News / Canada trade pivot has funds for supply chain development, but lacks a plan

Photo: © Mykhailo Polenok, Dreamstime.com

As Canada shifts its trade strategy, supply chain operators and their clients are reassured by the availability of funding for their sector, but the lack of a national strategy is a concern.

In the wake of prime minister Mark Carney’s impactful speech declaring the end of an era, and the need for Canada to diversify its trade and build new relationships, his administration has been in hot pursuit of new and/or stronger trade ties around the globe, from the EU and Mercosur trade blocs to China, India and Australia.

In the face of US threats to annexe its neighbour, tariffs, and signals of reluctance to renew the US-Mexico-Canada trade agreement (USMCA), Ottawa’s declared aim is to double non-US exports by 2035 to reduce its historical reliance on that market.

The question is in how far the supply chain side is ready for the task. After a record volume last year, up nearly 8% year on year, the Vancouver Fraser Port Authority declared itself ready for the challenge.

“The port of Vancouver is playing an outsized role in delivering more made-in-Canada products globally. We are uniquely poised to support Canada’s bold trade goals because of decades of strategic investments in terminal and rail capacity. With nation-building projects like Roberts Bank Terminal 2 and Second Narrows dredging on the horizon, we’re showing the world that Canada is open for business,” said port authority president and CEO Peter Xotta.

Bruce Rodgers, executive director of the Canadian International Freight Forwarders’ Association, finds the nation’s ports in good shape, pointing to expansion projects at most, but he has questions about rail capacity and surface capabilities.

“What is CP [Canadian Pacific] doing for additional capacity? Have we got the warehouse and truck capacity?” he asked.

There are also doubts about Vancouver International Airport, Canada’s premier gateway to Asia.

“If there’s a significant increase from Asia to Vancouver, they’re not as prepared as they should be,” said Jamie Porteous, now strategic advisor to Cargojet after retiring as co-CEO of Canada’s largest cargo airline. The airport lacks space for cargo and for parking planes, he pointed out.

In terms of traffic rights and access to markets, Canada’ airfreight sector is well positioned to cope with increased flows, both he and Mr Rodgers said. Mr Porteous added that Ottawa had been very supportive in obtaining access to points not covered in existing aviation treaties.

Having started out as a domestic operator, Cargojet has expanded internationally and accrued more than half of its revenue from international operations last year. Over the past year, the strongest growth has been in Latin America traffic. The carrier’s B767 freighters, the bulk of its fleet alongside a smaller contingent of B757Fs, have been active on charter missions all over the region, in addition to scheduled flights to Bogota and Lima.

Ottawa’s desire to boost intercontinental trade plays into the airline’s long-term fleet outlook. Cargojet had acquired four B777s for conversion into freighters, but sold them on in response to market dynamics and the extended timeline for certification of the conversion programme. Now management is reviewing the case for the larger freighter type.

While it has used B767Fs for China flights, the 777 would be a strong candidate for transpacific operations, and the southern cone of South America would also favour the type. In addition, the lion’s share of Cargojet’s domestic flows moves on the route connecting its hub in Hamilton with Vancouver, which might justify a 777 freighter if volumes keep rising.

“It’s something we’re evaluating,” Mr Porteous said.

The Canadian Chamber of Commerce has misgivings about the nation’s ability to cope with a large shift of trade to intercontinental lanes. He sa

“The status quo on infrastructure could quickly compromise our ability to meet the moment and maximise our economic gain,” commented Pascal Chan, VP, strategic policy and supply chains.

His organisation is worried about supply chain disruptions from work stoppages hobbling supply chains and sending shockwaves throughout the economy, and about lengthy approval times for supply chain infrastructure development processes.

“Red tape has always been an issue. The approval process takes too long,” Mr Rodgers agreed.

On the bright side, Ottawa is making money available for supply chain improvement projects. The National Trade Corridors Fund, established in 2017, has injected C$4.1bn (US$2.98bn) into supply chain development undertakings so far, but expires this year. Ottawa has already lined up a new channel, the C$5bn Trade Diversification Corridors Fund, to build and improve trade infrastructure.

Mr Rodgers lauds the government’s commitment to fund supply chain projects, but laments the absence of a comprehensive supply chain strategy to provide a framework for the allocation of funding.

Ottawa actually established a supply chain office, which produced a paper on supply chain development strategy, but this has languished on a shelf at the national transport agency, which is awaiting the outcome of negotiations on the USMCA framework.

“The government is putting another C$5bn up for bids for project funding, but we still haven’t got a strategy document on the supply chain. This is a real frustration for us,” Mr Rodgers said.