Government funding for new Nova Scotia port would be bad industrial policy

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John Risley is the co-founder of Clearwater Seafood and chair of Canada’s Ocean Supercluster.

The history of Canadian industrial policy around support for business is a checkered one – some successes and some failures.

The successes usually are accompanied by common themes: substantial private sector investment, a strategic rationale at the core of the project and a huge market opportunity. The failures are largely driven by an absence of those imperatives and a hefty dose of political bias.

Now, Ottawa is considering funding the new Melford container terminal, a deep-water port, in Nova Scotia’s Canso Strait. Media reports say project proponents are asking for $175-million. I would say the arguments being offered up in favour of such support suggest this project will fit in the latter, failure category.

While I am not an expert in the field, those who are understand the ports of Halifax, Saint John and Montreal all have extra capacity. Why then would it make sense to fund more such capacity?

The answer would be only in a situation in which the current capacity was not serving a certain market niche, and that niche could be attracted to Canada if the right business assets were on offer. Is this the case here?

Liberal MPs expressing opposition to proposed Melford Port in Nova Scotia

I was actually asked to consider investing in and supporting the Melford project some years ago, and my concern was identifying, in advance, just whether that potential was real. That is, were there customers who would commit to the port if the infrastructure was made available?

At the time of my question, no such customer had emerged, and I doubt one has now. As a result, there is a real question as to whether there is a compelling market opportunity that would justify the investment of hundreds of millions of taxpayers’ dollars.

Second, this is as much a railway issue as it is a port question. The cost of unloading a ship anywhere in Eastern Canada and moving its containerized cargo to mid-America (the destination of most such cargo now) is dominated by rail expenses, not port-related costs.

So does Canadian National Railway Co. CNR-T or Canadian Pacific Kansas City Ltd. CP-T want or need Melford? Would the rail infrastructure necessary to support a new East Coast port compromise or undermine the railways’ current commitments to their respective ports of focus?

I highly doubt either rail line is anxious to invest in more infrastructure in the absence of being assured there is contracted, incremental volume that could not otherwise be handled by, or attracted to, one of the current major ports.

There is nothing wrong, per se, with industrial policy as a strategy. I completely understand why the federal government would want to grant the recent subsidies to Stellantis NV STLA-N and Volkswagen AG VWAGY: to position Canada’s car manufacturing industry so it can play a meaningful role in the electrification of the sector. Thousands of jobs depend on that transformation.

I can also make sense of why Canada needs a competitive response to U.S. Inflation Reduction Act incentives that ensures investments in green energy happen here and not just south of the border. After all, we are an energy-based economy and we have fantastic renewable resources. We missed the boat on liquefied natural gas. We can’t afford to do the same on the green energy file.

I hope you get my point that not all government support make sense. Simply apply some basic principles and business-based questions when considering such ad-hoc public investments. Does this make strategic sense? Where are the customers? And what impact would such support have on existing infrastructure?

If there are not compelling answers to these questions, the public purse should stay firmly closed.