Prince Rupert, plus at criti-
cal inland facilities along the major transportation corridors at Prince
George, Kamloops and Cranbrook.
• Private terminal operators – own and operate port terminals for
passengers and cargo.
• Railways – major carriers include CN, CP, and BNSF. CN and CP are
federally regulated (as are BNSF operations in Canada) and all three
carriers have extensive transcontinental networks that link ports to
inland markets.
• Airlines – the Vancouver International Airport’s network includes
intercontinental service (by Air Canada, several foreign air carriers,
and numerous charter operators), continental connections (by Air
Canada, WestJet and many U.S. carriers), and regional services (by
Jazz and others).
• Shipping and cruise lines.
• Other carriers - truck and tugboat operators, shortline rail carriers.
• Labour (union, non-union) – longshore, railway, trucking, airline,
inspection agencies, etc.
• 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
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
responsibility for funding certain road and bridge infrastructure in
the busy Vancouver port/airport region, and for parts of the Canada
Line transit system linking the airport to the port and the central
business districts and tourism attractions of Vancouver and Rich-
mond.
• Private sector operators – of warehousing, vehicle and vessel repair,
trade exhibition and business facilities, etc.
3.2 Potential Opportunities for the Asia-Pacific Gateway and Corridor
As we look to the future, Canada’s Asia-Pacific Gateway and Corridor has a
significant opportunity to expand its role in global supply chains and the
rapidly evolving Asia-Pacific trade corridor. That said, the question that
often arises is “Why us?”
Simply put, Canada’s Asia-Pacific Gateway and Corridor strategically links
the Asia-Pacific region to North America via the shortest sea, land, and air
routings (see figure 3-3). The ports of western Canada are one to two days
closer sailing time to Asia-Pacific ports than their competitors in the U.S.,
and our airports are several hours closer flying time than similar facilities
south of the border. This puts shippers closer to their intended markets, be
it in Asia or North America, and enables transportation service providers to
turn their vehicles (ships/airplanes) around faster and realize benefits from
faster transit times between Asia-Pacific and North American markets.
For example, sea journeys between Shanghai and North America are:
• 68 hours faster through Prince Rupert than through Los Angeles; and
• 32 hours faster through Vancouver than through Los Angeles.
The combination of western Canada’s geographic advantage, the country’s
well-developed transportation network, existing infrastructure capac-
ity, and planned new facilities leaves Canada’s Asia-Pacific Gateway and
Corridor well positioned to pursue several potential opportunities. These
include:
Figure 3-3: Geographic Advantage of Pacific Gateway
Prince RupertVancouver
Los Angeles
Shanghai
Manzanillo
14 Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007
391.0
762.0
0
250
500
750
1,000
2005 2015
Global Container Traffic(TEUs, millions)
68.0
136.0
0
50
100
150
200
2005 2015
Transpacific Container Traffic(TEUs, millions)
17.7
34.0
0
10
20
30
40
2005 2015
Global Air Cargo Traffic(tonnes, millions)
3.2
6.8
0
2
4
6
8
10
2005 2015
Transpacific Air Cargo Traffic(tonnes, millions)
4,018.0
6,659.2
0
2,000
4,000
6,000
8,000
2005 2015
Global Air Passenger Traffic(RPKs, billions)
240.0
750.0
0
250
500
750
1,000
2005 2015
Transpacific Air Passenger Traffic(RPKs, billions)
Figure 3-4: Transpacific Container Markets
Figure 3-5: Transpacific Air Cargo Markets
Figure 3-6: Transpacific Air Passenger Traffic
• Increasing our participation in transpacific air cargo trade
(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.
• Increasing Canada’s participation in transpacific container
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.
• Increasing our participation in the transpacific air passenger
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.
15 Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007
• Developing value-added processing – With increased volumes
of both maritime container cargo and air freight, an opportunity
exists to establish value-added processing centres in western Canada.
Goods moving through the Gateway could potentially be stored for
distribution or undergo some form of processing to add value such
as customization of personal computers or affixing customer logos to
sports apparel. All activities would be free of GST and duties prior to
onward shipment to the U.S. under the export distribution program.
This is considered a high growth opportunity.
While geography leaves Canada well positioned to exploit these opportu-
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
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
that will take Canada through to the next century. This means not only
addressing the important infrastructure and capacity needs for the next
20 years, but also ensuring that land use planning and protection for the
Asia-Pacific Gateway and Corridor does not preclude its ability to respond
to the long term opportunities of what is now becoming known as the
Pacific Century.
Therefore, the vision for the Asia-Pacific Gateway and Corridor Initiative
needs to be anchored on a grander scale, both in terms of scope and plan-
ning horizon. The APGC vision also needs to capture the strategic objective
of making Canada’s Asia-Pacific Gateway and Corridor a magnet for
attracting a greater share of trade and travel across the Pacific. To succeed
as the preferred transportation network over the long term, the Asia-
Pacific Gateway and Corridor needs to capitalize on its strategic geographic
location and provide a complete package that includes not only phased
expansion of capacity to handle future growth, but also a transportation
system that is efficient, reliable, secure and cost competitive.
The proposed vision for the Asia-Pacific Gateway and Corridor is intended
to capture all of these elements:
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 North America, well into the 21st century.
Figure 3-7: Canada’s Asia-Pacific Gateway and Corridor
3.4 Economic Significance of the Gateway and Corridor
The Gateway is a major source of economic activity in British Columbia. It
generates over 75,000 direct jobs and roughly $4.6 billion in GDP economic
activity. A breakdown by mode is provided in the table below.
Figure 3-8: Gateway System Statistics – Transport Activity
Maritime Air Truck Rail Total
Direct Jobs 33,527 23,385 14,214 4,064 75,190
GDP (B$/yr) 1.9 1.5 0.9 0.3 4.6EconomicOutput ($B/yr) 5.4 2.4 1.9 0.7 10.4
Source: Economic Impact Analysis of the Major Commercial Transportation System,
Delcan/Economic Research Group, July 2003
16 Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 200716
The impact of the APGC stretches well beyond its direct activities. The
economic health of the municipalities surrounding these facilities stems, in
large part, from the employment of people engaged in related port/air-
port activities. As well, these facilities have direct impacts beyond the
Lower Mainland, with employment supporting the Gateway’s corridors
and the export sector extending throughout the prairies and even further
afield. A 2001 study by the Vancouver Port Authority found that almost
40% of the port’s direct jobs were outside of the Lower Mainland.
The gateway system also support several key sectors such as forestry,
mining, agriculture, manufacturing, and tourism that account for a signifi-
cant portion of the provincial economy and a majority of B.C.’s exports.
3.5 Performance Targets and Measuring Success
The APGCI constitutes a significant investment of public and private funds,
as well as dedication of human capital. The Results-based Management
and Accountability Framework of the Federal Government requires that
strategic outcomes be defined, performance measures be determined,
and a sound performance measurement strategy be developed that allows
progress to be tracked, with outcomes measured and reported. Here,
some potential performance measures are suggested for the APGCI. Addi-
tional, or alternative measures, should be determined by APGC program
managers in conjunction with information management specialists and
Treasury Board Secretariat analysts. Consideration must also be given to
the interdependencies that may exist across the performance measures.
Target 1: Boost Canada’s commerce with the Asia-Pacific region, as measured by:Measure 1a: Canada’s Asia-Pacific import trade volume.
Measure 1b: Canada’s Asia-Pacific export trade volume.
Measure 1c: Canada’s Asia-Pacific tourism receipts.
These measures focus on trade and commerce with Asia, rather than traffic
or market share (Targets 2 and 3, respectively).
Potential metrics include data that is already collected by the Federal
Government, such as the value of imports and exports between Asia-
Pacific nations and Canada as well as tourism expenditures in Canada by
Asia-Pacific source economies.
One issue that needs to be addressed is the timeliness of data availability.
In particular, data on tourism expenditures in Canada is characterized
by lengthy delays. A review of the type and timelines of data currently
collected is necessary to ensure that Canada has the data available to
measure progress in this and other areas.
Target 2: Increase Canada’s traffic volumes to/from the Asia-Pacific region measured by:
Measure 2a: Canada’s Asia-Pacific two-way sea container 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.
These measures focus on increasing Canada’s traffic volumes with Asia.
Over the coming decade and a half, the APGC is poised to facilitate the
expansion of Canada’s sea container, air passenger, and air cargo traffic
to and from the Asia-Pacific region. Canada’s airports and air navigation
infrastructure providers are making the needed investments in capacity.
Canada’s ports and railways are also investing in capacity and operational
efficiencies. Canada’s airlines are vigorously pursuing the development of
new routes and frequencies. The Government of Canada is committed to
improving the competitiveness of Canada’s airports by increasing oppor-
tunities for air access by pursuing open skies agreements to stimulate new
travel and trade opportunities. Provincial governments are making road
infrastructure investments to support the APGC, and the tourism industry
is marketing Canada as a destination for leisure, conventions, trade exhibi-
tions, education, and other activities.
While the primary objective is increased traffic, other measures should also
include relative performance in the number of destinations and service
frequencies.
Potential metrics include data that is already collected by the Federal
Government, such as origin/destination sea container, air passenger, and
air cargo volumes. Data timeliness and comprehensiveness will continue
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
destination of the goods.
Target 3: Increase the APGC’s share of North America bound traffic from Asia, as measured by:Measure 3a: Canada’s APGC share of Asia-NAFTA sea container traffic.
Measure 3b: Canada’s APGC share of Asia-NAFTA air passenger traffic.
Measure 3c: Canada’s APGC share of Asia-NAFTA air cargo traffic
British Columbia has set a target to raise its market share of Asia-NAFTA
sea container traffic from 9% to 17% by 2020. This target represents an
increase from an annual volume of two million TEUs to an estimated nine
million TEUs. While this may or may not be the final target set for the
APGC, it offers a starting point for consideration. The measurement of this
goal would include the combined activity of the three ports in Vancouver
and the Port of Prince Rupert. In measuring achievement of this goal, no
differentiation would be made among the ports. Federal investments will
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.
TEU volumes are tracked by the four APGC ports. U.S. west coast ports also
track TEUs, although the measure of market share is complicated by the
17 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
state ports as well as eastern U.S. ports. This data is not readily accessible
and Transport Canada should work with industry and the U.S. government
to collect and exchange this data.
Other measures should include the APGC’s market share of Asia-NAFTA air
passengers and air cargo.
Target 4: Improve the efficiency and reliability of the APGC for Canadian and North American exports, as measured by:
Measure 4a: Delivery reliability from the APGC to both Central Canada and the U.S. Midwest.
Gateway competitiveness depends on high performance logistics systems.
In the field of supply chain management, one of the most important per-
formance measures is delivery reliability. Logistics reliability facilitates the
reduction of inventories across the supply chain (including retail outlets,
distributors, in-transit inventories and source of supply inventories), which
in turn, reduces costs for producers and consumers. The achievement of
high reliability is a goal for both surface transportation modes (road and
rail) as well as the air mode.
Developing measures of supply chain reliability can be a challenging task.
The types of statistics usually collected for transportation and port/airport
systems are typically focused on traffic and operational measures. New
measures will have to be developed, and new statistical data collection
and reporting will need to be put in place. This will need to be a co-opera-
tive effort with the transportation and logistics industry.
It will not be sufficient to simply measure Canada’s performance, as suc-
cess depends on relative performance. Hence, measures will necessarily
have to include measurement of gateway and corridor competitors.
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.
Measure 4b: Shipment transportation times through the Lower Mainland and Prince Rupert.
One of the key nodes of the Asia-Pacific Gateway and Corridor is the
combined operations of the Ports in Vancouver and on the Fraser River.
These vital facilities must share regional highways, bridges and rail
infrastructure with commuters and other users in the B.C. Lower Mainland.
Gateway competitiveness will be impeded by (and potentially contribute
to) regional congestion. The Government of British Columbia has made a
major commitment in its Pacific Gateway Strategy Action Plan to improve
and expand key links from the ports and the Vancouver International
Airport to the corridor from Vancouver, including new highway linkages,
road capacity and bridges. Several elements of the Action Plan are being
developed as public-private-partnerships (P3s) to increase the scope of
investment and reduce the time to delivery of the needed capacity.
Success with Lower Mainland transportation times should be measured
for key corridor routes from the various port (and airport) locations. It is
recommended that Transport Canada work with the Greater Vancouver
Transportation Authority (Translink) in the development and publication
of these measures.
Measure 4c: Work stoppages.
Work stoppages have a significant negative impact on the APGC, not only
in the short run as traffic is diverted to competing ports, but in the long
term as well, since reliability is critical for gateways to attract and retain
customers. This measure is not limited to the ports themselves; labour
disruptions at railways or trucking firms, by border/security officers or by
any other component of the supply chain would have an impact. The ideal
target for this would be zero work stoppages. Measures could include
labour days lost or hours of closure. More sophisticated measures that
deal with “work to rule” incidences should also be developed.
18 Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007
In order to realize the vision and achieve the targets identified in the
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
long-term plan for APGC infrastructure, improvements must be made
to address emerging bottlenecks and multi-modal transfer points,
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
commerce, will be required to ensure maximum efficiency of the
APGC’s existing assets.
• Security and Border Efficiency – Canada already has some of the
world’s safest and most secure transportation systems and border
programs, however, the security and border environment is not
static, and constant improvement is imperative.
• 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
addressed to ensure a reliable supply of labour.
• Pro-Competitive Policy Framework – Since goods and people
can move between Asia-Pacific and the U.S. via several alternative
gateways, policies and regulations will be required across all levels
of governments and departments that ensure the efficiency and
competitiveness of the APGC.
Figure 4-1: Core Elements of APGCI Strategy
4.1 Gateway and Corridor Capacity
Issues and ChallengesAt the present time, much of the port and rail systems within the APGC are
at or nearing capacity. A comprehensive capacity and demand analysis
was completed in 2005 as part of the B.C. Ports Strategy. At the end of
2005, total container terminal capacity stood at 2.26 million TEUs (twenty-
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.
4.0 STRATEGIC ISSUES AND CHALLENGES
Optimizing and ExpandingGatewayCorridorCapacity
Fostering a Market-Driven
and Pro-Competitive
PolicyFramework
EnhancingHuman
Resources and CollectiveBargaining
PromotingEffective
CorporateGovernance
EstablishingSecure and SeamlessBorders
19 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
truck routes serving the Lower Mainland ports, including Highway 1, High-
way 99, Knight Street and River Road, are at or above capacity and traffic
congestion is consistently identified as one of the major regional issues.
This congestion impacts not only local residents, but also the smooth flow
of APGC traffic.
Going forward, a key challenge for Canada will be to ensure it has suf-
ficient capacity to accommodate the anticipated long term future traffic
growth. Investment and close collaboration will be required by both the
public and private sectors.
To address this issue, the Government of Canada and its transportation
partners will need to:
• Maximize efficiency and capacity of the existing system;
• Facilitate new investment in infrastructure; and
• Plan more effectively for the future and preserve land and right of
ways for future requirements.
Recent DevelopmentsThere have been several positive developments in recent years to improve
the efficiency and capacity of the APGC, including funding commitments
of over $6.2 billion for infrastructure in B.C., Alberta, and Saskatchewan.
• The Federal Government committed $591 million in the May, 2006
Budget for investment in strategic pan-western infrastructure for
the APGC, including: $321 in immediate commitments (upgrading
Pitt River Bridge and Mary Hill interchange, Roberts Bank Railway
Corridor overpasses and underpasses, Twinning of the Trans Canada
Highway in Banff National Park, South Fraser Perimeter Road, and
dredging along the Fraser River). The March 19, 2007 Federal Budget
increased the Federal Government’s committment to the APGC to $1
billion.
• The Government of B.C. announced a $3 billion Gateway Program
in January, 2006 that will support both local residents and APGC
traffic (this includes Federal Government contributions of up to $192
million). Key Program components include twinning of the Port
Mann Bridge, a new South Fraser Perimeter Road and North Fraser
Perimeter Road, and a new Pitt River Bridge.
• Improvements are also being made by the government of B.C. to the
Kicking Horse Canyon, a major connection/link between B.C. and
Alberta.
• CN and CP plan to invest $1.2 billion in rail infrastructure between
2004 and 2010. These funds will be used to improve infrastructure
in B.C., Alberta and Saskatchewan (Northern and Southern Rail
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.
• The Vancouver Port Authority has recently completed several capac-
ity expansion projects at Vanterm and Centerm, an environmental
review has just been completed for Deltaport’s third berth project, a
new Terminal 2 is being proposed for Roberts Bank, and the possibil-
ity of converting Lynnterm from break-bulk to container operation is
being assessed.
• The first phase of Prince Rupert’s Fairview container terminal will
open at the end of 2007.
• Efforts are underway by the Lower Mainland Trucking Forum to
improve the efficiency of the current system, including considering
expanding operations to a 24 hour basis.
• The Vancouver International Airport Authority has commenced
a 10-year $1.4 billion capital program to expand its international
passenger terminal building, along with other improvements. A new
Canada Line Rapid Transit project, funded jointly with the Federal
and B.C. Governments and TransLink, is also under construction.
It should be noted that Canada is not alone in this endeavour. Other coun-
tries like the U.S. and Mexico are also investing heavily in their gateways
and corridors.
Key Questions and Strategic Choices
Expanding Capacity
As previously noted, port terminals and facilities face several capacity
challenges. With so many alternative uses for waterfront land, it is also
difficult to prevent such land which may be required for future expansions
from being developed for other uses. Several new initiatives have been
raised as options to improve freight throughput and capacity and reduce
congestion in and around ports.
• Inland Terminals - Inland container terminals are cargo-transfer
facilities built away from existing marine infrastructure that can be
used as inter-modal transfer points for the shipment of both inbound
and outbound goods. The experience in other jurisdictions is that
large volumes of traffic are required to warrant the double handling
of containers but there are also opportunities to introduce a broad
range of value-added services (e.g. Foreign Trade Zones) and cost
efficiencies.
The Federal and B.C. Governments have been working with industry
to complete a feasibility study to determine location characteris-
tics and identify critical success factors required for efficient and
cost-effective inland container terminals. These terminals could be
built anywhere along the Western Canada corridor at locations with
established intermodal linkages.
20 Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007
• Shortsea Shipping - Shortsea shipping involves the local move-
ment of goods and passengers by water transport. With many
potential water routes, some believe that this strategy could provide
significant additional capacity. From an environmental perspective,
shortsea shipping could also reduce road traffic congestion, improve
air quality, and mitigate noise pollution.
Several companies currently provide shortsea shipping services along
the B.C. coast and the Fraser River, primarily transporting logs, wood
chips, gravel and crushed stone. Some believe that marine contain-
ers could be moved from the deep-water terminals to less expensive
and congested off-dock locations by shortsea shipping. This could
simplify the movement and storage of empty containers and reduce
congestion on the road network. There are some major limitations
however, relative to other shortsea shipping routes in other parts of
the country (Great Lakes, the Saint Lawrence Seaway, and Atlantic
region) where there are greater traffic densities and potentially
longer distances.
Going forward, the Federal Government will be faced with a list of projects
which will exceed its fiscal capabilities. There have been several simula-
tions which have considered modal improvements (e.g. a recent trucking
study examined improvements to the road system). However, there has
not been any comprehensive network analysis to consider the relative
impacts of pursuing alternative strategies. This information is critical to
establishing new transportation priorities, both modally (road, rail, etc.) as
well as regionally (Lower Mainland versus Prince Rupert).
The Government of Canada should consider developing a
comprehensive simulation program to determine the relative
impacts of different infrastructure investments and strategies
in the APGC.
Operational Efficiencies & Innovation
Gateway capacity can also be expanded by increasing operational efficien-
cies. The Port of Vancouver has realized throughput increases as a result
of its capacity to handle larger vessels and berth window corridor system.
However, other capacity-enhancing mechanisms are being introduced at
ports elsewhere in the world that could have application at APGC facilities.
These include increased automation, 24/7 operations (terminal and truck-
ing) and improved and/or more flexible labour practices.
Innovation is also crucial to maximizing efficiency and expanding capacity
of current facilities. Intelligent Transportation Systems (ITS) are a promis-
ing new field of communication and information technology which can be
used to improve throughput and avoid congestion.
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
view to improve the international and inter-provincial flow of goods.
24 hour operations have been identified as a solution which could maxi-
mize the capacity of our ports and terminals. A Lower Mainland Trucking
Forum has been established to pursue this objective. However, one major
issue remains unresolved: since most of the delivery points are not open
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
may not be corresponding benefits for truckers.
The Government of Canada should consider continuing to
promote innovative processes to expand capacity and efficiency
of the APGC, including working with industry to implement 24
hour operation.
Infrastructure Investment
The Federal Government has committed significant amounts of fund-
ing during the past few years to gateway infrastructure projects. Many
communities, aware of this funding support, are now lining up to seek
funding for other infrastructure initiatives they claim to be gateway-
related projects. In response, the Government of Canada has identified the
following criteria that must be met in order to qualify for APGCI funding
(see figure below). While this represents a comprehensive list, the federal
government should consider adding a criteria to explicitly include projects
that improve the processing of goods and passengers at border points.
Source: APGCI T.I.F. Application Guide.
APGC Infrastructure Funding Selection Criteria
• The project responds to a demonstrated (qualitative and quan-
titatively) need to address capacity constraints and bottlenecks
in support of Asia-Pacific international trade flows;
• The project has demonstrated benefits, such as economic/social
impacts, congestion reduction and a greater than one benefit-
cost ratio;
• The project improves safety, security and reliability;
• The project fosters local support for important transportation
corridors/infrastructure;
• The project promotes sustainable transportation principles by
reducing environmental impacts including criteria air contami-
nant emissions and greenhouse gas emissions; and
• The project leverages public and private funding, where appro-
priate, including alternative financing mechanisms.
21Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007
Other jurisdictions utilize different approaches to promote significant
capital investments in their transportation systems. In the U.S., funding is
made available through dedicated mechanisms to provide a steady stream
of investments. Tax-exempt bond financing is also available to stimulate
investment by other partners.
The Government of Canada should consider adding a selection
criteria that explicitly includes projects that improve the
processing of goods and passengers at border points.
The Government of Canada should continue to consider
developing new financing mechanisms to fund infrastructure.
Environmental Reviews
Currently, environmental review processes are a serious impediment to
the development of the APGC, both with respect to uncertainty and cost.
Some projects require both federal and provincial approvals, each utilizing
a different process. Approval processes need to be streamlined, harmo-
nized and consolidated.
Some processes include a time limit for a decision, which significantly
helps in the planning process. Timely approvals for critical transportation
projects are critical to the APGC’s ability to handle the projected volumes.
The Government of Canada should consider working with
provincial governments to develop a harmonized accelerated
impact assessment mechanism for high-priority gateway
projects.
4.2 Effective Governance & Coordination
Issues and ChallengesAn effective and efficient Asia-Pacific Gateway and Corridor requires co-
ordination among numerous stakeholders. If the Gateway is to optimize it
operations and enhance its competitiveness, a means must be established
to align disparate interests, policies, and approaches between:
• All levels of governments;
• The public and private sectors;
• Competing modes;
• Competitors within modes; and
• Between Canada and the U.S.
Recent DevelopmentsDuring the last 15 years, Canada has been a leader in the development
of new governance structures for airports, ports, air navigation services
and the St. Lawrence Seaway. However, going forward, new governance
models may need to be adopted to better respond to global competitive-
ness. Key issues include the potential for different ports and/or corridors
to duplicate investments, the ability to finance needed investments, the
overall competitiveness of Canada’s supply chain, and marketing effective-
ness.
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
carriers. At the time, Canada acted as an exemplar to many other nations.
Since Canada’s initial policies, new business models have emerged in the
infrastructure sector. The UK and Australia have fully privatised their ports
and airports. The Netherlands is using state owned corporations for its key
infrastructure facilities. France has partially privatised Aéroports de Paris
as a means of raising capital through equity markets.
Key Questions and Strategic Choices
Land Use Planning
A critical issue for the long-term vision and development of the APGC is
land use planning. Adequate land and rights of way must be identified
and protected for future development. At the present time, although
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.
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-
ing is encouraged and non-agricultural uses are controlled. The ALR covers
approximately 4.7 million hectares in B.C., effectively preserving them for
farming. This innovative policy has protected a significant amount of land
for future agricultural production, helping to ensure the sustainability of
the region.
The Government of Canada should consider working with
provincial governments to establish “Transportation Land
Reserves” to protect critical gateway land and rights of way for
future development.
Effective Governance
Canada has successfully privatised its nationally owned air and rail carriers.
While Canada has transferred its major ports and airports to not-for-profit
authorities, many other nations have fully privatised to finance infrastruc-
ture and improve access to equity capital. Some Canadian airports have
suggested privatization would be the logical next step in the evolution of
our system.
While Canada’s airport and port authorities have made major investments
in needed capacity, airlines and other users have raised concerns with
governance, transparency and the level of charges. Some believe
users and gateway competitiveness would be enhanced with a new
governance structure, such as for-profit private operation, with legislated
regulation of fees and charges to provide greater accountability and
transparency.
P3 models have been used for major Canadian transportation investments
such as the Confederation Bridge between New Brunswick and PEI, the
407 Highway bypass around Toronto, and the Canada Line transit system
linking Vancouver International Airport to Vancouver and Richmond.
These business models provide access to private equity for financing
needed infrastructure while retaining important policy
direction for government.
The Government of Canada should undertake a global review
of best practices in governance structures to determine if
further changes are required to port, airport and related
transportation entities to enhance the competitiveness of the
APGC.
The Government of Canada should consider pilot projects for
APGC facilities which would increase the role of the private
sector and investors in the delivery of infrastructure and
services.
Lower Mainland Port Integration
On July 7, 2006, the Vancouver Port Authority (VPA), Fraser River Port
Authority (FPA) and the North Fraser Port Authority (NFPA) agreed with
the Federal Government to explore the opportunities for a new integrated
port entity for the lower mainland.
Phase One of this initiative was to determine the business case for
integration and to recommend an organizational model. Key findings and
recommendations included:
• There is strong support for integrating the three Lower Mainland
port authorities. Several major benefits are anticipated, including
improved land use planning, improved efficiency and more effective
marketing.
• The three Authorities should be amalgamated into one new Port
Authority, established through Supplementary Letters Patent.
Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 200722
• A Transition Committee (made up of directors and CEO’s of the three
port authorities along with a representative of the Federal Govern-
ment) should be established to develop and implement a transition
plan.
The phase was completed and approved by the boards of all three authori-
ties in November. Specific recommendations were made on a number of
issues believed to be critical in permitting the new entity to achieve its
vision – to become a Global Competitor, Community Partner.
A Transition Committee has subsequently been established and work is
now underway in developing the Transition Plan.
The Government of Canada should continue to work with the
three Lower Mainland Port Authorities to amalgamate
them in 2007.
Cooperation and Support
To help control congestion, municipalities may impose various measures,
such as sales taxes and tolls, which also generate revenue. However, the
development of the Pacific Gateway and Corridor presents a particular
challenge for municipalities, which have property taxes as their chief
source of revenue. While they benefit from revenues as a result of pay-
ments in lieu of taxes from airports and ports, and property taxes of ten-
ants, it does not come without some costs – traffic congestion, potential
for reduced quality of life in some neighbourhoods, road maintenance and
investing in road-rail grade separations, services such as water, sewer, and
policing, and land that may be underperforming in terms of tax revenues.
A major issue with the current financial arrangement is that, as traffic
increases, municipalities do not benefit from increased revenues to offset
their increased expenses.
Failure to balance these costs and benefits forces municipalities to increase
property taxes, and consider converting industrial land to more profitable
uses. Resolving the sharing of these costs could significantly reduce local
opposition to gateway and corridor projects in the national interest.
The Government of Canada should consider working with the
Province of B.C. and municipalities to consider changing the
current property tax structure for gateway facilities from a PILT
model to one based on throughput.
4.3 Security & Border Efficiency
Issues and ChallengesAs discussed in Chapter 3, Canada’s geographic proximity to Asia is a key
strategic advantage for the Gateway and Corridor. The flow of goods and
people across the Pacific depends, however, on good security and border
processes. Failure to do so could result in the so-called thickening of the
border (see figure 4-2) or worst yet, consequences from security incidents.
23 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
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.
• Dual Clearance: A comparable issue exists for border clearances.
The Gateway and Corridor initiative positions Canada’s west coast as a
crossroad between Asian markets and the North American economy.
As with aviation security measures, the double clearance of contain-
ers, passengers and cargo transiting through Canada on to the US or
Asia risks mitigating the natural advantage Canada hopes to capture
through gateway development. Land border delays are the most
visible manifestation of this issue, but there are clear implications for
air cargo, container trans-shipping, and air travellers as well.
• Time Delays: Security and border processing for all modes of
transportation typically requires review by officials in a checkpoint
environment. This approach has, since 9/11, grown in time per trans-
action due to new equipment deployment and risk management pro-
cesses. These chokepoints demand a sustainable model of processing
so that delays are reduced. For goods, this is critical for managing
supply-chain costs and time (e.g. reliability, on time delivery). For
passengers, the hassle factor and time spent idling in line-ups are key
issues. One estimate puts the annual cost to the Canadian economy
due to border delays at $13.6 billion; more important to the gateway
is that any delay at the border is equivalent to relocating key markets
such as the United States further away from Canada.
• Changing Threats: The security environment is ever-evolving
with varying threats to both goods and people movement. To
address risks and vulnerabilities in this dynamic environment, there
is a need to identify and address challenges to the security of key
infrastructure and conveyances. For example, it will be important to
prevent the use of Asia-Pacific Gateway and Corridor infrastructure
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 facedfrom increased traffic.
Figure 4 2: Effect of Border Delays
Security is everyone’s first priority. But enhancing transportation and
border security need not be a zero-sum game in the facilitation of travel-
lers and goods. The adoption of risk management techniques, process
re-engineering, new technologies and international cooperation can
all contribute to the mitigation of delays and bottle-necks that are the
unintended result of new security measures. Fostering a secure Asia-
Pacific gateway will require key choices to be made within the context of
individual modes and inter-modal transfers requisite for efficient transpor-
tation of goods and people.
Recent DevelopmentsCanada is an important global leader in advancing border and security
related initiatives. Due to the tragic events of the 1985 Air India attacks,
Canada was thrust into this role in the mid-1980’s and has further
advanced new models of security and border processing since 9/11. The
following provides a summary of some recent developments:
• Strengthened Cooperation with United States: through the 2001
Smart Border Action Plan, and since 2005 the Security and Prosperity
Partnership.
• Substantial Security Investments: in response to key international
conventions (e.g. ICAO, IMO) for securing major sectors of transporta-
tion
• New Technological and Legislative Tools: including advanced com-
mercial information, advanced passenger information, creation of
new government entities (PSEPC, CBSA, CATSA) and the passage of
Counter-Terrorism legislation.
• Improved Facilitation of Goods and Passengers: such as CANPASS,
bilateral NEXUS/FAST and Partners in Protection programs.
Key Questions and Strategic Choices
Dual Clearance
As previously noted, a significant amount of Canada’s gateway traffic
involves movements between Asia and the U.S. The challenge of multiple
borders within a Gateway environment requires creative changes to in-
transit flows. The present requirement for dual clearance represents one
of the APGC’s greatest challenges.
Programs such as a permanent Transit Without Visa and U.S.-to-Interna-
tional Transfer Departures Facilities at airports are examples of initiatives
that will enhance transit passenger processes through Canada. Cargo
in-transit programs in Prince Rupert might also serve as a platform with
applications in other markets.
The Government of Canada should consider aggressively
pursuing opportunities to implement new approaches to
minimize or eliminate dual clearance processes.
Multilateral Cooperation
Canada has made excellent progress in redefining its border security
relationships with the United States and Mexico through the North
American Security and Prosperity Partnership (SPP). This co-operative
and holistic approach to managing flows of people and goods should be
extended to our trading partners in Asia. Greater trade facilitation efforts
with our largest trading partners in the region should be augmented with
expanded co-operation between our respective transportation, security,
immigration and border services agencies.
The equivalency and comparability of security systems is an emerging
area relevant to gateways. Recently, Canada, Europe and the United States
moved to one standard for screening gels and liquids for passengers on
commercial flights. Working through the G8, APEC, the International
Maritime Organization, the International Civil Aviation Organization, and
other groups, Canada should continue to advocate for the establishment of
common approaches to security issues. In particular, a focus on maritime
and air travel security is essential. Whether this involves implementing
transportation related deliverables under the SSP or new programs with
APEC, a co-operative framework will assist in opening new route opportu-
nities while minimizing frictions and choke points.
The Government of Canada should consider taking a lead role
in encouraging harmonization and mutual recognition of
transport and border security policies in the Asia Pacific region.
Coordinated Clearance
The importance of ready access for goods/people to the U.S. market is a
critical success factor for the Gateway and Corridor Initiative. Yet contin-
ued evolution of the U.S. threat-risk environment and associated policy
responses threaten to create a “Fortress America” response. Although
this may itself be a detriment to North American competitiveness, such
a response could emerge given the asymmetric development of interna-
tional terrorism.
An important element of reducing border congestion is to “push-out”
the screening of goods and people away from the border. Canada and
the U.S. have been quite successful in implementing pre-screening and
pre-registration programs for people and especially for goods. The regular
exchange of airline passenger data, information on container traffic,
and trusted traveller programs all contribute to reductions in border
delays. More screening and information gathering can be done through
biometrics, information technology, and voluntary pre-registration. Put
another way, frequent border users should be offered more opportunities
to participate in voluntary programs that allow for pre-screening and pre-
registration facilitated by new technologies. Volountary frequent traveller
programs like NEXUS offer the opportunity to facilitate flows of people.
One challenge facing government is how to maximize participation in such
programs and market effectively to a non-English/French/Spanish-speak-
ing market.
The ultimate solution to achieving a seamless border process is for Canada
and the U.S. to focus on joint clearance of passengers and goods at the
perimeter (e.g. first point of entry) and eliminate the need for an obtrusive
clearance process for transborder movement of people and goods.
The Government of Canada should consider aggressively
pursuing perimeter clearance with the U.S.
4.4 Human Resources
Issues and ChallengesAn adequate, well-trained and reliable workforce remains essential for
the smooth and effective functioning of the APGC. There are, however, a
number of challenges related to human resources for an expanded APGC.
Western Canada is suffering a labour shortage. The Royal Bank of Canada’s
January 2006 Provincial Outlook noted that across Canada, concerns were
highest in Alberta, Manitoba and B.C, with Saskatchewan not far behind.
The Canadian Trucking Human Resources Council estimates an additional
37,000 drivers are needed each year, while the Chartered Institute of Logis-
tics and Transport notes that the shortage of skilled logisticians is a serious
concern for firms operating global supply chains. Moreover, shortages in
the automotive and repair, tourism, construction and maintenance sectors
will all put increasing pressure on various aspects of the APGC.
Education and training are another issue. While post secondary institu-
tions are increasing the amount and quality of training options in the fields
of transportation, logistics and supply chain management, the numbers of
students enrolled continues to lag anticipated demand.
24 Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007
25 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,
unreliable labour force can significantly limit the potential of the APGC.
Asian shippers still raise past labour disputes at the Port of Vancouver as
cause for concern about the reliability of the port. Reliability is becoming
the key in global logistics, and concerns about reliability increasingly drive
supply chain decisions. The problems the U.S. west coast port and rail sys-
tems experienced in 2004 led key big box distributors and logistics service
providers to use east coast gateways such as Savannah and Charleston to
move Asia-Pacific goods in order to reduce the risks presented by west
coast port and rail reliability. Labour issues potentially threaten the
reputation of the APGC in a similar manner.
Recent Developments Canada’s new government has made improvements to the Temporary
Foreign Worker Program to make it easier for employers in B.C. and Alberta
to hire foreign workers when no Canadian citizens or permanent residents
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
attract and retain highly skilled workers will also address this shortage.
Industry Canada’s Lean Logistics Technology Roadmap outlines a number
of initiatives by industry organizations, HRSDC, provincial education
ministries and educational institutions to address the provision of trained
logisticians, but notes that more needs to be done to enable Canada to
“move rapidly into the future.”
Partnerships between labour and employers are developing at APGC ports,
and joint marketing efforts are emerging to show customers a united front
and address reliability concerns. This is an important start, although it will
take considerable concerted effort to change the negative perceptions that
exist. While much of the focus has been on the various long-shore labour
disputes in the past, the summer 2005 withdrawal of trucking services by
owner-operators also had a serious impact. The Final Report of the Task
Force on the Transportation and Industrial Relations Issues Related to the
Movement of Containers at British Columbia Lower Mainland Ports noted
that importers in Ontario and Québec were affected and that containers
and vessels were diverted to Seattle and Tacoma to avoid Vancouver.
Key Questions and Strategic Choices
Immigration
Canadian demographics suggest that the developing labour shortage will
not be addressed by natural growth of the Canadian population. While
achieving increased workforce participation by Canada’s growing Aborigi-
nal population could deal with part of the anticipated shortage, this likely
will not suffice to address the issue. Immigration is a means of addressing
the labour shortage, but this raises other social and economic issues.
The Government of Canada should consider facilitating
targeted immigration to address the current and anticipated
chronic labour shortages.
Education and Training
Post-secondary and industry options for training in transportation, logis-
tics and supply chain management are increasing. Nevertheless, enrol-
ment lags in part since these sectors have a relatively low profile among
Canadian youth and are not seen as strategic career paths. The industry
is attempting to improve marketing to prospective employees to attract
them for training, but it is in competition with other sectors for labour.
The Government of Canada should consider working with
provincial governments to establish transportation, logistics,
and supply chain management as a national priority for skills
training and education.
Collective Bargaining
Initiatives planned and underway by labour and management to improve
labour assignments, forecasting and training and conduct joint marketing
illustrate the mutual recognition of joint responsibility for improving the
labour environment and selling a reliable service. Nevertheless, as recent
events show, labour disruptions are still an issue.
The Federal Government has on occasion been drawn into the midst of the
issue in the national interest and has responded with back-to-work legisla-
tion. After-the-fact interventions, however, do not instill confidence in
the on-going reliability of the APGC. Reliability continues to be raised as a
major issue by offshore shippers. More needs to be done to prevent labour
disputes (e.g., mediation, final offer arbitration) before they occur.
The Government of Canada should consider new, innovate
forms of mediation and arbitration to prevent work stoppages
in the transportation sector.
4.5 Pro-Competitive Policy Framework
Issues and ChallengesCanada’s APGC is not the only alternative for moving goods and people
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
Canada, since many U.S. and even Mexican gateway corridor alternatives
are seeking to handle North American traffic to and from Asia. In order to
preserve Canadian jobs and ensure adequate direct transportation service
levels to serve Canadian needs, APGC-based supply chains need to be
competitive on a global level.
Governments must ensure that policies and regulations across various
departments and levels of government are consistent with this objective.
These include economic regulation and taxation policies.
Recent DevelopmentsCanada’s new government has taken a key step in the development of the
APGC by creating a separate Ministerial portfolio for the initiative. This
identifies the APGC as a government priority and indicates its multi-
departmental relevance.
The invitation by the Federal Government for participation of all level of
government is a key step to alignment of the entire policy environment.
Canada’s new government has recently announced a number of initiatives
such as the elimination of the federal net debt by 2021, a review of capital
cost allowances, and other measures to improve competitiveness and
encourage investment. These will help establish a competitive tax regime
for the APGC.
To make Canada’s duty deferral and other customs programs more
competitive with the U.S. FTZ program, Canada introduced the Export Dis-
tribution Centre program in 2001. While it has elements that are superior
to the U.S. version, limitations on value-added activity and export ratios
have made it less attractive than anticipated. Additional planned features
such as the operators certificate have not yet been implemented, further
hindering program take-up.
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 potential to expand air services. New liberalized air service agree-
ments with China and India are also important for the APGC. Canada’s new
international air policy, which seeks open-skies type agreements as a
primary objective when in the overall interest of the country, is a positive
development. Transport Canada intends to pay special attention to key
Asia-Pacific markets as it implements its new approach.
Key Questions and Strategic Choices
Policy Alignment
Establishing a true pro-competitive policy environment requires a multi-
departmental effort. Transportation policy alone can not produce the
necessary pro-competitive environment. The APGC needs to be a factor in
the policy development of key departments with responsibility for finance,
taxation, international trade and exports, tourism, industry, customs
and duties, public safety and security, inspection services, labour, human
resources, immigration, training and education, research and develop-
ment, environment, competition, public health, and statistics.
A national pro-competitive policy environment requires alignment of
provincial and federal policies. Federal progress in this area potentially
could be undermined by provincial policy, such as those limiting truck-
ing weights and dimensions, imposing road charges on key APGC links,
or imposing uncompetitive fuel taxes on trucking, rail, and aviation. The
participation and support of western provinces is also critical to the success
of the APGCI.
The creation of a separate Ministerial portfolio for the APGC will raise
the profile of the initiative in the policy-making activities of the various
relevant departments. The question is whether this will be sufficient to
change historically ingrained behaviors wherein staff tend to view their
responsibilities within narrow departmental “silos.”
The Government of Canada should consider incorporating APGC
performance measures in all relevant departments, or take
other steps to achieve internal alignment of goals.
Taxation
Canada’s tax regime needs to be reasonably competitive with respect
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.
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27 Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007 27 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
indicates the new government clearly has a long-term perspective on tax
policy with the objective of achieving lower taxation levels and a more
equitable tax regime. The key is preserving this over the short-to medium
term in order to keep a correspondence with the long-term vision of the
APGC.
The Government of Canada should consider working with
provincial and municipal governments to review all relevant
taxation policies to ensure that they do not impede the
competitive position of the APGC.
Foreign Trade Zones
Provision of value-added services is a key function of gateways. The
Foreign Trade Zone program of the U.S. has been an effective tool for
attracting foreign investment and economic activity to the U.S. that might
otherwise take place overseas. The Canada Border Services Agency and
Canada Revenue Agency have a number of programs that offer FTZ-like
benefits, but these programs do not provide as attractive an environment
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.
Air Policy
Canada’s new Blue Sky international air policy is a key step in the direction
of improving access for air carriers, both foreign and domestic, to Canada’s
gateway airports. The nation’s approach to air services negotiations has
moved from an incremental one to a more proactive stance to seek more
open skies type agreements, when in the overall interest of the country.
Canada’s new approach is also to seek more flexibility for all cargo opera-
tions. In this sense, this new policy supports the goals of the APGCI.
It should be noted that the world is gradually changing its position on
foreign ownership of air carriers, and some nations are taking steps to
amend air service agreements to replace the ownership and control provi-
sions with principle place of business provisions. To this end, the Minister
of Transport, Infrastructure and Communities has undertaken consultation
with stakeholders on potential changes to airline ownership restrictions.
Canada does not impose foreign ownership restrictions on bus, trucking or
rail companies.
The Government of Canada should consider reviewing airline
foreign ownership limits.
5.0 TOWARDS COMPETITIVE ADVANTAGE
Canada’s Asia-Pacific Gateway and Corridor has a number of strategic
advantages over competing gateways and transportation networks
including its geographic location and a modern and efficient transporta-
tion system. The fundamental issue is that the relentless growth of trans-
Pacific trade and travel, driven to a large extent by the massive expansion
of the China and India economies, will overload the current transportation
system to the point that congestion and delays will nullify the advantages
of shorter shipping and flight times across the Pacific. Investment in
transportation infrastructure in Asia will provide a quantum increase
in export capacity which needs to be matched on the North American
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
deal with this growing market demand and are poised to capture a larger
share of the Asia-Pacific trade and travel market. Canada needs to respond
quickly to ensure that the competitiveness of the Asia-Pacific Gateway and
Corridor is enhanced or risk being relegated to a secondary role in serving
the needs of global commerce.
By launching the Asia-Pacific Gateway and Corridor Initiative, Canada
has given itself the opportunity to overtake competitive initiatives to the
south. Although other jurisdictions and transportation authorities are
investing in new infrastructure and technology to increase capacity, most
of these efforts are being undertaken independently by mode and not
as part of a coordinated and integrated plan. To realize the vision of the
Asia-Pacific Gateway and Corridor Initiative, the Federal Government will
need to act quickly or the economic benefits of capturing a larger share of
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.
The next step is to develop a Strategic Action Plan for the Asia-Pacific
Gateway and Corridor that addresses the strategic issues and challenges
outlined in the previous chapter and takes the action necessary to:
• Optimize and expand the capacity of the Gateway and Corridor for
the short and long term.
• Promote effective corporate governance that facilitates private
investment, improves coordination and enhances accountability.
• Establish more secure and seamless border processes.
• Enhance human resource skills and labour reliability.
• Foster a market-driven and pro-competitive policy framework.
In conclusion, Canada has a tremendous opportunity to capture a
significant share of the transpacific flow of global commerce between the
growing markets of Asia and North America. While there has been a focus
on transportation infrastructure funding, it is important to remember
that this is only part of the equation and that establishing the right
“policy infrastructure” can be even more important in creating competi-
tive advantage for the Asia-Pacific Gateway and Corridor. Canada’s new
government has a bias for action and a strong commitment to enhancing
Canada’s competitiveness. Moving quickly to develop and implement a
Strategic Action Plan for the APGCI and establishing an interdepartmental
task force to develop an integrated policy framework will ensure the suc-
cess of the Asia-Pacific Gateway and Corridor Initiative and realization of
its long term vision.
28 Canada’s Asia-Pacific Gateway & Corridor: A Strategic Context For Competitive Advantage - March 2007