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Rightsizing the Transportation System

"If some countries have too much history, we have too much geography."
                         Prime Minister Mackenzie King
                         House of Commons

I had the great pleasure to participate in a panel discussion titled "Rightsizing the Transportation System: Meeting the Needs of the 21st Century" in Ottawa recently. As part of my opening comments, I used the above quote from Prime Minister Mackenzie King to explain the fundamental importance of transportation as part of our economic history.

Paraphrasing Mackenzie King, Canada's immense geography explains our history. Our vast open spaces and the resources they contain drove much of our economic development. And, in the eyes of the world still define much of who we are as a nation.

Our resources of fish, fur and forests led explorers up our waterways and into the heartland of the continent. The building of the Canadian Pacific Railway and the St. Lawrence Seaway were huge visionary projects. These transportation corridors opened up the country and enabled people to get to our resources and our resources to get to markets. Having adequate transportation helped build Canada and adequate transportation is needed now for Canada to reach its economic potential as a trading nation.

The Ottawa Economic Association sponsored the panel discussion to look at Canada's transportation challenges in an era of globalization. With the growing middle class of emerging markets such as China, Canada's resources— potash, grain, minerals, forest products, oil and gas— will be in greater demand than ever before. The key question is —do we have the right transportation system to support this economic opportunity?

Louis Theriault, the Vice President Public Policy for the Conference Board of Canada, kicked off the discussion with an overview highlighting our shifting trade patterns. Our imports and exports in constant dollars have climbed in tandem over the past 30 years. However if you compare the trade balance for Canada on a tonnage basis rather than a dollar basis, the two lines are much further apart—there is a huge trade surplus in the tonnage of goods exported versus goods imported.

That makes sense when you think about the large volume of bulky natural resources that Canada exports. However, economists tend to focus on dollars not weight when evaluating a country's trade surplus or deficit. The Conference Board presentation showed that the value per tonne of imports is about twice as much as the value per tonne of exports. That suggests many rail cars or terminals used to ship our exports don't transport imports, creating an 'empty backhaul' problem.

So when examining our transportation system, we need to think about what is being shipped. What are the logistics and economic challenges with this type of trade imbalance and how do we address those challenges?

The presentation also focused on the shifting modes of transportation being used considering the changing mix of customers. In 2001-02 about 70% of our trade was surface transport— half by truck and 20% by rail. Over the subsequent decade, our trade flows shifted from north-south to east-west as more and more of goods were destined for ports. Together truck marine and rail marine traffic doubled from 2002 to 2012, and surface exports by truck and rail dropped to about 50% of the total.

Transportation infrastructure takes a long time to build, and shifting trade patterns make it challenging for transportation capacity to keep pace. My strong view is that we need better data and a better way to analyze the transportation system as a whole —to find solutions, we need to better understand the problems. Examining the data and developing policy solutions based on evidence rather than emotion is the only way to ensure that Canada has a robust, efficient and economically competitive transportation system.

Discussing transportation policy and infrastructure can become a tense debate. What is in the best economic interests of one shipper such as grain might conflict with others such as the forest industry. What is the most efficient and profitable way for a carrier to operate might not be optimal for a shipper. That's why Fiona Murray, VP Corporate Marketing for CN Rail was invited to the event to share some perspectives on behalf of the carriers and I was there to share challenges from the standpoint of shippers.

I'm pleased to report that it was a civilized conversation. Even with different points of view, we both agreed that you cannot solve Canada's transportation issues by focusing on one commodity or on one carrier — all players must work together. And this is not an easy task.

Right now the federal government is examining these issues through the lens of the Canada Transportation Act Review, as it does every ten years. This is a positive step but nowhere near enough. We need a much deeper and broader policy reflection on ways to expand the capacity, improve the flexibility and maintain the economic efficiency of our system. We need seamless access across borders. We need flexibility and surge capacity. We need interconnectivity and an ability to be nimble.

And we need to examine the needs of remote communities who are captive to a single form of transportation. Going back to the words of Mackenzie King, we need to recognize the vast geography of our country. The reliability and economic efficiency of our transportation system is much more challenged by our geography than smaller countries or more densely populated nations. Many of the natural resources we export around the world need to be hauled from remote communities who are captive to a single form of transportation.

Our challenging geography made Canada and our geographic distances remain a challenge today. Let's be as bold and visionary as our forefathers and have a public policy debate on ways to "right-size" the transportation system and in doing so ensure job creation and prosperity for Canada.

Source: President's Blog / The Forest Products Association of Canada (FPAC)

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