Canada looks on as Mexico and US formally talk USMCA renewal
Canada was looking in from the outside as formal negotiations on the future of the ...
Photo: © Mykhailo Polenok, Dreamstime.com
The Canadian government has been aggressively pursuing trade agreements with partners around the world to reduce the economy’s reliance on US trade, and is pouring money into transport infrastructure to support this.
However, a new study raises questions about the nation’s ability to boost maritime traffic.
With little over a month before the deadline for renewal of the USMCA trade pact, manufacturers in all three nations have appealed to their governments to preserve the framework – but Canada and the US haven’t even begun negotiations.
Various demands from the US for concessions ahead of the talks have been rejected by Ottawa, with prime minister Mark Carney saying serious negotiations could resolve both sides’ concerns fairly quickly, but that Washington was not ready owing to other pressing issues.
He added that some governments that had rushed into agreements with the US to avert tariffs subsequently were disappointed with their trade deals.
Meanwhile, Ottawa is pushing ahead with its objective to double non-US exports by 2035. Its diplomatic offensive to strike trade agreements with the EU and Mercosur blocs as well as China, India, Australia, and other nations, has been flanked by the creation of a Trade Diversification Corridors Fund (TDCF), which will receive C$5bn ($3.61bn) over seven years, to beef up transport and logistics infrastructure.
“By investing in the infrastructure that moves our products to global markets, this fund will strengthen supply chains, unlock new export opportunities, and build a more resilient, diversified economy,” states the administration’s Budget 2025.
Over the coming four years, another C$1bn will be poured into Ottawa’s new Arctic Infrastructure Fund.
While ports stand to figure prominently in the TDCF, money will also go to inland elements like rail and trucking, noted Julia Kuzeljevich, director of policy and regulatory affairs at the Canadian International Freight Forwarders Association. It is not clear at this point how funding would be allocated, she noted.
A new research paper, produced by the Bank of Canada, raises questions over the nation’s maritime links’ ability to support the government’s ambitious trade development plans. It points out that the top ports had suffered a decline in connections since 2016.
Over the past ten years, deadweight tonnage at Canadian ports has shrunk from 167m tonnes in 2016 to 119m last year, a 28% decline. And connectivity to 11 trading partners was lost, resulting in a decline of 6m tonnes in capacity, while connections to 18 new trading partners added only about 3m tonnes.
This loss in connectivity increases the chance of disruption at distant hubs on domestic markets and prices, as Canada’s trade relies more on indirect traffic flows, the report warns.
According to the authors, one factor for the decline was the limited capacity of Canadian ports to handle ultra-large containerships, as they cannot accommodate vessels of over 15,000 teu. Hence a large chunk of the imports from South-east Asia is routed via the Los Angeles/Long Beach port complex.
However, the main driver is the development of global trade flows, which have grown the fastest in Asia. Not only Canadian ports, but also their US counterparts, have fallen in the global connectivity charts, according to the bank report. Three US gateways ranked among the top 10 most-connected ports in the world in 2016, but none remained in the top 10 by 2023, while the number of East Asian ports in that bracket rose from six to eight.
“The North American problem doesn’t have an easy fix for Canada and, despite our attempts to diversify trade, many decisions regarding ship calls to North American ports will rely on the strength of US trade with others. Shipping lines won’t necessarily consider Canada’s very small market in isolation,” said Ms Kuzeljevich.
A study produced by the Simon Fraser Institute argues that labour relations is an aspect that should be addressed.
“Ottawa must also take action on the labour relations front,” its authors wrote. “The challenge here is to improve the actual and perceived reliability of Canada’s trade gateways, notably on the west coast, where a pattern of strikes and other labour disruptions has damaged Canada’s reputation as a reliable supplier, raised import costs for Canadian households and businesses, and prompted some shippers to redirect their business to competing North American gateways.”
Ms Kuzeljevich concurred: “Yes, we will continue to rely on transhipments if we do not solve our labour reliability, which is always mentioned as a concern in international circles.”
Canada’s west coast gateways of Vancouver and Prince Rupert have actually fared well in the first quarter this year. According to Sea-Intelligence, their containerised imports climbed 9% and 7.8% respectively, outperforming US west coast ports.
A large chunk of this traffic is headed to the US, though. The future of USMCA and the marriage of Union Pacific and Norfolk Southern creating a transcontinental US rail giant will be significant factors shaping flows through Canada’s ports.
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