The Infrastructure That Matters Most.Indd

The Infrastructure that Matters Most: The Need for Investment in Canada’s Trade Infrastructure June 2016 to Shape Policy & the Power of our network This report was made possible by the generous support of our sponsors This report was produced in cooperation with This report has been prepared by John Law. John is the President of Lawmark International and a key contributor to the trade and infrastructure debate and policy making process in Canada. He has served as the President of the Transportation Association of Canada (TAC) and Chair of the Canadian Council of Deputy Ministers responsible for Transportation and Infrastructure. John is the former CEO of the Global Transportation Hub and served as Saskatchewan’s Deputy Minister of Transportation and Infrastructure. The author extends his thanks to Jody Eckert and Chandra Mark for their research support, and to Carlo Dade and Ryan Greer for their editorial contributions. In addition, the author wishes to recognize the input of the participants at the September, 2015 Canada West Foundation – Canadian Chamber of Commerce private sector Roundtable on Trade Infrastructure and Supply Chains in Toronto and the advice of senior offi cials at Transport Canada and Infrastructure Canada. TABLE OF CONTENTS Introduction 4 Section 1: Transportation Infrastructure and our Economic Livelihood 5 Section 2: Five Reasons to Make Trade Infrastructure an Investment Priority 8 Section 3: A Strategic Focus for the Next Generation of Trade Infrastructure 23 Section 4: Recommendations 27 Sources and References 29 INTRODUCTION What follows is an argument for enhanced trade only if our transportation network can enable the infrastructure investment, not simply as a reliable delivery of the goods. Now is the time for “nice to have” when we get around to it but as a a strategically focused and collaborative public- “must-have” before it is too late. It is a reminder of private upgrade of Canada’s key trade assets. In the fundamental connection of our economic support of this objective, this report revisits trade well-being as a country to this category of infrastructure now for two reasons: fi rst, the trade transportation infrastructure that enables the world into which we sell is changing in a way movement of products, services and people to that makes trade infrastructure improvements for key markets around the world. We look back Canada much more urgent, and second, the federal now upon the construction of the St. Lawrence government is about to launch a new infrastructure Seaway, our coast-to-coast national railway and the plan of unprecedented size in which trade establishment of Canada’s national highway system infrastructure has a vital role to play to support as historic investments in nation building. Today, continued economic well-being for Canadians. we are at the doorstep of a major new opportunity As the Canada Transportation Act Review that can reshape our economic destiny. Across suggests, investments in Canadian transportation the globe, three billion new global middle class infrastructure can drive our global competitiveness consumers are set to join our major trade partner for the next 30 years. to the south as customers of Canadian exports but The Infrastructure that Matters Most | The Canadian Chamber of Commerce 4 SECTION 1: TRANSPORTATION INFRASTRUCTURE AND OUR ECONOMIC LIVELIHOOD For a country that trades as much as Canada does, At the same time, the rules of the game in the the competitiveness of its trade infrastructure is one international trade arena in which Canada earns its of the most signifi cant determinants of the quality living are undergoing major changes. The advent of life that Canadians have come to expect. This is of formal agreements such as the Trans Pacifi c because Canada’s export-based economy relies upon Partnership (TPP) means that Canada’s export its roads, ports, waterways, railways, airports and economy will soon face a historic test. Canadian pipelines to move Canadian products and services fi rms currently share privileged access to the U.S. to the markets of its trading partners around the market under the North American Free Trade world. Together, these transportation and logistics Agreement (NAFTA) with Mexico. Soon however, assets that we call trade infrastructure combine they must anticipate nine arguably more aggressive with information systems and Canadian ingenuity players seated at that same trade table, all of whom to form the backbone of a trade network that, will now share the same advantages previously today, accounts for more than 60% of the country’s enjoyed by Canada. collective income. With this much of Canada’s annual gross domestic product tied to trade, the In the face of these new realities, the impacts of relative health of its trade infrastructure network recent shortcomings in Canada’s infrastructure directly affects the availability of jobs and whether network, such as that evidenced by the 2013 grain or not Canadians can get to them. Maintaining the crisis, extend beyond the multibillion dollar impact competitiveness of Canada’s trade infrastructure that this event had on the Canadian economy. We also pays real dividends because it directly are learning the hard way that Canada’s reputation generates more new revenue than other forms of for producing high quality products and services is infrastructure and in so doing, helps pay for the quickly eroded when we are unable to get them to country’s social and economic priorities. destination markets in a timely manner. This connection between infrastructure and Consequently, a signifi cant measure in this coming Canadians’ quality of life is not new but what is, it test for Canada will be the ability to demonstrate can be argued, is the urgency for meaningful action. improved reliability and effi ciency in our trade Perhaps the most signifi cant reason for urgency is infrastructure network. And the standard by which accelerating competition from other nations seeking our progress will be judged will not be a domestic a larger share of the international trade pie. It is all one. Canada’s will be graded by international about competitiveness. At a time when the quality customers who, to a much greater extent than ever of Canada’s own trade infrastructure is showing before, will gauge Canada’s reliability against that signs of increased strain, competitors are raising of competitor nations that offer similar products the bar by aggressively investing fi nancial and services. Our collective response will carry resources and political capital to improve their own consequences for the country’s trade performance trade infrastructure. and the individual wealth of our citizens. The Infrastructure that Matters Most | The Canadian Chamber of Commerce 5 For Canada to respond to heightened international To date, most of the government’s focus on competition on the timely basis that is now required, infrastructure has been devoted to its newly strong national leadership will be needed both established priorities for social, transit and green from the federal government and the private infrastructure. Each of these three categories has sector. The good news is that the government has received new federal funding of $20 billion over the staked out infrastructure, broadly defi ned, as a next 10 years for a total of $60 billion. Combined distinguishing feature of its mandate by borrowing with the existing $60 billion Building Canada in this unprecedented low-interest climate to invest Plan (BCP), the government has committed to a in rebuilding Canada’s aging national infrastructure. record level of federal seed capital for national The challenge is to ensure the government uses the infrastructure investment. funding to choose projects of meaningful long-term economic benefi t. While short-term stimulus can play a role in economic recovery, federal funding should include project investments that generate long-term economic growth and prosperity. Canada's $120B, 10-year Infrastructure Plan $20B New funding for $20B green infrastructure New funding for transit infrastructure $20B New funding for social intrastructure $60B Existing funding under the Building Canada Plan The Infrastructure that Matters Most | The Canadian Chamber of Commerce 6 With the majority of Canada’s national income less obvious but, arguably, more important role in tied to trade, the absence of a clear commitment to providing intelligence, information and analysis on making trade infrastructure an equal priority with trade infrastructure and integrated supply chains. the three new categories of infrastructure stands Canada could leverage this concept to help bridge out as a missed opportunity. The good news is that its trade infrastructure funding requirements and there is still time to get it right. The commitment inform supply chain improvements between Canada of $60 billion in new infrastructure funding and and the U.S. the government’s stated intention to update the Building Canada Plan can be leveraged together to Amongst the infrastructure choices available to the enhance Canada’s trade infrastructure network. new government, the one that is most integral to the economic well-being of everyday Canadians has In addition to the three new $20-billion funds, yet to be endorsed as a top priority. Commitments the government has promised to establish an to social, transit and green infrastructure need to be infrastructure bank to provide low-cost fi nancing for balanced with the longer-term return on investment municipal projects. In some countries, infrastructure from trade infrastructure. For the government and, banks have played a broader role than just indeed, for the country as a whole, this is not an supporting municipal projects and have contributed indulgence issue but rather is as bread-and-butter as to improving trade competitiveness. As the name it gets. Canada’s prosperity depends on immediate implies, they provide a range of fi nancial services and targeted investments in its economy-enabling from direct lending to facilitating private sector trade infrastructure.

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