1. The Canada-U.S. Supply Chain in the Era of Global Economic Competitiveness Canada-United States Law Institute 2008 Annual Conference April 17-19, 2008 The World’s Longest Undefended Border: Gateway or Checkpoint? Garland Chow Sauder School of Business University of British Columbia

2. Changing Geo-Economic Landscape From domestic supply chains (enabled by domestic transportation networks) to …. Continental supply chains (enabled by removal of trade barriers) to ….. Global supply chains (enabled by removal of trade barriers and improvement in international transportation and gateways)

3. Supply Chain Activities – Where Should They Be Performed? Product Design Product Development and Engineering Raw material and component sourcing Intermediate manufacturing Final manufacturing Distribution

4. BOEING 787 Supply Chain

5. Bombardier Transportation Bombardier Transportation Signs Contract for Advanced Rapid Transit Cars in Malaysia Malaysian partner, Hartasuma Sdn Bhd (HSB), 88 advanced rapid transit cars to Syarikat Prasarana Negara Berhad for use in Kuala Lumpur The cars will be manufactured at Bombardier Transportation facilities in North America with components sourced globally and final assembly in Malaysia by HSB.

6. Canadian Participation in Global Supply Chains Source: StatCan 2007

7. Trade with the U.S. is the Cornerstone of Canada’s Economy Canada – U.S trade $562 billion - #1 for U.S., #1 for Canada U.S. exports to Canada - $249 billion - #1 for U.S., #1 for Canada Canada exports to U.S. (imports) - $313 billion - #2 for U.S., #1 for Canada

8. CA – US Trade Reflects Economic Integration Enabled by NAFTA

10. Integration in the North American Cattle and Beef Industry 2005 $515 Million, 1,256,000 Head of Beef Cattle $47 Million, 7,600 Metric Tons of Beef $139 Million, 52,000 Metric Tons of Beef <$1 Million, 1,000 Head of Beef Cattle $550 Million, 146,000 Metric Tons of Beef $5 Million, 19,000 Head of Beef Cattle $132 Million, 67,000 Metric Tons of Beef $526 Million, 562 Thousand Head of Beef Cattle $1.2 Billion, 367,000 Metric Tons of Beef Source: North American Beef Industries are Integrated - Almost One Supply Chain Markets React Immediately to ‘News,’ But U.S. Recovered Quickly While Pain Lingered in Canada U.S. Increased Cattle Imports from Mexico and Beef Imports from Canada and Uruguay to Help Meet Demand

11. Integration in the North American Swine and Pork Industry, 2005 $17 Million, 125,000 Head of Swine $281 Million, 158,900 Metric Tons of Pork $478 Thousand, 3,700 Head of Swine $269 Million, 80,000 Metric Tons of Pork $598 Million, 8.2 Million Head of Swine $745 Million, 315,000 Metric Tons of Pork $51 Million, 60,000 Metric Tons of Pork North American Pork Industries are Integrated - Almost One Supply Chain U.S. Pork Exports Have Gained As Beef & Poultry Exports Have Declined Protectionist Response to Increased Trade to Continue Support for VCOOL Growing & Animal Identification May Be Requirement to Export Canada & Mexico May Seek Marketing Alternatives

12. 12 Alco Ventures Inc. Langley, BC Bakersfield, CA Cambridge, ON Port Coquitlam, BC

13. 13 Alco Ventures Inc. Langley, BC Bakersfield, CA Cambridge, ON Port Coquitlam, BC China

14. 14 Alco Ventures Inc. Langley, BC Distribution Center Kent, WA Cambridge, ON Bakersfield, CA

15. Fujifilm Fujifilm imported products from Asia to Canada and U.S. via port gateways Size of market in N.A., especially the U.S. grew to the level that made establishment of plant economical in U.S. Products formerly moved by container to Toronto via Vancouver now goes by truck across the border from S. Carolina Greenwood, S.C. plant is the Fujifilm Group's principal facility for manufacturing operations in North America.

16. Most Important Canada to U.S. Continental Supply Chains 1.Automobile manufacturing 2.Mineral energy 3.Machinery and equipment 4.Forest products 5.Agriculture and fish

17. West Coast Gateways Support Global Supply Chains into North America

18. The Asia-Pacific Gateway and Corridor serves North America

19. Canada’s Intermodal System: Reaching into North America’s Heartland Prince Rupert Vancouver Montreal Halifax Airport * Major Container Ports Prince Rupert Vancouver Asia-Pacific Gateway and Corridor Initiative Ontario-Quebec Continental Gateway and Trade Corridor and Trade Corridor Atlantic Gateway Montreal Windsor Halifax

21. The Challenge of a Thickening Border Inefficiencies at border = inefficiencies in supply chains Joint Canada-US Chambers of Commerce 2008 report: –Sense of frustration – 25 recommendations 16 May 201521

22. The Challenge of a Thickening Border Conference Board of Canada 2007 study : –Undermining benefits achieved through NAFTA –Business having to absorb compliance costs –Lack of predictability at border forcing changes in business practices and driving down efficiency –Thickening border may eventually erode Canada’s attractiveness as foreign investment location 16 May 201522

23. Can we afford to let a thickening border … Reduce the access of manufactures and retailers on both sides to efficient suppliers Reduce the effective consolidation of manufacturing or distribution Reduce the access of producers and consumers in the U.S. to low cost products from off shore Reduce the integration of supply chains across the U.S. – Canada border

24. Some Issues Canada is taking action because it has to, how important is a seamless border to the US? Transport agencies can only do so much, how important is a seamless border to DHS, CBSA? Infrastructure is a challenge but regulatory barriers may be the root problem.

25. Some Issues Institutional change is needed as the current institutions are ineffective – there needs to be a continental perspective What has been achieved through trade liberalization is being undone (in part) with thicker borders There is an increasing need to address complete supply chain from Asia to consumer in N.A. or in opposite direction

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