Winnipeg, port city. It's an unlikely label for a Prairie city far removed from any ocean. But Diane Gray's vision, as CEO of CentrePort Canada Inc., is to build Canada's first inland port on 8,000 hectares of land, with inter-modal air, highway and rail connections, and a free-trade zone – all at Winnipeg's James Armstrong Richardson International Airport. Ms. Gray is a former provincial deputy minister of finance who was part of the negotiations that created CentrePort. Now her job is to put those plans into action.
How can you thrive as an inland port when Winnipeg is so isolated?
I don't think that's a fair comment. If you look at how trade flows on rail, almost everything that Canadian National moves east-west or north-south goes through Winnipeg. If you look at the role the Winnipeg Airport Authority plays, it has the most dedicated cargo freighter flights of any airport in the country. That's because of our central location. [The airport]plays the role in Canada that Memphis plays in the U.S.
Seven per cent of provincial GDP comes from transportation and warehousing, which is more than in any other province. Because we are relatively small [in population] our companies need to export – to other parts of Canada or internationally.
Is there a model for this?
The short answer is no. We did look at inland ports in the U.S. and Mexico, and we drew important lessons – including the importance of rail. We are capitalizing on the fact that CentrePort has on-site access to three class-one rail carriers – CN, CP and BNSF [Burlington Northern Santa Fe]
Whereas most inland ports focus on being inbound distribution centres, our model is much more about export activity. We've refined our business case to look at opportunities for manufacturing and distribution. We're looking at regional distribution, taking advantage of our location between Northwestern Ontario and Saskatchewan. We're at the geographic centre of that region.
But isn't the population sparse?
But as Saskatchewan grows, and the population of Manitoba grows, and as you see the activity around Thunder Bay, there is actually a lot of economic activity. And look at the changing practices of retail chains – fresh food requires regional, not national, distribution. We are also working closely with Omnitrax, the owner of the port of Churchill, on opportunities to be more of a staging area for equipment going into Northern Canada.
We are working with the railways on backhaul opportunities – filling the empty containers as they go to Mexico or Asia, putting high-value commodities into them. We don't expect the goods coming in here are going to be absorbed within our province.
But how can you boost manufacturing in a high-wage, high-dollar zone like Winnipeg?
Manufacturing in Manitoba has held up very well. We have the largest aerospace industry in Western Canada; the largest bus manufacturing in North America. We have a very big agricultural equipment manufacturing sector, and all of that is designed for export.
Our companies have been able to refine themselves, taking advantage of lean manufacturing. They are also globally savvy. When you look at a location to source your [production]inputs, you want to be where it is as easy to get your inputs from Asia as from Europe. Being in the centre means you can do that here in a more seamless way.
And while inputs can be manufactured more cheaply in Asia, you still need assembly within this continent. Products like tractors or Caterpillar equipment are not coming into Canada or the U.S. manufactured in their entirety. They come in as inputs or component parts. There is always going to be some kind of assembly in North America.
Where does China fit in?
It is an important market and we have created some business partnerships there. We are working with rail and logistics companies to identify opportunities. But we are also looking south to Mexico and to Central and South America.
We have a company that takes commodities from across Western Canada, puts them in containers in CentrePort and exports them down south by BNSF to the port of Houston, and then uses Houston to ship into South America.
What about Heartlandia – the idea of an economic region comprising Northwestern Ontario, Saskatchewan, Manitoba and neighbouring U.S. states?
A lot of manufacturing companies operate with that kind of regional perspective. Our bus companies have operations in Winnipeg but also in Minnesota or North Dakota. North Dakota is really the unsung hero of the U.S. now with pretty exceptional growth. They, along with Saskatchewan, are sitting on significant oil, and there is a natural economic partnership between our region and Minnesota. Labour costs are low here, taxes are relatively low, and it's a dual economy that straddles the border.
Lower taxes?
We've had a number of major U.S. companies scouting new manufacturing facilities in our region of Canada. That's because by Jan. 1, 2012, the combined corporate income tax will be 33 per cent less in Manitoba than in the neighbours south of us. One-third lower corporate tax is a pretty significant opportunity for some companies. This is something we should really be pushing more to attract new investment.
But isn't the city of Winnipeg hampered by the lack of major head offices?
There are head offices here. Investors Group and Great West Life are owned elsewhere, but this is where they file their head-office taxes. Richardson's, Cargill Canada, Boeing Canada, New Flyer Industries are all here.
We are not Toronto, we are not Calgary – but if you were to compare us to a similar-sized city in the U.S., you would find significantly more head offices here. For a Winnipeg population of just under 800,000 people, there is quite a bit of economic activity and it is growing – and by companies with global presence, not just a local brand.
Why have you been you spared the economic gyrations here?
We have a very diversified economy and it may sound clichéd but you can see how it has helped. In years when one segment might be affected [by recession] another has held up well.
In times when some provinces are growing 4 per cent, a real good year in Manitoba is going to be 3.2 or 3.3 per cent. Then you saw a global recession where we in this province actually grew at 0.1 per cent. If you average out the past five years, you see that our 'non-negative growth rate' was actually the highest growth rate of any province. It's all about that diversification.
What makes you lose sleep?
Despite our diversification of markets, the U.S. is still our largest international customer. It's not as significant here as for other provinces. We're down to under 70 per cent of international exports going south.
But when the U.S. affects the Canadian economy, it affects us all – in everything from access to credit to export markets and the supply chain. The economy itself is always going be the one thing that makes or breaks a major economic development project.
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DIANE GRAY
Title
Chief executive officer, CentrePort Canada Inc., Winnipeg.
Personal
Born in Vancouver, Aug. 9, 1967.
Education
* University of Manitoba's and University of Winnipeg's joint masters of public administration.
* BA, political studies, U of Manitoba.
Career highlights
* Worked for the province of Manitoba from 1995 to 2009.
* Served as deputy minister of finance, of federal-provincial and international relations, and of trade.
* Appointed CEO of CentrePort in September, 2009.