President Donald Trump has initiated economic actions against Canada, breaking trade agreements and military treaties. He has mentioned using “economic force” to annex Canada. This move has shocked many long-time admirers of America. It also exposes Canada’s economic vulnerability in logistics. New airport infrastructure can help redirect Canadian trade away from the U.S. and support Canadian sovereignty.
Aviation is integral to Canada’s long-term economic freedom.
By value more than 35% of global trade moves by air according to IATA (International Air Transport Association). Yet inside Canada, that figure is only 10%. Two-thirds of Canadians live within two hours of the US border, enabling short-sighted infrastructure policies that made Canada dependent on America’s transportation infrastructure. Goods manufactured in Canada and exported globally are frequently transshipped through the United States. Even goods shipped between neighbouring Canadian provinces often go south across the US border first before returning to Canada. Easy access to US highways, airports, seaports, rail and pipeline infrastructure has delayed the nation-building construction of Canadian infrastructure.
Canada is now waking up to find that a single man can hold Canadian economic prosperity for ransom. All it takes is an unstable President of the United States to crash Canada’s economy. President Trump’s statements and actions seem disconnected from reality from the moment he was elected. His statements on trade on any given day can directly contradict both his previous and subsequent ones. In business, uncertainty can be devasting. The lack of Canadian infrastructure helps enable this dependency, creating a uniquely Canadian economic vulnerability.
How can new airports and aviation infrastructure help solve this problem?
Air connectivity is strongly positively associated with the total value of trade and economic growth. In a study done by IATA it was found that countries that have well-developed air cargo connections combined with good quality customs services and smart borders are better at integrating into global value chains. An increase in air cargo connectivity by just 1% is associated with a 6.3% increase in total exports and imports.
Although air freight is costlier (approximately four times that of road transport), it enables manufacturers to access a global market. In an economy influenced by online shopping and a preference for high-quality goods, aviation provides access to a global market independent of US infrastructure and tariffs. Canada can overcome Trump’s tariffs by building new, strategically placed two-kilometre-long runways.
Commodities shipped by air have high values per unit and can fulfill very time-sensitive deliveries. Air cargo includes pharmaceuticals, fashion garments, machine parts, electronics consumer goods, perishable agricultural products, seafood, and high-value inputs to a global just-in-time production chain. New industries are emerging near Canadian airports creating AEZ (Airport Economic Zone). For example, the AEZ around Toronto Pearson Airport is Canada’s largest employment zone, providing over 300,000 jobs.
The development of new long range unmanned cargo drones is expected to cut the cost of air cargo in half.
Building new infrastructure in Canada will be challenging. Over the past decade, Canada has faced rising debt, higher taxes, and increased bureaucracy. The economy shows low productivity and a declining standard of living, indicated by falling real GDP per capita. A new governance approach with an economic focus is essential. With global passenger and freight traffic expected to double by 2050, Canada needs a national airport strategy and associated economic zones, focusing on renewing and developing airport infrastructure and nearby industrial parks.
Canada is facing challenges due to the diminishing reliability of the United States as a business partner. While we remain optimistic about future opportunities for business with the United States, it is prudent to prepare for less favourable scenarios. Canadian logistics must be entirely self-sufficient and independent of any other nation. To achieve this, Canada must establish its own gateways to the global market. We can rise to the challenge by taking to the skies.
References
Export values by mode of transport, 1997 to 2023
International Trade Statistics
IATA report summary of air cargo value chain.