Mike McCracken has a funny way of explaining economic forecasts. But the CEO of Informetrica Research knows how to get his point across.
At the recent CILTNA Transportation Outlook Conference in Ottawa (Motortruck and sister publication Canadian Transportation & Logistics were the media sponsors of the event), he was trying to explain the difference between Canada and the US when it came to dependence on international trade. He characterized the US as “involved” in international trade and Canada as “committed”.
What’s the difference?
If you had a breakfast of ham and eggs this morning, you could say the chicken was “involved” but the pig was “committed” was McCracken’s colorful way of explaining it to the gathering of shippers, carriers, researchers and government representatives in attendance.
With trade in goods as a share of Canada’s GDP ranging between 72% and 62% over the past five years, there’s no question Canada is “committed” to international trade. (In comparison, for the US, which has a much larger domestic market upon which to base its economic growth, trade in goods as a share of GDP is just about 20%).
Transportation providers have been among those who have gained the most from this “commitment” to international trade, as Canadian motor carriers running transborder hauls can attest.
But just as trucking is reliant on Canada’s commitment to international trade, our ability to attract international trade is reliant on a commitment to an efficient transportation infrastructure and carrier capacity. Lack of either of those two variables will seriously hamper our ability to compete on the international scene.
And that’s exactly what has been happening, particularly in the hottest growth spot: Western Canada. As the Western Transportation Advisory Council argues in its recently released report compiled to assess freight volumes for Western Canada, our transportation industry had been lulled by a long period of excess capacity. Then in 2004, when huge volumes of containerized goods arrived on our western shores from across the Pacific at the same time that hungry foreign demand for our natural resources stressed our export systems, the cracks in our transportation network became evident.
If the record volumes of freight movements we’ve experienced the last few years are not just a bubble but part of the new normal – BC ports alone expect an annual growth rate for their containerized business of 10.2% to 2015 and most of those containers have to move inland somehow – what must the transportation community do to handle the higher volumes successfully? And what must change so that exporters and importers are not limited by the availability and quality of their transport service?
It falls on the trucking industry and the other modes to make sufficient investments in capacity and network efficiencies to handle the additional volumes of freight, but they’ve been hampered, as the Westac report points out, by a lack of accurate and integrated growth forecasts. Without accurate freight growth forecasts the risk to both transportation and infrastructure providers is a great one. Carriers and shippers are just not communicating in the way necessary to collectively understand the full magnitude of the expected freight growth and so are unable to fully utilize existing capacity or plan for future growth in capacity.
Aside from pointing this out, the Westac report is an important step forward because it assembles history and forecasts of volumes of major commodities and container movements in Western Canada. In the report, commodity shippers, major retailers and freight forwarders were asked what they anticipate they will ship each year to 2010 and in 2015.
In other words, plenty of good data carriers and shippers can use to plan for the future with eyes wide open. Of course, there’s little point in investing in additional rolling stock and new terminals if our road and border infrastructure remains a choke point. As the Canada West Foundation, which has a mandate to address infrastructure shortfalls and look at feasible alternatives to traditional funding, points out: Canadians do not understand the connection between infrastructure and the future economic prosperity needed to sustain the nation’s social programs, and as such, they are less likely to flag infrastructure as a high priority.
The last two decades have clearly shown that the trucking industry’s growth is closely tied to Canada’s continuing “commitment” to international trade. In that context, answers to the capacity question are critical and we must find a way to get government and the public on board with new infrastructure investments.