March 2008 www.asiapacifi c.ca Number 49 Greening the Asia Pacific Gateway: Sustainability as a Competitive Asset Executive Summary By Claude Comtois* Transportation-based trade gateways are at the centre verifi cation and organized markets pose challenges of economic globalization. Th e demand for effi cient to the implementation of sustainability schemes. For transportation is rising as world trade grows, but gateways, sustainability should be viewed through the intensive use of gateways creates a scarcity of economic, environmental and social dimensions resources, generates waste and aff ects the quality of that account for both physical and non-physical the ecosystems that challenge the objective of high infrastructure. Any approach to sustainability must economic outputs. Th e concentration of activities consider the common interests, capacity and willingness within gateways aggravates environmental conditions, of shippers, carriers and terminal operators. aff ecting noise levels, air pollution, and water and soil contamination. Th ere is a lack of space in gateways Th ere are three broad elements in corporate and the built-up environment has not taken into perspectives on sustainable development: account the capacity of ecosystems to support future expansion. Decentralization tendencies characterize • Globalization has extended sea-line connections all gateways in the global industrial production and put emphasis on gateways within the global process. Th ese forces can disturb the economic logistics network. But the environment plays a structure of gateways as they can lead to a devaluation constraining role even as technological advances of both gateway transport infrastructure and the help to overcome some of those constraints. capital invested. Th erefore, the need to implement Th ere is emerging a consensus in the transport sustainability measures is potentially the single most industry globally concerning environmental important issue facing the growth, performance and issues and impacts. organization of gateways. • Environmental regulations are increasing in number While there is consensus on sustainable transport and strength. Th ese aff ect the competitiveness of established largely through the United Nations, the transportation industry. Transport operators regulatory uncertainties and the lack of clearly must factor environmental costs into their business accepted defi nitions, monitoring standards, and integrate environmental performance into corporate strategies.

* Prof. Claude Comtois is Senior Research Fellow at the Asia Pacifi c Foundation of Canada, an associate of the Interuniversity Research Center on Enterprise Networks, Logistics and Transportation, Université de Montréal and professor of geography at the Université de Montréal. Prof. Comtois has a degree in political science, a M.Sc. in geography from Laval University and a Ph.D. from the University of Hong Kong for his research in the fi eld of transportation. His teaching and research are centred on transport systems with an emphasis on shipping and ports. He is a co-author of the Geography of Transport Systems, published by Routledge and has published many articles in scientifi c journals on port and marine transport.

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• Environmental sustainability represents a growing Th e Asia Pacifi c Gateway cannot escape these area of responsibility for transport companies, major international trends because it must remain forcing them to acquire expertise in environmental competitive. Research fi ndings demonstrate that management. Th e increasing links between regions that have environmental problems are not environmental performance and industry competitive globally. Complex systems of diff erential competition suggest that, in reducing negative charges for environmental impacts (i.e. congestion environmental impacts, a bottom-up approach fees, polluting emissions, waste management, energy that gives the operators the assessing rights may be effi ciency, etc) that impact operations of gateways more appropriate than a top-down approach. and corridors lead stakeholders to place emphasis on sustainability. Gateways are natural objects of competition where effi ciency is crucial. Based on evidence from container There are signs that sustainability measures are shipping, air hubs and rail yards, there are three key becoming the competitive standard, although the drivers of effi ciency: generally fragmented nature of modal-specific planning in gateways complicates integration • Internal effi ciency – this depends on cost-effi cient efforts. Stakeholders are also empirically testing infrastructure and can be measured through return implementation processes with a view toward on investment, energy consumption and emissions. expanding competitive options in the future. • Unimpeded accessibility – fully-fledged gateways International comparative analysis suggests the depend on clusters of value-added services emergence of several best sustainable practices taking within a highly integrated multi-modal network. the form of optimal network design, new operational Technology helps to increase connectivity, achieve architecture, freight assignment operations, yield economies of scale and reduce distance decay so management, shift in port of entry, etc. Th e various as to gain immediate transfer as far as possible. dimensions of sustainable transport are interdependent But no technology will ever permit immediate and lead to various trade-off s and opportunities for transfer; hence sustainability problems are transport decision-makers. Taken cumulatively these magnified by congestion that impedes access and approaches represent a signifi cant redirection for economic growth. transport governance. • Expansion capacity – capacity is a perennial issue Promoting an effi cient and sustainable transportation- that will continue as intermodal competition puts based gateway and corridor is not strictly a matter of pressure on the need for land. Environmental market organization or regulatory controls. Th ere is conditions can complicate, postpone or stop a need to strengthen transport governance, and this projects thus challenging their ability to respond to depends on three factors: market demand. • Leadership – commitment from top executives is Beyond legislation that imposes limits and constraints, essential to integrate sustainability in management the most important challenge for industry is to practices, seek government and stakeholder support implement environmentally-sustainable transport in policy-making and facilitate strategies balancing within competitive market structures. From environmental and corporate concerns. fi eldwork research in Western Europe, North America and East Asia, this study measured the extent to • Benchmarking – establishing a minimum standard which sustainable development practices aff ect in transport operations clarifi es the risks, impacts the competitiveness of the transportation industry. and responsibilities of stakeholders in implementing Environmental performance has been integrated in logistics in the gateway. the traditional economic considerations of transport • Operational Calendar – defi ning the scope, timelines enterprises: investments; the costs of credit; insurance and measurable targets through government, premiums; market capitalization; revenues; competitive industry and academia facilitates sustainability advantages; new markets; and strategic alliances. schemes, business practices and transport policies. APF Canada - Canada Asia Commentary No. 49 2 March 2008

Understanding the Green Gateway

Transportation-based trade gateways and corridors reasons. Corporate decision-makers have little are the archetypical modern growth machine. Th e alternative than to seek a balance point that satisfi es expansion of transport terminals with capacity to the market while minimizing the adverse eff ects handle and tranship goods and the related growth in on the environment. Becoming greener can confer traffi c volume has been underpinned by the extension short- and long-term economic advantages, though of air-sea-land connections. Th is new infrastructural these advantages are very poorly understood. In arena illustrates the cumulative connections between view of this, there is a pressing need to identify the infrastructure, industrial production and the man- challenges, explore the opportunities and realistically made environment. It is vital to understand the assess the impacts of sustainability on gateway role of sustainable development in maintaining the effi ciency and competitiveness. growth, performance and organization of gateways from the perspective of a system extracting the A series of critical issues is raised by these maximum potential from existing infrastructure. concerns. How are stakeholders participating in the development of gateways? How is sustainability Th ere is a widely held assumption that it is up to shaping the competitiveness of gateways? What are governments and regulators to address environmental the key drivers of environmental actions by gateway concerns. While governments and regulators stakeholders? How are industry’s practices addressing have an important role to play in establishing sustainability concerns? Above all, what are the standards and setting legal requirements, other implications for the competitiveness of Canada’s Asia gateway stakeholders need to embrace practices of Pacifi c Gateway? sustainability for commercial and non-commercial

International Container Trade and Hub Ports

International trade is dominated by maritime total container traffic increased from 30 million transport. The volume of freight carried by sea is TEU (20ft equivalent units) in 1990 to over 300 estimated at six billion tons per year (CNUCED, million TEU in 2005 (CIY, 2006). 2003). The growth in this trade is one of the major phenomena of world exchanges. The Another driving factor aff ecting the shipping industry globalization of markets has been underpinned by is the increasing size of vessels operating on the the expansion of the world’s sea-line connections world’s major maritime arteries. Th is has permitted and the complementary importance of hub ports carriers to reduce the cost of maritime transport by within global logistics networks. The globalization achieving economies of scale. Container carriers of of these networks and the need to coordinate over 14,000 TEU are already in operation. Between distribution between modes, regions and trade 1996 and 2006, the growth in world trade has have impelled the growth of container traffic which exceeded that of the world maritime fl eet refl ecting is a prerequisite for the commercial integration of improved productivity in the maritime fl eet through the world’s regions. Containerization standardizes an increase in ship loading capacity. international linkages, imposes a new dynamic between maritime carriers and port operators In this process, economic prosperity is closely and reduces handling costs. The importance of associated with network hubs within development containerization is demonstrated by the fact that corridors where the infrastructure is correlated with

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high levels of accessibility. These infrastructure Th e top container shipping lines have operated requirements, demanding investments beyond vessel capacity well above 100,000 TEU (Table 1). most government’s financial capabilities, have Th e strategy of these marine carriers is to off er global led to an extensive process of liberalization in the services that optimize the contribution of cargo organization of transport systems. Governments to existing facilities and to operate a system at full have undertaken a series of divestitures of their capacity. Th is process led to the grouping of fl eets transport systems, privatizing companies and through alliances, mergers or acquisitions. Th ese commercializing ports. Many of these policies shipping alliances have permitted the establishment have favoured the emergence of an extremely of global networks off ering extended port coverage competitive transport market, marked by a through Trans-Pacifi c, Trans-Panama, Trans- multiplication of linkages, the development of Atlantic and Trans-Suez services. In this context, new routes, deregulated fare structures and greater shipping lines are concerned both with linkages autonomy for transport firms in the organization to transactional networks through electronic data of their operations (Dion, Slack and Comtois, interchange and to the actual transport chains. But 2002). This fresh set of economic and political shipping alliances are rigid in their structure and activities has permitted the emergence of global organisation. Th ey lack fl exibility and capacity terminal operators. Some maritime carriers have to adapt rapidly to changes. Th e highest growth even added the management of container terminals in container throughput and rate of return are to their operations. achieved among non-alliance members mostly located in East Asia. Th ere is a closer match between Using available data, an examination of the location the main loading-unloading freight platforms and of the main stakeholders in the container shipping command centres of shipping lines in Asia compared industry highlights the sharp contrast between the to Western Europe and North America. throughput of marine gateways, the fleet capacity of global container shipping carriers and the Shipping lines select global hub ports on the basis volume of containers handled by the top terminal of effi ciency and cost and their capacity to secure operators (Figure 1). a large volume of traffi c. Th ere are over 200 port terminals in the world that are under the control of Th e top clusters of international container ports, fewer than 25 state-owned or private sector global those that handle above fi ve million TEU annually, have high gantry crane capacity and suffi cient water depth to allow the berthing of large container ships. In East Asia the main marine gateways are the cluster of ports in the Singapore Strait, the Pearl River Delta ports centred on Hong Kong, the ports of Shanghai and Ningbo in the Yangtze River delta, the Kaohsiung-Taichung corridor in the Taiwan Strait, the southern tip of the Korean Peninsula and the cluster of ports in Tokyo Bay. In North America, the main gateway is located in San Pedro Bay with the ports of Los Angeles, Long Beach and San Diego. In Western Europe, marine gateways are located in the Rhine-Scheldt area (with Antwerp and Rotterdam) Containerization standardizes international linkages, imposes a new dynamic between maritime carriers and and the Helgoland Bay in Northwest Germany (with port operators and reduces handling costs. Hamburg and Bremen).

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FIGURE 1: Container Shipping Industry, 2005

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TABLE 1: Headquarters and Slot Capacity of Major Container Shipping Carriers (2005)

Carrier Headquarters Capacity (TEU)

China Cosco Container Lines Beijing 322,326

China Shipping Container Line Shanghai 346,493

Hong Kong Orient Overseas Container Line (OOCL) Hong Kong 234,141

Taiwan Evergreen/Uniglory Marine Taipei 477,911

Yangming Marine Keelung 188,206

Singapore American President Lines (APL) Singapore 331,437

Japan Nippon Yusen Kaisha/TSK Tokyo 302,213

Kawasaki Kisen Kaisha (K-Line) Tokyo 227,872

Mitsui/OSK Lines Tokyo 241,282

South Korea Hanjin Shipping Co. Seoul 328,794

Hyundai Merchant Marine Seoul 147,989

Europe Maersk-Sealand Line Copenhagen 1,665,272 See Maersk-Sealand Line P&O Nedlloyd London/Rotterdam (prior to merger) (merged in 2005) Mediterranean Shipping Co. (MSC) Geneva 784,248

CMA-CGM Marseilles 507,954

Hapag Lloyd Container Line Hamburg 412,344

North America see Hapag-Lloyd CP Ships London (merged in 2005)

Other Zim Israel Line Haifa 201,432

Campania Sud Americana de Vapores (CASV) Valparaiso 234,002

United Arab Shipping Co. Dubai 74,004

Source: BRS-Alphanier – Liner Market Shares, 2000-2006

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operators, accounting for 60% of the total volume all markets. Th e top Asian terminal operators show of containers handled (Table 2). Th ese companies a fairly concentrated geographic distribution of their are not a homogenous group. Distinction has also operations in high throughput container facilities. to be made between traditional stevedores, carrier- Western European operators have developed a broad controlled operators and global hybrids whose global portfolio including large marine gateway parent company’s business is container shipping but facilities and transhipment hubs. North American operate port terminals as an independent business operators are developing investment strategies in unit (DSC, 2004). Th ere are sharp contrasts in potentially high growth greenfi eld schemes to cater to the geographical spread of operations. Th e global the growing Asia trade. container terminal industry is extremely dynamic with market competition in the Far East, Europe and Expanding ports hosting new container terminals with North America and various partnerships formed in capacity for the handling and transhipment of goods order to meet the demands of global networks created are emerging as land use models termed “gateways,” by multinational mergers requiring door-to-door, considered a prerequisite to participation in the just-in-time, logistics services for their products across increasingly exchange-based global economy.

TABLE 2: Headquarters and Slot Capacity of Major Container Terminal Operators (2005)

Terminal operators Headquarters Capacity (TEU million) HPH Hong Kong 64.3 PSA Singapore 49.3 APM Terminals Copenhagen 57.8 Eurogate Bremen 15.4 COSCO Beijing 34.2 P&O Ports London See Dubai Port World (merged in 2006) Evergreen Taipei 9.8 Dubai Port World Dubai 46.7 SSA Marine Seattle 8.5 American President Lines Singapore 6.5 HHLA Hamburg 8.1 Hanjin Seoul 7.9 Mediterranean Shipping Co. Geneva 11.0 NYK Line Tokyo 6.6 OOCL Hong Kong 5.0 CSXWT Charlotte See Dubai Port World (merged in 2005) MOL Tokyo 3.8 Dragados Madrid 6.0 K Line Tokyo 5.1 TCB Barcelona 4.4 ICTSI Manila 3.2 Yangming Marine Keelung 1.5 Hyundai Seoul 2.9 CMA CGM Marseilles 3.8 P&O NL London/Rotterdam 5.6 Source: DSC, 2006.

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Gateways and Intermodalism

Th e concept of the gateway is not new (Klink and Berg, high density corridors but between global logistic 1998): it has been actively studied since the 1950s. chains seeking to capture markets. Initially it referred to a node providing access and/ or transport services to places for the fl ow of goods, Th e establishment of synergies between these people and information. Recent advances in transport diff erent modes is critical to the success of gateways. and communications have not confi ned themselves Despite intermodal competition, global processes solely to container shipping, increasing vessel size facilitate the management of transport systems. and port terminal expansion. Th ey also cover a Telecommunications have become a key feature in whole range from airports, jumbo jets, rail facilities, the functioning of logistics systems. In the context of bloc trains, and logistics to the extensive application gateway development, all existing transport terminals of information technologies to the management of must be integrated physically. Th e transportation traffi c. Th e introduction of technological innovations industry is recognizing the scope for cross-sectoral is associated with the addition of new infrastructure alliances -- terminal operators, shipping lines, leading to a refashioning of existing networks. railway companies and trucking fi rms are working Together they create a whole new area of infrastructure. together under various forms of organisational New, denser infrastructure, based on multi-layered structures optimizing existing infrastructure with links, has intensifi ed the network economy. a view to off ering seamless, round-the-world transport services. Another key factor to consider The analysis of traffic for container shipping, air in the unfolding of a fully-fl edged gateway is the cargo and passengers, rail hubs and corridors and development of a portfolio of trade in goods and the telecommunication industry reveals several services. A comprehensive transaction system will key features. Gateways are characterized through provide the commercial currency to reduce costs, to a typology of load centres and transportation- exploit global production networks, to increase trade, based corridors. The location of hubs is not to integrate transborder manufacturing processes always commensurate with the degree of control and to create value added. exerted by international corporations. The complex ownership structure of gateway facilities In the perspective of a system extracting the maximum suggests an increasingly competitive business potential from existing infrastructure, it is necessary environment. World transport geography points to understand the role of the main stakeholders in the to a matrix of competition and cooperation among development of transportation-based trade gateways and between load centres and corridors. The and corridors, to provide greater modal choice and competition unfolding between gateways is not even to infl uence this choice according to economic between individual load centres and their adjacent and environmental needs.

Gateway Stakeholders and Sustainability

An effi cient gateway combines physical and non- specifi c legal, fi nancial and political frameworks physical infrastructure. Th e physical infrastructure in diff erent parts of the world (Lakshmanan and covers transport and telecommunication networks Anderson, 2002). Th e main stakeholders with and facilities. Non-physical infrastructure embodies knowledge and competencies to accommodate the capital, knowledge, labour force and resources international commerce, to reduce barriers governing applied to the physical networks, including the border-crossings and to intensify the development capacity to make a contract of carriage, to perform of gateways and transportation based corridors are transport and to negotiate transfer agreements in shippers, carriers and terminal operators (Figure 2). APF Canada - Canada Asia Commentary No. 49 8 March 2008

FIGURE 2: Components of Transportation System

Th e concept of transportation-based trade gateway to facilitate trade gateways. Th e most concrete expresses the need for economic integration. Trade manifestations concern policies supporting gateways consolidate: commercial transactions and infrastructure development. Th e major preoccupations are 1) the fl ow of products, services, people and with economic and operational effi ciency and the information resulting from a concentration of strengthening of commercial activities in relation to production, transformation and distribution the presence of transport nodes and corridors. functions; 2) transport systems and infrastructure facilitating Second, gateways, while recognized as transport these fl ows; and centres, are not the product of theories or planning practices. Th is is important to underline in light of 3) policies and rules regulating these elements. the current commercialization and liberalization processes of transport systems. Trade gateways are Th e concept leads to several observations. First, more and more the result of a decentralized decision- gateways are economic development tools: making process underpinned by market forces. governments continue to exert an important role

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Th ird, gateways are not immutable. Th ey can be can be located either in the gateway region or in created, reoriented or neglected in relation to the the hinterland. Th e geographic scope served by the introduction of new technologies, the construction gateway is determined by the efficiency of the of new infrastructure, the elaboration of policies, hinterland transport network. If the development the adoption of land use measures or commercial strategy is to create competitive advantage in both changes resulting from mutation within the local export and import markets, then emphasis will community. Evidence suggests that a major factor in be given to integrating production and logistics the transformation of a gateway is competition from functions at regional transport hubs with fully- other gateways. fledged multimodal trunk routes to/from the main gateway. Fourth, the analysis of changes in gateway development suggests that distinctions have Gateways are at the centre of economic globalization. to be made between import and export flows Th e anticipated growth in world trade aff ects the and the geographical scope of the hinterland demand for effi cient transport-based trade gateways market (Figure 3). For imports fl ows, the highest and corridors but this, in turn, has an impact on performance is obtained with value-added activities sustainability. Th e intensive use of gateways and taking place at the gateway itself to serve the local the gathering of the forces composing them, create or regional market. For exports, the objective is a scarcity of resources, generate important levels of to consolidate logistics activities with a view to waste and aff ect the quality of ecosystems that appear service overseas markets. Production functions to destroy the objectives of high economic outputs.

FIGURE 3: Geographical Logistics Patterns.

Import Export Comprehensive Logistics Logistics Logistics

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Th e physical features of the environment — distance, Th e permanent transformation of gateway topography, hydrology, climate and natural hazards geographical areas leads to a relocation or shift of — aff ecting the activities of the transport industry are activities. Th ere is typically a lack of space in and well known (Hensher and Button, 2003; Rodrigue, around gateways as the built-up environment has not Comtois and Slack, 2006). Th e analysis of the been designed to support future expansion needs. relationship between gateways and the environment As a result, all gateways display decentralisation suggests that the concentration of activities within tendencies already apparent in the global industrial gateways aggravates environmental conditions. production process. Th ese tendencies aff ect both the Concentration is at the heart of the environmental core of metropolitan structures as well as peri-urban problems of gateways. Traffi c density generates an areas and can disturb the economic structure of increase in the surrounding temperature, aff ects the gateways as they can lead to devaluation of gateway climate and has an impact on air quality. It has been transport infrastructure and of the capital invested. demonstrated that frequent transfers in land transport Besides, these tendencies increase transport needs networks increase noise levels. Growth in maritime in regions where the traffi c originally concentrated traffi c along multiple navigation routes, under varied in gateways has been transferred. Many suburban hydrological and meteorological conditions and near sectors cannot support the amount of capital needed densely populated coastal areas has an impact on for gateway development while peripheral cities do water quality. Th e removal of the land surface for not have the capacity to fulfi ll this new heavy demand highway construction or lessening surface grades for imposed on their resources. port and airport developments have led to the loss of fertile and productive soils. Also, soil contamination In future, the need to implement sustainable can occur through the use of toxic materials by the development strategies is potentially the single most transport industry. Many transport routes have important issue facing the growth, performance required the draining of land, thus reducing wetland and organization of gateways. Gateways and areas and driving out water plant species. Th e need transportation-based corridors thus represent a to maintain road and rail right-of-way or to stabilize unique opportunity to develop an understanding of slopes along transport routes has produced changes the evolution of transport systems and to formulate in vegetation with the introduction of exotic species. sustainable standards and implementation strategies. Social and economic cohesion can be severed when Any approach to sustainability must take into account new transport facilities cut across an existing urban the common interest of gateway stakeholders and their community. Arteries or transport terminals can defi ne capacity and willingness to respond in a transparent urban borders and produce segregation and can aff ect and accountable decision-making framework. the quality of urban life by creating physical barriers.

Key Drivers for an Effi cient Gateway

Th e concept of sustainable development when applied 2) environmental protection, at the local to transport refers to its role in securing a balance and global level, through the reasonable between equity, effi ciency and the capacity to answer use of non-renewable resources and the the needs of future generations. More specifi cally, development of new technologies; and this implies: 3) protection of individual well-being by reducing the impacts of pollution and poverty. 1) maintaining a level of economic growth that would create the necessary wealth to achieve In this context, a policy of sustainable transport sustainable development; must pursue several objectives, namely: securing

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energy supply; refl ecting the costs of non-renewable effi ciency can be measured in terms of eliminating resources in transport vehicle operations; and empty moves on rail and bulk vessels, curtailing adopting production processes that respect the cargo waiting time, reducing delays on runways, environment by eliminating negative externalities etc. Th ese actions are directly related to energy detrimental to future generations (UN, 2001). consumption and its related environmental impact in the form of gas and particulate emissions that While there is a general consensus on the objectives aff ects air quality causing damage to human health. of sustainable transport, the implementation of Multiple regulatory frameworks on polluting sustainability faces serious problems because emission reductions are a certainty. Sustainability of regulatory uncertainty and a lack of clearly underpinning terminal effi ciency focuses on accepted defi nitions and standards for monitoring, improving fuel effi ciency, refl ecting the costs of verifi cation and organized markets. Th e issue of non-renewable resources in terminal operations sustainable development must be articulated around and adopting production processes respecting the the economic, environmental and social dimensions environment by eliminating negative externalities. of the process. In the economic dimension, the objective is to orient progress toward economic Second, the functioning of gateways rests on the effi ciency. In the environmental dimension, the continuity of the transport network, minimum objective is to understand the reciprocal infl uences time interval between vehicles on the same route, of the physical environment and the practices of the high frequencies and regularity of movements. A industry. In the social dimension, the objective is to fully-fledged gateway depends to a large extent fi nd a solution to the contemporary problems raised on shippers developing clusters of services in the by the logistics revolution and to respect current and assembly, collection, shipment and distribution future needs of society. of freight with a view to offering door-to-door services. Spatial interaction is the operating force Gateways are a support, a resource and consequently of gateways. There are numerous gateways in the the object of competition. Evidence drawn from the world and all display a concentration of activities, top international container shipping, air hubs, railway demographic growth and increasing economic smart yards and dry bulk load centres suggests three weight. The main conditions for the development, key drivers related to the issue of concentration performance and organisation of gateways rests aff ecting the effi ciency of gateways: internal effi ciency, unimpeded accessibility and expansion capacity.

First, a fully-fl edged gateway involves several terminals. Terminal operators can be the initiators of gateways. Th ey thrive in attracting mega- carriers, expanding their market threshold, concentrating traffi c and providing effi cient physical placing, transfer and removal of cargo into/from carrier aircraft , vessels, trucks or trains. Th e performance of these terminals depends to a large extent on cost-effi cient infrastructure. As infrastructure charges must be cost-related, non- discriminatory and transparent, there is a need to develop a pricing regime that underpins a terminal’s Top international container ports have high gantry effi ciency, provides a reasonable return to investors, crane capacity and sufficient water depth to allow the and supports a competitive industry. Internal berthing of large container ships.

APF Canada - Canada Asia Commentary No. 49 12 March 2008 on: 1) an exchange structure based on a network of transport equipment and of the possibility of of transport arteries between strings of cities; 2) intermodal transfer. In the context of economic the functioning of comprehensive logistics chains; growth with increasing modal competition, and 3) the constant search for the best supply and effi ciency rest on the quality of multimodal transport distribution system. Carriers undertake transport by services. Terminal operators are responsible for sea, air, rail, road, inland waterway or by combination the operation of the area at the beginning and of modes. Advances in transport technologies such as end of the land, marine or air line which serves post-Panamax vessels and jumbo jets have permitted as the loading, unloading or transfer point for reductions in the cost of transport by achieving cargo and oft en includes various facilities such as economies of scale. Landbridges are an important warehousing, customs services and management part of global transport and logistics systems and offi ces. Th e interests shaping terminal operators’ one of the unavoidable outcomes of gateways as they strategies in gateway development are measured in provide intermodal structures and connectivity with terms of output, added capacity, productivity, value a continental hinterland. added or cost-benefi t, oft en through investment in automation. But traffi c growth, dominated Managing fl ows has become a key feature in the by road transport, the importance of airfreight success of carriers. All transport and trade gateways in logistics services, the increasing size of ships are aff ected by congestion. Th e safety of trade rests on and the improvement in rail facilities requiring the notion of passages as resources: supply measured additional space for transport terminals, represent in terms of corridors is limited, while demand challenges that cannot be answered by the current expressed in terms of the number of vehicles, ships, status quo. Th e issue of capacity is expressed in truck and trains using these passages increases. Th e terms of land use pertaining to the provision of geography of routes combined with the increase sites for expansion. Environmental conditions in vessel size and weight, movement of hazardous can complicate, postpone or prevent terminal goods, growth in traffi c and increasing acceleration development projects, creating serious diffi culties intensify the risks of congestion. Ultimately, the in trying to meet market demand. ideal gateway would provide immediate transfer of everything, toward any mode, in all directions at market cost where distance decay would be negligible. No technology will ever allow achieving that objective. Sustainability problems are expressed in terms of congestion that closes or impedes access to routes or passages aff ecting a gateway’s economy.

Th ird, capacity is a perennial issue of gateways. Th e basic structure of gateways and corridors are networks that concentrate communications, interfaces that act as compulsory passages for various activities and thresholds that organize directions. Th e capacity issue applies to the fl ow at the terminal entrance and exit of gateways as well as inside gateways. Th e capacity at which a vehicle, a product, a person or information can penetrate, The anticipated growth in world trade affects the demand for efficient transport, and the development of move or exit a gateway is a function of the network’s gateways, but has an impact on the environment and physical structure, of the quality and diversity sustainability.

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International and national legislation suggest that the suggests that environmental performance has been environment has become a factor of change in terms integrated in the traditional economic considerations of obligations, responsibilities and competitiveness. of transport enterprises. Environmental legislation is frequently perceived • Investments. Th e transport industry needs to as imposing a constraint on shippers, carriers and invest in clean technologies, improving energy terminal operators that limits their activities and effi ciency, increasing renewable energy use, waste increases the industry’s costs, since it can forbid actions reduction and recycling. Th ese various methods or decisions that could impact on ecosystems. Th ese and techniques may reduce the fi nancial costs restrictions can reduce the competitiveness of the of the transport industry in meeting emission transport industry, forcing stakeholders to respond reduction requirements. by developing environmental management systems and programs to meet regulatory requirements. • Credit rates. Th e fi nancial sector is increasingly In future, the planning and implementation of concerned about environmental sustainability. investments in transport infrastructure around As a result, merchant banks are implementing the globe increasingly include an environmental credit programs charging diff erent interest rates impact assessment satisfying minimum standards to terminal operators and carriers in relation to of analysis. All the partners of the transport their environmental performance. industry must respond to these new regulatory • Insurance premiums. Environmental costs infl uence requirements. Given the industry’s concern insurance premiums. Transport fi rms that undertake over financial sustainability, the most important activities that pose a potential risk to the environment challenge for the industry, then, is to implement pay an annual premium for any damage that might environmentally sustainable transport within occur to the environment and must prepare some competitive market structures. contingency plan. Th e conditions and insurance premiums are functions of the past environmental In order to measure the extent to which the performance of transport operators. Already practices of sustainable development aff ect the insurance companies reduce insurance premiums of competitiveness of the transportation industry, fi rms that have a green certifi cation. evidence has been drawn from detailed fi eldwork • Market capitalization. Increasingly, environmental with supporting information from trade journals, components are accounted for in the value of industry records and consultants’ reports. In-depth shares of stock market listed fi rms. A growing interviews were conducted in Western Europe, number of investors are seeking socially North America and East Asia with members of responsible investment opportunities. the industry, governments, research institutes and insurance companies. Th e aim was to understand • Revenues. Several factors permit the transport the practices in the industry, the environmental industry to increase revenues. State instruments management issues, the challenges and the such as fi scal advantages, government purchasing lessons learned, the economic impact and to relate policies and government subsidies that favor commercial standards to sustainable development through fi scal measures the purchase of green issues that are re-shaping the transport industry technologies permit fi rms that make use of these (Comtois and Slack, 2005). programs promoting environmental sustainability, to achieve important savings. Equally revenue Practices of environmentally sustainable transport sensitive are environmentally diff erentiated increasingly aff ect the competitiveness of the fairway charges that permit carriers to increase transport industry around the world. Analysis their revenues.

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• Competitive advantages necessity. Leading longer can carriers or terminal operators search for international manufacturers and retailers such pollution permits. Th ey must comply with local/ as Ikea, Wal-Mart, Nike and Home Depot international regulations, factor environmental costs are requesting freight forwarders to include into their business and integrate environmental environmental performance of product transport performance in corporate strategies. into their corporate footprint. • New markets. It is true that environmental Th ird, environmental sustainability represents management imposes restrictions that could result a growing area of responsibility for transport in more costly solutions. However, a transport companies that is forcing them to acquire expertise enterprise that acquires expertise in environmental in environmental management. Th e adoption management also secures a marketable knowledge. of measures of sustainable development is now Th is expertise can be harnessed to become a considered necessary by the industry in order statutory and even a commercial advantage. to maintain its competitiveness in all facets of transportation-based gateways and trade corridors. • Strategic alliances. Th ere are an increasing number Th e successes of the policies canvassed toward of transport operators attesting in their annual sustainability largely depend on the privately-owned reports to their compliance with environmental activities of commercial carriers and terminal legislation. Legal and compensation costs related operators that are also concerned with fi nancial to transport project development have an infl uence sustainability. Terminal operators, carriers and in global transactions of mergers and acquisitions. shippers must evaluate the eff orts undertaken in Th is suggests that environmental risk reduction terms of resources dedicated to the environment, represents an asset for active stakeholders. measure performance over time and communicate their results to the shareholders, local community The research findings provide insights on and governments. Market economy principles are corporate perspectives of sustainable development. integrated within environmental management. Three broad elements deserve discussion. First, Th e increasing links between environmental environment plays a constraining effect on the performance and industry’s competition suggest transport industry and rapid technological and that a bottom-up approach, giving the stakeholders scientific progress has permitted it to overcome the assessing rights, may be more appropriate the environment. But evidence shows that the than a top-down approach in reducing negative functioning of global trade requires careful environmental externalities. consideration of climate, water, air, soil and biodiversity as resources. There is an emerging consensus in the transport industry concerning the typology of environmental issues and impacts. The international overview of sustainable development practices does not make distinctions between varied geographical conditions. Sustainability is global in scope.

Second, environmental regulations are increasing in number and strength. Th ere are a wide range of responses to environmental legislation. But the practices of sustainable development constitute a Traffic growth and the improvement in rail facilities sector whose performance increasingly aff ects the requiring additional space for transport terminals is a competitiveness of the transportation industry. No challenge that must be met in a sustainable way.

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Strengthening the Asia Pacifi c Gateway

British Columbia is in a leading position for Canada’s for development, leading to serious infrastructure economic development. Freight, passenger and duplication. Th e Asia Pacifi c Gateway possesses information traffi c generated in this region has the prerequisites to be a global transhipment hub, been growing very rapidly. But the Asia Pacifi c an international gateway for North America and a Gateway cannot escape major trends emerging at fully-fl edged distribution and logistics centre. As the international level. In the context of growing the share of global traffi c increases, the sustainability commercial exchange, heavy demands will be put issue will become more acute. Without green on Canada’s Asia Pacifi c Gateway. Environmental certifi cation, the development of international hub challenges are determining factors in the process status will be limited as better environmentally of globalization. It has been demonstrated that performing gateways stand to benefi t. As a result, the regions that have environmental problems are not blueprint related to the implementation processes competitive at the global level. Th e study reveals of sustainable development in various gateways is the existence of complex systems of diff erential empirically being tested. Many gateway stakeholders charging for environmental purposes (i.e. congestion are evaluating how to increase their competitiveness fees, polluting emissions, waste management, by adopting practices of sustainable development energy effi ciency, etc) that address operations of with a view to face market competition. transportation-based gateways and corridors and lead stakeholders to give emphasis to sustainability. Figure 4 outlines a basic framework for implementing green logistics process in transportation-based Given the fragmented nature of multilayered gateways and corridors. Competitive factors fl ows, transportation corridors and gateways, it are expressed in terms of transport effi ciency, would appear diffi cult to develop an integrated accessibility and capacity. International comparative sustainable strategy of gateway development. Th is analysis suggests the emergence of several best is not a unique situation. In other parts of the world sustainable practices taking the form of optimal gateway development has oft en been fragmented, network design, new operational architecture, with not necessarily the best sites being selected freight assignment operations, yield management, shift in port of entry, etc. FIGURE 4: Green Logistics Framework.

Physical and Non-physical Infrastructure Regulatory and Market Practices

Green Logistics Processes APF Canada - Canada Asia Commentary No. 49 16 March 2008

Individually, none of the approaches for development it becomes possible to: 1) integrate transportation-based trade gateways and corridors sustainability in management practices; 2) seek and discussed above is entirely novel. Adoption of these obtain government support and the participation approaches gives transport gateway stakeholders of partners in building policies; and 3) facilitate competitive advantage and enhances effi ciency and the elaboration of strategies seeking equilibrium profi tability. While these steps represent distinct between environmental and industrial concerns. stages, it is clear that they are highly interrelated. Benchmarking allows the establishment of Th e various dimensions of sustainable transport are minimum sustainable standards for transport interdependent and lead to various trade-off s and operations. Th ese standards must identify the opportunities for transport decision-makers. Taken specifi c environmental status addressing climate cumulatively these approaches represent a signifi cant change, water, air, soil, noise, biodiversity and land re-direction for transport governance. take issues within the gateway area. Th e standards will clarify the risks, impacts and responsibilities of Promoting an effi cient and sustainable transportation- key stakeholders in implementing gateway logistics based gateway and corridor is not strictly a matter of in a sustainable manner. market organization or regulatory controls. Th ere is a need to strengthen transport governance. Th e objective An operational calendar provides an agenda for is not to create another administrative layer. Th e work by government, industry and academia governance of sustainable transportation facilitation on facilitating sustainable transportation- concentrates on innovations in the physical, economic and based gateways and corridors. The scope is to built environment – the three dimensions of sustainable concentrate on changes in gateway development development. Th e improvements to green logistics and performance, the transformation in the practices through changes in conveyances coming organization and policies of transport systems and going in a gateway depend on regional leadership, and physical flows and the impact of business benchmarking and the operational calendar. logistical systems and practices. The most efficient strategies are those that target short, medium- and Leadership is essential in developing sustainability. long-term objectives with precise values. International comparative studies reveal that if the top executives espouse visions of sustainable

Conclusion

With increasing growth in world traffi c, future Th is is refl ected in their typology of environmental scenarios will have to consider the provision of issues and selected corporate actions. Th e growth transportation and related service worldwide through of international traffi c is inevitable and is already an intermodal system combining ship, plane, truck or included in the global context of green logistics. train transportation. Th e question of restructuring transport systems is becoming more acute. Vancouver possesses most of the prerequisites to become an international gateway. Th e success of the Gateway operations, global intermodal network policies being canvassed toward propelling Canada’s and supply-chain management have become the Asia Pacifi c gateway into an integrated world main driver of traffi c growth. Th e tactics driven transport industry will largely depend on decision- by liberalization and globalization have changed making processes responding to, and converging on, corporate strategies in such a way that they are these changes. integrating sustainability as a competitive asset.

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