Executive Director’s Statement-Bruce Rodgers

Time for the government to show what it can do

Will Montreal have the same sad experience that Vancouver just suffered in July?  Or will an effective federal government – normally all too willing to intervene in the economy – take steps to avoid a labour stoppage at the Port of Montreal which will damage the city’s economy, especially small businesses.

The Port of Montreal Longshoremen’s Union and the Maritime Employers Association are meeting now. The parties are already alleging bad faith. A legal strike could occur in January of 2024.

This negotiation takes place in a period of considerable change in the shipping sector.

As recently reported on the Port of Montreal’s intermodal performance report, volume of containers transiting the Port of Montreal declined 14.5% year to date.

Meanwhile, as their members go home to families wrestling with persistent inflation, unions are watching automation threaten their future jobs.

It’s not surprising that in negotiations around North America they seem to have opted for longer contracts – 6 years in the U.S. West Coast ports and 4 years in Canada’s Pacific – and broader work rules to allow their members to diversify their roles.

The negotiations on Montreal will likely involve all the same issues.

When the strike ended on our West Coast, many voices expressed frustration with the process and the unnecessary costs to our economy – hundreds of millions in just a few weeks.

One of those voices was that of Labour Minister Seamus O’Regan. Reflecting on the torturous process and heavy cost to consumers and businesses, he declared he would invoke Section 106 of the Canada Labour Code to examine “the structural issues underlying this recent dispute, as well as similar disputes that have occurred at our ports across Canada.”

O’Regan’s frustration was echoed by others. The Greater Vancouver Board of Trade said: “Moving forward, the federal government needs to expand its options for addressing labour disruptions that impact the national economy and supply chains.” The Federation of Independent Business was more direct, urging the government to class ports as essential services.

Even the employer group involved in the strike expressed regret for the “profound repercussions this disruption has had on the national economy, workers, businesses…”

So, if everyone thought the process on the West Coast was terrible, why are we doing it again?

The pattern always seems the same. The parties signal their hostility early in the process. The federal labour minister declines to intervene, citing the need for normal negotiations to take place. But when those talks break down and the huge impact of port closures is felt, the government moves pretty quickly. Port workers are not deemed essential. But when they stop working… it turns out they are.

So, why go through the tedious process?  We all know how it will go. The parties will be fine. Only the rest of us will actually suffer.

These strikes are not consequence-free for consumers. A 12-day strike in Montreal in August of 2020 cost local businesses an estimated $600 million.

A Transport Canada study assessing the potential of another strike predicted costs of tens of millions a week.

These costs are insidious, hard to pin down, but they are nonetheless real.  As Canada tiptoes along the edge of recession, and consumers suffer sharply increased costs, the last thing Montreal needs is another self-imposed economic blow.

We welcomed the Labour Minister’s comments after the fiasco on the West Coast in July. Now he and his colleagues have the opportunity to show their skills and manage this situation.

Mr. O’Regan, complete your “examination of the underlying factors” and propose some solutions.

Should port workers be “essential?” Or do you have some proposals to move the parties into a new agreement without the usual collateral casualties; small business and consumers?

Head off a strike before it occurs, and protect the people and businesses of Montreal.

 

Bruce Rodgers                  Executive Director, CIFFA

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The members of the Canadian International Freight Forwarders Association (CIFFA) are increasingly frustrated by the ongoing challenges and rising costs of doing business in Canada.

CIFFA’s members have increasingly been asking the Secretariat office to do more to raise awareness around the issues they are facing: congestion, delays, capacity issues, inability to pick up or return containers, mounting fees for demurrage/detention, and no one to whom they can raise these issues with satisfactory results.

Our role, though not to point fingers at any party, has become a convoluted and frustrating one. While we have aimed to facilitate collaboration wherever possible, the issues are that there is no longer a supply “chain” in Canada, but supply “links”, each operating in a fragmented and siloed approach. Until there is a significant commitment to work collaboratively on “connecting these links”, in the national public interest, these issues will persist, undermining transportation and the supply chain overall.

Recent decisions by government to clear the backlog of the Pacific gateway has only resulted in a worsening situation for the import community and the costs of goods being transported. In late summer, a mandate was placed on the ports, terminals and rail providers to clear congestion in western Canada. Without foresight, decisions were made, not to work on a solution to the problem, but to shift the burden inland to central Canada. The result is a backlog in the inland supply chains.

There is no one cause or stakeholder solely responsible. This is a complicated and complex issue that requires foresight, commitment, and desire to resolve. Each sector plays a role in the problem, but collectively, we are all part of the solution.

Ocean Carriers: Due to changing consumer buying habits, over the course of the Covid pandemic, carriers initially changed schedule routing and brought an influx of containers into North America. This resulted in vessel integrity deterioration, and most importantly exposed infrastructure weaknesses as efforts were made to handle the volume.

Importers: Due to the uncertainty of product arrival and economic inflationary pressures, an inventory surplus was created. This has resulted in warehouse overcapacity and utilizing the import containers as overflow storage units.

Rail: The opening of additional temporary container yard locations in order to facilitate the import volumes ultimately resulted in creating additional costs due to moving containers inland. These additional yards are not equipped to effectively store, stack and sort containers, causing additional inefficiencies and pressures.

CIFFA is actively engaging with all stakeholders in the effort to stop the situation from worsening and to relieve the stress of the supply chain. CIFFA cannot execute these tasks alone, but in concert with other major and minor supply chain players. We are pleased to read about the initiatives presented in the recent release of the National Supply Chain Task Force report, titled: Action. Collaborate. Transformation. (ACT). Based on the title, we are impatiently awaiting the transformation.

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Over the past few weeks, CIFFA’s Secretariat office has seen increased concerns with the ongoing challenges of the supply chain. Members are asking for help and guidance to deal with rising/additional costs, significant delays and an overall lack of information.

CIFFA has also been contacted by government officials at both Federal and Provincial levels, seeking short-term solutions to the present situation. Our message has been both consistent and clear, that there are no short-term wins in this situation. Government awareness and interaction should have occurred several years ago. Many projects remain tied up in bureaucratic red tape, many of which would have lessened the burden felt by many today. The Port of Vancouver’s Robert Bank Terminal 2 expansion project and CN’s Milton Logistics Hub are two examples.

The situation, as most are aware, is both complex and complicated, one that involves many different stakeholders:

Recently, rail providers have made available off-site yard space to relieve congestion at the rail yards. While this will have a positive impact on spreading out the containers, resulting in additional capacity and improved pick-up times, the corresponding impact is increased costs and further confusion.

We have reports that in the U.S. drivers are leaving the long-haul sector and returning to local and drayage. This is a result of falling truckload rates and increased operating costs. Although we have yet to see a similar reversal in Canada, the contributing factors are similar.

CIFFA remains diligent in working with all stakeholders in the supply chain in order to improve fluidity and efficiency.

Although global complexities are a significant factor and cause of the current supply chain woes, Canadian supply chain stakeholders should not view this as an excuse not to work collaboratively to develop local solutions. We require all stakeholders to look at the broader picture and not solely at their bottom lines and shareholder returns. It will take a holistic effort, but one that is necessary for the betterment of the country.

 

Sincerely,

Bruce Rodgers            Executive Director, CIFFA

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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.