Manitoba Transportation 2010 Report

Prepared For: Manitoba Infrastructure and Transportation

University of Manitoba Transport Institute

This report was prepared for Manitoba Infrastructure and Transportation. The views expressed do not necessarily represent those of the Provincial Government, which provides no warranties as to the validity or accuracy of the information presented herein.

Table of Contents

1. The Economic Impact of Transportation in Manitoba...... 1 Gross Domestic Product ...... 2 Labour Income ...... 9 Employment ...... 15 Expenditures ...... 22 2. Logistics and the Regional Canadian Economy ...... 25 Gross Domestic Product ...... 25 Employment ...... 31 Labour Income ...... 35 3. The State of the Macro Economy ...... 40 The Global Growth Improvement ...... 42 Shape to Recovery ...... 43 Recovery Next ...... 45 Manitoba Economic Situation ...... 45 Economic Indicators ...... 47 Monetary and Energy Indicators ...... 55 4. Domestic Trade and Infrastructure Utilization ...... 65 Province/Territories Exports Leaving Canada from Source Province ...... 65 Usage of Manitoba’s Transportation Infrastructure ...... 69 Rail Commodity Traffic Flows ...... 73 Truck Commodity Traffic Flows...... 82 Rail & Road: Imports and Exports ...... 91 Port of Churchill ...... 98 5. NASCO Trade ...... 102 Exports ...... 102 Imports ...... 106 6. Manitoba International Trade ...... 111 Exports ...... 111 Top 10 Export Commodities ...... 111 Top 10 International Export Partners ...... 112 Mode of International Export for Manitoba 2009 ...... 113 Imports ...... 115 Top 10 Import Commodities by Value ...... 115 Top 10 International Import Partners by Value ...... 116 Mode of International Imports for Manitoba 2009 ...... 117 Mode of Imports - Manitoba Historic Comparison ...... 118

Glossary ...... 121 List of Figures ...... 125 List of Tables ...... 129

1. The Economic Impact of Transportation in Manitoba1 The activities of various sectors of an economy are intertwined with those of other sectors such that the economic impact is magnified or multiplied throughout the overall economy. Measurement of such effects is undertaken through economic impact models which quantify inter-sectoral relationships. There are numerous designs of such models, which vary primarily in the scope of the “net” which defines the direct impacts of the sector under investigation.

For this study of transportation in Manitoba, the definition applied is the commercial carriage of goods and people. This definition is advantageous to producing sound measures of the impact. It limits criticism of overstatement of the effects by limiting the sectors considered to those directly performing commercial transportation. It excludes allied sectors such as service industries (e.g. hotels), repair shops, and equipment manufacturers. When included, these allied sectors open the measured economic impact to criticism since the multiplicative effects of activities from the direct industry include the impacts on these allied sectors. This restrictive definition of the sector minimizes the validity of any criticism of double counting.

The Manitoba Bureau of Statistics regularly updates the parameters of the Input/Output model which proxies the activities of and interactions among various sectors of the economy. It is these interactions which provide the iterative process of the model. While making the model a more accurate reflection of the economy, these revisions compromise the validity of comparisons made to previous reports.

The robustness of economic impact results are dependent on the quality of information acquired about the direct (or “driver”) sector, and the quality of the input/output matrix used to derive the indirect and direct effects. Manitoba is a relatively small economy with few firms in many sectors. One consequence of this is general weakness of direct and input/output data.

Two approaches are available to acquire data for the direct sector. Data can be acquired from third-party data providers or the sector can be directly surveyed. In both cases, estimates of the economic drivers of the entire population are developed from the survey.

This analysis uses data acquired from third party data providers, principally Statistics Canada. This approach reduces costs, and allows the creation of historical results, which could assure greater consistency of that historical information. The modes included in the analysis are: road (for-hire trucking),2 rail, aviation, couriers and local messengers,3 and urban and inter-urban bus.

1 Annual data updates, along with changes in multipliers, may yield results that are not comparable among annual reports. 2 For-Hire trucking is the industry segment that explicitly covers truck transport. It consists of companies whose purpose is to transport freight for remuneration to destinations in domestic or international markets 3 Couriers and local messengers include the major international courier companies such as FedEx. 1

Based upon the “driver” data provided, the Manitoba Bureau of Statistics generates indirect and induced effects using multipliers created by its analysis of inter-sectoral relationships.

Gross Domestic Product

Estimated growth in total GDP for Manitoba derived solely from transportation activities4 is summarized in Figure 1.1. Total GDP measured on this basis rose from $2.89 billion in 2004 to $3.37 billion in 2008. Annual contribution to GDP has been on the rise, increasing by 16% since 2004.

Figure 1.1: Total GDP from Transportation in Manitoba $4.00 $3.50 $3.37 $3.00 $3.20 $3.21 $3.27 $2.50 $2.89 $2.00

$ Billions $ $1.50 $1.00 $0.50 $0.00

2004 2005 2006 2007 2008

This total includes the leverage effect of direct activity in transportation on other sectors, in other words, it is the sum of direct economic activity, indirect economic activity, and induced economic activity. Direct activity is measured by the economic drivers of employment, employment income, expenditures, and contribution to provincial gross domestic product by the transportation sector. Indirect activities are those that occur in firms that supply inputs to the direct sector. Induced effects are trickle down effects of expenditures by the direct and indirect sectors as they multiply through other sectors of the economy. These are largely driven by consumption spending. The indirect and induced effects are a measure of the leverage derived from the direct effect. The higher the amount of leverage, the greater the additional economic activity spawned from the original source. The total economic impact of the sector can be measured when the direct and the leverage effects are combined.

4 These transportation activities comprise aviation, trucking, rail, courier, and bus (urban and other). 2

Figure 1.2 shows the total Manitoba transportation GDP based on the distribution of Direct, Indirect, and Induced effects. Overall, $1.00 of GDP from direct transportation activities results in an additional $0.95 generated through activities in other sectors.5

Figure 1.2: Total GDP from Transportation in Manitoba by Leverage Component $4.00 $3.50 $3.00 $0.84 $0.84 $0.85 $0.88 $2.50 $0.76 $2.00 $0.72 $0.72 $0.74 $0.76 $0.66

$ Billions $ $1.50 $1.00 $1.47 $1.64 $1.64 $1.68 $1.72 $0.50 $0.00 2004 2005 2006 2007 2008 Direct Indirect Induced

Amongst the modes, trucking is the largest transportation sector in Manitoba, contributing over $1.34 billion (39.91% of total contributions) to GDP in 2008, as shown in Figure 1.3. This is followed by rail with $1.01 billion (30.02%) and aviation, which generates $0.57 billion (16.86%). All modes combined contributed $3.37 billion to Manitoba’s GDP in 2008.

Figure 1.3: Total Contribution to Manitoba GDP by Transportation Mode: 2008

Couriers, 6.87% Trucking, 39.91%

Aviation, 16.86%

Bus, 6.34%

Rail, 30.02%

5 The leverage factor is calculated as: (Indirect GDP + Induced GDP)/Direct GDP. 3

Figure 1.4 shows the trends in annual contributions to GDP by each mode since 2004.

Figure 1.4: Contribution to Manitoba GDP by Transportation Mode

$1.60 $1.34

$1.40 $1.29 $1.25

$1.20 $1.13 $1.05 $1.01 $1.01 $1.00 $1.00

$1.00 $0.89 $0.80 $0.62 $0.61 $0.57 $ Billions $ $0.55 $0.60 $0.54 $0.40 $0.23 $0.22 $0.22 $0.21 $0.21 $0.21 $0.20 $0.20 $0.19 $0.20 $0.18 $0.00 Aviation Couriers Trucking Rail Bus

2004 2005 2006 2007 2008

Courier and bus modes were relatively stable throughout the period, showing small, marginal increases. Trucking experienced steady growth over the time period covered in Figure 1.4. Rail has also enjoyed modest growth, although it may have peaked in 2005. Aviation’s contribution to GDP was fairly stable from 2004 to 2005 but dropped to a lower level since then.

4

Figure 1.5 displays total GDP generated by the Manitoba aviation industry between 2004 and 2008. In 2008, the Manitoba aviation sector contributed $568 million towards provincial GDP. From 2005 to 2006, aviation sector contributions to GDP declined by approximately $72 million. The following year, aviation’s contribution increased marginally.

Figure 1.5: Total GDP Generated by Air Sector in Manitoba $700

$600 $608 $616 $500 $544 $552 $568 $400

$300 $ Millions $ $200

$100

$0

2004 2005 2006 2007 2008

Every dollar contributed to Manitoba’s GDP from aviation activities was multiplied by $1.52 through indirect and induced contributions. In 2008, $225 million was generated directly through aviation itself, while an additional $189 million resulted from indirect activities and $154 million came from trickle down or induced effects. Figure 1.6 displays a summary of direct, indirect, and induced contributions to GDP by the Manitoba aviation industry.

Figure 1.6: Trend in Air GDP by Leverage Component $700 $600 $167 $500 $165 $147 $149 $154 $400 $202 $205 $300 $181 $183 $189 $ Millions $ $200 $100 $241 $245 $216 $219 $225 $0 2004 2005 2006 2007 2008 Direct Indirect Induced

5

In 2008, rail activities generated over $1.01 billion for Manitoba’s GDP. Following a large increase in 2005, contributions to the provincial GDP generated through rail activities leveled off, averaging around $1 billion per annum from 2005-2008. Annual GDP generated by the rail industry between 2004 through 2008 is displayed in Figure 1.7.

Figure 1.7: Total GDP Generated by Rail Sector in Manitoba $1,100

$1,000 $1,048 $995 $1,006 $1,011 $900 $892 $800

$ Millions $ $700

$600

$500

2004 2005 2006 2007 2008

Figure 1.8 displays the distribution of provincial gross domestic product produced by rail activities based on direct, indirect, and induced effects. In 2008, direct rail activities in Manitoba contributed approximately $649 million to provincial GDP. Indirect rail activities generated an additional $131 million, while induced activities contributed $230 million. For every $1.00 of GDP produced through direct rail activities in 2008, an additional $0.55 was added to the provincial economy.

Figure 1.8: Trend in Rail GDP by Leverage Component $1,200

$1,000 $238 $226 $229 $230 $800 $203 $136 $129 $131 $131 $600 $116

$ Millions $ $400 $674 $573 $639 $647 $649 $200

$0 2004 2005 2006 2007 2008 Direct Indirect Induced

6

In 2008, the trucking industry contributed over $1.34 billion to provincial GDP, an increase of 5.1% from 2007. Figure 1.9 displays the annual GDP contribution produced by the Manitoba trucking sector between 2004 through 2008.

Figure 1.9: Total GDP Generated by Trucking Sector in Manitoba $1,600 $1,400 $1,200 $1,343 $1,249 $1,285 $1,000 $1,127 $1,001 $800

$ Millions $ $600 $400 $200 $0

2004 2005 2006 2007 2008

Since 2004, GDP produced by the trucking sector has been steadily increasing. Average annual growth rate since 2004 is 7.7 percent. In 2008, for every dollar contributed to provincial GDP by the trucking industry, a further $1.04 was generated via indirect and induced contributions. Figure 1.10 displays trucking GDP contributions across the leverage components.

Figure 1.10: Trend in Trucking GDP by Leverage Component $1,600 $1,400 $1,200 $330 $307 $316 $1,000 $277 $246 $800 $331 $341 $356 $298 $600 $265 $ Millions $ $400 $551 $611 $629 $657 $200 $490 $0 2004 2005 2006 2007 2008 Direct Indirect Induced

Trucking operations directly contributed $657 million towards the Manitoba GDP and an additional $686 million through indirect and induced contributions in 2008. For all three components, GDP contributions increased by about 4.4 percent from 2007 to 2008.

7

Direct activities of each mode represent the largest proportion of the total effect or contribution to GDP. For example, in 2008, 40% of the total effect of air came from direct aviation activities, 33% from indirect, and 27% from induced activities. In the case of rail, direct activities account for a striking 64% of the total effect. This may be attributable to the relative fuel and labour efficiency of rail in long distance movement of large shipments.

Figure 1.11 shows comparative leverage of the modes in terms of contribution to GDP. Per dollar of GDP generated directly, bus generates the highest leverage throughout the economy at 1.69, while rail is the lowest at 0.55. Leverage ratios for aviation, couriers and trucking were 1.52, 1.09 and 1.04, respectively.

Figure 1.11: Leverage Ratios for Manitoba Total GDP by Transportation Mode

2.80 2.60 2.40 2.20 2.00 1.80 1.60 1.40 1.69 1.20 1.52 1.00 0.80 1.09 1.04 0.60 0.40 0.55 0.20 0.00 Bus Aviation Couriers Trucking Rail

8

Labour Income

In 2008, total labour income in Manitoba due to the transportation sector was $1.74 billion. Figure 1.12 presents total labour income earned in the transportation sector of the Manitoba economy, from 2004 to 2008. Note the small decrease from 2007 to 2008; a return to the level of labour income generated by the sector in 2004.

Figure 1.12: Total Labour Income from Transportation in Manitoba $2.00

1.86 1.82 1.85 1.74 1.74 $1.50

$1.00 $ Billions$ $0.50

$0.00

2004 2005 2006 2007 2008

In 2008, for each dollar of direct labour income in transportation, an additional $0.76 in labour income was created in the Manitoba economy.6 Figure 1.13 shows the distribution of labour income from 2004 to 2008.

Figure 1.13: Labour Income by Leverage Component from Transportation in Manitoba $2.00

$0.40 $0.39 $0.39 $0.40 $1.50 $0.37 $0.41 $0.41 $0.39 $0.40 $0.41 $1.00 $ Billions $ $0.50 0.98 1.06 1.03 1.05 1.06

$0.00 2004 2005 2006 2007 2008 Induced Indirect Direct

6 This is calculated as: (Indirect Income + Induced Income)/Direct Income. 9

As illustrated in Figure 1.14, in 2008, labour income from trucking represented nearly 47% of the total Manitoba transportation labour income. This was followed by rail representing around 25%, aviation with 14%, and bus and couriers finishing up with 8.3% and 6.3% respectively.

Figure 1.14: Contribution to Manitoba Total Labour Income by Transportation Mode: 2008

Couriers, 6.34%

Trucking, 46.58% Aviation, 13.95%

Total: $1.86 billion

Bus, 8.30%

Rail, 24.83%

Labour income generated by each transportation mode from 2004 to 2008 is shown in Figure 1.15. The only mode with consistent growth in labour income was trucking. Bus and couriers were very stable. From 2004 to 2008, aviation labour income declined by almost $106 million. Rail started at $450 million, peaked at $520 million in 2005, and dropped back to $460 million by 2008. Figure 1.15: Total Labour Income by Transportation Mode $1.00 $0.87 $0.86

$0.90 $0.84 $0.80 $0.79

$0.70 $0.67 $0.60 $0.52 $0.47 $0.46 $0.46 $0.50 $0.45 $0.37

$ Billions $ $0.40 $0.30 $0.26 $0.26 $0.30 $0.26 $0.15 $0.15 $0.15 $0.14

$0.20 $0.14 $0.12 $0.11 $0.11 $0.11 $0.11 $0.10 $0.00 Aviation Couriers Trucking Rail Bus

2004 2005 2006 2007 2008

10

In 2008, approximately $260 million was paid to Manitoba residents as aviation wages and salaries. Figure 1.16 displays the annual total labour income produced from the Manitoba aviation sector.

Figure 1.16: Total Labour Income Generated by Air Sector in Manitoba $400 $350 $366 $300 $303 $250 $261 $259 $260 $200

$ Millions $ $150 $100 $50 $0

2004 2005 2006 2007 2008

From 2004 to 2008, total aviation labour income in Manitoba declined at an average annual rate of 8 percent, though things were very stable during the 2006-2008 period. In 2008, total labour income from aviation increased slightly.

The effect of leverage components on Manitoba aviation incomes is displayed in Figure 1.17. In 2008, $126 million, $79 million, and $55 million in aviation incomes were generated by direct, indirect, and induced industry activities, respectively. Thus, indirect and induced activities added about $1.06 in wages and salaries for every $1.00 paid out for direct aviation activities.

Figure 1.17: Trend in Air Labour Income by Leverage Component $400 $350 $78 $300 $64 $250 $111 $55 $55 $55 $200 $92 $150 $79 $78 $79 $ Millions $ $100 $177 $147 $50 $127 $126 $126 $0 2004 2005 2006 2007 2008 Direct Indirect Induced

11

Figure 1.18 displays total annual labour income generated from 2004 to 2008 by the rail sector. In 2008, $462 million in labour income was earned by rail sector workers in Manitoba.

Figure 1.18: Total Labour Income Generated by Rail Sector in Manitoba $600

$500 $518 $400 $451 $466 $461 $462

$300

$ Millions $ $200

$100

$0

2004 2005 2006 2007 2008 Since 2004, total labour income generated by the rail sector has been relatively stable. The only exception was 2005, with an increase in labour income to over $500 million. But the following year rail labour incomes fell back below a half billion dollars and stabilized.

Figure 1.19 displays the distribution of labour income generated by the Manitoba rail sector. In 2008, the rail industry directly generated approximately $296 million in labour income and an additional $68 million and $98 million in indirect and induced labour income, respectively.

Figure 1.19: Trend in Rail Labour Income by Leverage Component $600

$500 $110 $400 $96 $99 $98 $98 $76 $68 $67 $68 $300 $66

$ Millions $ $200 $289 $332 $299 $295 $296 $100

$0 2004 2005 2006 2007 2008 Direct Indirect Induced

12

For every dollar directly earned through the rail industry in 2008, an additional $0.56 in labour income was generated throughout the provincial economy. Manitoba rail labour income was very stable from 2006 to 2008. In 2008, approximately $868 million in labour income was earned in the Manitoba trucking sector. Annual total labour income produced by the Manitoba trucking industry is presented in Figure 1.20. The growth experienced from the beginning of the 21st century began to wane. From 2004 to 2006, the income generated from the trucking sector increased by 24%, while it only increased by 4% over the next several years (2006 to 2008).

Figure 1.20: Total Labour Income Generated by Trucking Sector in Manitoba

$1,000

$800 $837 $861 $868 $790 $600 $674

$400 $ Millions $

$200

$0

2004 2005 2006 2007 2008

In 2008, each $1.00 earned directly from the trucking sector, generated an additional $0.90 through induced and indirect sectors of the Manitoba trucking industry. A summary of Manitoba trucking labour incomes broken down by leverage component is presented in Figure 1.21. Figure 1.21: Trend in Trucking Labour Income by Leverage Component $1,000

$800 $178 $183 $184 $168 $600 $143 $224 $226 $206 $218 $400 $176 $ Millions $ $441 $454 $457 $200 $355 $416

$0 2004 2005 2006 2007 2008 Direct Indirect Induced 13

In 2008, the Manitoba trucking industry directly generated $457 million worth of labour income. This further generated approximately $226 million in indirect and $184 million in induced incomes. Figure 1.22 provides the 2008 leverage ratios for labour income by mode. Aviation provides the greatest leverage with $1.06 of additional labour income through to the economy for every dollar of direct labour income. This is followed by trucking ($0.90), couriers ($0.69), rail ($0.56), and bus with $0.45 leveraged from each $1 of labour income spent directly in the sector.

Figure 1.22: Leverage Ratios for Manitoba Labour Income by Transportation Mode

1.20

1.00 1.06 0.80 0.90

0.60 0.69 0.56 0.40 0.45 0.20

0.00 Aviation Trucking Couriers Rail Bus

14

Employment

In 2008, the total employment attributable to transportation in Manitoba was approximately 51,339 full-time equivalents (see Figure 1.23).

Figure 1.23: Total Employment in Transportation in Manitoba

60,000

50,000 52,189 51,339 49,100 50,791 50,742 40,000

30,000 FTEs 20,000

10,000

0 2004 2005 2006 2007 2008

As presented in Figure 1.24 total employment created by the trucking sector is greater than that created by all the other sectors combined. Out of the total 51,339 FTEs in the Manitoba Transportation industry, 55.42% were employed in trucking.

Figure 1.24: Contribution to Manitoba Total Transportation Employment by Mode: 2008

Couriers, 7.57% Trucking, 55.42%

Aviation, 12.97%

Bus, 9.68%

Rail, 14.36%

15

Figure 1.25 shows that from 2004 to 2008 employment related to trucking increased by 4,957 FTEs, from 23,495 to 28,452. Prior to 2008, all modes with the exception of trucking and couriers were reducing their labour pool. In 2008 however, each sector in transportation increased the number of employees. Figure 1.25: Total Employment by Transportation Mode 28,452 30,000 28,278 27,894 27,677

25,000 23,495

20,000

15,000 8,511 10,000 8,423 7,938 7,500 7,370 7,272 7,159 6,680 6,660 6,570 5,402 5,173 4,992 4,970 4,864 3,887 3,758 3,758 3,754 5,000 3,725

0 Aviation Couriers Trucking Rail Bus

2004 2005 2006 2007 2008

When compared to the total number of people employed either directly, indirectly, or induced in the air (approximately 6,660 positions), rail (7,370), and trucking (28,452) sectors; the average annual wages were approximately $39,000 for air, $62,000 for rail, and $30,000 for trucking.7

7 These figures were found by dividing total labour income (Figure 1.15) by total employment (Figure 1.25) 16

Figure 1.26 shows the total employment by year broken down between direct, indirect, and induced effects. For each direct job in transportation an additional 0.93 jobs were created.

Figure 1.26: Employment by Leverage Component from Transportation in Manitoba

55,000

45,000 13,289 12,996 12,586 12,882 12,845 35,000 11,931 11,312 11,636 11,643 11,771 FTEs 25,000

15,000 25,203 26,970 26,272 26,254 26,572

5,000 2004 2005 2006 2007 2008 Induced Indirect Direct

In 2008, the aviation industry in Manitoba provided approximately 6,660 FTEs. This was a decrease of 1,851 full-time employees since 2004, but an increase by 1.37% (90 FTEs) since 2007. A summary of the total provincial aviation employment is displayed in Figure 1.27.

Figure 1.27: Total Employment Generated by Air Sector in Manitoba 10,000

8,000 8,511 7,159 6,000 6,680 6,570 6,660

FTEs 4,000

2,000

0

2004 2005 2006 2007 2008

17

In 2008, the Manitoba aviation industry directly employed about 2,670 FTEs. This resulted in the additional employment of approximately 2,203 indirect FTEs and 1,787 induced FTEs. The ratio of approximately 1.5 leveraged FTEs for every direct full-time employee is the largest of all modes. A summary of the distribution of Manitoba aviation employment is displayed in Figure 1.28. Figure 1.28: Trend in Air Employment by Leverage Component

10,000

8,000 2,283 1,921 6,000 1,792 1,763 1,787 2,815 FTEs 4,000 2,368 2,210 2,173 2,203

2,000 3,412 2,870 2,678 2,634 2,670 0 2004 2005 2006 2007 2008 Direct Indirect Induced When comparing the salaries of the direct, indirect, and induced full-time employees of the aviation sector; direct FTEs of the air sector incomes were always the highest earners. In 2008, the average annual salary for a direct FTE was approximately $47,000, whereas indirect and induced FTEs on average were earning $35,000 and $30,000, respectively.

18

In 2008, the Manitoba rail industry employed about 7,370 full-time people. The large decrease in 2006 (925 positions, approximately 11%) is primarily attributed to the closing of the CN call centre. In 2008, the number of jobs generated by the Manitoba rail industry increased by a further 98 positions from the recent low of 2007. Total annual rail industry employment in Manitoba is presented in Figure 1.29.

Figure 1.29: Total Employment Generated by Rail Sector in Manitoba8 9,000

8,500 8,425 8,000 7,940 FTEs 7,500 7,500 7,370 7,000 7,272

6,500

2004 2005 2006 2007 2008

The increase in 2008 could mainly be attributed to an increase in direct employment in the rail sector, accounting for 53 FTEs, followed by induced with 29 and indirect with 16 full-time equivalent positions. Overall, approximately 3,971 positions were directly attributed to the Manitoba rail industry. During this period, every job directly created by the rail industry generated indirect and induced employment at a rate of approximately 0.86.

8 One rail company in Manitoba failed to report 2004 employment numbers, causing the 2004 to 2005 increase in employment to appear greater than it actually was. 19

Figure 1.30 shows employment in the rail industry broken down by leverage component, from 2004 to 2008. Figure 1.30: Trend in Rail Employment by Leverage Component 10,000

8,000 2,515 2,370 6,000 2,238 2,170 2,199 1,370 1,295 1,221 FTEs 1,184 1,200 4,000

2,000 4,275 4,540 4,041 3,918 3,971

0 2004 2005 2006 2007 2008 Direct Indirect Induced In 2008, the average annual income for those directly employed by the rail industry was approximately $74,000. Similarly, average annual earnings for indirect and induced earnings were $56,000 and $44,000 respectively.

In 2008, the trucking industry employed approximately 28,452 full-time positions in Manitoba. This was an increase of 174 positions from 2007. Total annual employment in the Manitoba trucking sector, from 2004 to 2008, is displayed in Figure 1.31.

Figure 1.31: Total Employment Generated by Trucking Sector in Manitoba 30,000

25,000 27,675 27,894 28,278 28,452 23,495 20,000

15,000 FTEs 10,000

5,000

0

2004 2005 2006 2007 2008

Employment in the trucking sector grew dramatically from 2004 to 2005 and then cooled down. Overall, 4,957 positions were added in the trucking industry since 2004. In 2008, the Manitoba trucking industry directly provided 14,790 full-time jobs. The industry also produced an

20 additional 13,661 full-time jobs: 7,010 indirect and 6,651 induced. Figure 1.32 is a summary of the trucking employment contribution based on leverage.

Figure 1.32: Trend in Trucking Employment by Leverage Component 30,000

25,000 6,470 6,521 6,611 6,651 20,000 5,490 6,820 6,873 6,968 7,010 15,000 5,790 FTEs 10,000 14,385 14,500 14,700 14,790 5,000 12,215

0 2004 2005 2006 2007 2008 Direct Indirect Induced Nearly 1 indirect or induced job (approximately 0.92 FTE) was created with each person directly employed full-time in the Manitoba trucking industry. By distributing average annual labour income (see Figure 1.21), among full-time employees in the trucking sector, average annual salaries of $30,899 (direct), $32,239 (indirect), and $27,665 (induced) were earned in 2008.

The leverage ratio for the aviation sector in creating jobs throughout the economy is 1.49 for each direct job (see Figure1.33). Trucking comes second and creates 0.92 FTEs for each direct job. This is followed by rail at 0.86 FTEs, bus at 0.81, and courier at 0.62 FTEs generated for each direct full-time employee equivalent.

Figure 1.33: Leverage Ratios for Manitoba Employment by Transportation Mode

1.60

1.40 1.49 1.20 1.00 0.80 0.92 0.86 0.81 0.60 0.62 0.40 0.20 0.00 Aviation Trucking Rail Bus Couriers

21

Expenditures

In 2008, the total expenditures by the Manitoba aviation industry were worth approximately $1.43 billion. This was an increase of 2.88% from 2007. Over the review period (see Figure 1.34), provincial aviation expenditures have fluctuated, increasing from 2004 to 2005, and then sharply declining in 2006, before picking up again in 2007.

Figure 1.34: Total Expenditures Generated by Air Sector in Manitoba $1,800 $1,600 $1,400 $1,532 $1,553 $1,430 $1,200 $1,371 $1,390 $1,000 $800

$ Millions $ $600 $400 $200 $0

2004 2005 2006 2007 2008

As illustrated in Figure 1.35, indirect and induced operations from the aviation sector generated approximately $0.82 for every dollar spent directly in 2008. This resulted in an additional $643 million influx into the provincial economy through indirect ($390 million) and induced ($253 million) spending.

Figure 1.35: Trend in Air Expenditures by Leverage Component $2,000

$1,500 $271 $275 $243 $246 $253 $418 $424 $1,000 $374 $379 $390 $ Millions $ $500 $843 $854 $754 $765 $787

$0 2004 2005 2006 2007 2008 Direct Indirect Induced

22

In 2008, direct aviation expenditures in Manitoba were worth around $787 million. This was an increase of 2.88% from 2007. Following a decline in 2006 (of 11.7%), expenditures stabilized and began to increase.

The Manitoba rail industry, in 2008, generated over $1.5 billion in expenditures. This was an increase of 13% since 2004. The rail sector spent over $7.08 billion in the span of five years. Annual total expenditures by the Manitoba rail sector are displayed in Figure 1.36.

Figure 1.36: Total Expenditures Generated by Rail Sector in Manitoba $1,700

$1,600 $1,652 $1,586 $1,592 $1,500 $1,568

$1,400 $1,406 $1,300 $ Millions $ $1,200

$1,100

$1,000

2004 2005 2006 2007 2008 Figure 1.37 displays the distribution of rail expenditures based on direct, indirect, and induced spending. Rail expenditures in all categories increased slightly from 2007 to 2008. The leverage ratio in 2008 was 0.64; for every $1.00 of direct spending, there was an additional $0.64 spent.

Figure 1.37: Trend in Rail Expenditures by Leverage Component $2,000

$1,500 $392 $373 $377 $378 $334 $252 $239 $242 $243 $1,000 $214 $ Millions $ $500 $857 $1,007 $956 $967 $971

$0 2004 2005 2006 2007 2008 Direct Indirect Induced

23

In 2008, total expenditures by the Manitoba trucking industry were nearly $2.8 billion. This was an increase by $122 million from the previous year, and the highest recorded level of spending in the review period (see Figure 1.38). Following tremendous growth in 2005 (12.6%) and 2006 (10.8%), the growth in 2007 slowed to a rate of 2.9%, only to increase to 4.5% the following year.

Figure 1.38: Total Expenditures Generated by Trucking Sector in Manitoba $3,000

$2,500 $2,818 $2,619 $2,696 $2,363 $2,000 $2,099 $1,500

$ Millions $ $1,000

$500

$0

2004 2005 2006 2007 2008

The distribution of total trucking sector expenditures in Manitoba is presented in Figure 1.39. In 2008, approximately $0.84 of indirect and induced spending was generated for every dollar directly spent the trucking sector. Over $1.53 billion of direct spending occurred during 2008, which represents an increase by 4.5% since 2007. This resulted in $1.29 billion in indirect ($744 million) and induced ($543 million) expenditures.

Figure 1.39: Trend in Trucking Expenditures by Leverage Component $3,000

$2,500 $543 $505 $520 $456 $2,000 $405 $744 $692 $712 $624 $1,500 $554 $000,000 $1,000 $1,530 $1,283 $1,422 $1,464 $500 $1,140

$0 2004 2005 2006 2007 2008 Direct Indirect Induced

24

2. Logistics9 and the Regional Canadian Economy Canada is the second largest nation in the world in terms of land mass, but has the lowest population density of the industrialized nations. Canada is also economically dependent on international trade. Thus, logistics is critical to Canadian prosperity and mobility.

Gross Domestic Product

Figure 2.1 shows per capita gross domestic product (GDP), in constant (2002) dollars, from logistics in Western and Eastern Canada. Note the slight, steady increase from 2004 to 2007 and a small drop in 2008 in both regions, as well as nationally. Direct contribution to GDP per capita from the sector was much higher in Western Canada ($2,451 in 2008) compared to Eastern Canada ($1,422).

Figure 2.1: Per Capita Direct GDP from Logistics by Region10

$2,650 $2,456 $2,492 $2,451 $2,373 $2,450 $2,219 $2,250 $2,050 $1,757 $1,850 $1,707 $1,743 $1,741 $1,628 $1,650 $1,429 $1,429 $1,422 $1,372 $1,416 $1,450 $1,250 2004 2005 2006 2007 2008

Canada Western Canada Eastern Canada

9 In this chapter, “logistics” consists of transportation and warehousing, as defined by Statistics Canada. 10 Western Canada includes Manitoba, Saskatchewan, Alberta, British Columbia, Yukon Territory, Northwest Territories and Nunavut. 25

Figure 2.2 displays the increasing importance of logistics in Western Canada relative to Eastern Canada. Since 2004, GDP per capita from logistics in Western Canada increased by more than 10%, versus an increase of 3.6% in Eastern Canada. However, the importance of the West relative to the East seems to be diminishing. This is evident by a larger decline in per capita contributions from the logistics sector to direct GDP of the West.

Figure 2.2: Per Capita Contribution of Logistics to Direct GDP: Western vs. Eastern Canada 114 112.35 112 110.71 110.47 110 108 106.98 106 104 104.18 104.17 102 103.19 103.64 100 100 Index Points (2004=100) Points Index 98 2004 2005 2006 2007 2008

Western Canada Eastern Canada

Within Western Canada, the importance of the logistics sector varies by province. Figure 2.3 shows per capita direct GDP from logistics by province.

Figure 2.3: Per Capita Direct GDP from Logistics by Western Province

$2,900 $2,821 $2,700

$2,500 $2,540 $2,351 $2,300 $2,262 $2,175 $2,212 $2,100 $2,027 $2,022 $1,900 2004 2005 2006 2007 2008

British Columbia Alberta Saskatchewan Manitoba

Logistics is more important in Alberta compared to the other three Western provinces. From 2004 to 2008, annual direct GDP contributions from the logistics sector in Manitoba increased at rates greater than the other Western provinces (average annual growth of 2.69%). Due to this steady growth, Manitoba surpassed British Columbia in 2007.

26

Figure 2.4 and 2.5 display the importance of logistics as a percentage of total GDP by territories and provinces in 2008.11 Among Canadian provinces and territories, Manitoba had one of the highest shares of GDP related to logistics (7.0%), just behind Northwest Territories (7.25%).

Figure 2.4: Logistics Direct Contribution to GDP by Territories: 2008

E CDA 4.05%

W CDA 6.11%

CDA 4.75%

NUN 1.57%

NWT 7.25%

YUK 2.75%

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0%

Figure 2.5: Logistics Direct Contribution to GDP by Provinces: 2008

E CDA 4.05% W CDA 6.11% CDA 4.75% NFLD 2.86% P.E.I. 2.59% N.S. 4.04% N.B. 5.60% QUE 4.33% ON 3.90% MB 6.99% SK 6.08% AB 5.68% BC 6.43%

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0%

11 The series was separated into territories and provinces due to the fact that figures from territories skew the results. 27

The importance of logistics relative to overall GDP in Manitoba is evident. Its share of GDP in Manitoba is nearly 1% higher than the average for Western Canada (6.1%) and over 2% higher than the national average (4.75%). Figure 2.6 shows the trend in share of GDP for each of the Western provinces. As a share of GDP, logistics has been relatively stable in the west, with Manitoba maintaining the highest share, followed by British Columbia.

Figure 2.6: Logistics Contribution to Direct GDP by Province: Western Canada

7.50% 7.14% 7.14% 7.10% 6.99% 6.85% 7.00% 6.51% 6.48% 6.45% 6.43% 6.50% 6.26%

6.00% 6.30% 6.30% 6.08% 6.05% 6.17% 5.50% 5.69% 5.68% 5.49% 5.60% 5.00% 5.27% 4.50% 4.00% 2004 2005 2006 2007 2008

BC AB SK MB

A number of factors contribute to the greater importance of logistics in Western compared to Eastern Canada. Economic growth has been higher in Western Canada, contributing to infrastructure development. During this period, trade through the Asia Pacific gateway has also increased, fueling greater demand for Western Canadian logistics services. (This is a particularly important factor in British Columbia.) As well, the geography of Western Canada requires greater travel distances compared to Eastern Canada.

28

In 2008, logistics (i.e. transportation and warehousing) was the fifth most important sector of the Manitoba economy, contributing $2.7 billion to the provincial GDP12 of $38.3 billion. The logistics sector was surpassed only by finance and insurance, manufacturing, health care and social assistance, and retail trade (in terms of direct GDP). Logistics is a “derived demand” activity, i.e. the demand for transportation and warehousing is based on shippers’ needs to move and store goods. Thus, logistics enables a variety of other key sectors (shown by blue bars in Figure 2.7) such as manufacturing, retail and wholesale trade, and construction. When these sectors are included with logistics, total contribution to the Manitoba GDP in 2008 was more than $18 billion.

Figure 2.7: Direct GDP of Sectors of the Manitoba Economy: 2008 $8,000 $7,225 $7,000 $6,000

$5,000 $4,761 $4,000 $3,090 $2,735 $2,849 $2,696 $ Millions $

$3,000 $2,446 $2,069 $1,995 $1,891

$2,000 $1,557 $1,254 $1,129 $1,055 $798 $686 $1,000 $637 $344 $0

12 The GDP measured by Statistics Canada in this section is the direct contribution of Transportation and Warehousing and directly related sectors. It excludes indirect and induced effects. 29

Figure 2.8 reveals a steadily growing GDP contribution from Manitoba logistics sector from 2004 to 2008. In 2008, GDP contribution was greater than $2.7 billion, a $359 million increase from 2004. Growth in GDP contribution from the logistics sector from 2004 to 2008 averaged 1.7% per year.

Figure 2.8: Direct GDP Level Transportation and Warehousing: Manitoba $2,800 $2,734 $2,735

$2,700 $2,639

$2,600 $2,537

$2,500 $ Millions $ $2,376 $2,400

$2,300 2004 2005 2006 2007 2008

As displayed in Figure 2.9, logistics accounted for 6.97% of the Manitoba economy in 2008, which was a decrease from the previous year (7.14%). During the past five years, the share of GDP generated by the logistics sector has seen minor ups and downs; up to 7.15% in 2006, down to 6.97% in 2008.

Figure 2.9: Trend in Share of Manitoba Direct GDP from Transportation and Warehousing 7.4% 7.15% 7.14% 7.2% 7.10% 6.97% 7.0% 6.85% 6.8% 6.6% 6.4% 6.2% 6.0% 2004 2005 2006 2007 2008

30

Employment

Figure 2.10 displays employment in logistics per thousand people. Figure 2.10: Direct Employment in Logistics per 1,000 People by Region 23.5 23.5 24.0 23.1 23.0 22.5 22.5 22.0 20.7 21.0 19.6 19.8 20.0 19.4 19.5 19.0 19.5 19.4 19.1 18.0 18.8 18.3 17.0 2004 2005 2006 2007 2008

Canada Western Canada Eastern Canada

From 2004 to 2008, logistics employment in Western Canada ranged from 22.5 to 23.5 employees per 1,000 persons. In Eastern Canada, employment has also been relatively stable, ranging from 18.3 to 19.4 employees per 1,000 persons. Note the jump in logistics employment from 2007 to 2008 at the National level. Figure 2.11 shows the ratio of per capita logistics employment for Western Canada compared to Eastern Canada. The ratio of logistics employment per capita has remained relatively stable from 2005 to 2008. In 2008, the ratio of number of people employed in Western Canada over those working in Eastern Canada increased slightly to 120.9%. This indicates that the number of people employed in the logistics sector in Western Canada increased by a larger rate than Eastern Canada (or taking into consideration Figure 2.10, the Eastern Canadian work force declined).

Figure 2.11: Ratio of Per Capita Direct Logistics Employment: Western vs. Eastern Canada 130%

125% 122.9% 120.9% 120.9% 120.1% 120.5% 120%

115%

110% 2004 2005 2006 2007 2008

31

Figure 2.12 displays direct employment in logistics per thousand persons in Western Canada. In 2008, Manitoba was highest in employment per thousand persons in the logistics sector at 30.4, followed by BC at 22.9. After a decline from 2004 to 2005, employment in Manitoba’s logistics sector recovered and grew. Employment recently grew by 14%, from 26.6 people per 1,000 in 2005 to 30.4 in 2008. During this time period, BC increased by a rate of 1.8% and Alberta by 3.7%. Saskatchewan declined by 1.1% during this period.

Figure 2.12: Direct Employment in Logistics per 1,000 People by Province: Western Canada 33.0 BC AB SK MB 30.4 31.0 28.6 29.0 27.5 27.5 26.6 27.0 25.0 22.9 23.1 22.9 22.4 22.5 23.0 22.7 21.0 22.2 21.1 21.4 22.1 19.0 19.1 19.0 18.8 18.9 17.0 18.8 2004 2005 2006 2007 2008

32

Figure 2.13 along with Figure 2.14 show the share of total employment from logistics for each region, province, and territory in 2008. The share of jobs in the sector was the largest in the Canadian territories. Note nearly 13% of the Northwest Territories workforce is in logistics. Although the ratio of employment was higher in the territories, the population and number of jobs available are much smaller than those found in most provinces. Among the provinces, the share of jobs related to logistics was largest in Manitoba at 6.6%, followed by New Brunswick and British Columbia at 5.3%. The share of jobs related to logistics was larger in Western Canada, compared to Eastern Canada.

Figure 2.13: Logistics Contribution to Direct Employment by Territories: 2008

E CDA 4.5%

W CDA 5.2%

CDA 4.7%

NUN 6.9%

NWT 12.8%

YUK 9.2%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0%

Figure 2.14: Logistics Contribution to Direct Employment by Provinces: 2008

E CDA 4.5% W CDA 5.2% CDA 4.7% NFLD 4.5% P.E.I. 4.3% N.S. 4.4% N.B. 5.3% QUE 4.7% ON 4.4% MB 6.6% SK 4.4% AB 4.6% BC 5.3%

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0%

33

In 2008, logistics directly employed nearly 37,000 people in Manitoba (as shown by the red bar in Figure 2.15), an increase of roughly 7.4% from the previous year (2007). This is approximately 7.3% of total paid employment in Manitoba and ranked 8th overall among industries (employing more people than the construction, wholesale trade, and the professional services sectors13). If other sectors dependent on logistics are included, then there were 256.9 per 1,000 people—more than half (51%) of the entire Manitoba workforce.

Figure 2.15: Direct Paid Employment by Sector14 of the Manitoba Economy: 2008 Paid Employees 90

80 76.81 70.87 70 61.64 60 46.97 50 46.16 39.63 38.46 40 36.76 Thousands 26.73 30 25.84 23.39 19.49

20 15.90 11.29 10 7.89 0.00 0.00 0.00 0

13 Agriculture is not included in the count of paid employees by Statistics Canada. 14 The data for Agriculture, Forestry, and Fishing, Mining, Oil and Gas, and Utilities are unavailable. 34

Figure 2.16 shows the trend in annual paid employment of logistics workers in Manitoba.

Figure 2.16: Trend in Logistics Direct Total Employment: Paid Employees (Thousands) 37 36.76 36

35 34.22 34 32.64 33 32.29 32 31.40 31 30 2004 2005 2006 2007 2008

Employment in the logistics sector experienced a decline between 2004 and 2005 of nearly 900 paid employees. The level of employment recovered the following year and has since increased to 36,762 employees in 2008. This is a 7.4% increase from 2007 and a 13.9% increase from 2004.

Labour Income

Per capita labour income attributable to logistics for Western, Eastern, and all of Canada are displayed in Figure 2.17. Per capita labour income rose steadily in all regions of Canada from 2004 to 2008. Per capita labour income from logistics in Western Canada reached $1,684 in 2008, an increase by 22% from 2004. In Eastern Canada, per capita labour income from logistics was $1,091 in 2008, an increase by 11% from 2004.

Figure 2.17: Per Capita Direct Labour Income from Logistics by Region $1,900 $1,684 $1,620 $1,700 $1,573 $1,449 $1,500 $1,385 $1,275 $1,238 $1,300 $1,210 $1,134 $1,104 $1,091 $1,068 $1,100 $1,050 $982 $996 $900 2004 2005 2006 2007 2008

Canada Western Canada Eastern Canada

35

Figure 2.18 displays the ratio of per capita income from logistics in Western Canada relative to Eastern Canada. The ratio rose steadily from 2004 to 2008, with an average annual growth of approximately 1.26%. Overall, the ratio increased by almost 9.2% during the last five years. This indicates (considering Figure 2.17) that in relative terms, the logistics industry is becoming an increasingly important sector in Western Canada compared to Eastern Canada.

Figure 2.18: Ratio of Western to Eastern Direct Per Capita Income from Logistics

156.0% 154% 154.0% 152% 152.0% 150% 150.0% 148.0% 145% 146.0% 144.0% 142.0% 141% 140.0% 2004 2005 2006 2007 2008

As shown in Figure 2.19, direct labour income per capita increased in each of the Western provinces over a five year period (2004 to 2008). In 2008, Alberta experienced the highest growth levels among Western provinces as labour income per capita from logistics reached $2,029. This is an increase by 32% from 2004. During this period, direct labour income per capita in Manitoba increased by 13%. Manitoba recorded the lowest level of growth among the Western provinces; nevertheless, its actual value is higher than Saskatchewan’s.

Figure 2.19: Direct Labour Income per Capita from Logistics by Province: Western Canada

$2,200 $2,029 $1,924 $2,000 $1,861 $1,800 $1,661 $1,542 $1,537 $1,600 $1,476 $1,508 $1,386 $1,364 $1,400 $1,472 $1,429 $1,403 $1,200 $1,308 $1,353 $1,304 $1,229 $1,000 $1,170 $1,018 $1,090 $800 2004 2005 2006 2007 2008

BC AB SK MB

36

Figure 2.20 displays the share of labour income generated by logistics for the territories, while Figure 2.21 shows the same for the provinces. In 2008, the logistics sector’s share of labour income was highest in Northwest Territories (7.62%). This was followed by Manitoba with 6.91%. Nationally, 5.16% of labour income generated came from the logistics sector of the economy. Note the share is considerably higher in Western Canada compared to Eastern Canada.

Figure 2.20: Logistics Direct Contribution to Labour Income by Territories: 2008

E CDA 4.66%

W CDA 6.10%

CDA 5.16%

NUN 3.26%

NWT 7.62%

YUK 4.12%

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0%

Figure 2.21: Logistics Direct Contribution to Labour Income by Provinces: 2008

E CDA 4.66% W CDA 6.10% CDA 5.16% NFLD 5.32% P.E.I. 3.11% N.S. 4.68% N.B. 5.12% QUE 4.95% ON 4.50% MB 6.91% SK 6.07% AB 5.69% BC 6.42%

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0%

37

Figure 2.22 displays total labour income in Manitoba by sector. Logistics contributed $1.8 billion to total labour income of the provincial economy in 2008 (represented by the red bar). This was about 7% of total Manitoba labour income and ranked 7th among industry sectors. When combined with those sectors which rely on logistics, labour income was worth $11.1 billion in 2008 (about 43.9% of Manitoba’s total).

Figure 2.22: Direct Total Labour Income by Sector of the Manitoba Economy: 2008

$3,500 $3,261 $3,007 $3,000

$2,500 $2,429 $2,176 $2,117 $1,948 $1,780 $2,000 $1,777

$1,500 $1,362 $1,105 $ Millions $ $943

$1,000 $753 $682 $640 $459 $381 $338 $500 $300

$0

38

As shown in Figure 2.23, labour income from the logistics sector in Manitoba has grown in the last five years from $1.5 billion to nearly $1.8 billion in 2008. This is a 15.8% increase from 2004 to 2008 (average annual growth of 3.7%).

Figure 2.23: Direct Labour Income In Transportation and Warehousing: Manitoba $1,800 $1,780

$1,750 $1,711

$1,700 $1,663 $1,650 $1,596

$ Millions $ $1,600 $1,537 $1,550

$1,500 2004 2005 2006 2007 2008

In spite of the growth shown in Figure 2.23, as a share of total labour income in Manitoba, logistics declined from 7.50% in 2004 to 6.99% in 2008 as shown in Figure 2.24. Although wages have increased in the logistics sector, the declining trend reflects that wages in other industries have collectively increased by a larger amount. Average annual salary received by a Manitoba logistics worker only increased by 1.7% between 2004 and 2008 (to $48,400 per employee).15

Figure 2.24: Trend in Share of Manitoba Labour Income from Logistics 7.60% 7.50% 7.50% 7.45% 7.40% 7.36% 7.30% 7.20% 7.11% 7.10% 6.99% 7.00% 6.90% 2004 2005 2006 2007 2008

15When comparing Direct Labour Income and Direct Total Employment for the logistics industry. 39

3. The State of the Macro Economy The macroeconomic perspective presents performance, structure, and behavior of the national or regional economy as a whole. This review of the macro economy will cover global, Canadian, and Manitoban economies.

Most of the recent data and reports indicate that the global economy is on the verge of recovery, following a severe global economic downturn dubbed “The Great Recession.” In January of 2009, the World Economic Situation and Prospects 2009 prepared by the United Nations suggested that “the world economy is mired in the worst financial crisis since the Great Depression. What first appeared as a sub-prime mortgage crack in the United States housing market during the summer of 2007 began widening during 2008 into deeper fissures across the global financial landscape and ended with the collapse of major banking [financial] institutions, precipitous falls on stock markets across the world, and a credit freeze.”16

The new 2010 report states that the world economic situation is improving. “The economic revival has been driven in no small part by the effects of the massive policy stimuli injected worldwide since late 2008.” The recovery is uneven, and conditions for sustainable growth as stated in the report remains “fragile.” There are plenty of reasons to worry. “Credit conditions are still tight in major developed economies, where many major financial institutions need to continue the process of deleveraging and cleansing their balance sheets. The rebound in domestic demand remains tentative at best in many economies and is far from self-sustaining. High unemployment rates and the large output gap in most countries, along with a number of other factors, such as the possibility of pandemic virus outbreak, analogous to H1N1 in 2009 and H5N1 in the early 2000’s could hurt economic activity, continue to pose challenges for policymakers worldwide. In addition, the global macroeconomic imbalances, which were part of the problem in the first instance, could widen again to form a source of renewed financial instability.”17

Four times larger than allowed under the European Union, the budget deficit of Greece exceeded 12% of GDP, and led hedge fund managers and other speculators to attack the Euro, betting that Greece will default or at least have difficulties paying its debt. A persistent belief that Greece will default on its debt increases the risk of holding that debt, which increases the interest payable, and leads to an overall increase in Greece’s budget deficit. Bloomberg News (March 10, 2010) reported that Greece has more than €20 billion of debt due in April and May 2010. This debt was successfully rolled over with help of unprecedented €110 billion bail-out from European Central Bank and IMF. Prior to announcing the bailout however, the options available to Greece were default on its debt or bail out of some sort by Greece’s partners. Both of those options, however, should/could hurt the Euro.

16 United Nations. World Economic Situation and Prospects 2009 - Global Outlook 2009. New York: United Nations, 2009. 17 United Nations. World Economic Situation and Prospects 2010 - Global Outlook 2010. New York: United Nations, 2 December 2009. 40

Default could have sent a panic signal and speculative attacks to other deficit-plagued countries such as Portugal, Spain, Italy, and Ireland. The bail out by other European Union countries, which is against the Maastricht Treaty, could/should damage Greece and possibly the rest of the European Currency Union through the moral hazard.18 Bailing out a country that is negligent in its fiscal policy might set a bad example to other members of PIIGS (Portugal, Italy, Ireland, Greece, and Spain) as they will lose their incentives to reduce public expenditures and cut their deficits.

Greece is trying to cut its deficit. The outline of measures to reduce the budget deficit is in place. Besides reducing spending, the Greek government increased tax on fuel and tobacco, increased sales tax (especially on luxury goods), reduced wages in the public sector by 7%, and froze pensions. In addition, civil servants’ holiday bonuses will be cut by 30% (equivalent to one months pay for 700,000 public sector workers). The reduction in public servants’ wages and holiday pay/bonuses led to massive walk outs (strikes) by tax collectors and garbage workers.

At the time of writing this report, the unfolding situation in Greece and for that matter the whole European Union and the rest of the world is unknown, but the mood of some experts is troublesome. The implications to the Euro Zone depend on the path Greece will follow. Greece was bailed out and with almost $1 trillion bailout package (includes the Greece’s payment) intended to stop the spread of crises onto other members of the PIIGS, might be a cure or at least step in the right direction. The central presumption that underlines such drastic measures by European Union is for Greece to rebound and fulfill its promise to cut its budget deficit to 3% of GDP by 2014. Based on data from CME Group19 however, there is a 54% chance that Greece will default on its government bonds in the next 5 years. But as a Nobel Memorial Prize winner in Economics, a Professor of Economics and International Affairs at the Woodrow Wilson School of Public and International Affairs at Princeton University, a Centenary Professor at the London School of Economics, and a columnist for The New York Times Paul Krugman states the collapse of the Euro and return to national currencies would set off, “the mother of all financial crises”.

18 Economist Paul Krugman described moral hazard as: "...any situation in which one person makes the decision about how much risk to take, while someone else bears the cost if things go badly." Financial bail-outs of lending institutions by governments, central banks or other institutions can encourage risky lending in the future, if those that take the risks come to believe that they will not have to carry the full burden of losses. Lending institutions need to take risks by making loans, and usually the most risky loans have the potential for making the highest return. So-called "too big to fail" lending institutions can make risky loans that will pay handsomely if the investment turns out well but will be bailed out by the taxpayer if the investment turns out badly. Source: Krugman, Paul (2009). The Return of Depression Economics and the Crisis of 2008. W.W. Norton Company Limited.

19 CME Group, the largest and most diverse derivatives exchange in the world based in Chicago, Illinois. 41

The Global Growth Improvement

Based on data from the United Nations, in 2009 world, developed, transitory, and developing economies reached troughs and a move towards recovery is evident (see Figures 3.1 and 3.2).

Figure 3.1: Annual Growth Rates of Real GDP20 by Region 10 8.0 8

6 7.0 4.3 3.9 4 1.4 1.6 2 2.8 1.4 0 -2.6 0.6 -2 -4 -3.9 -6 -5.9 -8 2006 2007 2008 2009 2010

World Developed Transition Developing

Unlike previous year forecasts, the United Nations is more optimistic about 2010. They expect the world to have “mild growth” of 2.4 percent, which is still below the more robust growth of previous years. They predict recovery for the European Union (EU) and Japan, reaching GDP growth of no more than 0.5 and 0.9 percent, respectively, in 2010. However, these are much weaker projections than for the United States, which the United Nations predicts to be around 2.1 percent in 2010. Nevertheless, at this pace of recovery, the major developed economies are not anticipated to provide a strong impetus to global growth in the near future.21

20 Source: United Nations. Development Policy and Analysis Division, Global Economic Outlook data. 21 United Nations. World Economic Situation and Prospects 2009 - Global Outlook 2009. New York: United Nations, 2009. 42

Figure 3.2: Annual Growth Rates of Real GDP22 by Country 15 11.1

8.2 10 7.7 7.6

7.3 5 6.3 3.1 1.5 5.0 1.0 3.1 2.8 0 -3.0 1.0 0.0 -3.5 -5 -3.5

-6.8 -10 2006 2007 2008 2009 2010 Canada China U.S. European Union India Russia

Shape to Recovery

The United Nations considers that the global economy is recovering.23 However, they indicate that various countries will recover differently. Developing Asian economies are expected to demonstrate the strongest recovery, and low-income countries are expected to have the weakest recovery, with developed economies having a recovery that is somewhere in the middle. The recovery path depends on how optimistic you are about recovery and prospects of a particular economy. The three components for economic revival are the speed, strength, and durability of the recovery. These three elements constitute Alphabet Theory on Recovery.

The main shapes of economic recovery are the “U,” the “V,” and the “W.” Figure 3.1 and Figure 3.2 might indicate that these economies are “V” shaped; they hit rock bottom and are now on a steady course for recovery. This type of recovery is perhaps the best-hoped-case scenario for all countries. Asian economies are most likely to follow the “V” shaped recovery. The strong domestic demand (India and Indonesia) and, as the rest of the world recovers, an increasing surge for exports will drive Asian economies out of the slump, becoming the world’s economic growth locomotives. China forecasted to lead the recovery for the region, with their strong public and private investments. Furthermore, China’s trade balance is improving, with exports rapidly increasing as well as their imports.

22 Source: United Nations. Development Policy and Analysis Division, Global Economic Outlook data. 23 NBER responsible for determining recession and recovery periods defines recovery as a period following the trough. On April 12, 2010 they announced that no trough had been reached, therefore, indicating that the recovery period has not begun.

43

China is not only a supplier to the world; it is also rapidly becoming one of the main customers in the world. These are signs that China might be a front-runner in leading the recovery.

However, more economists believe the recovery will be of the “U” form; slow and subdued. Nearly two-thirds of top leading business economists in the Blue Chip Economic Indicators Survey believe the United States is set for a U-shaped recovery. The recovery will begin with a reduction in the pace of business inventory liquidation (the cycle), marginal improvements in consumer spending, and residential investment. It will then falter a little, as non-residential investment and a rigid labour market would remain a drag on GDP. This is a classical “U” shaped recovery.

While Canada did far better than other major developed countries during the crisis, it felt the negative shocks, mainly through trade, consumer/producer confidence, and financial channels. Mark Carney, Governor of the Bank of Canada, stated: “with more than 400,000 jobs lost and a $30 billion fall in output, the Canadian economy has suffered a deep, albeit brief, recession.”24

The good news is Canada is on its way towards recovery. “In Canada, as expected, a recovery in economic activity is also under way, following three consecutive quarters of sharp contraction. This resumption of growth is supported by monetary and fiscal stimulus, increased household wealth, improving financial conditions, higher commodity prices and stronger business and consumer confidence,” according to Carney. However, the heightened volatility and the continuously strong dollar might be preventing Canada from following a “V” type of recovery and instead point towards a more “U” shaped one. The Bank of Canada is now projecting the economic growth to be slower than previously forecasted.25

The double-dip or the “W” shaped recovery is what a number of economists anticipate regions with massive stimuli will follow. As the letter indicates, this type of recovery reflects an economic roller coaster, decline followed by recovery, quickly followed by another dip, before eventually returning to sustainable growth. The stimulus packages brought on have been tremendously costly for some governments and the exit strategy from this fiscal policy could spur a second wave of economic downturn. Furthermore, Dr. Paul Krugman believes there is a risk of second wave of crisis, “

Another type of recovery that should be mentioned is the “L”. This shape of recovery implies that after the sudden and big fall there is a very prolonged stagnation. This doomsday scenario has its similarities with the “Lost Decade” experienced in Japan following the Japanese Asset Price Bubble burst from 1991 to 2000.

24 Bank of Canada, Publication and Research, Remarks by Mark Carney on 16 December 2009. 25 Bank of Canada, Publication and Research, Remarks by Mark Carney on 29 October 2009. 26 CNBC News. Second Stimulus Needed to Avoid Lost Decade. Published: Monday, 10 Aug 2009. < http://www.cnbc.com/id/32354922/> 44

Krugman stated, “right now I think the world as a whole kind of looks like Japan in the early 90’s. Not a catastrophe, but we really don’t know how we get serious growth going.”

The job market is still declining in the United States (albeit at a lower rate), the housing market is still at an “unknown” stage, a large budget deficit might frighten investors and lead them to withdraw from U.S. debt, and rising oil price along with planned health-care reform are the signs of possibility for worrisome times to come in the United States. Whichever shape the economic recovery might take, “The good news is that it does not look like the 2nd great depression<”27

Recovery Next

It has now been more than 24 months since the United States officially announced a recession. (It is often assumed that of all OECD countries, the United States was the first one in recession). Even though there is no official declaration that recession is over, a growing number of various authorities and institutions are jumping on the “recession is over” wagon. The recession could well be over. But the most pressing question is: when will the economies return to “normal” levels? The answer to this question differs from region to region, but they all have one thing in common: it will not be immediate.

“We are on track for the recovery both in Canada and globally,” Mr. Carney said at a news conference. “But it's early days *we are on right track+. It's a long road *ahead+.” In Canada, domestic demand has expanded, but the overall economic growth is lagging due to weak net exports and a strong Canadian dollar. One of the fundamentals of the Canadian Economy is international trade and therefore, our recovery is heavily dependent on recoveries elsewhere, especially the United States. The good news for Canada is the job market shows tremendous improvement. Overall, the recovery in Canada is projected to be somewhat more modest than the average of previous cycles.28

Manitoba Economic Situation

It has been recorded that Manitoba has been the most stable provincial economy in Canada over the last decade. The economic indicators showed that Manitoba was well positioned to weather the impacts of a global economic slowdown. A well diversified economy, immigration, and strong population growth are the main factors why the Manitoba economy remained resilient in global economic downturn.29

27 CNBC News. Second Stimulus Needed to Avoid Lost Decade. Published: Monday, 10 Aug 2009. < http://www.cnbc.com/id/32354922/> 28 Bank of Canada. Monetary Policy Report, October 2009. 29 The Conference Board of Canada. Canada’s New Economic Powerhouse (2009). 45

Manitoba’s key industries include construction, transportation, manufacturing, agriculture, hydro-electricity, minerals, finance, and trade. The manufacturing sector is expected to rebound following the rising demand from the United States. Mining is anticipated to be in expansionary mode in 2010 after the base metal and crude oil prices have recovered and the service sector will continue to be strongly propelled by a good performance in the finance, insurance, and the real estate industries.

Housing in Canada, and Manitoba in particular, has been quite robust in the recent economic turbulence. The new rules geared towards cooling the housing market that come into effect in April 2010 are signs indicating that real estate prices did not fall; they were actually rising throughout 2009.30 It is expected that in 2010, housing in Manitoba will pick up where it left off, and housing starts will rise.31 Although the construction sector might benefit from increasing housing starts, due to completion of the Manitoba section of the Keystone pipeline and therefore removing some of the momentum in the construction sector, it is anticipated to be a drag on the economy in 2010.

30 Economist. Slow Canada (2010). 31 The Conference Board of Canada. Provincial Outlook (Winter 2010). 46

Economic Indicators

The economic performance indicators listed in this section capture a set of trends in the economies of Manitoba, Canada, and occasionally the United States, between 2005 and 2009. Figure 3.3 shows GDP totals (in millions of 2002 dollars) for Canada and Manitoba, while Figure 3.4 presents rates of change in GDP for Canada, United States, and Manitoba.

Figure 3.3: Gross Domestic Product (Canada/Manitoba32), $ Millions

$1,340,000 $42,407 $42,280 $43,000 $1,315,907 $1,320,000 $42,000 $1,321,360 $1,300,000 $1,283,419 $41,593 $41,000 $1,280,000 $1,286,431 $40,000 $1,247,807 $1,260,000 $40,158 $39,000 $1,240,000 $38,860 $1,220,000 $38,000 $1,200,000 $37,000 2005 2006 2007 2008 2009

GDP (Canada) GDP (Manitoba)

From 2005 to 2008, Canada’s GDP increased by over $70 billion from $1.25 trillion to $1.32 trillion. In 2009, Canadian GDP fell back to $1.29 trillion, a decrease of 2.6%. As expected, GDP in Manitoba did not experience a significant decline in 2009. The Manitoba GDP decreased by only $127 million (2009), a 0.3% decline.

Figure 3.4 displays annual changes in GDP growth rate. From 2005 to 2007, Canadian and U.S. levels of growth fluctuated, while the provincial growth maintained an overall steady increase. In 2008, the rate of growth declined in Canada, United States, and Manitoba.

Serious economic weakness in the World and especially in the United States had a negative impact on the Canadian economy as a weaker export sector spilled over into the non-export components of the Canadian economy.33 Canadian GDP growth experienced a significant decline from 2007 to 2008, from 2.53% to 0.41%, and went even further down in 2009 to -2.48%. A similar story unfolded in the United States, where GDP growth plummeted from 2.14% in 2007 to -2.73% in 2009. Meanwhile, Manitoba’s economic performance in previous years was strong. The GDP growth of Manitoba for the years between 2006 and 2008 outperformed the national average. Manitoba GDP grew by 3.57% in 2007 and 1.96% in 2008. The reported GDP growth for 2009 in Manitoba was -0.30%.

32 The data for 2009 are based on the Survey of Economic Forecasters. 33 Manitoba Finance: Budget Paper A. The Economy (2008) 47

Figure 3.4: GDP Growth (Canada/United States/Manitoba)34,3536 3.34% 3.57% 4% 3.02% 3% 2.53% 1.96% 2% 3.05% 2.85% 2.64% 2.67% 2.14% 1% 0.41% -0.30% 0% 0.44%

% Change % -1% 2005 2006 2007 2008 2009 -2% -2.48% -3% -2.73% -4%

Manitoba USA Canada

Figure 3.5 displays labour income (in millions of dollars) for Canada and Manitoba between 2005 and 2009. From 2005 until 2008, Canada’s labour income increased at an average annual growth rate of 5% from $164.3 billion to $190.3 billion. In 2009, however, labour income in Canada declined by 7% to $176.6 billion. During the same time period, Manitoba’s labour income increased from $21.4 billion to over $25.9 billion. The average annual growth rate in Manitoba was 4.8%.

Figure 3.5: Labour Income (Canada/Manitoba) $ Millions $200,000 $30,000 $25,458 $25,921 $24,070 $22,603 $190,000 $21,377 $25,000 $190,307 $20,000 $180,000 $183,730 $15,000 $170,000 $176,600 $174,405 $10,000

$160,000 $164,323 $5,000 $150,000 $0 2005 2006 2007 2008 2009

Canada Manitoba

34 Source: International Monetary Fund, World Economic Outlook Database, October 2009 35 Source: CANSIM II, Chained 2002 Dollars, Gross Domestic Product Table 3840002, V15855778 36 Source: Survey of Economic Forecasters, February 26, 2010 48

Figure 3.6 shows the rate of change in labour income for Canada and Manitoba between 2005 and 2009. Since 2005, Manitoba preserved a steady rate of change in labour income until it started slowing in 2008. From 2007 to 2009, labour income contracted by 4.7%. Canada’s rate of change in labour income saw an increase from 2005 to 2006, a slight decline thereafter, and then a free fall to reach -7.2% in 2009.

Figure 3.6: Change in Labour Income (Canada/Manitoba) 15% 6.14% 5.35% 6.37% 3.58% 10%

5% 6.49% 5.74% 5.76% 1.82% 4.32% 0% % Change % 2005 2006 2007 2008 2009 -5% -7.20% -10% Manitoba Canada

Figures 3.7 and 3.8 reflect changes in market prices (Consumer Price Index or CPI) in the Canadian and Manitoban economies. CPI can be used to calculate the effects of inflation in income, benefits, and the price of goods or commodities used. To calculate CPI, Statistics Canada uses the retail price of a representative shopping basket of about 600 goods and services from an average household's expenditure on: food, housing, transportation, furniture, clothing, and recreation.37 As a measure of price of a basket of consumer goods and services, CPI is often referred to as an indicator of price changes (inflation/deflation) in the economy.

Figure 3.7 displays the Consumer Price Indices for Canada and Manitoba. Between 2005 and 2009, the CPI for the Canadian economy increased from 107.0 to 114.4. This implies that prices for the average Canadian basket of goods and services increased by 6.92% since 2005. Such an increase in prices could partially be explained by the price increases in energy and other more volatile sectors. Once the most volatile prices are removed, the price index rose by 6.8% during the period from 2005 to 2009. The CPI for Manitoba also increased from 108.8 to 114.9 (2005 - 2009), an increase by almost 5.61% since 2005.

37 Bank of Canada. The Bank in Brief notes on the Consumer Price Index. 49

Figure 3.7: Consumer Price Index38 (Canada/Manitoba) 114.9 116 114.2 113.6 114 114.4 112 110.8 114.1 110 108.8 111.5 112.3 109.1 110.4 108 109.2 107.0 106 107.2 104 105.5 102 Index Points (2002 = 100) = (2002 Points Index 100 2005 2006 2007 2008 2009

Headline (Canada) Headline (except 8 most volatile) Headline (Manitoba)

Figure 3.8 shows rate of inflation in Canada and Manitoba from 2005 to 2009. Average annual growth rate in headline CPI (average inflation) was 1.7% for Manitoba and 1.8% for Canada. Since the mid 1980s, prices in Manitoba were always predominately higher than national prices. The Bank of Canada focuses on inflation (inflation targeting), which excludes the 8 most volatile components, so the average inflation in Canada between 2005 and 2009 was 1.6%. One main reason headline inflation fell in 2008 was the falling level of aggregate demand (especially global oil demand). Once the 8 most volatile components are removed, inflation actually increased. To stimulate overall demand, the Bank of Canada cut its interest rate.

Figure 3.8: Change in CPI (Canada/Manitoba) 3.50% 3.04% 3.00% 2.50% 2.14% 2.37% 2.21% 2.50% 2.00% 1.88% 2.00% 1.74%

1.50% 1.84% 1.64% 1.66% 1.05% % Change % 1.00% 0.58% 0.50% 0.57% 0.00% 0.30% 2005 2006 2007 2008 2009 Headline (Canada) Headline (except 8 most volatile) Headline (Manitoba)

38 The Headline CPI is not adjusted for seasonality or for the often volatile elements of food and energy prices. The eight most volatile components of CPI (fruit, vegetables, gasoline, fuel oil, natural gas, mortgage interest, intercity transportation, and tobacco products) are removed. 50

Figure 3.9 displays the year to year trends in quarterly average Bank of Canada interest rates. The Bank of Canada’s bank rate decreased from the third quarter of 2007 until it reached a historic low in the second quarter of 2009 and remained fixed from this point onward. The current rate set by the Bank of Canada at 0.50% is the lowest level ever for the 75-year-old central bank. This historic move was motivated by the sharp downturn in the global economy (including Canada) and an attempt to stimulate the economy.

Figure 3.9: Quarterly Average Interest Rates (Bank of Canada Rate) 5 % 80.0% 60.6% 60.0% 4.75 4 % 40.0% % Change 20.0% 3 % 0.0% -20.0% 2 % -40.0% Interest Rate % Rate Interest -60.0% 1 % -77.8% -80.0% 0 % 0.50 -100.0% 1 3 1 3 1 3 1 3 1 3 ------2005 2005 2006 2006 2007 2007 2008 2008 2009 2009

Figure 3.10 displays the changing value of personal expenditures in the Canadian and Manitoba economies. Personal expenditures represent the portion of GDP contributed by consumption of consumer goods and services. These goods and services reflect household expenditures.

Figure 3.10: Personal Expenditures (Canada/Manitoba39) $ Millions $820,000 $810,723 $812,205 $28,000 $27,500 $800,000 $787,063 $27,373 $27,000 $780,000 $26,500 $752,727 $760,000 $26,277 $26,000 $25,500 $740,000 $723,146 $25,000 $720,000 $24,265 $24,990 $24,500 $700,000 $24,000 2005 2006 2007 2008 2009 Canada Manitoba

39 The data for personal expenditures in Manitoba for 2009 is unavailable at the time of writing the report. 51

Canada’s personal expenditures increased to nearly $811 billion in 2008, an increase of over $23 billion from 2007. Between the years of 2004 to 2008 the average annual growth rate was 3.9%. Manitoba’s personal expenditures increased to nearly $27.4 billion in 2008 from $23.6 billion in 2004 representing an annual average growth rate of 3.85%. Consumer spending will remain firm as long as commodity prices don’t “fall through the floor”.40

Figure 3.11 shows the trends in personal expenditures for Canada and Manitoba between 2005 and 2009. Canada’s rate of change in personal expenditures rose by 0.9% from 2005 to 2007. During this same period, Manitoba’s rate of change in personal expenditures increased by 2.2%. In Canada and Manitoba personal expenditures rate of growth declined in 2008.

Figure 3.11: Change in Personal Expenditures (Canada/Manitoba) 6% 5.15% 5% 4.09% 4.17% 3.67% 4% 4.56% 3% 2.94% 2.99% 3.01%

% Change % 2%

1% 0.18% 0% 2005 2006 2007 2008 2009 Canada Manitoba

Figure 3.12 presents the number of housing starts in Canada, United States, and Manitoba between 2005 and 2009. Housing starts is a leading indicator and is usually used to identify the patterns of the business cycle. When housing starts are rising, it implies the economy is growing. If starts are declining, as in Canada, the United States, and Manitoba, it implies the economy is contracting (recession).

The number of Canadian housing starts declined to a five-year low of 590,600 from 850,300 in 2008 (a decline of approximately 30.5%). Since 2007, Canadian housing starts decreased by 35%, a further indication the economy was contracting. In the United States, the number of housing starts declined even further. From 2005 to 2009 the United States housing starts fell by 73%. In 2009 alone, the number of U.S. housing starts was 6.6 million, a decline of 39% from 2008.

The Manitoba housing market was not immune as local housing starts declined in 2009 by 25%. However, unlike the Canadian and U.S. housing markets, the number of housing starts in Manitoba did not begin to decline until 2008.

40 MFC Global Investment Management. North American Economic Outlook. (Fall 2008) 52

Figure 3.12: Housing Starts (Canada/United States41/Manitoba) $ Thousands

23.0 30,000 22.1 25 24,875 20.2 25,000 16.4 20 20,000 16,102 18.8 21,743 15 15,000 10,804 10 10,000 6,639 5 5,000 896.3 916.5 911.6 850.3 590.6 0 0 2005 2006 2007 2008 2009

Canada U.S. Manitoba

Figure 3.13 shows the rate of change in housing starts in Canada, United States, and Manitoba between 2005 and 2009. The collapse in Canadian housing starts is evident. The number of housing starts went from growth of 2.25% in 2006, to a decline of 30.54% in 2009.

Figure 3.13: Change in Housing Starts (Canada/United States/Manitoba) 13.86% 20% 7.43% 6.33% 7.45% 10% -3.91% 0% 2.25% -0.53% -10% -3.70% -6.72% -25.79% -20% -12.59%

% Change % -30% -25.94% -30.54% -40% -32.90% -38.55% -50% 2005 2006 2007 2008 2009

Canada U.S. Manitoba

41 Source: U.S. Bureau of the Census, Construction Reports, Series C-20, Housing Starts. Housing start = The start of construction of a privately-owned housing unit is when excavation begins for the footings or foundation of a building intended primarily as a housekeeping residential structure and designed for nontransient occupancy. All housing in a multifamily building is defined as being started when excavation for the building has begun.

53

The U.S. housing market has experienced decline since 2007. In 2009, the U.S. housing market saw a decline of 25.8%. Compared to Canadian and U.S. housing starts, Manitoban housing starts appeared to be stable until 2008 when starts declined by 3.9%. The number of Manitoba starts declined even further in 2009 (approximately 25.8%).

Figure 3.14 displays the unemployment rate in Canada, United States, and Manitoba between 2005 and 2009. The unemployment rate is defined as the percentage of people unemployed that are available and currently looking for work. In 2009, unemployment rates in Canada, United States, and Manitoba were 8.3%, 9.3%, and 5.2% respectively. The last time the Canadian unemployment rate was this high was in 1998, while the Manitoban unemployment rate previously reached this level in 2004. The U.S. unemployment rate reflects a 28 year high, last reaching this level in 1982.

In Manitoba, as was reported by Statistics Canada, the largest gains in employment were in the logistics (transportation and warehousing) sector followed by education.

Figure 3.14: Unemployment Rate42 (Canada/United States/Manitoba43) 10 % 9.3 9 % 8 % 6.8 8.3 6.3 7 % 6.0 6.2 6 % 5.1 4.6 4.6 5 % 5.8 5.2 % of Labour Force of Labour % 4 % 4.8 4.3 4.4 4.2 3 % 2005 2006 2007 2008 2009

Canada U.S. Manitoba

42 Source: International Monetary Fund, World Economic Outlook Database, October 2009. 43 Source: CANSIM II, Unemployment Rate, All Occupation, Table 270008, V2373417.

54

Figure 3.15 displays change in unemployment rates in Canada, the United States, and Manitoba between 2005 and 2009. A negative number indicates a decrease in unemployment rate, due to an increase in employment.

Figure 3.15: Change in Unemployment Rate (Canada/United States/Manitoba) 4.0% 3.4%

3.0% 2.2% 2.0% 1.2% 1.0% -0.4% 0.2% -0.5% 1.0% 0.0% % of Labour Force of Labour % -0.2% -1.0% -0.5% 2005 2006 2007 2008 2009

Canada USA Manitoba

Canada experienced a declining unemployment rate from 2005 to 2007, decreasing by 0.4% in 2005, 0.5% in 2006, and 0.3% in 2007. In 2008, the unemployment rate increased by 0.2%. In Manitoba, the change in unemployment rate has fluctuated both positive and negative between 2005 and 2009. The unemployment rate in the U.S. increased much faster than in both Manitoba and Canada. In 2008, Manitoba’s unemployment rate decreased by 0.2%, whereas in Canada and the U.S. it increased by 0.2% and 1.2%, respectively.

Monetary and Energy Indicators

The exchange rate between two currencies specifies how much one currency is worth in terms of another. It is determined by the demand for and the supply of a currency in the foreign exchange market. Many factors such as economic performance, balance of payments, interest and inflation rates among others affect the Canadian exchange rate. Surplus in our balance of payments for example, imply that foreigners are buying more goods and services from us than we do from them, and they pay for these goods and services in Canadian dollars, therefore demand more of our currency and boosting its value. High interest rate will attract foreign investors, again boosting the value of our currency. If inflation in Canada is high, it tends to send a signal that the currency is due to depreciate in order to keep our exports competitive.

55

Figure 3.16 shows the trends in the exchange rate between Canadian and U.S. dollars.

Figure 3.16: Quarterly Average Exchange Rates – U.S. Dollar $1.30 $1.25

$1.20

$1.10 $1.06 $0.98

$ CND $ $1.00

$0.90

$0.80 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 ------2005 2005 2005 2005 2006 2006 2006 2006 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 2009

The value of U.S. dollar against the Canadian dollar fell sharply in 2007 due to the continued strength of the Canadian economy and the U.S. currency’s weakness on world markets. In October of 2007, the Canadian dollar averaged above the U.S. dollar for the first time in 30 years, at CND $0.9447 for USD $1.00. Subsequently, the Canadian dollar averaged at par in November of 2007, and closed the year (in December) above par at CND $0.9913 for USD $1.00.

For most of 2008, the Canadian dollar fluctuated around par. The exchange rate between the Canadian dollar and the U.S. dollar began to appreciate in the last quarter of 2008 with an average of CND $1.218. During the first quarter of 2009, the Canadian dollar continued to depreciate against the U.S. dollar and averaged its lowest point since the second quarter of 2004 at CND $1.2613 per U.S. dollar. Since then however, the Canadian dollar started to appreciate once again, closing at CND $1.051 in December of 2009.

56

Figure 3.17 displays the quarterly Canadian dollar effective exchange rate index (CERI). This is a fairly new index, which was created to replace the C-6 index that the Bank of Canada used before. “The CERI uses multilateral trade weights published by the International Monetary Fund and includes the six currencies of countries or economic zones with the largest share of Canada’s international trade.”44 The multi-lateral trade weights used in CERI account for direct and third-market competition, whereas the bilateral weights used in the C-6 index do not. Thus, CERI shows a more comprehensive picture of Canada’s trade competitiveness. A rise in CERI indicates appreciation in the Canadian dollar.

Figure 3.17: Quarterly Average Effective Canadian Exchange Rate Index (1992 = 100)45 130 122.31 120 113.07 110 100 90 97.86 80 70

Index Points (1992 = 100) = (1992 Points Index 60 1 1 1 1 1 1 1 1 1 1 ------2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

With the Canadian dollar appreciating relative to the U.S. dollar (see Figure 3.16), the export- based Canadian economy is in a competitive disadvantage with the United States (its main trade partner). Looking at CERI, it becomes evident that the Canadian dollar is appreciating relative to the U.S. Dollar, Euro, Japanese Yen, U.K. Pound Sterling, Mexican Peso, and Chinese Yuan. This indicates that Canada is becoming less competitive, as the value of the Canadian dollar relative to the currencies of our main trade partners is increasing.

44 Bank of Canada Review. A New Effective Exchange Rate Index for the Canadian Dollar (Autumn 2006). 45 Effective exchange rate index composed of an updated group of currencies and associated weights based on the most recent IMF statistics.

57

The S&P/TSX Composite Index is an index of stock prices for the largest companies on the Toronto Stock Exchange as measured by market capitalization. The S&P/TSX Composite Index accounts for approximately 70% of market capitalization for all Canadian based companies listed on the TSX. The size and extensive economic sector coverage of the S&P/TSX Index has made it the primary indicator of market activity for Canadian equity markets.

Changes in the S&P/TSX Composite Index reflect the market view of economic prospects; consequently, it is another leading indicator for the economy. Figure 3.18 shows the quarterly average S&P/TSX Composite Index between 2005 and 2009.

Figure 3.18: Quarterly Average S&P/TSX Composite Index 16000 30.0% 14372.93 22% 14000 20.0% 12000 11368.02 10.0% % Change 10000 0.0% 8000 8512.77 -10.0% 6000

Index Points Index 4000 -20.0% 2000 -30.0% 0 -36% -40.0% 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 ------2005 2005 2005 2005 2006 2006 2006 2006 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 2009

In 2008, S&P/TSX Composite Index declined by 30% only to rebound in 2009, when the index rose by 34% in total Canadian dollar return. The big losers of 2008 (Financial and Energy sectors), became the big winners of 2009.46 In the first quarter of 2009, the index fell by 36% from the levels of the same time in 2008.

46 MFC Global Investment Management. Global Intelligence (2009). 58

A broader picture of activity in the Canadian economy is presented in Figure 3.19. The quarterly average Composite Index of Leading Indicators for Canada comprises of top ten components, which lead cyclical activity in the economy and together represent all major categories of GDP.47 When the series is above 100 index points and continues to increase, the economy is considered to be in expansion, or this time around it is thought to be recovering.

Figure 3.19: Quarterly Average Composite Index of Leading Indicators (Canada) 235 3.44% 4.00% 230 3.00% 225 225.73 2.00% 220 % Change 215 1.00% 210 213.87 0.00% 205 -1.00%

Index Points Index 200 -2.00% 195 190 -3.00% -3.35% 185 -4.00% 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 ------2005 2005 2005 2005 2006 2006 2006 2006 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 2009

The CLI is designed to provide early signals of turning points between upswings and downswings in economic activity; the aim is to communicate more clearly the future outlook for cyclical developments in economic activity. As the above figure shows, the CLI contracted from high of 230 (third quarter of 2008) to 214 points (second quarter of 2009). Since then, it has been in expansionary mode, reaching 226 points in the last quarter of 2009.

The index never declined below the 100 mark since 1992 (the base year for the CLI) therefore, looking at the index points might be misleading. It is more useful to look at the rates of growth in the index, which again show that Canada is in an expansionary mode. From the last quarter of 2008 to the third quarter of 2009, the index grew from -3.35% to +3.44%.

47 Statistics Canada. Canadian Composite Leading Indicator (2009). 59

Figure 3.20 displays the average annual composite leading indicator between 2005 and 2009 for Canada, Germany, Japan, the United States., and the United Kingdom. All five of these OECD member countries experienced gradual declines in their composite leading indicator when comparing them to a 100-mark (long-term trend).

Among the developed countries listed in Figure 3.20, Canada has the lowest growth rate from 2005 to 2008. In 2009, Canada’s average annual composite leading indicator was 88.59, behind only United Kingdom at 90.91; while the United States was the lowest at 87.26.

Figure 3.20: Average Annual Composite Leading Indicator for Five ‚Developed‛ Economies 110 104.41 104.05 103.61 103.03 102.56

105 102.53 101.94 101.82 101.23 101.01 100.43 100.41 100.16 100.01 99.52 99.28 99.24 99.09 98.63 100 98.39

95 90.91 88.59

90 87.63 87.46 87.26 Index Points Index 85

80

75 2005 2006 2007 2008 2009

Canada Germany Japan United Kingdom United States

60

Figure 3.21 displays the average annual composite leading indicator for Canada, Brazil, Russia, and Major Five Asian Economies48 (Indonesia, Korea, Malaysia, the Philippines and Thailand).

The contrast between Canada’s leading indicator and the CLI’s of emerging economies is well evident from this chart. Brazil has shown the largest growth rate during the previous five years. In 2008, Brazil’s average annual composite leading indicator was 105.72, closely followed by the Russian Federation at 105.26. The Major Five Asian economies and Canada had a very similar Composite Leading Indicator index.

Figure 3.21: Average Annual Composite Leading Indicator Canada to Emerging Economies 105.72 105.48 105.26 104.77 103.72 105 103.47 102.85 102.20 101.37 101.23 100.64 100.01 99.72 99.29 99.28

100 98.39

95 90.14 88.59 90 88.58 Index Points Index

85 84.12

80 2005 2006 2007 2008 2009

Canada Brazil Russian Federation Major Five Asia

48 Asia-5 countries are the principal Asian economies affected by financial market turmoil since 1997. Source: The OECD Economic Outlook: Sources and Methods. 61

Figure 3.22 presents the Average Annual Composite Leading Indicator of the Canadian, Chinese and Indian economies. Average annual CLI in the fastest growing developing economies of China and India is very similar to the CLI of Canada. After reaching a peak in 2007, China, India, and Canada all fell (in 2009) by about 13%.

Figure 3.22: Average Annual Composite Leading Indicator Canada to Chinese and Indian Economies 105 102.10 102.33 101.23 100.93 100.64 100.46 100.01 99.91 99.29 99.28 98.97

100 98.39

95 Index Points Index 89.08 88.84 90 88.59

85 2005 2006 2007 2008 2009

Canada China India

Figure 3.23 displays the trend in quarterly average oil prices between 2005 and 2009.

Figure 3.23: Quarterly Average Price Oil/Barrel ($US) $140 100% $121.40 $120 80% 60% $100 36.53% 40% % Change $80 $74.63 20% $60 0%

US$ / Barrel US$ -20% $40 $44.43 -40% $20 -54.16% -60% $0 -80% 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 ------2005 2005 2005 2005 2006 2006 2006 2006 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 2009

In early 2009, oil prices continued to sink on signs of deepening recessions in developed countries and sharply decelerating growth in emerging markets. The latter accounted for the increased demand in oil during the past few years.

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Deep recessions in the United States and other developed nations, and a sharp slowdown in industrial production and construction in emerging markets, reduced the global oil demand in 2009. This is likely one of the reasons for the sharp decline in price of oil. Since 2007, the oil price has seen unprecedented volatility. The average price in the first quarter of 2007 was $57/barrel. It reached an average of $121/barrel in the beginning of 2008, and hit an all time high at $143/barrel in July of 2008. What followed was a free fall in oil price, plunging to $33/barrel by the end of 2008, the lowest price level since the summer 2004. In just one quarter from the third to the fourth of 2008, the price of oil fell 52.2%. The oil price has since rebounded, reaching $74/barrel at the end of 2009.

Figure 3.24: Quarterly Average Unleaded Fuel Prices (Winnipeg Region) $1.6 24.7% 30% $1.4 $1.34 20% $1.2 $0.97 % Change 10% $1.0 $0.8 $0.85 0% $0.6 -10% $ CND / Litre/ CND $ $0.4 -20% $0.2 $0.0 -30% 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 ------2005 2005 2005 2005 2006 2006 2006 2006 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 2009

As shown in Figure 3.24, prices for unleaded fuel in the Winnipeg region declined during the later part of 2008. The bottom was reached during the first quarter of 2009 at $0.84/litre. The price for unleaded fuel has since rebounded to $0.97/litre.

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The price for diesel fuel in the Winnipeg region has followed the same trend as unleaded fuel prices, reflecting the same volatility (see Figure 3.25). Average price for diesel fuel during the third quarter of 2008 was $1.35 per litre. In just three quarters the price for diesel fell by 39.1% to $0.82/litre.

Figure 3.25: Quarterly Average Diesel Fuel Prices (Winnipeg Region) $1.6 43.5% 50% $1.4 40% 30% $1.2 $1.35 % Change $0.91 20% $1.0 10% $0.8 0% $0.82 $0.6 -10% -20% $ CND / Litre/ CND $ $0.4 -30% $0.2 -40% $0.0 -37.8% -50% 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 ------2005 2005 2005 2005 2006 2006 2006 2006 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 2009

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4. Domestic Trade and Infrastructure Utilization

When using Customs-based trade statistics, there are caveats on the mode of transport for both imports and exports. For imports, information on the transportation mode of a commodity usually refers to the last mode by which commodities were transported to the Canadian port of clearance and documented by Customs. This may not always be the mode by which goods arrived at the Canadian port of entry in the case of inland clearance. For exports, the mode of transportation recorded represents the last mode used to carry goods across international borders. This transportation mode may not necessarily be the same mode used to deliver cargo within Canada, that is, trans-shipment effects are not recorded and are not readily available. For example, some grain movements to China may not be recorded as marine.

Province/Territories Exports Leaving Canada from Source Province

Canadian provinces and territories export billions of dollars worth of goods annually to countries around the world by different modes of transportation. The following tables display the value of exports originating and exiting from each province/territory.49

Total exports via road, rail, air, water, powerlines or pipelines, and “other” modes comprise the total exports of Canada50 (Table 4.1).

Table 4.1: 2009 Total Exports Leaving Canada via Originating Province ($,000) % Depart From Province Exports from Origin Total Provincial Exports Original Province ON 128,795,439 147,588,395 87% BC 21,942,745 25,698,611 85% QUE 38,108,160 58,158,959 66% MB 5,618,708 10,726,334 52% AB 32,614,228 69,746,087 47% SK 3,532,126 21,827,385 16% OTHER 15,693,237 25,042,251 39% TOTAL 246,304,643 358,788,022 69% Ontario exported $148 billion, or 41% of Canada’s total of $359 billion in 2009. Ontario also recorded the highest share of provincial exports departing from the source province, at 87%. Manitoba exported $10.7 billion, with 52% of those exports ($5.6 billion) being sourced from within the province. Forty-seven percent of Alberta’s export value departed directly from that province, although it should be noted that the $69.7 billion of Alberta-sourced exports include substantial oil and gas exports, the large majority of which depart via pipeline. Saskatchewan, in contrast, shipped relatively little (16%) of its $22 billion in 2009 exports through its own ports.

49 All Data gathered by Statistics Canada 50 The mode “Other” often represents either intermodal traffic (where more than one mode of transportation was used) or shipments that did not classify the mode of transportation that was utilized. 65

The energy sector, mainly transported via the “powerline and pipeline” modes, can create a “noise” factor when looking at the use of traditional transportation infrastructure in serving Canada’s export needs. It is appropriate to remove the energy sector’s contribution to the export analysis, as these commodities tend to move via a proprietary transportation infrastructure. Table 4.2 repeats the summary presented in Table 4.1, but excludes the energy sector commodities.

There were $304 billion in non-energy exports from Canada in 2009 (Table 4.2). Both Ontario and British Columbia exported 87% of their exports from their own ports. In BC’s case, over $20 billion of the province’s $24 billion in exports left via BC’s ports. Ontario exported $148 billion in total, of which $128 billion left Canada from that province. Manitoba exported just under $10 billion in total, and 50% of those exports left from Manitoba.

Table 4.2: 2009 Non-Energy Exports Leaving Canada via Originating Province ($,000) % Depart from Province Exports from Origin Total Provincial Exports Original Province ON 128,289,636 147,082,592 87% BC 20,449,270 23,520,185 87% QUE 36,987,389 57,038,189 65% MB 4,987,115 9,926,081 50% AB 7,186,217 26,392,801 27% SK 2,082,370 15,750,068 13% OTHER 15,541,730 24,423,850 40% TOTAL 215,523,727 304,133,766 71% Looking specifically at the non-energy transportation modes, air records the highest share of provincial exports leaving via the originating province’s ports (Table 4.3). With some provinces being landlocked, it is not surprising to find water transportation to have the lowest share of exports leaving via the originating province’s own ports.

Table 4.3: 2009 Non-Energy Export Modes Leaving Canada via Originating Province ($,000) Exports via % Depart from Mode Total Exports Originating Province Original Province ROAD 106,913,089 136,919,459 78% RAIL 29,560,116 49,030,474 60% AIR 37,884,458 39,871,116 95% WATER 35,245,407 71,585,384 49% OTHER 5,920,657 6,727,333 88% TOTAL 215,523,727 304,133,766 71%

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Tables 4.4 through 4.7 provide mode-specific summaries of the value of exports leaving via the originating provinces’ own transportation infrastructure. Only 4 provinces/territories record at least four-fifths of their road-based exports leave via their own portals. Ontario, BC, Manitoba and New Brunswick distinguish themselves from the other jurisdictions by using their own roads to a greater extent (Table 4.4).

Table 4.4: 2009 Road Exports Leaving Canada via Originating Province ($,000) % Depart from Original Province Exports from Origin Total Provincial Exports Province ON 77,574,928 86,036,403 90% BC 5,375,247 6,120,778 88% MB 4,097,370 4,773,168 86% NB 1,380,307 1,685,931 82% AB 4,236,930 7,346,986 58% QUE 13,314,990 26,098,355 51% SK 926,221 2,025,736 46% NS 6,147 1,917,241 0% NFLD 689 330,645 0% YK 260 122,226 0% PEI 0 446,768 0% NWT 0 14,525 0% NU 0 697 0% TOTAL 106,913,089 136,919,459 78% Road exports accounted for $137 billion in exports in 2009, with Ontario and Quebec exporting the highest values of goods. Ontario exported $86 billion, of which 90% left Canada through Ontario based road infrastructure (approximately $78 billion). Manitoba exported $4.8 billion and used its own infrastructure for 86% of those exports (by value). Rail accounted for $49 billion in 2009 exports, with Ontario accounting for $24 billion, of which 98% departed Canada through Ontario border crossings (Table 4.5).

Table 4.5: 2009 Rail Exports Leaving Canada via Originating Province ($,000) Total Provincial % Depart from Original Province Exports from Origin Exports Province ON 23,215,059 23,772,949 98% BC 1,324,654 3,284,454 40% QUE 2,771,321 7,660,462 36% MB 578,505 1,727,006 33% SK 952,377 4,116,653 23% AB 501,093 7,212,051 14% OTHER 217,107 1,256,899 7% TOTAL 29,560,116 49,030,474 60%

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Manitoba exported $1.7 billion by rail in 2009 and used its own infrastructure for 33% of those exports, or $578 million.

Table 4.6: 2009 Air Exports Leaving Canada via Originating Province ($,000) Total Provincial % Depart from Original Province Exports from Origin Exports Province BC 1,408,158 1,436,259 98% ON 22,005,887 22,665,259 97% QUE 11,336,978 11,815,874 96% AB 1,398,488 1,571,490 89% SK 113,084 135,206 84% MB 190,417 266,576 71% OTHER 1,431,446 1,980,452 60% TOTAL 37,884,458 39,871,116 95% Air exports accounted for $40 billion in Canadian exports in 2009. British Columbia exported $1.4 billion in total and appears to have utilized their own infrastructure the most (98%). Ontario exported the most in terms of total value ($22.7 billion), of which 97% ($22 billion) departed from Ontario airports. Manitoba exported $266 million in total, and used its own airport infrastructure for 71% of those exports ($190 million).

Table 4.7: 2009 Marine Exports Leaving Canada via Originating Province ($,000) Exports from % Depart From Original Province Total Provincial Exports Origin Province BC 12,007,962 12,344,007 97% NB 6,238,580 7,059,183 88% NS 878,062 1,011,038 87% QUE 8,795,504 10,667,519 82% NFLD 4,854,318 7,929,327 61% ON 2,430,171 10,866,095 22% PEI 11,221 111,704 10% MB 29,589 3,045,170 1% SK - 9,343,538 - AB - 9,174,723 - NWT - 26,803 - YK - 5,119 - NU - 1,158 - Total 35,245,407 71,585,384 49% Exports leaving Canada by water totaled about $72 billion in 2009. British Columbia had the largest value of total water based exports, at $12 billion, of which 97% left from British Columbia directly.

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Ontario ranked second, with a total of $10.9 billion, although only 22% of those exports (by value) left directly from Ontario ports. Quebec’s water-based exports were very close to those reported by Ontario ($10.7 billion), although a much greater percentage of those exports (82%) left directly from Quebec ports. Manitoba exported $3 billion by water, of which a very small percentage (1%) was exported from Manitoba’s only seaport, Churchill.

Usage of Manitoba’s Transportation Infrastructure

Figures 4.1 through 4.4 summarize the level of exports exiting through Manitoba on the basis of source province or territory. While half of the exports leaving through Manitoba ports (by value) are sourced from Manitoba (Figure 4.1), provinces such as Alberta, Saskatchewan and Ontario extensively use Manitoba’s infrastructure to export their goods out of the country. This information is summarized for all transportation modes.

Figure 4.1: 2008 Source Province Exports Leaving via Manitoba to International Destinations BC, 3.4% AB, 15.2%

SK, 16.2% MB, 52.3%

By Value: $10.68 Billion ON, 12.0%

Of the $10.7 billion in exports leaving from Manitoba, 52% originated from Manitoba. Sixteen percent and 15% (by value) were sourced from Saskatchewan and Alberta, respectively. The fourth largest source province/territory share (by value) belongs to Ontario, which accounted for 12% of the $10.7 billion of exports exiting via Manitoba in 2008. It should be noted, however, that the scale of total Ontario exports makes Manitoba’s infrastructure much less of a factor in Ontario’s exports than for those from Saskatchewan or Alberta.

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Shifting from source province to transportation mode, Figure 4.2 illustrates that almost 70% of the value of exports leaving from Manitoba in 2008 left by road.

Figure 4.2: Mode of 2008 Total Exports by All Provinces Departing From Manitoba to International Destinations Road, 69.2%

Air, 2.8%

Energy, 3.3%

By Value: $10.68 Billion

Rail, 24.7%

Aside from road, only rail was a significant mode in terms of share of exports leaving via Manitoba in 2008. Manitoba is the only province between Ontario and BC with marine access, but the value of exports leaving via that route was rounded as too small to register when compared with the other modes used to move exports via Manitoba’s infrastructure. No doubt, Churchill’s short shipping season (about 3 months) limits the scale of Manitoba’s marine exports, as do other logistics factors.

Much of the export market for Canadian products involves interprovincial or inter-territorial movement prior to commodities’ final exit from the country. In this process, some provinces/territories use other jurisdictions’ infrastructure to a greater extent than other jurisdictions use the transportation infrastructure of source provinces or territories. Given Canada’s strong trading relationship with the United States, provinces or territories not adjacent to the U.S. have a particular handicap when it comes to using their own ground-based infrastructure in exporting to the U.S.

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However, even jurisdictions in direct contact with the U.S. do not necessarily take the most direct route to the U.S. border. For example, all 3 prairie provinces have direct access to the U.S. market, but use their own ground-based infrastructures to varying degrees. Figure 4.3 provides a depiction of prairie provinces’ export surplus/deficit (by weight). A precise interpretation of Manitoba’s line item in Figure 4.3 would be that “the weight of road exports leaving via Manitoba is 542,000 tonnes greater than the weight of Manitoba’s own road-based exports”. Conversely, “568,000 more Alberta-sourced road-based tonnes of exports leave Canada than the weight of road-based exports leaving via Alberta”. Saskatchewan-sourced, road-based exports exceed the weight of road-based exports leaving Canada via Saskatchewan by about 126,000 tonnes. Essentially, Alberta road-based exporters benefit from the use of others’ roads to a greater extent than other jurisdictions benefit from Alberta’s roads. We interpret this as Alberta being in a road export “deficit” situation.

Figure 4.3: 2008 Prairie Provinces' Road Export Weight Surplus/Deficit (Exported by Road From Prairies)

Manitoba 0.542

Saskatchewan -0.126

Alberta -0.568

-0.75 -0.50 -0.25 0.00 0.25 0.50 0.75

Million Tonnes

As in the past, Manitoba was in the opposite situation. Others benefit more from the use of Manitoba’s roads (and road portal infrastructure) than Manitoba benefits from others’ roads and infrastructure. Manitoba therefore has maintained its “surplus” from previous years, disproportionately assisting other provinces and jurisdictions in meeting their road-based export infrastructure needs.

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Table 4.8 expands upon the information presented in Figure 4.3 to look at the overall relationships among the provinces/territories in the use of roads and export infrastructure.

Table 4.8: 2008 Provincial/Territorial Usage of Jurisdictions’ Road Infrastructure Weight of Prov's Province of Departure from Canada Road Exports (‘000 BC AB SK MB ON Other Tonnes) British 3,019 25 40 46 36 26 3,192

Columbia 94.6% 0.8% 1.3% 1.4% 1.1% 0.8% 100.0% 198 1,514 260 224 150 38 2,384 Alberta 8.3% 63.5% 10.9% 9.4% 6.3% 1.6% 100.0%

Province 20 154 298 241 61 11 785 Originating Originating Saskatchewan 2.5% 19.6% 38.0% 30.8% 7.8% 1.3% 100.0% 29 16 20 1,950 76 10 2,100 Manitoba 1.4% 0.7% 0.9% 92.9% 3.6% 0.5% 100.0% 239 84 39 179 24,959 576 26,076

Ontario 0.9% 0.3% 0.2% 0.7% 95.7% 2.2% 100.0% Other 34 23 1 2 5,145 7,525 12,730 Prov/Terr 0.3% 0.2% 0.0% 0.0% 40.4% 59.1% 100.0% Total Weight of Exports Leaving via 3,539 1,817 659 2,643 30,428 8,185 47,271 Prov. (‘000 Tonnes) Percent of Weight of Prov's Road Exports 107.0% 84.8% 51.1% 134.4% 59.2% 63.3% Leaving via Own Prov Infrastructure

Province's Surplus or 347 -567 -125 543 4,352 -4,545 Deficit (‘000 Tonnes) Main Beneficiaries of BC AB SK MB ON “Other” Port Province's AB SK AB SK QC* ON Infrastructure ON AB "Other" *Included in “Other”

In Table 4.8 we see that the approximately 543,000 tonne Manitoba “surplus” is drawn from the difference between the 2,643,000 tonnes leaving via Manitoba and the 2,100,000 tonnes of Manitoba-sourced road exports. We also see that while 1,817,000 tonnes left Canada via Alberta roads, 2,384,000 tonnes of Alberta-sourced road exports left Canada in 2008.

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In looking at the interprovincial movements which facilitate Canada’s road-based export market, one notes that Alberta shipped 260,000 tonnes through Saskatchewan and 224,000 through Manitoba to foreign destinations, which collectively accounted for 20% of the weight of Alberta-sourced road exports.

Saskatchewan shipped 241,000 tonnes through Manitoba, which accounted for 31% of the total weight of Saskatchewan-sourced road exports.

Rail Commodity Traffic Flows

Figures 4.4 to 4.13 present the overall rail traffic flows in and through the provinces of Alberta, Saskatchewan, Manitoba, Ontario and Quebec from 2004 through 2008. Intraprovincial flows are those for which the originating and destination province is the same. East and West bound flows are those that originated in other provinces or territories and are “just passing through” the subject province or territory. The east bound and west bound categories are understandably related to the subject province’s location relative to other jurisdictions. 51 Figure 4.4 presents the amount of rail traffic flow in and through the province of Manitoba in the context of the categories introduced above.

Figure 4.4: Rail Traffic Flows In/Through Manitoba, 2004-2008 25,000 21,079 21,191 21,116 20,428 20,000 19,179

15,000 9,901 9,749 9,698 9,478 9,365 10,000 5,645 Tonnes (000) Tonnes 5,405 5,167 5,168 5,161 4,220 4,147 4,112 4,107 5,000 3,986 250 242 516 442 437 0

2004 2005 2006 2007 2008

In 2008, 9.9 million tonnes of rail freight moved through Manitoba from the east (west bound), and 19.2 million tonnes entered from the west, moving east bound. Manitoba intraprovincial rail tonnage was relatively minimal in comparison with other rail movements (2008: 250,000 tonnes).

51 Statistics Canada - Stats Can publication: Rail in Canada 52-216 73

Over the period 2004 to 2008, rail traffic originating from Manitoba declined from 5.6 to 5.2 million tonnes (although 2005 and 2006 tonnage was about equal to that in 2008). The only real “trend” was in a reduction of east bound freight heading to provinces such as Ontario and Quebec in 2007 and 2008.

Figure 4.5 presents the equivalent rail traffic flow information for the province of Alberta. The main difference between the Alberta pattern and that for Manitoba is the dominance of Alberta- origin rail freight in contrast to Manitoba’s relatively small percentage of “home grown” rail freight.

Figure 4.5: Rail Traffic Flows In/Through Alberta, 2004-2008

35,000 32,784 32,012 30,721 29,999 29,140 30,000

25,000 21,297 19,888 19,696 18,882 20,000 17,705 15,000 9,218 8,971 8,901 8,715 8,513 8,294 8,235 7,947 7,348 7,006

Tonnes (000) Tonnes 10,000 4,038 3,180 3,281 3,277 5,000 3,012 0

2004 2005 2006 2007 2008

Both west and east bound freight had increased from 2004 through 2007, although 2008 registered a decline in both east bound and particularly west bound freight. As with Manitoba, Alberta registered relatively little intraprovincial rail, although Alberta’s level was the highest of the three prairie provinces. Alberta generated approximately 30.7 million tonnes of outbound freight in 2008, a slight decline from the recent 2006 high of about 32.8 million tonnes. Both Alberta and Saskatchewan have significant outbound rail tonnage associated with agricultural production and other primary resource production.

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Figure 4.6: presents similar rail traffic flow information for Saskatchewan. As with Alberta, rail sourced from the “home” province was the single largest freight category.

Figure 4.6: Rail Traffic Flows In/Through Saskatchewan, 2004-2008

30,000 25,824 25,907 26,504 24,036

25,000 22,791

20,000 13,917 13,657 13,281 13,205 15,000 12,963 10,743 10,380 10,312 10,112 9,799 10,000 Tonnes (000) Tonnes

5,000 2,192 1,836 1,795 1,786 1,778 192 168 197 185 165 0

2004 2005 2006 2007 2008

Saskatchewan’s west bound traffic flow remained steady at about 10 million tonnes per year from 2004 to 2008. East bound rail traffic flows were relatively stable from 2004 to 2008 at about 13 million tonnes to just under 14 million tonnes in 2005. Intraprovincial movements within Saskatchewan, as in Manitoba, were very low relative to other freight routing categories. Saskatchewan’s origin traffic flows dropped by almost 4 million tonnes from 2007 to 2008, after steady increases from 2004. Traffic destined for Saskatchewan had been steady for the period from 2004 to 2007 at about 1.8 million tonnes, although it has risen to about 2.2 million tonnes in 2008.

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Figure 4.7 and Figure 4.8 present corresponding findings for Ontario and Quebec, respectively. Ontario-destined rail freight appears to have been in decline since 2004, with a drop of over 2 million tonnes from 2007 to 2008.

Figure 4.7: Rail Traffic Flows In/Through Ontario, 2004-2008

30,000 26,345 25,891 25,386 24,711

25,000 22,490

20,000 14,920 14,775 14,699 14,646 14,612 15,000 8,037

10,000 7,821 Tonnes (000) Tonnes 6,432 6,401 6,354 6,235 6,164 5,717 5,753 3,367 3,346 3,321 3,148 3,143

5,000 2,547

0

2004 2005 2006 2007 2008 Ontario’s west bound and east bound traffic flows have been relatively steady for the past few years at somewhat over 3 million tonnes and 6.2 to 6.4 million tonnes, respectively. In addition to its drop in inbound freight, Ontario has had a large drop in intraprovincial rail freight from 8 million tonnes in 2004 to about 2.5 million tonnes in 2008. Shipments originating in Ontario have been fairly stable from 2004 through 2008, at somewhat under 15 million tonnes per year.

Quebec tends to register a low percentage of “pass through” freight, either east bound or west bound. With Quebec, freight tends to be either inbound, outbound, or intraprovincial. With its strong marine port sector, this may be expected, as inbound rail freight often transships to marine.

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Figure 4.8: Rail Traffic Flows In/Through Quebec, 2004-2008

35,000 32,939 32,959 32,081 30,954

30,000 27,872 25,000 20,000 11,160

15,000 11,103 10,915 10,841 10,348

Tonnes (000)Tonnes 10,000 5,862 4,967 4,777 5,210 4,938 2,333 2,112 1,949 1,860 1,689 1,610 1,526 1,482 1,265

5,000 1,094 0

2004 2005 2006 2007 2008

Figure 4.9 and Figure 4.10 present summaries of rail traffic tonnage for British Columbia and the Atlantic Provinces, respectively. These figures are understandably less complex as there is no provision for “pass through” east bound or west bound rail freight. With limited rail infrastructure east of Quebec, and major marine port infrastructure in Quebec, it is understandable to see similarities among the Quebec distribution (Figure 4.8) and the patterns presented in Figures 4.9 and 4.10. Figure 4.9: Rail Traffic Flows In/Out of British Columbia, 2004-2008 60,000 48,173 50,000 47,016 44,011 43,624 40,414 40,000 35,088 33,558 32,677 31,829 31,142 30,000

Tonnes (000) Tonnes 20,000 11,853 11,709 10,705 10,217 9,459 10,000

0 Intraprovincial BC-Origin BC-Destination

2004 2005 2006 2007 2008

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BC’s intraprovincial freight has fluctuated somewhat since 2004, but has generally been in a slight downward trend, from 33.6 million tonnes in 2004 to 31.8 million tonnes in 2008. Prior to a drop of over 4 million tonnes from 2007 to 2008, BC-destined rail freight had been on an upward trend from 40.4 million tonnes in 2004 to 48.1 million tonnes in 2007.

BC-origin rail freight has also been on an upward trend, although the strength of that growth has been “softer” than for the BC-destined rail freight. Also, the drop-off in 2008 was less pronounced for BC-origin rail freight.

Figure 4.10: Rail Traffic Flows In/Out Atlantic Canada, 2004-2008

25,000 23,341 23,178 21,808 20,650

20,000 18,189

15,000

10,000 Tonnes (000) Tonnes 5,515 5,160 4,722 5,087 4,588 4,544 4,303 4,030 3,890 5,000 3,732

0 Intraprovincial ATL-Origin ATL-Destination

2004 2005 2006 2007 2008

In Atlantic Canada, intraprovincial movements (actually intraregional movements) have been on a slow decline, with 5.5 million tonnes in 2004, and 4 million tonnes in 2008. Traffic flows originating in the region totaled 21.8 million tonnes in 2008, a rise of about one million tonnes over 2007 levels and an increase of 3.6 million tonnes over 2004 levels. Conversely, traffic destined for Atlantic Canada has been decreasing since 2004, from 4.6 million tonnes to 3.7 million tonnes in 2008.

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Figure 4.11 summarizes the rail traffic tonnage in and through Manitoba on the basis of originating province or territory. By weight, rail originating in BC and passing through Manitoba on its way to more easterly points represents the largest single block of freight in Manitoba’s profile. Despite a large amount of freight entering Manitoba from BC (22% of total freight flowing in or through Manitoba), very little of it actually stays in Manitoba (1% of total freight flowing in or through Manitoba).

Saskatchewan-sourced rail freight passing through Manitoba represents the second largest block (19%), followed closely by rail freight passing through Manitoba from the other direction, originating in Ontario (18%).

Only about 12% of freight passing through or destined for Manitoba actually has this province as its final destination. Of that subset, about three-quarters (75%) comes from either Alberta, Saskatchewan, or Ontario, with each of these three provinces having fairly similar shares, by weight.

Figure 4.11: Rail Traffic Flows In/Through Manitoba, by Originating Province, 2008 (by Weight: 38.5 Million Tonnes) 25% 1% 3% 22% 19% 3% 18% 20% 1% 15% 3% 13% 9% 10% 1% 7%

5% 0% 1% 0% Percentage of Total Manitoba Traffic Manitoba of Total Percentage

Flow Through Manitoba Destined for Manitoba

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Ontario generates the most rail traffic flowing out west through Manitoba to the three western provinces, with up to 40% of rail freight moving through Manitoba being an Ontario-Alberta link (Figure 4.12).

Figure 4.12: West Bound Rail Traffic Flowing Through Manitoba, Destined for SK, AB, BC 45% AB 40% 35% BC 30% 25% 20% BC 15% AB 10% SK 5% AB BC SK SK 0% Atlantic Quebec Ontario 2004 2005 2006 2007 2008

The second largest rail freight link is the Ontario-BC movement of freight, with about one- quarter of Manitoba’s pass-through rail freight (by weight).

Quebec-BC represents around 15% to 18%, followed by Quebec-Alberta (about 10%), and Ontario-Saskatchewan (about 5%). Atlantic Canada accounts for very little of rail freight traveling through Manitoba to the three western provinces.

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Figure 4.13: East Bound Rail Traffic Flowing Through Manitoba, Destined for ATL, QC, ON 40% ON

35%

30% ON

25%

20% ON QC 15%

10% QC QC 5% ATL ATL ATL 0% Saskatchewan Alberta British Columbia

2004 2005 2006 2007 2008

In terms of east bound rail freight being sourced from the provinces to the west of Manitoba, Ontario is clearly the main recipient. Of east bound rail freight moving through Manitoba, 30% to 38% appears to be a Saskatchewan-Ontario link (although 2008 appears to represent a definite low point at about 30%). It appears the BC-Ontario link’s share of rail freight passing through Manitoba has increased in response to reductions in the Saskatchewan-Ontario share of freight. The BC-Ontario link is the second largest rail freight link passing through Manitoba.

Rail links from BC, Alberta and Saskatchewan to the Atlantic Provinces via Manitoba are extremely small in terms of tonnage.

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Truck Commodity Traffic Flows

Shifting to a view of truck-based freight movement, Figures 4.14 to 4.23 present information on the breakdown of truck traffic flows in and through the provinces of Manitoba, British Columbia, Alberta, Saskatchewan, Ontario, Quebec and Atlantic Canada from 2004 to 2008. Intraprovincial flows are those for which the originating and destination provinces are the same. East and west bound flows are those that originated in other provinces or territories and are “just passing through” the subject province or territory.

East and west bound truck traffic flows are commodities that flow through a province and are destined for provinces to the West or East of that province. 52 Figure 4.14, presents the truck traffic flows, in and through, the province of Manitoba in the context of the above categories, from 2004 and 2008.

Figure 4.14: Truck Traffic Flows In/Through Manitoba, 2004-2008

12,000 10,410 10,551 9,773 10,000 9,619 8,292 8,000

6,000 5,389 4,633 4,573 4,314 3,980 4,150 4,009 3,900 3,742 3,588 3,473 3,054 2,997 2,942 2,857 4,000 3,017 Tonnes (000) Tonnes 2,328 2,325 2,232 1,957 2,000

0

2004 2005 2006 2007 2008

For Manitoba, the main difference between rail and truck movement is the share of intraprovincial movement. While very little rail freight moves intraprovincially in Manitoba, intraprovincial truck freight is the largest category, by weight. In 2008, approximately 10.2 million tonnes of commodities entered or passed through Manitoba from other provinces or territories, down from about 10.9 million tonnes in 2007. In 2008, intraprovincial movements totaled 10.6 million tonnes, up slightly from 2007’s 10.4 million tonnes.

52 Statistics Canada: Trucking Commodity Origin and Destination; Survey Data Release: August 11, 2008

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Truck freight destined for Manitoba was at a 5-year high in 2004 (5.4 million tonnes), but has been fairly level at around 3.6 to 3.9 million tonnes for the last 3 years. West bound truck freight through Manitoba to British Columbia, Alberta, and Saskatchewan appears to have been strengthening through the last 5 years, with 2008 levels about 140,000 tonnes higher than for 2007. However, within the last 5 years, Manitoba actually reported its highest annual west bound tonnage in 2005 and 2006. East bound truck tonnage is consistently lower than west bound truck tonnage, which is opposite that for rail freight. Likely the commodity mix plays a major role in this difference. East bound rail includes a significant grains and oilseeds component on its way to the Saint Lawrence Seaway system, whereas east bound truck includes very little of these commodities.

Figure 4.15, summarizes the truck traffic flows, in and through, the province of Alberta from 2004 to 2008. As a percentage of truck tonnage in and through Alberta, the province’s strong intraprovincial share has been rising since 2004. In 2004, 76% of the province’s 101,594 tonnes of truck freight was intraprovincial. By 2008, total in/through truck freight in Alberta rose 33% to 134,661 tonnes, of which 81% was intraprovincial. As demand for transportation is a derived demand, this is a reflection of the high level of activity in the Alberta economy over the last 5 years. It is also interesting that virtually all of the growth in Alberta truck tonnage was as a result of intraprovincial growth. For Alberta, as with Ontario, the intraprovincial truck trade dwarfs truck movements involving other jurisdictions.

Figure 4.15: Truck Traffic Flows In/Through Alberta, 2004-2008

120,000 108,900

100,000 94,937 82,456 77,716 80,000 77,452 60,000 40,000 Tonnes (000) Tonnes 14,226 11,061 10,804 10,008 11,317 8,466 11,050 10,925 7,595 20,000 9,969 2,518 2,185 1,912 1,900 1,622 1,625 1,592 1,483 1,462 1,203 0

2004 2005 2006 2007 2008

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Figure 4.16, summarizes the truck traffic flows, in and through, Saskatchewan from 2004 to 2008. Intraprovincial truck freight experienced a significant decline from 2006 to 2007, but recovered in 2008. It would appear that the 2007 drop in intraprovincial truck tonnage corresponded to a significant increase in Saskatchewan-originating truck freight. However, 2008 appears to reflect a return to “normal”, with intraprovincial trucking representing 54% of tonnage (in comparison to 58% in 2006 and 44% in 2007).

Figure 4.16: Truck Traffic Flows In/Through Saskatchewan, 2004-2008

25,000 23,463 22,184 20,377

20,000 17,404 14,808 15,000

10,000 8,913 6,503 5,648 5,794 4,827 5,302 5,159 5,026 4,339 4,838 Tonnes (000) Tonnes 4,447 4,401 4,161 4,000 3,929 3,667 3,592 3,376 3,241 5,000 3,219

0

2004 2005 2006 2007 2008

Generally, Saskatchewan’s extraprovincial truck freight (on a tonnage basis) appeared fairly solid in 2008, although east bound freight was perhaps a bit “soft”, but that would be consistent with some of the patterns for other Western Canadian freight sources.

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Figure 4.17, displays the truck traffic tonnage, in and through, the province of Ontario from 2004 to 2008. The main component of Ontario trucking is intraprovincial, which represented 80% of Ontario truck tonnage in 2008. This was only fractionally lower than the 81% recorded in 2006. However, total truck tonnage has dropped in Ontario from 212.5 million tonnes in 2006 to 187 Million tonnes in 2008, a decline of 12%.

Figure 4.17: Truck Traffic Flows In/Through Ontario, 2004-2008

200,000 173,067 164,782 154,644 150,399 150,000 144,880

100,000

Tonnes (000) Tonnes 50,000 20,784 19,868 18,795 17,482 16,951 19,828 18,004 17,509 15,630 15,447 1,211 1,220 1,168 1,063 975 873 850 843 805 723 0

2004 2005 2006 2007 2008

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Figure 4.18: Truck Traffic Flows In/Through Quebec, 2004-2008

100,000 83,861 82,887 76,742 73,610 80,000 72,914

60,000

40,000 19,519 Tonnes (000) Tonnes 17,461 17,335 14,869 14,511 16,321 15,349 15,305 14,290 20,000 12,901 3,365 2,728 2,558 2,368 2,285 1,615 1,589 1,475 1,408 1,388 0

2004 2005 2006 2007 2008

Figure 4.18, summarizes the truck traffic tonnage in and through Quebec from 2004 to 2008. Quebec has a trucking pattern similar to that of Ontario, although on a percentage basis it depends less upon intraprovincial movement than does Ontario (2008: Quebec: 68%; Ontario: 80%).

Also, east bound truck movement originating from the west and passing through Ontario to points further east is almost non-existent (as a % of Ontario truck tonnage), whereas east bound freight entering the west border of Quebec and exiting to the Atlantic provinces is actually larger than the corresponding west bound flows through Quebec.

86

Figures 4.19 and 4.20 present summaries of truck traffic tonnage for British Columbia and the Atlantic Provinces, respectively. These figures are understandably less complex as there is no provision for “pass through” east bound or west bound rail freight.

Figure 4.19: Truck Traffic Flows in British Columbia, 2004-2008

80,000 71,711 70,000 55,769 55,016

60,000 54,416 53,769 50,000

40,000

30,000 Tonnes (000)Tonnes 20,000 6,890 7,874 6,379 6,300 7,100 5,621 5,276 5,841 5,763 10,000 5,120

0 Intraprovincial BC-Origin BC-Destination

2004 2005 2006 2007 2008

Due to British Columbia’s geographic location as the most westerly province, there are no shipments flowing east or west through the province. Intraprovincial traffic flows in British Columbia have been fairly stable from 2004 to 2008 at 54 to 56 million tonnes, although there was a 2007 spike to 72 million tonnes.

BC-origin truck freight was on a slight upward trend from 2004 to 2007, but fell back 18% in 2008. However, BC-destined truck freight rose 12% in 2008 from 2007 levels.

Atlantic Canada, as with British Columbia, does not have commodities passing through the region. Intraprovincial movements (actually “intraregional” movements) declined in 2007 by about 3 million tonnes and recovered in 2008 by 1 million tonnes. Atlantic-origin and Atlantic- destined road freight enjoyed two relatively buoyant years (2006, 2007) which were bracketed by lower tonnage in 2005 and 2008.

87

Figure 4.20: Truck Traffic Flows in Atlantic Canada, 2004-2008 19,324

20,000 18,597 18,181 16,899 15,970 15,000 10,668 10,583 9,537 8,774 8,518 8,316 8,226 10,000 8,215 7,733 7,056 Tonnes (000)Tonnes 5,000

0 Intraprovincial ATL-Origin ATL-Destination 2004 2005 2006 2007 2008

Figure 4.21 summarizes the truck traffic tonnage in and through Manitoba on the basis of originating province or territory.

Figure 4.21: Truck Traffic Flows Destined For/Through Manitoba, by Originating Province, 2008 (By Weight: 24.75 Million Tonnes)

55% 42.6% 50% 5.6% 45% 40% 35% 30% 25% 4.1% 20% 12.6% 15% 4.3% 4.9% 10% 1.0% 4.5% 1.6% 0.7% 3.3% 3.9% 0.01%

Percentage of Total Manitoba Traffic Manitoba of Total Percentage 5% 0.3% 0% BC AB SK MB ON QUE ATL Flow Through Destined for MB

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About 58% of freight passing through Manitoba has this province as its final destination. Ontario has the greatest “pass-through”, with 13% of truck freight in Manitoba’s profile coming from Ontario on its way to areas west of Manitoba.

Figure 4.22, presents the percentage of west bound truck traffic tonnage through Manitoba destined for Saskatchewan, Alberta and British Columbia from 2004 to 2008.

Figure 4.22: West Bound Truck Traffic Flowing Through Manitoba, Destined for SK, AB, BC

60% AB

50%

40%

BC 30%

20% AB

10% BC SK AB SK SK BC 0% Atlantic Quebec Ontario 2004 2005 2006 2007 2008

Ontario is the largest supplier to the western provinces, and the pattern of this graph is surprisingly consistent with the rail equivalent (Figure 4.12). The main difference is that the Ontario-BC and Quebec-BC rail links appear a bit stronger than the road links to BC (on a percentage basis).

89

Figure 4.23, presents the percentage of east bound truck traffic tonnage through Manitoba destined for Atlantic Canada, Quebec and Ontario from 2004 to 2008.

Figure 4.23: East Bound Truck Traffic Flowing Through Manitoba Destined for ATL, QUE, ON 60% ON 50%

40% ON

30%

20% QC ON QC QC 10% ATL ATL ATL

0% Saskatchewan Alberta British Columbia

2004 2005 2006 2007 2008

In terms of east bound truck freight being sourced from the provinces to the west of Manitoba, Ontario continues to be the main recipient. In 2007, Ontario experienced a significant drop-off in truck freight tonnage coming from Alberta, and to a lesser extent from Saskatchewan. However, 2007 tonnage from BC was dramatically higher than had been reported in 2006, and was similarly almost twice as large as the tonnage reported in 2008.

As with rail, truck tonnage from Alberta, Saskatchewan and BC to Atlantic Canada continue to be very small.

90

Rail & Road: Imports and Exports

Canada is a trading nation. While the previous analysis summarizes domestic movement by rail and road, international freight movement is critical to Canada’s balance of payments and standard of living. Figures 4.24 through 4.33 summarize total imports/exports entering/leaving Canada by the high volume modes of road and rail.

The Canada/US border is the world’s longest undefended international boundary. However, there are many controlled entry/exit points along that border and movements across a handful of those portals comprises a large share of total transborder movements. Figure 4.24 presents the total export values for road and rail from Canada in 2009. Of the $137 Billion in road-based exports, $122 Billion (89%) left via one of the Top 10 road export hubs in Canada. Rail exports are even more concentrated among the Top 10 rail export hubs. The top 10 collectively account for 95% of Canada’s $49 Billion in rail exports in 2009.

Figure 4.24: Total Exports Road and Rail (2009) (000's)

Road $136,919,460

Rail $49,030,476

$0 $50,000,000 $100,000,000 $150,000,000

With this level of concentration among the major export hubs, the subsequent summaries will focus on those Top 10 road and rail portals, although the role of Emerson (Manitoba’s main international portal) will be highlighted.

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Figure 4.25 summarizes the distribution of 2009 rail exports (by value) for each of Canada’s Top 10 rail export portals. Sarnia and the Windsor/Ambassador crossing collectively account for $22.5 Billion (46%) of Canada’s 2009 rail export value. Given the number of crossing points along the Canada/U.S. border, this represents a significant concentration with the top 2 portals. Emerson ranks 8th overall in value of rail exports through Canadian ports, moving $1.9 Billion across the border in 2009. This represented 4% of Canada’s rail exports, by value.

Figure 4.25: Top 10 Rail Export Portals in Canada (2009) ($,000) Trout River $849,736

Kingsgate $1,476,935

Emerson $1,940,270

Lacolle $2,016,846

Pacific Highway $2,129,990

North Portal $3,556,124

Fort Erie $5,812,869

Fort Frances $6,114,202

Windsor -… $8,327,019

Sarnia $14,177,162

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Looking at road-based exports (Figure 4.26), Windsor, Ontario was the largest exporting hub, accounting for $40.8 Billion in 2009, or 30% of the total value of Canada’s road exports in that year. Emerson, Manitoba ranks 6th, with $5.9 Billion, or 4.3% of Canada’s road exports in 2009.

Figure 4.26: Top 10 Road Export Portals in Canada (2009) (000's)

North Portal $2,031,614

Philipsburg $2,771,553

Coutts $5,026,738

Pacific Highway $5,318,496

Emerson $5,879,326

Lansdowne $6,621,538

Lacolle $12,017,268

Sarnia $16,641,041

Fort Erie $24,760,311

Windsor - Ambassador Bridge $40,789,907

Figure 4.27: Top 10 Rail Export Portals in Western Canada (2009) (000's)

Sprague $309

Prince Rupert $1,302

Cascade $20,321

Vancouver Marine Operations $20,535

Huntington $40,294

Coutts $611,294

Kingsgate $1,476,935

Emerson $1,940,270

Pacific Highway $2,129,990

North Portal $3,556,124

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Figure 4.28: Top 10 Road Export Portals in Western Canada (2009) (000's) Edmonton $136,813

Regway $230,225

Osoyoos $263,598

Boissevain $382,991

Kingsgate $879,098

Huntington $1,237,572

North Portal $2,031,614

Coutts $5,026,738

Pacific Highway $5,318,496

Emerson $5,879,326

Figures 4.27 and 4.28 focus on Western Canadian portals’ exports by rail and road, respectively.

North Portal, Saskatchewan is the largest western Canadian rail export portal, moving $3.6 Billion in exports via rail in 2009. Emerson, Manitoba ranks third in western Canada, moving $1.9 Billion.

In terms of truck transport, Emerson ranks first in western Canada, with $5.9 billion of road- based exports.

94

Shifting to 2009 imports, Figures 4.29 through 4.33 reflect the “backhaul” side of Canada’s exports. In 2009, $193 Billion was imported into Canada by truck (Figure 4.29), or about $56 Billion more than we exported by truck in that same year.

Figure 4.29: Total Imports Road and Rail (000's)

Road $192,909,635

Rail $25,901,392

$0 $50,000,000 $100,000,000 $150,000,000 $200,000,000

Rail-based imports were valued at $26 Billion in 2009 or about $23 Billion less than were exported by rail in that same year. The net import-export difference between Canada and the USA for combined road and rail movement in 2009 was about $33 Billion. However, “pipeline and powerline” energy sector exports are a significant offsetting source of revenue for Canada’s balance of payments.

Figures 4.30 and 4.31 summarize the value of imports through Canada’s Top 10 rail and road portals, respectively. While the actual site is usually fairly well identified on the export side, import records are more tied to the location where a shipment clears Customs. As such, locations well within Canada’s borders are often cited as the “port of entry.” For example, the Toronto “Long Room” is identified as the largest rail import “portal” ($5.4 Billion) although the shipments likely entered through Windsor, Sarnia or Fort Erie before transiting to Toronto.

The Windsor Ambassador Bridge ranks first by road in Canada ($46.6 Billion). Emerson ranks 6th ($9.4 Billion). The Top 10 Canadian road import sites account for $147 Billion (76% of total).

95

Figure 4.30: Top 10 Rail Import Portals for Canada (2009) (000's)

Emerson $68,867

Winnipeg $541,844

Fort Erie $923,322

Calgary $1,213,497

Vancouver - Main Long Room $1,214,492

Montréal - Main Long Room $2,230,763

Edmonton $2,460,118

Sarnia $3,137,072

Windsor - Ambassador Bridge $4,817,202

Toronto - Main Long Room $5,417,955

Figure 4.31: Top 10 Road Import Portals for Canada (2009) (000's)

Coutts $5,778,973

North Portal $5,866,104

Toronto - Pearson Int. Airport $6,391,763

Lacolle $7,990,640

Emerson $9,417,269

Pacific Highway $10,455,422

Niagara Falls $10,551,393

Fort Erie $17,949,232

Sarnia $26,626,310

Windsor - Ambassador Bridge $46,611,969

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Figures 4.32 and 4.33 summarize imports through the Top 10 Western Canadian rail and road portals, respectively.

Figure 4.32: Top 10 Rail Import Portals for Western Canada (2009) (000's)

North Portal $36,753

Kamloops $68,238

Emerson $68,867

Lethbridge $204,221

Saskatoon $274,459

Regina $370,788

Winnipeg $541,844

Calgary $1,213,497

Vancouver - Main… $1,214,492

Edmonton $2,460,118

Figure 4.33: Top 10 Road Import Portals in Western Canada (2009) (000's)

Vancouver - Int. Airport $577,175

Edmonton $635,819

Winnipeg $644,889

Huntington $1,058,491

Kingsgate $1,287,257

Vancouver - Main… $2,466,200

Coutts $5,778,973

North Portal $5,866,104

Emerson $9,417,269

Pacific Highway $10,455,422

97

Edmonton is the largest western Canadian rail portal, with $2.46 Billion clearing import Customs in that city. As with Toronto (and other “inland” ports), this is simply a reflection of where Customs were cleared, not where the commodities actually crossed the border into Canada.

Emerson ranked 8th in Western Canada’s Top 10 in 2009, clearing $68.87 Million in rail imports. Winnipeg ranked fourth in rail import value, clearing $541.84 Million.

Emerson is the second largest road import site in Western Canada, accounting for $9.4 Billion in imports. The largest road import portal is the Pacific Highway in British Columbia, with $10.46 Billion. Together, these two hubs account for 52% of the road imports entering via Western Canada.

It should be reiterated that import data are tied closely to the “clearing house” at which a shipment is recorded as entering Canada. In contrast, export data are more closely linked with the physical port through which a shipment left Canada. As such, reviewing the pattern of exports rather than the pattern of imports (particularly for rail) is likely much more revealing in understanding the relationship between Canada’s trade and use of transportation infrastructure.

Port of Churchill

The Port of Churchill is located on Hudson Bay and serves as Canada’s only deep water arctic seaport. Although the port was primarily developed to serve as an exporter of Western Canadian agricultural products, the port’s operations have since expanded with the resupply of northern communities in the Kivalliq and Qikiqtaalk regions of Nunavut.

Operations at the Port of Churchill can be classified primarily as either International or Domestic. Although there can be some overlap, these classifications provide good distinctions between port operations.

International Port operations that are classified as International are those traveling from Churchill directly to other countries (i.e. no stops at other major Canadian ports).

98

Exports In 2009, approximately $155 million worth of international exports left the Port of Churchill. These exports consisted of nearly 530 thousand tonnes of wheat and durum leaving on 18 vessels bound for ports in Mexico, South America, Africa, and Europe.53

International cargo leaving from Churchill is primarily in the form of agricultural products (grains and oilseeds) originating from the Canadian Wheat Board, the port’s largest customer (in 2008, approximately 90% of the total traffic leaving the port was sourced from the CWB).54 Figure 4.34 summarizes the types and values of commodities exported through the port of the previous five years.

Figure 4.34: Port of Churchill Export Commodities 2005-2009 $180 $175 $160 $155 $140 $134

$120 $109 $100 $92 $80 $60

$ Millions (2009) CAD (2009) Millions $ $40 $20 $0 2005 2006 2007 2008 2009 Wheat (Including Durum, Meslin) Canola Seeds Peas Other

The commodity listed as “Other” represents agricultural equipment shipped to Singapore in 2005, which accounted for less than 1% of the total value of goods shipped from the port that year. During the past three years, international exports from Churchill have consisted entirely of wheat. In 2009, wheat shipments from Churchill represented 2.6% of the total value of wheat exported from Canada. In addition, approximately 50.3% of the total value of wheat commodities leaving Manitoba (bound for international customers) cleared via Churchill.

53 Home. 12 Dec. 2009. Port of Churchill. 54 2008 November 06. Grain flows through Churchill despite tight supply. < http://www.cwb.ca/public/en/newsroom/releases/2008/110608.jsp> 99

Despite Churchill’s location, which would suggest service to ports in Russia, Greenland, Iceland, United Kingdom, or Norway, exports over the previous five years have primarily been bound for Europe (aside from the UK), (predominantly throughout the Mediterranean Sea) and Africa.

Over the past 5 years, goods being shipped internationally from the Port of Churchill have originated from the Western Canadian provinces (Manitoba, Saskatchewan, Alberta, and British Columbia). Figure 4.35 differentiates the value of goods leaving the Port of Churchill on the basis of the provinces of origin.

Figure 4.35: 2009 Port of Churchill Exports by Province of Origin

Alberta, $51,006,161

Saskatchewan, $81,272,818 British Columbia, $166,950

Manitoba, $22,799,144 Over half (52%) of the value of exports was sourced from Saskatchewan, with 33% being sourced from Alberta, with these two provinces collectively accounting for 85% of the value of 2009 exports through Churchill

Imports Vessels arriving in Churchill have primarily arrived empty. In 2007 and 2008, Churchill received shipments of fertilizer from Russia, destined for Saskatoon.55 Following the offloading, the vessels were reloaded with wheat bound for Italy.56 Although these shipments of fertilizer had been arranged with a buyer, the purpose of these deliveries was largely to serve as a demonstration to promote the viability of an “Arctic Bridge” between Churchill and Russian ports.57

55 Port of Churchill Welcomes Continued Ship Movements From Russia. 12 Dec. 2009. 56 (2007 October 17). Port of Churchill Welcomes First-Ever Ship From Russia. 57 Port of Churchill Welcomes Continued Ship Movements From Russia. 12 Dec. 2009. 100

Domestic In addition to international operations, the Port of Churchill also serves the Canadian Domestic market on two levels; Northern Resupply and Short-Sea Shipping.

Northern Resupply With no direct land link (i.e. road or rail) to southern Canada, communities, businesses, industries, families, and individuals in Nunavut largely rely on an annual sealift to supply non- perishable goods for the year. Sealift offers a cheaper alternative to purchasing goods that have been shipped using costly airfreight. Among the major companies performing sealift services (e.g. Northern Transportation Company Ltd (NTCL)., Nunavut Sealink & Supply, Nunavut Eastern Arctic Shipping (NEAS)), many operate from the Saint Lawrence Seaway and travel around the northern coast of Quebec, supplying remote communities along the way. Vessels are able to resupply in Churchill before continuing on to communities on the Hudson Bay shore of the Kivalliq (Keewatin) region. It is also possible to continue the sealift to communities in the Qikiqtaalk (Baffin) region, although direct routing from the Saint Lawrence Seaway is the more common routing.

In 2009, approximately 15,000 tonnes of dry goods and construction materials were shipped from Churchill. This was a significant decline (representing approximately 30,000 tonnes) from 2008 due to the completion of the Meadowbank Mine in Nunavut. Variability in freight requirements in response to a volatile mining sector makes it difficult to plan long-term for Churchill’s freight infrastructure.

Short-Sea Shipping In addition to northern supply, firms have also begun testing Churchill as a base for short-sea shipping. In short-sea operations, firms will transport loads between domestic ports using water ways which are often cheaper then overland methods such as rail or road. Beginning in a 2007 trial program, grain was shipped to the Port of Halifax from Churchill.58 Following the success of these operations, an agreement was signed in 2009 between both ports to continue developing this “grain bridge” and to establish other short-sea opportunities.59

Short-sea shipping serves as a backhaul load for vessels that are resupplying northern communities. Backhaul loads provide cargo to vessels that otherwise would have traveled empty, increasing their revenues and providing incentive to continue northern operations.

58 (2009 March 10). Halifax and Churchill team up to build bridge for grain, arctic business. 59 Ibid 101

5. NASCO Trade

This section focuses on commodities traded and freight transportation modes used along the NASCO corridor; running through “the central United States, eastern and central Canada, and deep into Mexico.” (For maps and details about NASCO, see http://www.nascocorridor.com/). The NASCO corridor is an initiative of the North America Corridor Coalition Inc.

The NASCO corridor connects a number of railways, including CN, Canadian Pacific, Union Pacific, Kansas City Southern, Burlington Northern Santa Fe, and Ferromex. The main roads of NASCO are Highway 1 and Highway 75 in Canada; I-35, I-94 and I-29 in the United States; and Routes 80, 86, 40, 57 and 70 in Mexico. U.S. states along the corridor include: Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North and South Dakota, Oklahoma, Texas, and Wisconsin. NASCO crosses into Canada at Pembina, North Dakota, making Winnipeg well-situated for trade with the U.S. and Mexico.

Exports60 Figure 5.1 displays Manitoba exports by road to U.S. and Mexican states along the NASCO corridoor. In 2009, road exports to NASCO members were valued at approximately $2.6 billion. This was a decline of 9% from 2008. Exports to NASCO states represented 64% of total Manitoba cleared exports to the United States, by value. The dollar value of exports to NASCO states by road has decreased by 20% since 2004.

Figure 5.1: Manitoba Exports by Road to NASCO States

$3,500 $3,206 $3,135 $2,969 $3,001 $2,841 $3,000 $2,574 $3,137 $3,052 $2,903 $2,946 $2,500 $2,783 $2,517 $2,000

$1,500

$1,000 $ Millions (2009) CAD (2009) Millions $ $500 $68 $84 $66 $55 $58 $58 $0 2004 2005 2006 2007 2008 2009

Mexico Total Road Exports to NASCO Total Road Exports to US

60 Exports refer to goods which depart through Manitoba borders. Some of these goods originated in other Canadian provinces. 102

Figure 5.2 presents a breakdown of NASCO exports by road by U.S. state of destination (and also includes Mexico). In 2009 the majority of Manitoba’s NASCO exports were to Minnesota, North Dakota, Illinois, Iowa, Wisconsin and Texas. They accounted for 77% of road export traffic to NASCO states in 2009.

From 2008 to 2009, growth in the value of goods cleared through Manitoba (to NASCO states), ranged from -43% (South Dakota) to +1% (Minnesota). In 2009, Minnesota accounted for 24% of the total value of NASCO exports. Other major destinations included North Dakota (19%), Illinois (10%) and Iowa (10%). Overall, the total value of goods exported to NASCO partners through Manitoba decreased by 11% from 2008 to 2009.

Figure 5.2: Ditribution of NASCO Exports from Manitoba, by Road $900 $800 $700 $600 $500 $400 $300 $200 $ Millions (2009) CAD (2009) Millions $ $100 $0

2004 2005 2006 2007 2008 2009

In 2009, the leading Manitoba export to Minnesota (by value) were buses, valued at $175 million, and accounting for 29% of total export value. The second largest commodity exported to Minnesota were motor vehicle parts with a value of $41 million.

Soya Beans, buses, and sunflower seeds were the leading commodities exported to North Dakota in 2009. Soya beans was the most valuable commodity at $79 million (16% of total exports). Bus exports were the second highest valued commodity with values of $54 million (bus frames, 11% of total exports) and $30 million (completed vehicles, 6% of total exports). Since 2004 Manitoba exports to North Dakota have decreased by 12%.

In 2009, $58 million worth of goods was exported from Manitoba to Mexico. Between 2004 and 2009, the value of exports to Mexico decreased by 6%. This appears to be primarly due to a decrease of pork exports. However, frozen potatoes experienced increasing demand. The most

103

valuable export was frozen potatoes (over 41% of total Manitoba exports to Mexico), followed by processed pork, valued at $5.7 million (10%).

Figure 5.3 displays Manitoba exports by rail to NASCO states. Exports to U.S. NASCO members represented approximately 46% of the total value of Manitoba rail exports to the United States.

Figure 5.3: Manitoba Exports to NASCO Partners, by Rail $500 $436 $450 $400 $335 $350 $285 $352 $287 $300 $255 $250 $224 $298 $200 $249 $245 $150 $196 $204

$ Million (2009) CAD (2009) Million $ $84 $100 $59 $36 $37 $43 $50 $21 $0 2004 2005 2006 2007 2008 2009

Mexico Total Rail Exports to NASCO Total Rail Exports to US

In 2009, total value of Manitoba exports by rail to Mexico was $43 million, representing 15% of Manitoba’s total export traffic to NASCO partners. While 2008 was the busiest year for exports to Mexico with a value of $84 million, in 2009 Manitoba exports to Mexico declined to $43 million. This was primarily due to a decline in exports of wheat, canola, and other cereals. These commodities represented approximately 76% of the total value of Manitoban exports to Mexico (by rail) in 2008. In 2009, these commodities represented only 2% of the total value of Manitoban exports to Mexico.

104

Figure 5.4 presents a breakdown of NASCO exports by rail by U.S. state of destination (and Mexico). The major destinations of Manitoba exports were Illinois, Minnesota, Texas, North Dakota, Iowa, and Nebraska, accounting for over 70% of Manitoba’s rail export traffic to NASCO states, by value. From 2008 to 2009, change in the value of goods cleared through Manitoba (to NASCO states), ranged from -83% (Michigan) to +19% (Texas).

Figure 5.4: Distribution of NASCO Exports from Manitoba, by Rail $140 $120 $100 $80 $60 $40

$ Millions (2009) CAD (2009) Millions $ $20 $0

2004 2005 2006 2007 2008 2009

From 2008 to 2009, exports to Illinois decreased by $50 million (42%), largely due to declining exports of canola products, which was the highest valued commodity ($56 million) (exported to Illinois in 2009), as well as declines in exports of automobile parts, building supplies, and scrap materials.

In 2009, exports to Minnesota decreased by $18 million (29%). The most valuable commodities exported to Minnesota were sodium ($7 million), Oats ($6 million), and urea ($4 million).

In 2009, the value of Manitoban exports (by rail) increased in only 4 jurisdictions mentioned in Figure 5.4 (Iowa, Missouri, North Dakota, and Texas). Of these, Texas experienced the highest growth in value from the previous year ($7 million, 19%). This was largely attributed to increased exports of sodium chlorate ($20 million)which represented 45% of the total value of exports to Texas (by rail).

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Imports Figure 5.5 presents the value of Manitoba imports by road from NASCO origins. In 2009, road imports from NASCO were worth over $6 billion, a decrease of 9% from the previous year. Between 2004 and 2009, Manitoba imports from NASCO increased by 17% ($887 million).

Figure 5.5: Manitoba Imports from NASCO partners, by Road $7,000 $6,632 $6,000 $6,068 $6,068 $5,792 $6,000 $5,180 $6,339 $5,809 $5,797 $5,000 $5,582 $5,780 $5,001 $4,000

$3,000

$2,000 $ Million (2009)CADMillion$ $1,000 $179 $210 $221 $259 $293 $270 $0 2004 2005 2006 2007 2008 2009 Mexico Total Road Imports from NASCO Total Road Imports from US

In 2009, Manitoba imports by road from U.S. NASCO states were worth $5.8 billion. This represented approximately 64% of the total value of Manitoba imports by road from the United States. This was a decline of $463 million from the previous year, largely due to decreasing imports from Wisconsin, Texas, and Indiana.

In 2009, Manitoba imported $270 million worth of goods from Mexico by road, a decrease of 10% from the previous year.

106

Figure 5.6 provides a breakdown of NASCO imports by road by U.S. state of origin (and Mexico). In 2009, the majority of Manitoba’s NASCO imports were from Illinois, Minnesota, Wisconsin, North Dakota, Texas and Iowa. They accounted for $4.5 billion (or 75%) of the road import traffic from the NASCO corridor in 2009.

Imports from Illinois have increased by 47% since 2004, partly due to increased imports of dump trucks. In 2009, dump trucks represented $204 million (14% of total road imports). Since 2005 this has been the leading commodity imported from Illinois, followed by newspapers and periodicals, valued at $108 million (8% of the total). Illinois accounted for 23% of total Manitoba imports from NASCO in 2009.

The second largest origin of NASCO imports to Manitoba was Minnesota, at $1.0 billion, or 18% of total Manitoba imports from NASCO. From 2008 to 2009, imports from Minnesota declined by 5%. In 2009, the largest commodities imported by road were snowmobiles ($149 million), followed by automobiles ($110 million).

In 2009, approximately 4% of Manitoba’s imports from NASCO originated from Mexico. From 2008 to 2009, the value of Manitoba imports from Mexico decreased by 8%. The major commodities coming from Mexico were automotive parts, cigarettes, and furniture.

Figure 5.6: Distribution of NASCO Imports to Manitoba, by Road $1,600 $1,400 $1,200 $1,000 $800 $600 $400

$ Million (2009) CAD (2009) Million $ $200 $0

2004 2005 2006 2007 2008 2009

107

Figure 5.7 displays Manitoba imports from NASCO partners, originating by rail. In 2009, rail imports were valued at $283 million (a decrease of 26% from 2008). The list of top commodities (by value) was quite diverse, including copper, automobiles, herbicides, rail tankers, and automobile parts.

In 2009, Manitoba imported $263 million in goods from U.S. NASCO states, which amounted to 48% of all rail imports from the United States. From 2008 to 2009, the value of rail imports from U.S. NASCO origins decreased by 29%.

During this period, goods imported to Manitoba from Mexico were valued at $21 million (representing 7% of total imports from NASCO origins). Imports from Mexico increased 76% from 2008 to 2009, and 127% from 2004 to 2009.

Figure 5.7: Manitoba Imports from NASCO Partners, by Rail $450 $384 $400 $339 $350 $372 $283 $300 $256 $261 $311 $250 $220 $251 $263 $200 $236 $210 $150

$ Million (2009) CAD (2009) Million $ $100 $28 $50 $9 $21 $9 $12 $21 $0 2004 2005 2006 2007 2008 2009

Mexico Total Rail Imports from NASCO Total Rail Imports from US

108

Figure 5.8 shows NASCO imports by rail. The value of goods coming in by rail from NASCO states has fluctuated year-to-year. In 2009, the majority of Manitoba’s NASCO imports originated from Texas, Illinois, Minnesota, Wisconsin, and Missouri. These states collectively represented 69% of the total value of NASCO imports to Manitoba.

Figure 5.8: NASCO Imports to Manitoba by Rail $90 $80 $70 $60 $50 $40 $30 $20 $ Millions (2009) CAD (2009) Millions $ $10 $0

2004 2005 2006 2007 2008 2009

Between 2008 and 2009, the value of goods imported into Manitoba declined among 8 of the 14 NASCO members. These declines ranged from $3 million (Indiana) to $68 million (Michigan).

During this period, the value of rail imports from Michigan declined from $85 million to $17 million (approximately 80%). The previous year (2008) was significant in regards to the value of imported goods from Michigan into Manitoba. These imports represented the highest value of annual imports from a NASCO state between 2004 and 2009. This spike can largely be attributed to an import of refined copper in 2008 that was valued at approximately $53 million (2009). This commodity represented 63% of the total value of goods imported from Michigan that year and was an increase of 185% from the previous year. The value of refined copper imports were reduced to $8 million in 2009 (a decline of 86% from 2008 and 59% from 2007). Similarly, imports of unrefined copper increased from $1 million in 2007 to $7 million in 2008. Imports of unrefined copper were worth $1.9 million in 2009 (an increase of 82% from 2007). In addition, there was a purchase of petroleum that was valued at nearly $13 million (2009) and represented approximately 15% of the total value of goods imported from Michigan that year. This appears as a one time purchase, as this commodity was not shipped by rail in the year prior (2007) or after (2009).

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In 2009, rail imports from Illinois declined by 33% from the previous year (a decline of $21 million). This was due to reduced imports of several assorted commodities. These commodities, which included petroleum, processed metals, animal feed, and anti-freeze, were valued between $2 to $6 million in 2008 and were among the most valuable commodities imported from Illinois. In 2009, the value of many of these commodities was worth less than $1 million. In addition, in 2008, imports of ammonia were worth $9 million and represented 14% of all Illinois rail imports. In 2009, this commodity did not clear into Manitoba by rail.

The previous discussion highlights the volatility in Manitoba trade with any one NASCO partner, and underscores the need to retain diversity in our stable of trading partners. Such diversity could assist Manitoba in ensuring stability in its trade with our southern neighbours.

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6. Manitoba International Trade

Exports In 2009, Manitoba exported over $10.7 billion in commodities to other countries, a 3% increase from 2008 ($10.3 Billion).

Top 10 Export Commodities In 2009, major Manitoba exports included a mix of agricultural goods, raw materials, finished goods, and energy products. Overall, the “Top 10” commodities represented 44% of total value of Manitoba goods that were exported in 2009. These same commodities accounted for 38% of the total value of Manitoba exports in 2008. The Top 10 export commodities in 2009 are listed below in Table 6.1.

Table 6.1: Top 10 Export Commodities from Manitoba Value Top 10 Export Commodities % ($ Millions) Wheat, nes61 and meslin $982 9% Low erucic acid rape or colza seeds, whether or not broken $756 7% Nickel unwrought, not alloyed $540 5% Petroleum oils and oils, obtained from bituminous minerals, crude $489 5% Copper unrefined, copper anodes for electrolytic refining $343 3% Electrical energy $331 3% Potatoes, prepared or preserved other than by vinegar or acetic acid, frozen $324 3% Aircraft parts nes $324 3% Low erucic acid rape (canola) or colza oil and its fractions, refined $310 3% Repairs $295 3% Total of Top 10 $4,694 44% Total of all Export Commodities $10,726

Between 2008 and 2009 there was little shift among the major export commodities. Seven of the commodities listed in Table 5 were ranked among the top exports in 2008, with the top four having the same ranking in both years. Commodities that entered the Top 10 in 2009 included aircraft parts (nes), copper, and electricity. Some commodities that dropped out of the Top 10 ranking (diesel powered buses, live bovine, and oats) still ranked among the top 20 Manitoba exports.

61 Not Elsewhere Specified (NES) 111

Top 10 International Export Partners In 2009, approximately 87% of all Manitoba exports were destined for only ten countries. Among these countries, exports appeared to be regionalized with concentrations in North America, Asia, and the Middle East. Figure 6.1 presents the distribution of Manitoba exports among major international export destinations.

Figure 6.1: 2009 Manitoba’s Top Countries of Export ($ Millions)

United States $7,228 China $648 Japan $511 Mexico $266 Hong Kong $182 Australia $116 Saudi Arabia $109 United Kingdom $96 Iraq $94 Russian Federation $73 Other $1,404

0% 10% 20% 30% 40% 50% 60% 70% 80%

The majority of Manitoba exports are shipped to the United States. In 2009, approximately 67% of the total value of Manitoba exports was destined for the United States. This was a decline of 2% from 2008. The top four recipients of Manitoba exports (United States, China, Japan, and Mexico) remained unchanged from 2008, though the ranking shifted, as the distribution of exports to China tripled from 2% to 6%, overtaking Japan which increased from 3% to 5%. New entrants among the major export destinations in 2009 included Hong Kong, Australia, Saudi Arabia, and Iraq. These replace previously ranked countries United Arab Emirates, Taiwan, Iran, and Indonesia.

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Mode of International Export for Manitoba 2009 A commodity’s characteristics can be a major determinant in the choice of mode to move that product to its destination. The concentration of road (44%) and rail (16%) traffic (Figure 6.2) reflects the commodity mix which emphasizes low value and heavy weight goods being shipped (relatively) short distances (United States), which would not be appropriate or cost effective to ship by air. In addition, the topography and geography of Manitoba supports direct road and rail traffic to the United States (as opposed to freshwater or marine traffic).

A summary of the mode of transport of Manitoba’s exports is presented in Figure 6.262.

Figure 6.2: Mode of Manitoba Exports 2009 ($ Millions)

Air, $267 Energy, $800

Other, $114

Water, $3,045

Rail, $1,727

Road, $4,773

Compared to 2008, the value of goods shipped by road and rail each decreased by 5%, while air decreased by 8%.

62 The transportation mode “Other” represents intermodal traffic or shipments in which the mode of transport was not listed. 113

Figure 6.3 displays the value of Manitoba exports on the basis of mode of transportation from 2003 to 2009.

Figure 6.3: Modes of Manitoba Exports- Historical $7,000

$6,000

$5,000

$4,000

$3,000

$ Millions (2009) Millions $ $2,000

$1,000

$0 2003 2004 2005 2006 2007 2008 2009

Air Energy Other Rail Road Water

During this period (2003-2009), the value of goods shipped by road declined by 15%. This was the only mode that experienced a decrease in value during this period.63 Increases in the value of goods moved by water and air (31% and 1.7% respectively) may reflect Manitoba exports traveling to more destinations outside of North America (away from easily accessible road and rail networks).

63 The mode “Other” declined by 8%, though this may be a reflection of record keeping rather than transportation practices. 114

Imports Due to the difficulty of tracking a single item past the port of clearance, it is important to note that these imports only represent goods that entered into Canada through Manitoba. Following their entry, these goods may have travelled farther to other provinces.

In 2009, goods imported through Manitoba ports and borders were valued at approximately $13 Billion. This was a decline of 11% from the previous year.

Top 10 Import Commodities by Value Table 6.2 displays the top 10 commodities imported through Manitoba based on value in 2009.

Table 6.2: Top 10 Import Commodities to Manitoba by Value Value Top 10 Import Commodities % ($ Millions) Parts of turbo-jets or turbo-propellers $300 2% Wheeled tractors, nes $228 2% Newspapers, journals and periodicals, nes $213 2% Dump trucks designed for off-highway use $210 2% Herbicide, anti-sprouting & plant-growth regs,forms/pack for retail sale or prep/art $207 2% Combine harvester-threshers $194 1% Snowmobiles, golf cars and similar vehicles $167 1% Parts of cranes, work-trucks, shovels, and other construction machinery $158 1% Petroleum oils and oils, obtained from bituminous minerals, crude $140 1% Automobiles with reciprocating piston engine displacing not more than 1,000 cc $132 1% Total Top 10 $1,947 15% Total Imports $12,965

In 2009, the highest valued imports entering into Manitoba were classified as aircraft parts. Overall, these goods represented 2% of the total value of imports entering into Manitoba. Between 2008 and 2009, the total value of imported aircraft parts increased by 165% and shifted in rank from 13th to 1st. Additional high ranking imports (in terms of value) included tractors, newspapers and periodicals, and dump trucks. Petroleum, which was previously ranked 5th in 2008, fell to 9th in 2009, with an overall decline of 17%.

It should be noted that the Top 10 exports represented 44% of the value of Manitoba’s exports, while the Top 10 imports collectively only accounted for 15% of imports, with the single largest commodity only accounting for 2%. As such, relatively small shifts in the dollar values of commodities imported can create volatility in the ranking of those commodities.

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Top 10 International Import Partners by Value Although the United States is the dominant player, the provincial economy holds a relatively diversified portfolio of trading partners. As such it is important to review in depth exactly which countries Manitoba trades with and what exactly is being traded.

Figure 6.4 presents the Top 10 import partners to Manitoba in 2009.

Figure 6.4: 2009 Manitoba’s Top Countries64 of Imports ($ Millions)

United States $10,549 China $596 Mexico $360 Germany $227 Japan $126 Canada $119 United Kingdom $118 Italy $97 Taiwan $85 France $58 Other $630

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

In 2009, the United States was the largest supplier of imports to Manitoba (81%). In terms of value, China decreased by 12% from 2008. In 2009 the United Kingdom re-entered the list of major import partners, ranking 7th with a value of $118 Million (an increase of 43% from 2008). This growth was due (in part) to an increase in imports of herbicide ($33 million) and tractors ($7 million) in 2009. Overall, the top 10 import partners accounted for 95% of the total value of imports into Manitoba.

64 In 2009, Canada ranked 6th among the largest international suppliers to Manitoba. Imports that are classified as Canadian often represent goods that were produced in Canada, exported to another country for sale, and then re-entered Canada unaltered. 116

Mode of International Imports for Manitoba 2009 In 2009 the primary mode of transportation for goods moving into Manitoba was by road, representing 82% of the total value of imports. Rail accounted for roughly 5% of the value, water65 transportation to Manitoba was responsible for 4%, while air transportation was utilized for 8% of the value. Pipeline and Energy transmission was responsible for less than 1%. The modal category of “other” captured approximately 1% of the total value of imported goods.

Figure 6.5: Manitoba Modes of Imports (2009) ($ Millions)

Water, $454

Air, $1,050

Road, $10,665 Energy $45 Other, $140

Rail, $611

From 2008 to 2009, the modal distribution of imports into Manitoba was fairly stable, though the total value of imports declined by 11%. With the exception of air, each of the modes experienced a decline during this period. The value of Manitoba road imports decreased by 11% (approximately $1.2 Billion), while imports of energy, water, rail, and “other” decreased at rates of 47%, 12%, 28%, and 12% respectively.

65 Water based imports do not represent the Port of Churchill. Instead these are likely goods that arrived to Canada by way of ocean, Great Lakes, or St. Lawrence Seaway which were then transferred to road or rail and shipped to Manitoba where customs were cleared. 117

Mode of Imports - Manitoba Historic Comparison The level of activity (based on commodity value) has varied among each of the transportation modes from 2003 to 2009. Figure 6.6 highlights the value of goods transported by road. Figure 6.7 expands the value scale to provide greater detail of the other (non-road) modes and their performance over the past seven years.

Figure 6.6: Modes of Manitoba Imports- Historical $14,000

$12,000

$10,000

$8,000

$6,000

$ Millions (2009) Millions $ $4,000

$2,000

$0 2003 2004 2005 2006 2007 2008 2009 Air Energy Other Rail Road Water

From 2003 to 2009, the value of goods being imported by road increased by 13% with the only decline occurring in 2009 (10%). From 2003 to 2008, the value of road traffic had increased 26%, at an average annual rate of 5%.

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Figure 6.7: Modes of Manitoba Imports- Historical (Road Removed) $1,400

$1,200

$1,000

$800

$600

$ Millions (2009) Millions $ $400

$200

$0 2003 2004 2005 2006 2007 2008 2009

Air Energy Other Rail Water

From 2003 to 2009, the value of imports into Manitoba by air declined by 18%. This actually represents a recovery, as 2009 recorded the second highest value (nearly $1.1 Billion) during this period. The value of annual air imports was in decline between 2003 and 2006, reaching a low of $778 million66 in 2006. Since then, the value of commodities being received by air has increased at an average annual rate of 11%. Rail imports fluctuated, with relatively high values in 2005 and 2008. Overall, the value of rail imports has increased 13% from 2003 to 2009. Imports by water increased by 17% during this period, though at a gradual rate marked with a small decline (2%) in 2006 and a larger decline (12%) in 2009.

66 Adjusted for inflation. 119

Glossary

Aviation: Level I to III air carriers; classified by Statistics Canada as follows:

Level I. Canadian air carriers not classified as level VI that, in each of the two calendar years immediately preceding the report year, transported at least 1,000,000 revenue passengers or at least 200,000 tonnes of revenue goods. Level II. Canadian air carriers not classified as level VI that, in each of the two calendar years immediately preceding the report year, transported 100,000 revenue passengers or more, but fewer than 1,000,000 revenue passengers, or 30000 tonnes of revenue goods or more but less than 200,000 tonnes of revenue goods. Level III. Canadian air carriers not classified as level VI that, in each of the two calendar years immediately preceding the report year, realized annual gross revenues of $1,000,000 or more for the air services for which the air carrier held a license. Level IV. Not applicable. Level V. Canadian air carriers not classified as level I, II, III or VI that, in each of the two calendar years immediately preceding the report year, realized annual gross revenues of less than $1,000,000 for the air services for which the air carrier held a license. Level VI. Canadian air carriers that, in the report year, operated the air service for which the air carrier holds a license for the sole purpose of serving the needs of a lodge operation. (Source: http://dsp‐ psd.pwgsc.gc.ca/Collection‐ R/Statcan/51‐ 203‐ XIB/51‐ 203‐ XIE2005000.pdf)

Canadian-Dollar Effective Exchange Rate Index (CERI): A weighted average of bilateral exchange rates for the Canadian dollar against the currencies of Canada's major trading partners. The six foreign currencies in the CERI are: U.S. dollar, euro, Japanese yen, U.K. pound, Chinese yuan, and Mexican peso. The South Korean won forms part of the index before 1996, but the Chinese yuan does not. CERI replaced the C-6 index in October 2006. It is calculated using multilateral trade weights, while the C-6 index used bilateral trade weights. (Source: http://www.bankofcanada.ca/en/glossary/glossceri.html)

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Couriers and Local Messengers: The courier industry comprises establishments primarily engaged in providing air, surface or combined courier delivery services. Courier establishments of the Post Office are included. The local messenger industry comprises establishments primarily engaged in providing messenger and delivery services of small parcels within a single urban area. Establishments engaged in the delivery of letters and documents, such as legal documents, often by bicycle or on foot; and the delivery of small parcels, such as take‐ out restaurant meals, alcoholic beverages and groceries, on a fee basis, usually by small truck or van, are included. (Source: http://dsp‐ psd.pwgsc.gc.ca/Collection‐ R/Statcan/50‐ 002‐ XIB/50‐ 002‐ XIE2006003.pdf)

Consumer Price Index (CPI): A measure of price movements, produced by Statistics Canada and obtained by comparing retail prices of a representative "shopping basket" of goods and services at two different points in time (http://www.bankofcanada.ca/en/glossary/glosscpi.html)

Direct Economic Activity: The direct employment, employment income, expenditures and contribution to provincial gross domestic product for a sector.

Employment: employed persons are those who, during the reference week: (a) did any work at all at a job or business, that is, paid work in the context of an employer‐ employee relationship, or self‐ employment. It also includes unpaid family work, which is defined as unpaid work contributing directly to the operation of a farm, business or professional practice owned and operated by a related member of the same household; or (b) had a job but were not at work due to factors such as own illness or disability, personal or family responsibilities, vacation, labour dispute or other reasons (excluding persons on layoff, between casual jobs, and those with a job to start at a future date). (Source: http://dsp‐ psd.pwgsc.gc.ca/collection_2007/statcan/71‐ 543‐ G/71‐ 543‐ GIE2007001.pdf)

For Hire Trucking: Any motor carrier that transports goods for compensation. (Source: http://dsppsd.pwgsc.gc.ca/Collection‐ R/Statcan/53‐ 222‐ XIB/0000453‐ 222‐ XIE.pdf)

Gross Domestic Product (GDP): by industry at basic prices is a measure of the economic production which takes place within the geographical boundaries of Canada.

“Gross” means that capital consumption costs, that is the costs associated with the depreciation of capital assets (buildings, machinery and equipment), are included. Estimates are prepared for 215 separate industries using the North American Industrial Classification System (NAICS). (http://www.statcan.ca/cgibin/imdb/p2SV.pl?Function=getSurvey&SDDS=1301&lang=en&db=I MDB&dbg=f&adm=8&dis=2)

Indirect Economic Activity: Additional economic activity that occurs in firms that supply inputs to the direct sector.

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Induced Economic Activity: The trickle-down effect of expenditures by the direct and related indirect sectors as they multiply through other sectors of the economy. These are largely driven by consumption spending.

Labour Income: Labour income comprises of wages and salaries and supplementary labour income. It is defined as all compensation paid to employees. Earnings of self‐ employed persons or working owners of unincorporated businesses are not included in labour income. In addition to regular remuneration, it includes directors’ fees, bonuses, commissions, gratuities, income in kind, taxable allowances, retroactive wage payments and stock options. Wages and salaries are estimated on a “gross” basis, i.e. prior to deductions for employees’ contributions to income tax, employment insurance, pension funds, etc. Supplementary labour income, which is defined as payments made by employers for the future benefit of their employees, comprises employer contributions to employee welfare, workers’ compensation, employment insurance and pensions. (http://www.statcan.ca/cgi‐ in/imdb/p2SV.pl?Function=getSurvey&SDDS=2602&lang=en&db=I MDB&dbg=f&adm=8&dis=2)

Leading Indicators: The Canadian Composite Leading Indicator (CCLI) comprises of ten components which lead cyclical activity in the economy and together represent all major categories of Gross Domestic Product (GDP). It thus reflects the variety of mechanisms that can cause business cycles. (http://www.statcan.ca/cgibin/imdb/p2SV.pl?Function=getSurvey&SDDS=1601&lang=en&db=I MDB&dbg=f&adm=8&dis=2)

Leverage: The sum of the indirect and induced activities. The leverage ratio is calculated as: (Indirect Income + Induced Income)/Direct Income.

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Paid Employment: work activity excluding housework and volunteer activity. (Source: http://dsppsd.pwgsc.gc.ca/collection_2007/statcan/71‐ 543‐ G/71‐ 543‐ GIE2007001.pdf)

Rail: Traditionally rail data was classified under Class I and Class 2 railways. Since 1997, data has been classified using the NAICS system. Rail Transportation falls under NAICS subsector 482, which is further classified as follows: Short‐ Haul Freight Rail Transportation (482112); Mainline Freight Rail Transportation (482113); and Passenger Rail Transportation (482114). (Source: http://dsp‐ psd.pwgsc.gc.ca/Collection‐ R/Statcan/52‐ 216‐ XIB/52‐ 216‐ XIE2005000.pdf)

Unemployment: Given the concept of unemployment as the unutilized supply of labour, the operational definition of unemployment is based primarily on the activity of job search and the availability to take a job. In addition to being conceptually appropriate, job search activities can, in a household survey, be objectively and consistently measured over time. Therefore, unemployed persons are those who: (a) were on temporary layoff during the reference week with an expectation of recall and were available for work, or (b) were without work, had actively looked for work in the past four weeks, and were available for work, or (c) had a new job to start within four weeks from reference week, and were available for work.

Persons are regarded as available if they reported that they could have worked in the reference week if a suitable job had been offered (or recalled if on temporary layoff); or if the reason they could not take a job was of a temporary nature such as: illness or disability, personal or family responsibilities, because they already have a job to start in the near future, or because of vacation (prior to 1997, those on vacation were not considered available). Full‐ time students currently attending school and looking for full‐ time work are not considered to be available for work during the reference week. They are assumed to be looking for a summer or co‐ op job or permanent job to start sometime in the future, and are not part of the current labour supply. (Source: http://dsp‐ psd.pwgsc.gc.ca/collection_2007/statcan/71‐ 543‐ G/71‐ 543‐ GIE2007001.pdf)

Unemployment Rate: Number of unemployed persons expressed as a percentage of the labour force. The unemployment rate for a particular group (e.g. age, sex, marital status) is the number unemployed in that group expressed as a percentage of the labour force for that group. (Source: http://dsp‐ psd.pwgsc.gc.ca/collection_2007/statcan/71‐ 543‐ G/71‐ 543‐ GIE2007001.pdf)

Urban and Inter-urban Bus: Includes public transit from the Canadian Urban Transit Association and an estimate of inter-urban buses based on historical Statistics Canada data. Inter-urban includes intercity, school, charter, sightseeing and other buses.

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List of Figures

Figure 1.1: Total GDP from Transportation in Manitoba ...... 2 Figure 1.2: Total GDP from Transportation in Manitoba by Leverage Component ...... 3 Figure 1.3: Total Contribution to Manitoba GDP by Transportation Mode: 2008 ...... 3 Figure 1.4: Contribution to Manitoba GDP by Transportation Mode ...... 4 Figure 1.5: Total GDP Generated by Air Sector in Manitoba...... 5 Figure 1.6: Trend in Air GDP by Leverage Component ...... 5 Figure 1.7: Total GDP Generated by Rail Sector in Manitoba ...... 6 Figure 1.8: Trend in Rail GDP by Leverage Component ...... 6 Figure 1.9: Total GDP Generated by Trucking Sector in Manitoba ...... 7 Figure 1.10: Trend in Trucking GDP by Leverage Component ...... 7 Figure 1.11: Leverage Ratios for Manitoba Total GDP by Transportation Mode ...... 8 Figure 1.12: Total Labour Income from Transportation in Manitoba ...... 9 Figure 1.13: Labour Income by Leverage Component from Transportation in Manitoba ...... 9 Figure 1.14: Contribution to Manitoba Total Labour Income by Transportation Mode: 2008 ...... 10 Figure 1.15: Total Labour Income by Transportation Mode ...... 10 Figure 1.16: Total Labour Income Generated by Air Sector in Manitoba ...... 11 Figure 1.17: Trend in Air Labour Income by Leverage Component ...... 11 Figure 1.18: Total Labour Income Generated by Rail Sector in Manitoba ...... 12 Figure 1.19: Trend in Rail Labour Income by Leverage Component ...... 12 Figure 1.20: Total Labour Income Generated by Trucking Sector in Manitoba ...... 13 Figure 1.21: Trend in Trucking Labour Income by Leverage Component ...... 13 Figure 1.22: Leverage Ratios for Manitoba Labour Income by Transportation Mode ...... 14 Figure 1.23: Total Employment in Transportation in Manitoba ...... 15 Figure 1.24: Contribution to Manitoba Total Transportation Employment by Mode: 2008 ...... 15 Figure 1.25: Total Employment by Transportation Mode ...... 16 Figure 1.26: Employment by Leverage Component from Transportation in Manitoba ...... 17 Figure 1.27: Total Employment Generated by Air Sector in Manitoba ...... 17 Figure 1.28: Trend in Air Employment by Leverage Component...... 18 Figure 1.29: Total Employment Generated by Rail Sector in Manitoba ...... 19 Figure 1.30: Trend in Rail Employment by Leverage Component ...... 20 Figure 1.31: Total Employment Generated by Trucking Sector in Manitoba ...... 20 Figure 1.32: Trend in Trucking Employment by Leverage Component ...... 21 Figure 1.33: Leverage Ratios for Manitoba Employment by Transportation Mode ...... 21 Figure 1.34: Total Expenditures Generated by Air Sector in Manitoba...... 22 Figure 1.35: Trend in Air Expenditures by Leverage Component ...... 22 Figure 1.36: Total Expenditures Generated by Rail Sector in Manitoba ...... 23 Figure 1.37: Trend in Rail Expenditures by Leverage Component ...... 23 Figure 1.38: Total Expenditures Generated by Trucking Sector in Manitoba ...... 24 Figure 1.39: Trend in Trucking Expenditures by Leverage Component ...... 24 Figure 2.1: Per Capita Direct GDP from Logistics by Region ...... 25 Figure 2.2: Per Capita Contribution of Logistics to Direct GDP: Western vs. Eastern Canada .... 26

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Figure 2.3: Per Capita Direct GDP from Logistics by Western Province ...... 26 Figure 2.4: Logistics Direct Contribution to GDP by Territories: 2008 ...... 27 Figure 2.5: Logistics Direct Contribution to GDP by Provinces: 2008 ...... 27 Figure 2.6: Logistics Contribution to Direct GDP by Province: Western Canada ...... 28 Figure 2.7: Direct GDP of Sectors of the Manitoba Economy: 2008 ...... 29 Figure 2.8: Direct GDP Level Transportation and Warehousing: Manitoba ...... 30 Figure 2.9: Trend in Share of Manitoba Direct GDP from Transportation and Warehousing ...... 30 Figure 2.10: Direct Employment in Logistics per 1,000 People by Region...... 31 Figure 2.11: Ratio of Per Capita Direct Logistics Employment: Western vs. Eastern Canada ...... 31 Figure 2.12: Direct Employment in Logistics per 1,000 People by Province: Western Canada .... 32 Figure 2.13: Logistics Contribution to Direct Employment by Territories: 2008 ...... 33 Figure 2.14: Logistics Contribution to Direct Employment by Provinces: 2008 ...... 33 Figure 2.15: Direct Paid Employment by Sector of the Manitoba Economy: 2008 Paid Employees ...... 34 Figure 2.16: Trend in Logistics Direct Total Employment: Paid Employees ...... 35 Figure 2.17: Per Capita Direct Labour Income from Logistics by Region ...... 35 Figure 2.18: Ratio of Western to Eastern Direct Per Capita Income from Logistics ...... 36 Figure 2.19: Direct Labour Income per Capita from Logistics by Province: Western Canada ..... 36 Figure 2.20: Logistics Direct Contribution to Labour Income by Territories: 2008 ...... 37 Figure 2.21: Logistics Direct Contribution to Labour Income by Provinces: 2008 ...... 37 Figure 2.22: Direct Total Labour Income by Sector of the Manitoba Economy: 2008 ...... 38 Figure 2.23: Direct Labour Income In Transportation and Warehousing: Manitoba ...... 39 Figure 2.24: Trend in Share of Manitoba Labour Income from Logistics...... 39 Figure 3.1: Annual Growth Rates of Real GDP by Region ...... 42 Figure 3.2: Annual Growth Rates of Real GDP by Country ...... 43 Figure 3.3: Gross Domestic Product (Canada/Manitoba), ...... 47 Figure 3.4: GDP Growth (Canada/United States/Manitoba), ...... 48 Figure 3.5: Labour Income (Canada/Manitoba) ...... 48 Figure 3.6: Change in Labour Income (Canada/Manitoba) ...... 49 Figure 3.7: Consumer Price Index (Canada/Manitoba) ...... 50 Figure 3.8: Change in CPI (Canada/Manitoba) ...... 50 Figure 3.9: Quarterly Average Interest Rates (Bank of Canada Rate) ...... 51 Figure 3.10: Personal Expenditures (Canada/Manitoba) ...... 51 Figure 3.11: Change in Personal Expenditures (Canada/Manitoba) ...... 52 Figure 3.12: Housing Starts (Canada/United States/Manitoba) ...... 53 Figure 3.13: Change in Housing Starts (Canada/United States/Manitoba)...... 53 Figure 3.14: Unemployment Rate (Canada/United States/Manitoba) ...... 54 Figure 3.15: Change in Unemployment Rate (Canada/United States/Manitoba) ...... 55 Figure 3.16: Quarterly Average Exchange Rates – U.S. Dollar ...... 56 Figure 3.17: Quarterly Average Effective Canadian Exchange Rate Index (1992 = 100) ...... 57 Figure 3.18: Quarterly Average S&P/TSX Composite Index ...... 58 Figure 3.19: Quarterly Average Composite Index of Leading Indicators (Canada) ...... 59 Figure 3.20: Average Annual Composite Leading Indicator for Five “Developed” Economies .. 60

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Figure 3.21: Average Annual Composite Leading Indicator Canada to Emerging Economies.... 61 Figure 3.22: Average Annual Composite Leading Indicator Canada to Chinese and Indian Economies ...... 62 Figure 3.23: Quarterly Average Price Oil/Barrel ($US) ...... 62 Figure 3.24: Quarterly Average Unleaded Fuel Prices (Winnipeg Region) ...... 63 Figure 3.25: Quarterly Average Diesel Fuel Prices (Winnipeg Region) ...... 64 Figure 4.1: 2008 Source Province Exports Leaving via Manitoba to International Destinations .. 69 Figure 4.2: Mode of 2008 Total Exports by All Provinces Departing From Manitoba to International Destinations ...... 70 Figure 4.3: 2008 Prairie Provinces' Road Export Weight Surplus/Deficit ...... 71 Figure 4.4: Rail Traffic Flows In/Through Manitoba, 2004-2008 ...... 73 Figure 4.5: Rail Traffic Flows In/Through Alberta, 2004-2008 ...... 74 Figure 4.6: Rail Traffic Flows In/Through Saskatchewan, 2004-2008 ...... 75 Figure 4.7: Rail Traffic Flows In/Through Ontario, 2004-2008 ...... 76 Figure 4.8: Rail Traffic Flows In/Through Quebec, 2004-2008 ...... 77 Figure 4.9: Rail Traffic Flows In/Out of British Columbia, 2004-2008 ...... 77 Figure 4.10: Rail Traffic Flows In/Out Atlantic Canada, 2004-2008 ...... 78 Figure 4.11: Rail Traffic Flows In/Through Manitoba, by Originating Province, 2008 ...... 79 Figure 4.12: West Bound Rail Traffic Flowing Through Manitoba, Destined for SK, AB, BC ...... 80 Figure 4.13: East Bound Rail Traffic Flowing Through Manitoba, Destined for ATL, QC, ON ... 81 Figure 4.14: Truck Traffic Flows In/Through Manitoba, 2004-2008 ...... 82 Figure 4.15: Truck Traffic Flows In/Through Alberta, 2004-2008...... 83 Figure 4.16: Truck Traffic Flows In/Through Saskatchewan, 2004-2008 ...... 84 Figure 4.17: Truck Traffic Flows In/Through Ontario, 2004-2008 ...... 85 Figure 4.18: Truck Traffic Flows In/Through Quebec, 2004-2008 ...... 86 Figure 4.19: Truck Traffic Flows in British Columbia, 2004-2008 ...... 87 Figure 4.20: Truck Traffic Flows in Atlantic Canada, 2004-2008 ...... 88 Figure 4.21: Truck Traffic Flows Destined For/Through Manitoba, by Originating Province, 2008 ...... 88 Figure 4.22: West Bound Truck Traffic Flowing Through Manitoba, Destined for SK, AB, BC ... 89 Figure 4.23: East Bound Truck Traffic Flowing Through Manitoba ...... 90 Figure 4.24: Total Exports Road and Rail (2009) ...... 91 Figure 4.25: Top 10 Rail Export Portals in Canada (2009) ...... 92 Figure 4.26: Top 10 Road Export Portals in Canada (2009) ...... 93 Figure 4.27: Top 10 Rail Export Portals in Western Canada (2009) ...... 93 Figure 4.28: Top 10 Road Export Portals in Western Canada (2009) ...... 94 Figure 4.29: Total Imports Road and Rail ...... 95 Figure 4.30: Top 10 Rail Import Portals for Canada (2009) ...... 96 Figure 4.31: Top 10 Road Import Portals for Canada (2009) ...... 96 Figure 4.32: Top 10 Rail Import Portals for Western Canada (2009)...... 97 Figure 4.33: Top 10 Road Import Portals in Western Canada (2009) ...... 97 Figure 4.34: Port of Churchill Export Commodities 2005-2009 ...... 99 Figure 4.35: 2009 Port of Churchill Exports by Province of Origin ...... 100

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Figure 5.1: Manitoba Exports by Road to NASCO States...... 102 Figure 5.2: Ditribution of NASCO Exports from Manitoba, by Road ...... 103 Figure 5.3: Manitoba Exports to NASCO Partners, by Rail ...... 104 Figure 5.4: Distribution of NASCO Exports from Manitoba, by Rail ...... 105 Figure 5.5: Manitoba Imports from NASCO partners, by Road ...... 106 Figure 5.6: Distribution of NASCO Imports to Manitoba, by Road ...... 107 Figure 5.7: Manitoba Imports from NASCO Partners, by Rail ...... 108 Figure 5.8: NASCO Imports to Manitoba by Rail ...... 109 Figure 6.1: 2009 Manitoba’s Top Countries of Export...... 112 Figure 6.2: Mode of Manitoba Exports 2009 ...... 113 Figure 6.3: Modes of Manitoba Exports- Historical ...... 114 Figure 6.4: 2009 Manitoba’s Top Countries of Imports ...... 116 Figure 6.5: Manitoba Modes of Imports (2009) ...... 117 Figure 6.6: Modes of Manitoba Imports- Historical ...... 118 Figure 6.7: Modes of Manitoba Imports- Historical (Road Removed) ...... 119

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List of Tables

Table 4.1: 2009 Total Exports Leaving Canada via Originating Province ...... 65 Table 4.2: 2009 Non-Energy Exports Leaving Canada via Originating Province ...... 66 Table 4.3: 2009 Non-Energy Export Modes Leaving Canada via Originating Province ...... 66 Table 4.4: 2009 Road Exports Leaving Canada via Originating Province ...... 67 Table 4.5: 2009 Rail Exports Leaving Canada via Originating Province ...... 67 Table 4.6: 2009 Air Exports Leaving Canada via Originating Province ...... 68 Table 4.7: 2009 Marine Exports Leaving Canada via Originating Province ...... 68 Table 4.8: 2008 Provincial/Territorial Usage of Jurisdictions’ Road Infrastructure ...... 72 Table 6.1: Top 10 Export Commodities from Manitoba ...... 111 Table 6.2: Top 10 Import Commodities to Manitoba by Value ...... 115

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