International trade is very important to Canada. For 2010, the value of exports and imports is estimated as about 60 percent of GDP. While about three quarters of the value of Canadian trade is with the U.S., non-energy natural resource exports are heavily dependent on shipping to overseas markets. Manufactured products imported from Asia are becoming increasingly important in Canada’s trade.
In spite of the importance of seaborne trade, Canada is not regarded as a maritime nation by the criterion of Canadian-flag shipping. This reflects the long-standing public policy of reliance on the most efficient services as selected by the Canadian or foreign importers or exporters responsible for the shipping arrangements.
However, Canada had a significant maritime presence in the past and its port communities still have an important maritime industry.
Canadian fleet, pioneering days to the present
In the days of wooden sailing ships, Canada had a thriving shipping industry. The country’s forests provided the wood for shipbuilding and the mill owners required ships to get their lumber to foreign markets. This was why Canadian-born Samuel Cunard entered the shipping business. In 1840, he expanded into a transoceanic service that became the world-famous Cunard Line. By 1878, Canada ranked fourth among shipowning nations.
However, in the last decades of the century, Canadian participation in shipbuilding and shipping diminished, as steel and engineering skills became prerequisites for a successful shipbuilding industry.
The two world wars caused temporary booms in Canadian shipping, but since 1949, when the Canadian government sold off its registered fleet, the vast majority of Canadian overseas trade has been carried in ships registered in other countries.
The Canadian-registered fleet is now less than 5 million gross registered tonnes and operates mainly on domestic and trans-border routes, such as the Great Lakes and St.
Lawrence Seaway, where Canadian owned or flagged vessels dominate, and in the east and west coast coastal trades. The B.C. Ferry Corporation is one largest passenger ferry operators in the world.
Lumber industry drove innovation
The importance of shipping to the marketing of Canadian forest products continued to be reflected in the presence of Canadian control over shipping arrangements. In the 1970s, B.C. forest-product companies were instrumental in the development of the open-hatch bulk carrier for their exports. It was in part the arguments of these exporters that, in 1991, led the Canadian government to make changes to the Canadian Income Tax Act to permit the management of international shipping companies from a Canadian base without exposing profits to Canadian tax.
This was a vital change in the Canadian fiscal regime that has enabled the traditional Canadian shipping companies such as Canada Steamship Line and Fednav, both in Montreal, to continue unhindered by the fiscal regime.bIt has also enabled new enterprises to be established, as found in Vancouver.
Fiscal conditions for ship management help establishing new businesses
The first and largest company to move its head office to Vancouver was the tanker operator Teekay Corporation which moved from California. Not only did Vancouver offer a favourable fiscal (and scenic) environment, the established maritime economy supported a well-informed labour market. A number of firms moved an office to Vancouver from Hong Kong, for example, Valles Shipping and Fairmont Shipping. The fiscal regime has also enabled local businesses to develop into international shipping.
The most notable is the container shipping company, Seaspan Corporation, which was an outgrowth from the coastal tug and barge and ship brokerage business of Seaspan International. The container line is now one of the world’s major independent owners of container ships.
Methanex Corporation has chosen to enter into shipping in the development of its total supply chain concept for the global marketing of methanol. Methanex‘s wholly-owned subsidiary, Waterfront Shipping, operates the largest methanol tanker fleet in the world.
It would be wrong to present Canada’s support for its trade as placed only in its support for an international regime for ship management. There are two other aspects of Canadian policy that deserve recognition.
The first aspect is the policy on liner shipping. Under the Shipping Conferences Exemption Act, shipping conferences continue to be allowed under conditions largely comparable with those under the U.S. Ocean Shipping Reform Act. However, there are two notable differences in Canada. First, there is no specific regulation of non-conference lines in Canada. They are treated like any other business. Second, there is normally no follow-up to provisions in the Act, questioning the rationale for its continuance.
Canadian gateway strategy helps to improve port conditions
The second aspect is the attention that Canada has given to improving the landside conditions for trade. The early aspect of this was the corporatization of the major ports under the Canada Marine Act of 1998. It has resulted in more proactive and dynamic management of Canada’s ports. Further recognition of the importance of landside conditions to international shipping is evident in the introduction by the federal government in 2005 of the Pacific Gateway Strategy, designed to improve conditions along the west coast routes. The need was highlighted as shown by conditions in 2004-05 when landside capacity failures resulted in severe port congestion. The Gateway Strategy, now a national programme, has important effects in focusing public and private interests on the need for collaboration in infrastructure investments in a network affected by multiple interests.
The importance of collaboration for the development of the efficient infrastructure is matched by increased collaboration needed among participants in logistics chains. Nowhere is this more important than in port-related operations where there are so many interdependent activities. A major change appears to be underway in the landside arrangements but change is less evident at sea.
More attention to future challenges required
It is well known that for logistics networks to work efficiently visibility and reliability are crucial. Both deserve more attention. Since cargo loaded on a container ship is known when the ship sails (now, well before), why do destination terminals and inland carriers not know immediately of the impending cargo handling requirements? Why any delay? Information may not likely be forthcoming from security organisation, but why not sooner by lines or terminals? Is the communication on ETAs and berth availability between bulk carriers and terminals as effective as it can be today?
When shippers and container lines negotiate ‘service’ agreements, why is the focus so much on rates and minimal annual quantities when so much stress during the year revolves around peak traffic? Similar issues challenge inland transport arrangements. Committing to traffic volumes involves the risks of forecasting. But better to evolve processes for dealing with the risks than leave their resolution to chance.
Trevor D. Heaver, Professor Emeritus of the Sauder School of Business, University of British Columbia, Vancouver