VZCZCXRO0240
RR RUEHHA
DE RUEHHA #0055/01 2042011
ZNR UUUUU ZZH
R 232011Z JUL 07
FM AMCONSUL HALIFAX
TO RUEHC/SECSTATE WASHDC 1198
RUEHOT/AMEMBASSY OTTAWA 0453
INFO RUCNCAN/ALL CANADIAN POSTS COLLECTIVE
RUEHHA/AMCONSUL HALIFAX 1270

UNCLAS SECTION 01 OF 02 HALIFAX 000055 
 
SIPDIS 
 
SIPDIS 
 
FOR WHA/CAN 
 
E.O. 12958: N/A 
TAGS: EWWT ELTN ETRD ECIN ECON PGOV CA US
SUBJECT: HALIFAX STRUGGLES TO KEEP UP WITH U.S. COMPETITORS IN ASIAN 
CONTAINER BUSINESS 
 
REF: (A) 06 VANCOUVER 1366; (B) 06 VANCOUVER 1225 
 
SUMMARY: 
-------- 
¶1. The port of Halifax and the province of Nova Scotia are 
looking for C$400 million from Ottawa so they can go 
head-to-head with U.S. ports in handling rapidly increasing 
volumes of container traffic from China and India.  Without 
federal support for marketing and infrastructure expansion, 
local industry analysts fear Halifax will continue to see 
decreased activity and eventually lose all chance to cash in on 
this new global shipping trend.  End Summary. 
 
Introduction 
------------ 
¶2. Officials with the Port of Halifax are in the midst of a 
tough competition to capture a share of the booming Asian 
container business.  Shipments from China and the Indian 
sub-continent to North America are growing at a rapid pace and 
west coast ports are facing a capacity crisis as they try 
catch-up by expanding their facilities.  For example, Prince 
Rupert, British Columbia is embarking on a multi-million dollar 
expansion program (reftels).  But, ports along the east coast of 
North America also see opportunities to handle a part of the 
Asia business.  Halifax is one such port, but it faces stiff 
competition from ports in New York/New Jersey, Baltimore, 
southern Virginia and Savannah, which are already moving forward 
with expansion and improvement programs.  Port officials, and 
government and business leaders in Halifax fear their city is 
lagging behind, hindered by the absence of a strategic growth 
plan and the funds to boost the port's competitive status. 
 
Halifax's current competitive status 
------------------------------------ 
¶3. In its promotional material, Halifax presents itself as a top 
notch, uncongested port, blessed with a naturally deep, ice-free 
harbor and the closest North American port in travel time to 
Europe and the Suez Canal. Its other advantages include an 
existing network of transportation links to Central Canada and 
the United States, which local officials boast is the most 
efficient in Eastern North America.  Not so evident are the 
disadvantages.  One of the more significant is its rail service 
provided by Canadian National (CN), the only rail company 
serving the port.  Port marketing officials contend that 
potential customers are turned off by what they regard as the 
non-competitive nature of that relationship, but of more concern 
is CN's equipment schedules.  Port stakeholders complain that CN 
unilaterally sets the schedules and port users are expected to 
align their schedules with CN's.  The result - containers are 
left on the dock, waiting for a train. 
 
Addressing Stagnant Growth 
-------------------------- 
¶4.  Overall, officials readily acknowledge that the most 
pressing problem for the port is that few Asian shippers are 
aware of Halifax's potential as a gateway into the North 
American market.  This identity problem has resulted in Halifax 
lagging behind its competitors as evidenced by five years of 
stagnant container activity.  In 2006 the port's two container 
piers handled approximately 530,000 TEUs (twenty-foot equivalent 
units), about half of the port's capacity.  For the first 
quarter this year, container volume has slipped three percent 
compared with the same period last year.  So what to do to 
counter the slide?  As an early measure, officials have taken 
their marketing campaign directly to China and also to India 
where last year they contracted with a company in New Delhi to 
carry out a promotional program within the country.  The port 
also recently touted its Suez link by entering into an agreement 
with the Suez Canal Authority, aimed at promoting Asian trade 
through the canal. 
 
Enter the Gateway Concept 
------------------------- 
¶5.  While analysts applaud these marketing initiatives, the 
bigger concern is that Halifax must move quickly to upgrade its 
facilities if it expects to go head-to-head with its U.S. rivals 
in the North American gateway competition.  A primary concern is 
room to expand.  The port has an opportunity to double its size 
by developing lands adjacent to one of its container piers. 
However, the "chicken and egg" question comes into play - 
improve and build now and use the new facilities as a drawing 
card, or try to improve after attracting the new Asian business. 
 Not surprising money is a prime consideration, especially since 
any large-scale improvement to container facilities would also 
require corresponding upgrades to the existing transportation 
network.  Recognizing that these expansion issues extend beyond 
their jurisdiction, port officials pushed for the creation of a 
coordinating, consultative body called the Halifax Gateway 
Council.  Formed in 2004, the Council has a varied membership, a 
reflection of the anticipated far-reaching effects of the future 
 
HALIFAX 00000055  002.2 OF 002 
 
 
growth of the port.  On the council are representatives of other 
ports in Nova Scotia, the cruise ship industry, shipping 
companies, the Halifax International Airport Authority, 
airlines, local business organizations and the three levels of 
government. 
 
Developing the Strategy:  the role of the Provincial Government 
--------------------------------------------- ------------------ 
¶6.  Given the significant impact that the port of Halifax has on 
the economic wellbeing of the entire province, the Nova Scotia 
government has made development of the Asian-North American 
gateway concept one of its top priorities.  Provincial 
politicians see their role as working with the Gateway Council 
in crafting a strategy for further developing the port of 
Halifax.  Later, the focus would expand to include all 
provincial ports such as Sydney and possibly a new container 
port on the Strait of Canso, as proposed by SA Marine of 
Seattle.  One regional scenario would be to form a partnership 
with the port of Saint John in the neighboring province of New 
Brunswick. 
 
Finding the money: Looking to Ottawa 
------------------------------------ 
¶7.  Another anticipated role for the provincial government is 
coordinating the requests for federal funds to support the 
gateway initiative.  The figure economists and business leaders 
predict the province would need comes in at approximately C$400 
million.  This would include money for marketing initiatives and 
port upgrades, but also for roads and highways, especially 
upgrading the Nova Scotia portion of the TransCanada highway. 
Local and provincial officials are hoping to tap into the 
federal government's Gateways and Border Crossings program, 
seeing federal assistance for the expansion of Prince Rupert and 
the Pacific Gateway as a precedent.  However, at present the 
province has not formally applied for funding as officials are 
still consulting with industry analysts, port stakeholders, 
economists and business leaders on developing the province's 
case. 
 
COMMENT: 
-------- 
¶8.  All port stakeholders agree that Halifax is at a significant 
decision point.  Without a major marketing push, improvements to 
its facilities, and support from Ottawa, the port is going to 
miss what industry analysts see as the chance of a lifetime and 
the port will very likely never play in the big leagues with its 
U.S. competitors.  Just how the federal funding issue will 
unfold is unclear. So for now, the port is pushing ahead with 
its own initiatives - things like hosting a trade mission from 
India and investing in two more super-size cranes.  But as one 
industry consultant told us these measures aren't what the port 
needs most - it's lots of cash, an increased profile and a 
string of new shipping lines.  End Comment 
FOSTER