In an unfettered free-market economic system, entrepreneurs need to read the market for possible signals that suggest new business opportunities for developing or implementing new technologies or new strategies in order to raise productivity. Since time immemorial, humankind has searched for ways to increase the returns from productive effort. It is due to human ingenuity applied to the task of survival that large settlements developed along rivers that not only provided a means of sustenance and survival, but also a means of transportation that could move large quantities of goods.

While people could transport goods by carrying them on their shoulders or backs, they also learned to domesticate animals that could each carry the same weight and volume of goods as an entire family of people. The same animal could walk along a riverbank while pulling a small vessel that could carry the equivalent weight and volume of goods as a whole team of identical animals. By the 7th century, man’s inventive spirit created a boat with a keel, rudder and moveable sail that could actually sail a zig-zag path into a prevailing wind.

Trade between groups of people who lived at great distances from each other depended on the ability to cheaply and efficiently move large volumes and heavy weights across great distances, courtesy of access to water-based transportation. By the late 19th century, a trend had emerged, with larger ships carrying greater weight and increased volume of cargo at lower cost per unit. This evolving trend in the productivity of commercial transportation continues to the present day, as is evident from the size of container ships.

Eastern Canadian Opportunity

A very large segment of the world’s trade moves in containers that each measure 8 feet by 8 feet by 40 feet, and the largest ships can carry over 10,000 containers between a select group of Asian and European ports, offering shippers lower transportation costs per container than smaller ships. While these ships can sail the newly enlarged Suez Canal, they are too large to sail through the newly enlarged Panama Canal. Neither can they sail into any East Coast American port for a variety of reasons that include insufficient dock space to transfer and store containers.

There is, however, a port located in a large and protected oceanic inlet at Sydney, Nova Scotia, off Cabot Strait in Eastern Canada, that is sufficiently deep to accommodate the depth of the super-sized ships and where coastal land is readily available for development into the kind of terminal area needed to accommodate the massive number of containers that these ships can carry. To develop the necessary terminal capacity for the world’s largest container ships to arrive at Halifax, in contrast, would require massive amounts of funds to expropriate land and demolish buildings to make space for such a terminal, compared to the low cost available at Sydney.
 

“The essence of government market regulation is to restrict market entry so as to protect the commercial interests of existing players. The very nature of such economic regulation invites insiders from regulated industries to gain considerable influence inside the government regulatory agencies, thereby “capturing” them, in the economic jargon.”

A private group previously explored the option of developing a super-port for the world’s largest container ships at Chedabucto Bay, near the entrance to the Strait of Canso, for the purpose of transferring containers to smaller ships headed to several east coast American ports plus the Port of Montreal, and during warmer weather, ports located along the inland waterway upstream of Montreal toward the Great Lakes. But the private group that had developed successful maritime ports elsewhere in the world seemed to continually encounter some unseen forms of opposition to their project in Eastern Canada.

Such opposition is the likely result of Transport Canada having distributed large amounts of money into developing maritime terminals and airports across Eastern Canada. The Port of Montreal is being expanded at a cost of $350-million, including a new terminal at Varennes. The Port of Saint John received $68 million, while Halifax International Airport received a new $30-million runway and the Port of Sydney received a dredge valued at $38 million. While Halifax may hope for Ottawa to invest in its port, the recent economic downturn requires that all levels of government curtail expenditures and allow the private sector to invest in port development.

Follow the Money

The British comedy series Yes, Minister and its sequel Yes, Prime Minister depicted situations where a senior bureaucrat comically and subtly manipulated the Minister, and later the Prime Minister, usually with his own hidden agenda or that of a political friend. During America’s Watergate investigations and during the Iran-Contra hearings, witnesses suggested that the investigating government committee should “follow the money trail!”  In Eastern Canada, somebody either has something to gain or seeks to protect an investment from competition by opposing private efforts to develop a terminal for super-sized ships at a location such as Sydney.

It will be much cheaper for private interests to develop a terminal for the world’s largest container ships at the Port of Sydney or even at Saint Pierre and Miquelon than at Halifax, but developing a terminal at either of these two locations would provide competition for Halifax-based businesses connected to or dependent on the ship transport industry. While using political connections to indefinitely delay developing a terminal for mega-sized container ships at Sydney would protect such business from competition, such action could push development of the terminal offshore and outside of Canadian sovereign territory, away from Transport Canada’s jurisdiction.

The essence of government market regulation is to restrict market entry so as to protect the commercial interests of existing players. The very nature of such economic regulation invites insiders from regulated industries to gain considerable influence inside the government regulatory agencies, thereby “capturing” them, in the economic jargon. Government regulation also sustains inefficiency within regulated industries, irrespective of whether the regulations are formal and written or informal and unwritten. In the absence of formal market regulation, a government agency can use a variety of means to indirectly enact market entry control by indefinitely delaying a project.

There is a market case to be made for the operation of a terminal in Eastern Canada that can berth the largest container ships on the ocean and serve as the transfer point where containers are moved onto to smaller vessels that sail to several east coast American ports as well as ports located along the St. Lawrence  waterway. While a government agency that seeks to indefinitely delay such development may protect commercial interests in Halifax, that agency could also be the catalyst that drives such a terminal offshore to Bermuda, the Azores, or Saint Pierre and Miquelon.

Harry Valentine is a free-marketeer living in Eastern Ontario.

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