Ports: Trade winds

The Port of Vancouver expands to accommodate ever-growing Asia-Pacific business.

The bustling Port of Vancouver is busier than ever. This year, Capt. Gordon Houston, president and CEO of the Vancouver Port Authority, expects Canada's largest port will handle more than 77 million tonnes of cargo, worth more than $43 billion. In 2007, the volume could surpass 80 million tonnes. “Every year,” he says, “we seem to break another record.” Much of the increase has to do with rising Asia Pacific trade. As the port strives to become North America's gateway to Asia, Houston is working to overcome some growing pains. Capturing more of China's business in particular means expanding the port, ironing out regulatory processes and working with transport organizations across Canada. Recently, Scottish-born Houston sat down with Calgary-based contributor Michelle Magnan at his Vancouver waterfront office to discuss his plans, the Port of Halifax's bid for Asia-Pacific trade, and who will replace China as the next global manufacturing powerhouse.

Canadian Business: You have said you're seeing unprecedented rates of growth at the port. What is the biggest challenge you face?

Gordon Houston: Success is an issue, because with that success has come more cargo. More cargo needs infrastructure to handle it. In the past, we always had enough space and enough infrastructure to grow. But our growth, mainly due to the rise of the Asia-Pacific trade, has focused itself in Vancouver. That has now meant that we have an intensive building program.

CB: How intensive?

GH: The building program is about $1.2 billion. It's a significant amount of capital that we are having to put in. That $1.2 billion is only connected to our container business, because [while] the growth that we're experiencing is actually across all sectors of our business, [the expansion is] mainly in the container trade. The container trade needs a lot of infrastructure. So a lot of the money is going into expanding existing facilities.

CB: Last year, the feds requested additional environmental impact studies, delaying the $280-million Delta port expansion by as much as a year. You've said that these environmental reviews take too long and the regulatory process is too slow. How can the system be improved?

GH: It's a continuing debate. The agencies are no different from us; they would like to see it happen faster. There are also some policy things that could be done. For instance, if you apply through the provincial government, [it is] guaranteed you'll have your answer in 180 days. The federal system doesn't have such a guideline, which we would love to see. In fact, they would like to see it too. They would like to see some changes to their rules that would make it easier for industry to make these applications.

CB: What's the holdup?

GH: The wheels of government turn, but they turn exceedingly slow, and that's just part of it. The Canadian Environmental Assessment Authority, which all the stuff goes through, only has about 150 employees. Every year they turn over more than 3,000 projects. If that's the volume of projects, is the threshold set too low? There's maybe a policy decision that could be made there. The provincial government will hire outside consultants to review projects if they get short-staffed. The federal government won't do that. Why do we not do that? There are things that can be done.

CB: Considering the port's growth, and the need for better infrastructure, how well is business running right now?

GH: The infrastructure we've got is definitely equal to the task that needs to be done today. However, we're working very closely with the two railroads and also with the provincial and municipal governments about roads, because as the port expands its business, the road and the rail systems need to keep pace. CP Rail put $160 million last year into their system, which added 15% extra capacity into Vancouver. CN has capacity; they're putting in more rolling stock. Everybody's contributing here. The issue for us is to make sure we all grow at the same rate. There's no point in us growing at 30% if the rail's growing at five, and it's uneconomic for them to grow at 30% if we're growing at five.

CB: You expect container cargo at the port to grow by 300% by 2020. What's driving the growth?

GH: The manufacturing base in North America has declined. People in China are making it. I quite often say, 'Somebody stand up who's not wearing anything that was made outside this continent.' I have yet to see somebody stand up. Either they don't know or they know damn well just about everything they're wearing is coming from China. It's very difficult to get people to understand the size, or the percentage, of goods we buy made outside this country.

CB: You met with Chinese President Hu Jintao when he was here in September. How did that go?

GH: Very well indeed. It was really encouraging to see our federal government and their government agree that we need to have a strategic alliance with each other, because that will mean an awful lot. It will mean more trade through the port, the ability for people to buy consumer goods will be improved, the prices will stay down, we'll get a proven destination status for Chinese people to come here as tourists, and it should help our cruise business.

CB: The Port of Halifax is working to increase its Asia-Pacific trade. How do you think they'll do?

GH: They won't be as successful as we are because the distance is too great for them. It is much farther by sea from China to Halifax, even with the Suez Canal, than it is to come across the Pacific. They won't take away all our business. What may happen is that cargo that's bound for very close to the east coast–although it's going to be more expensive to take it by sea–would be much cheaper for the land portion. I think they will get into the market. They just hired a vice-president, who used to be our harbour master, specifically to grow that business. They'll get there, but they'll never take a huge portion of the Asia-Pacific trade away.

CB: It appears that Asia-Pacific trade will continue strong for years to come. After China, who's next?

GH: Manufacturing is already starting to move. The Pearl River Delta is the manufacturing centre of China right now, and hence the world. They'll most definitely get managers wanting pay increases and workers wanting more money. So what's going to happen is eventually somebody's going to say, 'You know, we could do this in Vietnam and it would be a lot cheaper.' And you'll see it shift. Vietnam will be like China, because basically, and I don't mean this unkindly, they're uneducated. They're still a Third World country. But India would be the next one. India's a very different proposition. They're very well-educated people. Call centres and computer businesses are relocating there. So by the time this gets there, it's going to have a dramatic effect on their society, because you're already going to have a middle class that's well supplied with goods, services and wealth. It's really going to be bringing the lower caste, as they would call it, up very quickly.

CB: So, after China, Vietnam and India. What then?

GH: Maybe Africa. India may be a very quick transition. China will probably last 30 years, and the cycle gets shorter as you go on, so maybe 20 years in Vietnam, then into India for 10, 15 years. [India] is 40 years away. I'm just disappointed I probably won't be here to see it, because I really believe it's going to happen.