strategic gateways and trade corridors: the challenge of shifting international trade

THE UNIVERSITY OF BRITISH COLUMBIA

Strategic Gateways and Trade Corridors: The Challenge of Shifting International Trade(Prof) David GillenYVR Professor of Transportation Policy & ManagementDirector, Centre for Transportation StudiesSauder School of BusinessUniversity of British Columbia, Vancouver, Canada

CMA Canada Supply Chain Management Speaker Series

School of Business & Economics

Wilfrid Laurier University, November 16, 2007


Changes and Challenges

• Amount and composition of trade– Bulk versus containers

– Hubs versus ODs

– Trade imbalance

• Impacts on infrastructure efficiency– Full versus empty

– Market concentration

– Sea land interface

• Economics of Gateways– Gateways & productivity and gateways as networks/alliances

• Policy/management responses– The lens of Federal policy

23-04-22 2


Amount and Composition of Trade

23-04-22 3

THE UNIVERSITY OF BRITISH COLUMBIA23-04-22 4


0 200 400 600 800 1,000 1,200 1,400 1,600 1,800

Germany

United States

China

Japan

France

Netherlands

United Kingdom

Italy

Canada

Belgium

Billions of $US

Imports

Exports

Source; Jean Paul Rodrique Vancouver Gateway Conference 2007

World’s 10 Largest Exporters and Importers, 2005


Pressures: Global Commerce is Expanding, Patterns are Shifting

• Global marketplace integration is driving the distribution of economic activity, as well as the expansion of world trade

• The emergence of new economic powers such as China and India is forcing all trading nations to adjust, or be left behind.

• Imports from China to Canada grew almost 550%, from $4.6B to $29.5B between 1995 and 2005.

• Partners and competitors are acting aggressively on the intersecting issues of trade, transport and security.

23-04-22 7


Is It the Correct Target?

23-04-22 8


Impacts on Infrastructure Efficiency

23-04-22 9


TEU 12,500 Crew: 13


0.1

1.0

10.0

100.0

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

0

1

2

3

4

5

6

7

8

9

Mil

lio

ns

Loaded (inbound) Empty (inbound)

Loaded (outbound) Empty (outbound)

Loaded Ratio (Outbound / Inbound) Empties Ratio (Outbound / Inbound)Source; Jean Paul Rodrique Vancouver Gateway Conference 2007

Containers Handled by the Port of Los Angeles, 1995-2006 (in TEU)


4.0

5.2

5.6

7.2

8.8

10.2

12.4

13.9

14.5

3.5

3.3

3.3

3.9

3.9

4.1

4.2

4.3

4.9

2.8

3.5

4.5

5.9

6.1

7.3

8.9

9.9

12.7

2.3

2.7

3.6

4.0

4.2

4.9

5.2

5.6

7.3

1.2

1.3

2.2

2.7

1.5

1.7

1.7

1.8

2.6

1.4

1.7

2.9

3.6

2.6

2.9

3.2

3.3

4.2

0 10 20 30 40 50

1995

1998

2000

2001

2002

2003

2004

2005

2006

Asia-USA

USA-Asia

Asia-Europe

Europe-Asia

USA-Europe

Europe-USA


Containerized Cargo Flows along Major Trade Routes, 1995-2006 (in millions of TEUs)


$0

$500

$1,000

$1,500

$2,000

$2,500

1993

-4

1994

-2

1994

-4

1995

-2

1995

-4

1996

-2

1996

-4

1997

-2

1997

-4

1998

-2

1998

-4

1999

-2

1999

-4

2000

-2

2000

-4

2001

-2

2001

-4

2002

-2

2002

-4

2003

-2

2003

-4

2004

-2

2004

-4

2005

-2

2005

-4

Asia - US

US - Asia

Asia - EuropeEurope - Asia


Maritime Freight Rates (USD per TEU), 1993-2006


0 100,000 200,000 300,000 400,000 500,000 600,000 700,000

Wal-Mart

Home Depot

Target

Sears (K-Mart)

Ikea

Lowe's

Costco

Ashley Furniture

Payless ShoeSource

Samsung

Matsushita

Toyota

Hamilton Beach

Honda

CVS (Eckerds)


Largest American Importers of Asian Goods Through Maritime Container Transport, 2004 (in TEUs)


Logistics and the Acceleration of Freight

23-04-22 15

• The velocity of freight– Shipment and transshipment.– No significant speed

improvements in recent decades.

– Intermodal operations; the most important element.

– Logistical threshold:• Time based management

of distribution becomes a possibility.

• From push (supply based) to pull (demand based) logistics.



Mounting Capacity and Time Pressures in Global Freight Distribution

• Time is the essence…– Surprising time underperformance:

• Only 63% of transpacific container vessels arrived on time at their scheduled port calls.

• 53% for transatlantic port calls.

– The major factor behind delays is port congestion:• Multidimensional concept.• Physical docking capacity.• Transshipment capacity.• Storage capacity.• Inland capacity.

– Reinforce the importance of the maritime / land interface.

23-04-22 16

THE UNIVERSITY OF BRITISH COLUMBIA22. April 2023 17

Is this the Correct View?


Container Transport Costs from Inland China to US West Coast ($US per TEU)

0 500 1000 1500 2000 2500

Land access to port(China)

Port handling (China)

Maritime transport

Port handling (USA)

Land access to finaldestination (USA)


23-04-22 18


The Economics of Gateways

23-04-22 19


Economics of Gateways

• Gateways are alliances– Alliances are vertical and horizontal

• Gateways internalize externalities– Upstream and downstream agents recognize mutual benefit– provide platform for cooperation and competition

• Gateways provide agglomeration effects• Gateways integrate infrastructure, service,

information and human capital


Economics of Gateways

• Demand side forces favouring gateways– Accessibility/wide geographic scope/interconnectivity/intermodal

access– Reliability/connecting capacity/Delivery speed– Allocating risk– Network externalities

• Supply side forces– Reduce transactions cost –limit horizontal and vertical boundaries– Reduce logistics costs– Economics of scale, scope and density– Internalize externalities-alliances


Gateways and productivity

• Productivity drives real income and economic welfare• Profit = revenue – costs• Gateways and revenue

– Increases ‘willingness to pay’ with value adding services• Reliability & consistent service (risk reduction)

• Gateways and costs– Enabler like technology (not just another factor input)

• Service accountability & transparency• Benchmark – measure & monitor• New practice• Invest in network


Gateways are Systems

• Gateways are a facilitator in the global supply chain• Gateways increase productivity by expanding markets, moving

down the cost function and lowering costs, shifting down the cost function

• Gateways increase productivity by internalizing externalities of upstream and downstream agents

• Gateways increase productivity by allocating risk optimally


Current Research Undertakings• Question: what institutional/policy design complements export

performance?– Domestic market structure and export performance

– (1) firm size and cost function, (2) product and process innovation

– Examine multi-market contact in a Cournot game

• Question: how does gateway vertical integration between infrastructure providers and carriers differ in performance from vertical contracts? – our interest is in efficient gateway (congestion)pricing

• Question: How do we measure gateway performance?– TFP= Aggregate Index of Hedonically-Adjusted Gateway Output

– Aggregate Index of Nodal Infrastructure Inputs plus Strategic Investments and Initiatives

– 4 effects: (1) exogenous DD effect, (2) factor price effect, (3) public K effect, (4) disembodied (i.e. factor neutral) technical change effect

23-04-22 24


Gateway Performance

23-04-22 25

Applying the Quality Adjustments to Output The simple aggregate index of productivity for the gateway productivity is represented as: TFP= Aggregate Index of Hedonically-Adjusted Gateway Output

Aggregate Index of Nodal Infrastructure Inputs plus Strategic Investments and Initiatives

which can be re-written as and we can write the numerator as:


Policy and Management Responses

23-04-22 26


Federal Response:

1. International Commerce Strategy– align major transportation systems– Logistics is about efficiency, service quality and capacity to

deliver– Competition is in supply chains not individual components –

therefore partnerships

23-04-22 27


Federal Response:

2. Volumes and Values of National Significance– Strategy should have national not regional focus– Strategy should focus on volumes and values which are

most important for Canada• Does this focus on picking winners?• Is this a ‘field of dreams’?

23-04-22 28


Federal Response:

3. Future patterns in global trade & transportation– Emerging patterns place new demands on transportation

infrastructure– performance linkage between :

• infrastructure and user capital (ships)• Links and nodes (distribution networks)

– Future patterns are not exogenous – they can be managed– Information technology shapes patterns

23-04-22 29


Federal Response

4. Potential scope of capacity and policy measures– Systems interconnection versus integration

• Across modes• Investment and policy• Public versus private• Jurisdictions and governance

– How do we choose – based on what performance metric?– Who receives the rents?

23-04-22 30


Thank you

[email protected]


Lens of National Policy

23-04-22 32

THE UNIVERSITY OF BRITISH COLUMBIA 33

Strategies to improve gateway logistics: The shippers’ responses

• The shippers accept higher transport costs to achieve greater reliability of service.– Retail shippers start shipping earlier to reduce the peak.– Shippers open other routes, e.g., accelerate development

of East Coast routes for South Asian trade.– Shippers add flexibility to West Coast routings through

the location of distribution facilities and availability of alternate port routings.

• A better but more competitive gateway environment.

23-04-22

THE UNIVERSITY OF BRITISH COLUMBIA 34

Strategies to improve gateway logistics: The strategies of service providers

• Objective – to make the [Vancouver] Gateway the best place for gateway activity [on the West Coast of North America]. Not the biggest, but the best!

• To achieve this a multi-pronged program needs to be continued.

• Overview of the program:– Pricing should play a greater role in guiding behaviour.– Leadership is essential to achieve change.– Accountability is important to relationships. – Communication is fundamental to planning and execution.– Enterprise must be shown to adjust to the future, which is now!Source: Trevor Heaver (Gateway Conference Vancouver 2007)

23-04-22

strategic gateways and trade corridors: the challenge of shifting international trade

Documents