By David Lindsay, President and CEO, Forest Products Association of Canada
“If some countries have too much history, we have too much geography.”
Prime Minister Mackenzie King
House of Commons, 1936
Mackenzie King was on to something ― Canada’s immense geography, in large part, explains our economic history. Our 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. Transportation corridors opened up the country and enabled people to get to our resources and helped get our resources to people in markets around the world. Having adequate transportation helped build Canada and adequate transportation will continue to be needed for Canada to achieve its economic potential as a trading nation.
The great Canadian historian Harold Innis developed what he called a “staple thesis” asserting that the export of natural resources of staples such as fur, fish and forestry from Canada had an impact on not only our economy but our social structure and our political institutions. Mining and forestry “company towns” are uniquely connected to their communities across Canada. Professor Donald Creighton and political economist W.A. Mackintosh of Queen’s University also studied the relationships among our economy, our geography and our political structures.
During the last 25-plus years, as the importance of the high-tech economy grew, the significance of Canada’s transportation system hasn’t had the same attention. But, considering that Canada is a trading nation —an export economy with a wealth of natural resources transported across long distances to access world markets—it’s a debate we need to re-engage.
The federal government is now undergoing a review of the Canadian Transportation Act, as it does roughly every 10 years. This is an important step but nowhere near enough. We need a much deeper and much broader policy reflection on ways to expand the capacity, improve the flexibility and maintain the economic efficiency of our transportation system. We need to bring together the best data and the best minds to see if our current transportation system is an enabler or a barrier to our potential growth.
The goal is an extensive and far-reaching review, and that’s not always easy. Politicians often look for short-term fixes or tinkering at the margins. Using health care as an example, the desire to find ways to get best value for money and to effectively and efficiently deliver health care can get sidetracked because of the immediate financial pressures, some new medical miracle or the short-time horizons of electoral cycles. Instead, whether it is health care or transportation, what we need is a deeper collective policy debate with a long-term view.
We’ve had these kind of wide-ranging discussions before. In the not-too-distant past, the Macdonald Royal Commission of the 1980s paved the way to free trade and competitive tax policies. In the 1990s, there was a wide-ranging public policy discussion on how to avert the brain drain and enhance our innovation economy. We need that type of public policy focus on Canada’s transportation needs. Past deliberations have tended to focus narrowly on urban infrastructure such as giving cities a portion of the gas tax or the importance of public transit. What is needed now is to tackle the policy question of how to create a world-class 21st century transportation system as a linchpin of our export economy.
The Conference Board of Canada is already taking up that challenge. It has launched a strategic review of the country’s transportation system
and is collecting the vital data required to assess the current state of play. Already it has made some interesting discoveries. For example, when looking at the trend lines for exports and imports first by tonnage and then by value, it found a surprising dichotomy. By weight, our exports surpass imports. However that reverses when it comes to dollars per tonne, whereby imports are worth much more. This difference suggests we are exporting more bulky commodities using elevators, terminals and railcars dedicated to specific commodities which may not be needed by our imports and can exacerbate a “backhaul problem”; an imbalance in transport flows or the challenge of getting often empty equipment back to an area of demand. How does this impact the efficiency of our transportation network?
The Conference Board also found that in 2002, 70 per cent of the value of exports was purely by surface mode, such as trucks and trains. Now, as marine transport has become more important, it’s down to 50 per cent, a large shift in a short period of time because of our growing trade with countries other than the United States. Yet arguably, our transportation system has not grown to accommodate that change. When there are bottlenecks at the Vancouver port, are we jeopardizing our reputation as reliable suppliers in the world market? Do we have what it takes to be an export superpower and take advantage of the growing number of trade deals such as the Canada-Europe free trade agreement or a Trans-Pacific Partnership?
Transportation infrastructure takes a long time to build, and shifting trade patterns make it challenging for transportation capacity to keep pace. That’s why we need to better analyze the existing 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 an efficient and economically competitive transportation system.
And there is a lot of emotion in the transportation debate. As the old adage goes, “Where you stand depends on where you sit”. What is in the best economic interests of grain shippers might conflict with others such as the potash or forest industries. The most efficient and profitable way for a carrier to operate might not be optimal for a shipper. There is also the best interest of society in general to consider. Balancing the interests of individual carriers and individual shippers, while keeping an eye on the larger public good, is not an easy task.
Many of our resource industries are located in far-flung communities and single-industry towns that are captive to a single form of transportation ― if they cannot get their goods to international markets via a robust and reliable transportation system, the town can shut down. Again, we need to accommodate the huge distances in Canada. It takes an average of 1,500 kilometres to transport grain from Saskatchewan to tidewater. In Australia, it averages just 400 kilometres. Canada needs a transportation network that serves the vast geography of our country so we can compete with smaller countries, more densely populated nations or countries with much shorter distances to ports.
Many of the key transportation assets in Canada were traditionally owned by government but Ottawa has privatized or commercialized CN, Air Canada and our airports, and replaced ownership with oversight and regulation. No one is calling for the government to again take over control of our transportation infrastructure. However, with the challenges of distance, we need the public sector to work with private interests to truly understand the challenges and issues from all perspectives.
Governments must be part of any broad policy discussion about the economic opportunities and economic challenges now facing Canada and where the transportation system fits in. Together we need to look at how to expand capacity, improve 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. We need to right-size the transportation system to unlock Canada’s economic potential and get our products to market in a reliable way.
We have already referred to our longest serving prime minister, Mackenzie King, but we should also take inspiration from our first prime minister, Sir John A. Macdonald. His National Policy knit this country together by building railways to accommodate east-west trade flows despite the fact that north-south was, and still is to a lesser degree, the natural flow. Nearly a century and a half after the completion of the CPR, the east-west flows have become more important than ever with the growing economic importance of Asia. In the forest industry for example, we used to ship more than 80 per cent of our products south to the United States but those shipments are now closer to 60 per cent. Forest products are now Canada’s largest export to China and our sales to the Pacific Rim continue to grow.
Our challenging geography made Canada, and our geographic distances remain a challenge today. Our resource sector helped build this country and the resources of Canada will continue to be in demand well into the future. So let’s be as bold and visionary as our forefathers and have a public policy debate on ways to “right-size” the transportation system. Job creation and prosperity for Canada depend on it.