In the middle of the 19th Century, the new railway technology was going to provide for the first time a major east-west link across the continent, ultimately reorienting the transport network from a north-south axis (along the eastern seaboard and down the Mississippi) to an east-west one, opening up on a hitherto undreamt of scale the development of the west. In fact, the century that followed in both Canada and the US was of nation building on an unprecedented scale. But those projects are largely over. The next stage is stitching together the continent as a whole: we are no longer only building countries, but have moved on to the construction of something wholly new and unprecedented. The shift now is to the north-south axis.
But that historical moment when the US was poised to open the west through the construction of the railway, contains a powerful lesson – a lesson contained in a tale of two cities.
The original thought was that the main railway junction would be in St. Louis, the dominant city in the Midwest and the fourth largest in the US. But St. Louis made two mistakes that were to prove disastrous. To the eyes of that city, railways were a dirty, expensive, unproven technology. They thought at first that they would remain aloof from this new evolution of the network, preferring to remain the king of the Mississippi, a free piece of infrastructure that to date had given the city a commanding economic position. So their first mistake was the Not In My Backyard syndrome.
Then they said, well, alright, we’ll allow the railways to come, but we will not allow a bridge to be built across the Mississippi, because we want to force the people and goods coming by train to be ferried across the river by barges, because that’s what we do here. So their second instinct was protectionism.
Chicago, on the other hand, was a small but new and thrusting town that said they would be the railway hub, and trains could pass through and exchange passengers and cargo unimpeded, allowing the huge efficiencies that the new rail network offered a chance to be fully realized. Chicago invested, they acquired a dominant position in the new network, and by 1860 the city was served by 11 railways and 100 trains a day passed through the city.
St. Louis never recovered. It went from a dominant to a very secondary position in the network and has never really recovered. This story was repeated in microcosm a thousand times throughout the country as communities vied to have the economic dynamism and energy that being on the railway offered to them. Those that succeeded in attracting the iron horse prospered. Those that were bypassed withered.
The railway as parable
The story of the railway is, in a way, a parable about “globalization,” which is merely shorthand for an incredible “densification” of a whole series of networks that girdle the globe and create huge and growing value for those who are connected to them. But not everybody is connected. With the global network, you must either be a destination in your own right (Chicago, London, Hong Kong, Tokyo), or you must be on the route to a destination. Steps must be taken if the natural bi-national economic region in the International Northeast is to be put on the road to the major centres of global commerce. We call this natural economic region “Atlantica.”
Eastern Canada before 1867 was a collection of north-south trade corridors protected and managed by the first Canada-US trade agreement, known as the Reciprocity Agreement. The United States abrogated reciprocity, and (prime minister John) Macdonald was forced back on what he considered to be very much a second best policy: the National Policy. That policy was a conscious decision to disconnect from one network and to create a new one, more or less from scratch.
The tariff wall went up at the border, sundering many trading relationships southward, and a new network was created in the form of nation-building infrastructure reaching from the Atlantic to the Pacific.
The effect on Eastern Canada was dramatic. In effect, we were cut off from the global network and became the obscure end of the line for a new national network. Over a period of a century or more, the pieces of the natural trading region that straddles the border in this part of North America progressively turned their backs on each other. Economic activity was sucked out of Atlantic Canada, which had been dependent on international trade with New England, the Caribbean and Europe. In the words of one famous Maritime historian, it was as if the Maritimes had been pushed a thousand miles further out to sea, just as the move away from heavy industrial manufacturing hit northern New England and upstate New York particularly hard about a century later, pushing that region also a thousand miles further out to sea.
But the possibility exists today to haul ourselves a thousand miles back into the heart of North American economic activity. That possibility is created by the new network-building activities that increasingly dominate the globe and the continent, and that can connect the industrial heartland of North America with Europe and Asia via a series of trade corridors radiating out from the Port of Halifax to major destinations in North America.
St. Louis or Chicago?
As we all know, trade between Asia and North America is growing by leaps and bounds. Maritime trade has been growing between the two by 15% a year in recent years. Most of that cargo has traditionally gone to West Coast posts like LA and Long Beach, Seattle and Vancouver. But those ports are butting up against significant capacity constraints. The capacity of the major west coast ports will be exceeded by projected traffic within a couple of years, and last summer LA and Long Beach were already exceeding capacity, with disastrously disruptive effects on the world trading system.
The traditional response is to put cargo on ships headed from Asia through the Panama Canal and into east coast ports. But the Panama Canal today operates at 93% capacity, which means it is, to all intents and purposes, full. It will take $8 billion to $10 billion and many years to expand the canal, which will also raise the cost of using the canal.
Moreover, the way we move containers by sea, the lifeblood of the world transport system, is changing. It used to be that the bulk of the ocean shipping fleet carried 3,000 to 4,000 containers. This is the largest size of ship the Panama Canal can accommodate. But the next generation of ships are too large to fit through the Panama Canal – hence their name, Post-Panamax ships.
But if the West Coast ports are at capacity and the Panama Canal is choked and cannot accommodate these ships, how will they reach the richest market in the world? Via the Suez Canal, of course. It can handle these ships and more – it has the depth and it has the spare capacity. Moreover, the difference in distance that a ship has to cover going from Hong Kong to New York City via the Panama or the Suez Canals is 300 miles. In other words, distance is not an issue.
So the ships are there, the route is there, the business case and the economics are there. Why has this route not lived up to its potential? A host of reasons. First of all, the East Coast has its capacity problems too. In particular, the port of New York/New Jersey has significant constraints on its ability to accommodate Post-Panamax ships. It has water draft issues (its harbor is too shallow, and a billion dollars is being spent not merely to dredge the harbor, but to blast the rock out to lower the depth) and air draft issues because the Bayonne Bridge at the entrance to the harbor is too low to accommodate the fully loaded ships. Yet these ships have to call at New York or they will not come from Asia, because New York is the anchor port on the East Coast.
But they can call at Halifax. Halifax has a natural depth that allows it to accommodate the largest ships in the world, it has no air draft issues at the
terminal at the entrance to the harbor, and it has spare capacity. It is also on the great circle route from the Mediterranean and Europe to New York. That means that Halifax, the only east coast port on the route to New York that can handle this Post-Panamax traffic, is in a pivotal position in the global trade network, and is joined at the hip with New York/New Jersey if we are to bring the economic energy of Asia to the east coast of North America in large volumes. Only Halifax can lighten the load of the big ships and make New York/New Jersey accessible to them.
But we cannot think about the front door alone: in other words, the arrival of goods from Asia and Europe. It is not sufficient to drop the stuff at the port. You have to unload those boxes from those ships and do one of three things with them. You have to put them on a truck, put them on a train or put them on a short-sea shipping carrier destined for a smaller regional port. New York has huge capacity constraints in this regard, as does Halifax.
Transport black hole
The centre of this region is a transport black hole. If you want to go by the shortest route to the tens of millions of people who live in the US northeast, you cannot do so on the interstate network, but only on secondary roads. At the moment, looking west, the Port of Halifax aims to connect almost exclusively with Chicago in the US market, because of its excellent connections with the US industrial heartland, and because it is in the interests of Canadian National Railway (CN) to do so, for reasons that are obvious if you look at their route map. But because of poor connections and disinterest by CN, we find it almost impossible to connect with Buffalo, the fifth largest port of entry to the US, and the hub of an equally impressive distribution network reaching a region currently largely inaccessible to the Port of Halifax.
And heading south, the main highway from the nearest land border crossing to the US only allows an 80,000-lb load on trucks, meaning a fully laden container cannot be moved by the main highway from Halifax to Boston or New York. This is in strong distinction to the other north/south routes elsewhere in the region.
And the short-sea shipping network, what should be the gem in the crown, is constrained by protectionist legislation. I say gem in the crown because short-sea shipping should allow us to deliver goods directly to the heart of major urban markets without having to use scarce road and rail capacity, without increasing traffic and at lower environmental cost.
This is not of merely local interest. Not only is Halifax the only port north of Virginia (and the only Canadian port) capable of taking fully loaded Post-Panamax ships, but it is also a significant piece of continental infrastructure for other reasons.
For example, one of the major constraints on regional growth right down to New York City is the paucity of room for port development.
Moreover, it is now widely understood that the transport infrastructure across the Hudson River is now at maximum capacity, which means, as Michael Gallis likes to say, that the west bank of the Hudson River is now effectively the east coast of North America for international trade purposes. And looking at short-sea shipping routes as well as an I-95 corridor with a 100,000-lb load limit, the Port of Halifax is the solution to the relative isolation of the area between the east bank of the Hudson and the Atlantic.
Continentalism is starting to percolate in the minds of decision makers, but it has not yet sunk in with respect to this region. An illustration is the high-priority highway corridors as designated by the US Congress. One is immediately struck by three features:
* One is the predominance of north-south high priority corridors. The dominant theme is the realization of an integrated North American transport infrastructure, supplying the north-south connections that lacked under the previous regimes concerned solely with national (largely eastwest) transportation systems. This shows that NAFTA is under construction all around us;
* The second is the power and efficacy of the Tennessee Congressional delegation;
* The other feature that leaps off the page for residents of Atlantica is that the International Northeast is virtually the only part of the country with no designated high-priority corridors. Yet based on the objective factors that usually justify the construction of new interstate highways (such as the potential economic spin-off) there is almost no other route that could generate as many potential benefits as a highway cutting eastwest across Atlantica.
This is not idle talk. Under pressure from members of Atlantica’s congressional delegation, including especially Senators Susan Collins, Olympia Snowe, Chuck Schumer, and Hilary Clinton, the outgoing US Transportation Secretary, Norm Mineta, has pledged Washington will carry out a multi-modal transportation study of the corridor that reaches from Halifax, right across New Brunswick, Maine, New Hampshire, Vermont, and northern New York state to the Ontario border. Congress has appropriated a million dollars for this. My Institute is working to make sure that the Government of Canada participates actively in that study and acts on its recommendations.
By the way, remembering the theme of choosing to be connected to the emerging networks and the consequences for those regions and people that fail to make the right choices or that are simply by-passed by events, I really don’t think that we have a choice about building the coherence of our international region, because investment and commerce increasingly will flow to those regions where the obstacles to the quick and efficient movement of goods, services and people have been minimized. Remember the parable of St. Louis and Chicago. We are behind in this regard.
Compare what we are doing, for example, with the plans for Texas. The Texas Transportation Commission has approved a plan for 4,000 miles of multi-use corridors. The Trans-Texas Corridor, a state-wide network designed to be up to 1,200 ft wide, includes elements such as six passenger-vehicle lanes, four 13-ft-wide truck lanes, six rail lines with high-speed lines for passengers and freight, and a 200-ft-wide dedicated utility zone.
Estimated cost for the 50-year project is between US$145 billion and US$183 billion. Everything really is bigger in Texas.
Now is the time to engage in this debate about where we fit in the emerging global trade networks, before the networks are formed and solidified for the next 20 years. Whether we choose St. Louis’s fate or Chicago’s is entirely in our hands.