Moncton’s New Neighbourhood in the Global Economy:
Atlantica: the International Northeast Economic Region
Text of remarks by Brian Lee Crowley, President, AIMS
to the AGM of the Greater Moncton Chamber of Commerce
5 May 2004
Ladies and Gentlemen,
Quel plaisir que d’avoir été invité de m’addresser à un auditoire aussi important et influent pour ce qui est de l’avenir de notre région commune. J’ai été ravi d’accepter et d’avoir l’occasion d’être ici parmi vous aujourd’hui afin de mettre devant vous un avant-goût d’un projet important de mon institut, je dirais même qu’il s’agit d’un projet d’une importance capitale pour notre avenir et celui de nos enfants et petits-enfants.
I am here to tell you the story of a single region, divided only by history and a common border and united by one of two possible futures. That single region is northern New England, upstate New York, Atlantic Canada and Quebec, what my colleagues and I at my Institute call Atlantica, what former Bangor mayor Tim Woodcock calls Our Shared Region, and what some call the International Northeast Trade Corridor or Economic Region.
To understand the important of this concept to our future, we must cast our minds into the past. We often forget that before 1867, the two halves of this bi-national region were deeply integrated economically, and that Sir John A. Macdonald’s National Policy of a tariff wall at the border coupled with the building of east-west infrastructure (i.e. railways) to create an artificial east-west economy, that National Policy was very much a second best option compared to the free trade or “reciprocity” agreement that he first sought with the US.
Thus, over a period of a century or more, these pieces of a natural trading region progressively turned their backs on each other. Instead of the border being the political dividing line it needs to be, it became much more. 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, Ernie Forbes, it was as if the Maritimes had been pushed 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. People of vision and imagination will see this moment for what it can be: a decisive turning point in this region’s history, one that is generating huge opportunity for us, if only we can seize it.
If we want to get from here to there, it is important to know where both “here” and “there” are. So let’s start with where “here” is, because I don’t think most people yet realise where we are. Most of us think of this as where we are. But this view obscures more than it reveals.
We are at the intersection of three powerful trade relationships and our local neighbourhood is now dominated three increasingly coherent and powerful economic regions with well defined and consciously pursued economic interests. Where we need to go can be summed up as three imperatives given the neighbourhood we inhabit and the patterns that swirl about us.
The three trade relationships that define our world
Let’s talk trading relationships first:
NAFTA: Trade between Canada and the US is the largest in the world: $2 billion worth of trade every single day of the year. Thirty-eight states have Canada as their largest trading partner. Ten million Ontarians sell more to the US than 120+ million Japanese. Canada is the largest supplier of oil and gas to the United States. Over 300,000 trucks enter Maine alone from Canada every year, about a 50% increase in only 5 years.
The second trade relationship is the EU-NAFTA relationship. Forty percent of world trade occurs between these two trading blocs.
Finally, there is the Suez Express. As a result of changes in shipping technology, including the move to post-Panamax ships, world shipping patterns are shifting radically. Almost the totality of Asian shipping to North America used to cross the Pacific to west coast ports. But increasingly shipping destined for east coast and neighbouring destinations is borrowing the so-called Suez Express route. As a result, the east coast of North America is now on the Pacific Rim, and is a destination for the industrial output of fast-growing China, India and SE Asia as well as a departure point for our exports back to them.
Note that we in Atlantica are at the intersection of these three trade relationships.
The three neighbours that surround us
I also mentioned that we are at the intersection of three powerful economic regions, regions that happen to spill over the old and outdated jurisdictional boundaries that define our politics, but not trade or growth. These are: the Quebec City to Windsor Corridor, the New Atlantic Triangle and Appalachia
Who are we in the middle of all this?
I used to think that Atlantic Canada was a relatively poor region within a wealthy country, but it’s not. It is one half of a relatively poor region within a wealthy continent. Let me try and illustrate:
Unlike the Quebec City to Windsor Corridor or the New Atlantic Triangle, Atlantica is characterized by above average levels of unemployment, outmigration and low income. Combine all these “distress factors” on a single map, and the picture comes sharply into focus.
Atlantic Canada and eastern Quebec is not simply a poor region within Canada, any more than upstate New York, Vermont, New Hampshire and Maine are just a relatively underdeveloped part of the United States. In fact, these areas represent two halves of a single poor region within North America, a fact surely explained, at least in part, by the disruptive effects of the border on regional economic coherence. A couple of quick examples will suffice:
The peculiar interaction of the border and geography in this region means that the border is far more disruptive of economic efficiency than almost anywhere else (a close parallel would be the Ontario/Michigan border). Look, for example, at the inefficient route that geography and national policy have imposed on freight traffic trying to get from the Halifax-Moncton corridor to markets in the North American heartland. Compare that to the geographically most efficient routes, a map, by the way, that underlines the continuing importance of Moncton’s historic role as the Hub of the Maritimes. Now look at how the border would affect a route that was much more efficient. Look at the route that rail cargo follows from that same corridor trying to get to Boston and New York. So much for the advantages of being “a day’s sailing time closer to Europe”.
Note too that New England is a fiction, at least from an economic point of view. As the concept of the New Atlantic Triangle makes clear, the conurbation stretching from Boston through Connecticut and into New York City is already densely developed and prosperous – in fact it may be the largest concentration of wealth and wealth generating capacity in the world. It is already deeply interwoven into the fabric of North American economic life.
The same is true of the Quebec City to Windsor Corridor. The orientation of these dynamic and highly developed regions is south and west in continental terms. In practical terms, they see little in the way of interest or opportunity to the north and east, however much they may pay lip service to the idea of greater regional co-operation. One of the ties that bind Atlantica together is the shared experience of underdevelopment, a dissatisfaction with the status quo, and a commitment to rejoining the mainstream of North American economic life.
There is precedent for this subtle matching of true interests in defiance of formal political boundaries. Look at our third neighbour, Appalachia, for example, and we can quickly see that the Appalachian Regional Commission, has been one of the continent’s most successful projects at achieving economic growth in an underdeveloped region, and has done so by abstracting from formal political boundaries such as states, and defining the region by objective characteristics of underdevelopment — factors such as outmigration, unemployment and low incomes.
The three imperatives that beckon to us
a) Transport intensive economy
We have little choice about the steps we have to take throughout our shared region. As we move ever deeper into the service-based economy, the density of quick and efficient transport infrastructure becomes a vital competitive issue. According to the USDOT, truck traffic in North America will double over the next 16 years or so, reflecting these trends. Rail traffic will grow, but more slowly. And as the result of many economic trends, such as the increasing customisation of production (cars, Dell computers, Amazon books, custom shirts over the Internet) sent from highly efficient centralised production facilities, plus just-in-time inventory control, and the decentralisation of much physical and intellectual production thanks to the Internet, the value of things to be shipped will rise, while the weight will decline and the diversity of final destinations will explode.
The model of the future for transport is not the railways, shifting large volumes of relatively homogeneous freight over high traffic lines between major centres, however important that will continue to be. The model for the future is UPS and FedEx, tailoring both pick up and delivery to highly individual and widely dispersed need. That means that truck traffic is going to be unimaginably more important, with air traffic also growing in importance. Resistance to expansion of the road network, however, also means that sea transport, among others, will increase for some purposes, relying on fast-shipping technology.
b) Continental integration
It is said that in a globalising world, the economic future lies with those places that are either destinations in themselves or are en route to destinations. So what are we? In the old dispensations, we were neither — we were the end of the line on both sides of the border. But no more…
Continentalism is starting to percolate in the minds of decision-makers, but it has not yet sunk in with respect to this region. As an illustration, look at this map of high priority highway corridors as designated by the US Congress.
Looking at this map, one is immediately struck by two features. One is the predominance of north-south high priority corridors. The dominant theme of this map 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 east-west) transportation systems. This map shows that NAFTA is under construction all around us.
The other feature that leaps off the page for residents of Atlantica is that the US 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 east-west across Atlantica.
Just consider that economic development is most often generated at the intersection of interstates. An interstate crossing the American portion of Atlantica on an east-west axis would likely intersect the following US interstates: 95, 93, 91, 89, 87 and 81, while also connecting with the Trans-Canada Highway at several points. Here is one notional route for such a highway, what I call Main Street Atlantica, including a branch to Montreal through the Eastern Townships of Quebec.
And this is not idle talk. Under pressure from members of Maine’s congressional delegation, including especially Senator Susan Collins, the 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 and Vermont and northern New York state to the Ontario border. Congress has appropriated a million dollars for this. The congressional representative for northern Maine is a member of the House Transportation Committee, and has inserted Main Street Atlantica in the new high priority corridors map, although that is no guarantee that it will make it through to the final version. My Institute is working to make sure that the Government of Canada participates actively in that study and acts on its recommendations.
Highways lead people to jobs and encourage employers to invest in facilities along their footprints. It’s no coincidence that economic opportunities are poorest in areas of Atlantica that are not on major trade routes and where good roads do not exist and people cannot get their goods or themselves to market. The study of the economic impact of the US interstate highway system shows that the greatest development occurs around the intersections of interstates, something there will be a lot more of here if we can build the cross-state infrastructure I’m talking about.
But as we all know, it isn’t just the truck and road situation that is an obstacle for us in the region. Air transport within Atlantica between its major centres is minimal to non-existent, especially across the international boundary. The rail links, as I’ve already noted, are poor and have inefficient weight restrictions. The Jones Act is a big obstacle to the development of fast-shipping technology that could allow the natural advantages of the Port of Halifax, that alone in this region can accommodate post-Panamax ships, to be pressed into the service of the region as a whole.
c) Regional coherence building
One of the things that surely explains our relative degree of underdevelopment in this region is that we have not yet brought ourselves to think in terms of a shared cross-border region where local success depends on working more effectively across boundaries, to achieve the kind of economies of scale, transport efficiencies and other regional coherences that more successful regions, such as the mid-west, Ontario, California and Texas —regions with which we are in competition — take for granted.
I really don’t think that we have a choice about building the coherence of our 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 minimised. We are behind in this regard.
Our competitor regions are not waiting for us to get our act together, and if we don’t build the ability to move people and goods across this region properly and efficiently, we simply will not be able to compete to attract the investment, jobs and growth that we all want to see.
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 statewide 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 $145 billion and $183 billion.
The North American Superhighway. Note that it connects the Quebec City – Windsor Corridor and western Canada to the central trade corridor of continental integration, but we don’t even get on the map, because its designers are thinking solely about the NAFTA relationship, not the EU_NAFTA or the Suez Express-NAFTA ones. They have not understood the global trading patterns that define where we are in the world.
The Continental One Route (Toronto-Miami). Note that it runs right through the heart of Appalachia, playing exactly the kind of function that I foresee for Main Street Atlantica.
It is important to note, by the way, that Atlantica is not merely a question of roads and ports and rails. Energy, for example, is a major component.
The pipeline that already links the offshore to Boston through the heart of this region is the spine of a whole new economic entity. And you will note that it is no accident that it was built, not to take that gas into the industrial heartland of Canada, but to help us re-establish our vital links with our historic partners in New England, creating opportunities throughout the region. We would not have built this pipeline had we not had access to American consumers to pay the cost of exploration, development and pipeline construction.
Electricity is another area where Atlantica makes eminent sense. We held a conference on this theme here in Moncton a few months ago. Curt Hebert, former chairman of FERC in Washington was the keynote speaker. We followed that up with a new paper on creating an Atlantica, bi-national electricity market, disponible sur notre site web à www.aims.ca
The Irving oil refinery in Saint John, one of the largest in North America, is one of only two oil refineries in Canada to export the majority of its production, and it does so to a region that corresponds closely to Atlantica. That refinery is a major piece of Atlantica infrastructure.
But there is more to this than infrastructure, however important that is.
The economic future I have laid out here can only come to pass if we demand that our political leaders complete the market opening actions they’ve started but not finished. NAFTA remains incomplete. We are treading water on negotiations for a free trade zone linking the EU and NAFTA — a zone that would tear down the transatlantic barriers that stand between us and opportunity. And in this election season it is clear that political forces hostile to freer trade are more powerful in the Washington political establishment than they have been for decades. Look at the US farm bill or steel protectionism or the US attitude at the Doha trade round which has brought broad-based trade liberalisation virtually to a standstill.
And we have to add to those forces the devastating effects of 11 Sept. 2001. 11 September has driven home to Washington how the institutions of a free society can be turned into weapons to be used against them. Relatively open borders are one of those institutions. Whether terrorists came in from Canada last time or not, the border is an area of vulnerability that Americans will manage in order to maximize their own security.
But if that means hours of delay for goods, services and people moving across the border, it will hurt us badly in both halves of Atlantica. If 300,000 trucks enter Maine from Canada every year, and each one of them is delayed for just an extra 20 minutes – well you do the math about the cumulative loss of economic efficiency and vitality that results.
The purpose of our Atlantica project at AIMS, then, is to play our part: to begin to build the intellectual capital in the form of an understanding of the shared region that straddles the border and the common interests it residents have in deepening that relationship. It is already happening, as is so clearly demonstrated by the support of NY state transportation commissioner Joe Boardman for the Atlantica concept, the Mineta plan for a regional transportation assessment, and the existence of the natural gas pipeline that now ties our region together, all demonstrate.
I don’t want to minimize what has already been accomplished politically in this region. The Council of New England Governors and Eastern Canadian Premiers goes back nearly 30 year and the Gulf of Maine Council on the Marine Environment goes back more than 10.
But as I have tried to show, part of the problem with the co-operation that has taken place is that it is often based on the political fiction of “New England” being a coherent region in any sense. I believe that it is not, and that when we strive for regional coherence while excluding upstate NY and including Connecticut and Rhode Island and even the Boston area (the “New Atlantic Triangle”), we are betraying our own lack of strategic and geo-political sense. We allow people with interests widely diverging from our own to veto policies that are vital to our interests, and we get little or nothing in return. I believe that regional coherence and efficiency will only be achieved when we think coherently about what the relevant region is.
What I want to underline in closing, ladies and gentlemen, is that political co-operation and action largely follows the growth of economic activity. In other words, it is the people in this room, and the forces that you represent, that will lead the drive for tearing down the barriers that still divide us. If you wait until politicians want to take the initiative before trying to build cross-border relations, you’ll be waiting a very long time indeed. Only when they sense that there is an understanding in the public’s mind that the benefits of tearing down these familiar old barriers outweigh the costs, only then they will do so.
The possibilities I have outlined this evening will not occur simply because they can — they have to be made to happen. And the people in this room are vital to this effort, because it is, as I’ve already remarked, when the ties exist on the ground that we can get the attention of politicians to liberalise trade relations, open the border, remove non-tariff and other barriers to trade and generally get out of the way so that we can do what we do so well.
Thank you ladies and gentlemen.