FORCE COMPETITION IN OUR MARINE SECTOR

Pinned January 26, 2022

CIFFA’s Executive Director Bruce Rodgers on why Canada’s Competition Laws need more bite

On Monday January 31st the federal government will convene a summit to discuss supply chain frustrations with a wide variety of participants.  Despite the odds against rapid success, it’s a welcome effort.

The stubborn supply chain mess affects virtually every consumer and community. And although the problems are certainly international, there are things that can be done right here in Canada, to improve the situation.

Ottawa has been tiptoeing along a very narrow line: trying to be seen as active on the problem, while avoiding any expectation that the government could craft a “solution” that solves all the problems.  Presumably political advisers were telling the Cabinet “you touch it, you’ll own it.”

But south of the border the U.S. President took an aggressive tack, travelling to a California port and personally urging railroads, truckers and ports to take extraordinary measures. By Christmas the White House was touting evidence the situation was improving.

Driven to do something, the Canadian federal government announced the “summit” to allow all the various parties a chance to comment. Although easily criticized as a communications gesture, the decision to put all the players in one place is actually a pretty fair idea.

One feature of the problem – the first priority – is the need for widespread cooperation. Cargo moves from ship to port, terminal, warehouse, rail, truck…it really is a chain.  If one party – warehouses, say – make a move to tackle the backlog by extending their hours of operation, it doesn’t help if the port and the truckers don’t follow the lead. That’s why we wrote to the Prime Minister just days after the last election suggesting he name a special representative to bring people together and recommend their most useful suggestions back to the Cabinet.

The federal summit is possibly a step in that direction, and maybe Transport Minister Omar Alghabra will play the role of coach-referee-investigator that’s required.

Somebody must. Solutions to the congestion and delays will include operational changes, government regulatory simplification and spending on improved infrastructure.  Business and government both need to come to the party with items to offer.

At the Summit it’s very likely many speakers will mention the U.S., both because of President Biden’s activism, but also because of the aggressive defense of U.S. interests by the Federal Maritime Commission, the “independent federal agency responsible for regulating the U.S. international ocean transportation system for the benefit of U.S. exporters, importers, and the U.S. consumer.”

Our equivalent is the Canadian Transportation Agency, with a more modest role and substantially weaker legislative “bite”.  Over the course of the pandemic the Americans have been much more active in confronting both service deficiencies and the spiralling costs faced by customers.

The government should significantly increase both the mandate and the legal power of the Canadian Transportation Agency in addressing marine issues.

Trade into North America uses ports and railways in both countries. Much of the cargo coming through Canadian ports is U.S.-destined, just as considerable volumes of cargo landing in California and Washington ports will make its way to Canada. We are closely locked together economically, and it’s entirely appropriate that we cooperate legally and politically too.  Ottawa should do all it can to establish close ties with U.S. federal and state governments on marine matters.

The ocean-going shipping industry is a powerful force, answering to no government.  Organized in explicit cartels called “conferences” the shipping giants have feasted in the pandemic. Recently Bloomberg offered an example: Denmark’s A.P. Moller-Maersk A/S, the world’s second-largest container carrier, was on track for an annual profit last year that would match or surpass its combined results from the past nine years.”

Traditionally nations have accepted these cartels  – Canada has a specific law on the books exempting them from our Competition laws – but the gigantic costs and uncompetitive behaviours may have triggered an international rebellion.  Several nations are considering legislation to break up the cartels and force more competition. Canada should follow the 2015 advice of our then-Commissioner of Competition and join the international trend towards competition.

Once assembled, the participants in Canada’s supply chain will offer suggestions to reduce the backlog and smooth the flow.  Most of the measures will be small changes to operations and regulatory processes. Collectively they may add up to real improvements. But the crisis is also an opportunity to make larger reforms that strengthen the marine sector and the supply chains that rely on it.