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The application of economic impact analysis: a case study of Fraser Port Tedder, Sinclair John 1994

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THE APPLICATION OF ECONOMIC IMPACT ANALYSIS: A CASE STUDY OF FRASER PORT by SINCLAIR JOHN TEDDER B.A., The University of British Columbia, 1991 A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF ARTS in THE FACULTY OF GRADUATE STUDIES (School of Community and Regional Planning) We accept this thesis as conforming to the required standard THE UNIVERSITY OF BRITISH COLUMBIA April 1994 © Sinclair John Tedder, 1994 In presenting this thesis in partial fulfilment of the requirements for an advanced degree at the University of British Columbia, I agree that the Library shall make it freely available for reference and study. I further agree that permission for extensive copying of this thesis for scholarly purposes may be granted by the head of my department or by his or her representatives. It is understood that copying or publication of this thesis for financial gain shall not be allowed without my written permission. (Signature) Department of C ort>l u*J < '"""X "t A<£&fQ*JAt- '' tJfsJsJi A>d-The University of British Columbia Vancouver, Canada Date Qif^s /6, '??r DE-6 (2/88) Abstract The purpose of this thesis is twofold: first, to review the literature on economic impact analysis in general, and port-economic impact literature in particular; and second, to use this background to undertake an economic impact assessment. The case study for this thesis is Fraser Port, which is located along the lower reaches of the Fraser River in British Columbia's Lower Mainland metropolitan region. The port is administered by the Fraser River Harbour Commission. This thesis is about production, people, and the economic significance of Fraser Port. This thesis is not an analysis of economic impact theory, but a review and application of port impact identification techniques. All data and impacts presented relate to 1992. Ports perform a necessary function in a nation's trading system by providing a transshipment connection between land and water modes of transport. As such, the port is strategically connected to the production of the many goods passing through its facilities. For this thesis, the impact of the various commodities passing through the port is termed port-associated. The port also manifests its presence through its daily operations and generates numerous employment opportunities both within and beyond the confines of the waterfront. The economic impact driven by this activity is termed port-industry and most closely reflects the impact of the working waterfront. To complete the impact assessment of the port-industry category, a survey was undertaken to collect sales revenue and employment information. This data i i was then aggregated into specific industry sectors and a total economic impact was estimated using appropriate economic multipliers. The result was a picture of direct, indirect, and induced activity resulting from the daily operations of the port. The port-associated category was assessed in a slightly different manner. The value of each cargo was determined and, where appropriate, was assessed for the economic activity related to its production. This activity is not generated by the port, but is associated with Fraser Port through the use of its transshipment services. The results of the assessment reveal that the port-industry category generates approximately one quarter of a billion dollars of provincial gross domestic product (GDP). This led to a total GDP impact across Canada of close to $275 million. Employment amounted to about 2,113 full-time equivalent positions in B.C. and nearly 3,400 across Canada. In 1992, the total value of import and export cargo passing through Fraser Port was approximately $6.1 billion, $3.8 billion of which was international imports. The remainder, $2.3 billion, was made up of domestic outbound and inbound cargoes, and international exports. It is important to recognize that these two categories of port activity are measures of different effects. The results of the port-industry and port-associated categories should not be added to produce a total Fraser Port impact. Adhering to this recommendation will ensure that the figures, and thus Fraser Port, will not be misrepresented to the public. i i i Table of Contents Page Abstract ii Table of Contents iv List of Tables viii List of Figures ix Acknowledgements x Introduction 1 Chapter 1. Ports and the Economy 3 1.1 The Evolution of a Port 4 1.2 The Port as an Economic Generator 5 1.3 The Post-War Growth of Trade 7 1.4 Vancouver and Fraser Port 9 1.5 Conclusion 10 Chapter 2. Port Economic Impact Methodology 12 2.1 Defining Economic Impact Studies 12 2.1.1 Cost-Benefit Analysis 12 2.1.1 Economic Impact Assessment 13 2.2 Defining Economic Impacts 15 2.2.1 Direct Impact 15 2.2.2 Indirect Impact 16 2.2.3 Induced Impact 16 2.2.4 The Multiplier 17 2.3 Defining Economic Impact Models 17 2.3.1 Economic Base Model 18 2.3.2 Income and Expenditures Model 22 2.3.3 Input-Output Analysis 23 i v 2.4 Summary of Models 26 2.5 Port Economic Impact Studies 27 2.5.1 Defining the Primary Activity 28 2.6 Economic Impact Model used in the 1981 and 1993 Fraser Port Studies 34 Chapter 3. Introduction to Fraser Port 36 3.1 3.3 3.3 3.4 3.5 3.6 3.7 3.8 3.9 Location of Fraser Port 36 The Lower Mainland System of Ports 38 History of Fraser Port 40 Fraser Port Administration 41 Fraser Port Facilities 42 Transportation Infrastructure 44 Physical Characteristics 44 Fraser Port Cargo Statistics 45 3.8.1 Total International and Domestic Shipments 45 3.8.2 International Shipments 46 3.8.3 Domestic Shipments 47 3.8.4 Exports by Region 48 3.8.5 Imports by Region 49 Conclusion 50 Chapter 4. A Critique of the 1981 Fraser Port Economic Impact Study 52 4.1 4.2 4.3 4.4 4.5 4.6 Results of the 1981 Fraser Port Economic Impact Study 52 Review of the 1981 Results 54 The Division of Port Activity 55 Port Dependency 57 Incorrect Presentation of Results 58 Calculation of the Secondary Impact 60 v 4.7 Conclusion and Recommendations 62 Chapter 5. Fraser Port Economic Impact Study Methodology 64 5.1 5.2 5.3 Purpose and Scope 64 Evaluation of Port-Industry and Port-Associated Impacts 66 5.2.1 Port-Industry Methodology 66 5.2.2 Port-Associated Methodology 70 Conclusion 74 Chapter 6. Fraser Port Economic Impact Assessment Results 75 6.1 6.2 6.3 6.4 6.5 6.6 Provincial Impacts of Port-Industry Activity 75 National Impacts of Port-Industry Activity 77 Economic Impact of the Port-Associated Sector 78 6.3.1 Export and Import Commodity Value 78 6.3.2 The Export Sector 78 6.3.3 Fraser Port Imports 84 6.3.4 Shipbuilding/Repair and Marinas/Moorage 87 Comparison of the 1981 & 1992 Fraser Port Economic Impact Studies 88 Comparison of Fraser Port and Vancouver Port Corporation Port-Industry Results 89 Conclusion 90 Chapter 7. Summary and Conclusions 92 7.1 Summary 92 7.1.1 Port Activity Definitions 93 7.1.2 Fraser Port 94 7.1.3 Lessons of the 1981 Fraser Port Economic Impact Study 95 7.1.4 Port-Industry Results 96 7.1.5 Port-Associated Results 97 7.2 Conclusion 99 7.2.1 Application of Port Economic Impact Theory and the Legitimacy of Results 99 7.2.2: Fraser Port Methodology Revisited 102 v i References 105 Appendix 1. Survey List: Port-Industry and Port-Associated Businesses 112 Appendix 2. Survey Questionnaires 116 Appendix 3. Calculation of Induced Multipliers 119 Appendix 4. Calculation of Port-Industry Impacts 123 Appendix 5. Calculation of Cargo Values and Associated Impacts 127 v l i List of Tables Page Table 3.1: Comparison of Lower Mainland Ports, in metric tonnes 38 Table 3.2: Fraser Port international export and import shipping statistics, 1992 (in metric tonnes) 46 Table 3.3: Fraser Port domestic outbound and inbound shipping statistics, 1992 (in metric tonnes) 48 Table 6.1: Economic impact of the port-industry sector, B.C., 1992 76 Table 6.2: Total economic impacts for B.C. and Canada 77 Table 6.3: Total inbound and outbound tonnages and values, 1992 79 Table 6.4: Export sector distribution of port-associated GDP impacts for Canada, 1992 80 Table 6.5: Export sector distribution of port-associated employment impacts for Canada, 1992 (in full-time equivalents) 81 Table 6.6: Export sector distribution of port-associated labour income impacts for Canada, 1992 83 Table 6.7: Commodity value of international imports shipped via Fraser Port, 1992 85 Table 6.8: Domestic inbound commodity values and GDP, employment, and labour income impacts for B.C., 1992 86 Table 6.9: Economic impacts for B.C. and Canada, 1992 87 Table 6.10: Comparison of VPC and Fraser Port port-industry employment and labour income impacts for B.C., 1992 90 v i i i List of Figures Page Figure 3.1: Fraser Port Jurisdiction 37 Figure 3.2: Percentage distribution of Lower Mainland shipping tonnages, 1992 39 Figure 3.3: Domestic and international cargo shipped via Fraser Port, 1992 (in 1,000 tonnes) 45 Figure 3.4: International exports by region of distination, 1992 49 Figure 3.5: International imports by region of origin, 1992 50 ix Acknowledgements Several people were instrumental in the completion of this thesis and must be thanked. First, I would like to thank Mr. Bill James and Mr. Rick Pearce of the Fraser River Harbour Commission, and of course Dr. Emam Khan of the Harbour Commission who provided much support and led me through the intricacies of governmental organizations. Thanks also to Salman Jamal who assisted with the study while employed by the Harbour Commission. I must also extend a warm thanks to my supervisor, Dr. Craig Davis, who helped immensely with this project. This opportunity with Fraser Port helped me more than could have been imagined. Finally, I would like to thank Eugenie Lam who encouraged me when my energy had waned, and uplifted me when my confidence had fallen. This thesis could not have been completed without any of these people. Thank you all. Sinclair Tedder, March 30, 1994. x INTRODUCTION. The purpose of this thesis is to provide an understanding of the economic impact surrounding the operation of a port. Fraser Port, under the administration of the Fraser River Harbour Commission, serves as the case study. Chapter one introduces the economic role of ports in a regional and national context. The evolutionary relationship between a port and its adjacent urban area is examined. The chapter introduces two economic roles of a port: (1) as a provider of transshipment services; (2) as an economic generator. The second chapter examines economic impact analysis in general, and port-economic impact analysis in particular. The chapter opens by describing an economic impact and its various components. This is followed by an introduction to three techniques of multiplier identification and impact assessment. The definitions of port activity that form the basis of the Fraser Port study follow this discussion. Finally, the chapter introduces the type of multipliers chosen to estimate the economic impacts of Fraser Port. Chapter three introduces Fraser Port by describing its location, facilities, and cargo tonnage characteristics. The intention of this chapter is to introduce the reader to Fraser Port and to provide a basis on which the results of the impact assessment may be viewed. In 1981, an economic impact study of Fraser Port was completed. Chapter four presents a critique of this study. The chapter concludes with several 1 recommendations and a discussion of how the 1993 study avoids the mistakes made in 1981. Chapter five discusses the practical methodology of the 1993 Fraser Port economic impact study. Each stage of the impact assessment is outlined from identification of the survey sample and survey process, to impact identification and presentation. Chapter six presents the results of the impact analysis in two sections: the first shows the impacts of industries involved with the movement of cargo; the second presents the impacts of the exporters and importers who ship goods via Fraser Port. The economic impacts of industries more river related than port related (in this case shipbuilding/repair and marinas/moorage) are also provided in the second category. The chapter finishes with a comparison of this assessment with the 1981 Fraser Port study, and the 1990 Economic Impact Study of the Vancouver Port Corporation The final chapter summarizes the relevant points of discussion and the results of the analysis. It goes on to discuss some conclusions that can be deduced from the results and the impact assessment process. The discussion includes perspectives on the application of impact assessment theory, problems encountered during research, and the validity of impact results. Appendices present a list of companies surveyed, the questionnaires used during the research phase, the calculation of induced multipliers, the spreadsheet application and calculations of impacts, and the valuation of Fraser Port commodities. 2 CHAPTER 1. PORTS AND THE ECONOMY. While ports have been in existence for centuries, providing essentially the same service then as today, they have become less of the mysterious, dark and dangerous areas as once imagined. Through changing technology, environmental and economic research, and public scrutiny and access, ports have come out from behind both physical and psychological confines. What is a modern seaport of today? Hoyle and Pinder (1981) state that "[transport integration is the essential port function, but a modern seaport node within a multimodal transport system frequently develops also as a major urban centre, an industrial focus, an important source of employment, and an influential factor in national and regional development" (p. 1). This chapter expands on this theme by discussing the economic role of a port and its influence on the surrounding region. Ports are commonly referred to as transshipment points for goods entering or leaving the country. James Bird (1971) states that a port is "best defined in terms of its function as a place where each-way changes between land and sea transport regularly take place" (p .13). Boschken (1988) describes ports as "part of a country's economic infrastructure ... [acting]... as primary transshipment points in the allocation of goods and services" (p. 20). In any description, a port is part of a nation's transportation network, and as such has an integral role in the distribution of goods. When discussing ports, the terms hinterland and foreland are used to describe the area served by the port (Bird, 1971). The foreland lies seaward to the port and includes all our foreign trading partners. The hinterland refers to the area of land 3 surrounding the port. This region is affected by the port through direct labour demand and industrial agglomeration, and can be the source and destination of cargo. A port's hinterland is bounded by the reach of its cargo shipments and, as such, can extend across the country. The immediate, or adjacent, urban area that relies on the port for its labour demand, and on its proximity to shipping facilities, is often termed the urban hinterland, while the hinterland extends to include all inland areas associated with the port. 1.1: The Evolution of a Port. Bird's (1971) 'Anyport' model describes the evolution of a port community and its eventual development into a metropolitan centre. During the early stages of a port's development, the adjacent town is dominated by harbour activity and the port's hinterland is small, reflecting the lack of a developed trading system and transportation network (Bird, 1971). Eventually, seaborne exploration opens new markets and increases the capacity to trade, which simultaneously promotes regional economic expansion. As port activity increases, a growing demand for port services prompts the establishment of new quays and storage facilities. Initially, the port connects with its hinterland via a perpendicular transport route -- be it a road, rail line, or river. As the economy expands, competing demands for land in the traditional port area cause further port expansion to occur along the shoreline. The port's original perpendicular penetration of the hinterland fans out in a semi-circular extension into the region. Eventually, more transport routes connect directly with the port as outlying producers and consumers attempt to minimize transportation costs. With each stage in the evolution of 'Anyport,' employment increases and generates 4 various spin-off benefits. This occurs through not only the expansion and operation of port facilities, but also the development of industrial activity to supply products to the port, and export and import activity dependent on the port for its services. Trade, thus, becomes an essential function and promoter of regional economic expansion. The port, through virtue of its existential presence, is one of the many beneficiaries. The employment and industrial agglomeration effects are discussed in greater detail below. 1.2: The Port as an Economic Generator. A port acts as an economic generator providing employment and inducing numerous secondary economic opportunities throughout the region and nation. A port not only provides employment for longshoremen and port authority officials; it also requires the services of shipping agents, customs brokers, tug boat operators, and numerous other transport related services. The port community is neither a homogeneous group nor is it necessarily situated near the waterfront. Many port related services may be located far from the working waterfront in areas more amenable to their needs, such as providing access to clients and business services. The purchase of goods and services by the port community and the payment of wages and salaries create spin-off or secondary effects beyond the web of transport related activities (see Chapter 2 for a discussion of secondary impacts). The services provided by the port community and the resulting expenditures generate economic activity not only in the region adjacent to the port, but also throughout the nation. The port community requires goods and services similar to any business activity: for example, goods such as office equipment and supplies, 5 and services such as accounting and communications. The employees of the port community, as part of the greater community, also generate economic activity through the spending of incomes. Without the spending associated with this port related activity, income would be removed from the local economy and the spin-off economic opportunities would be lost. The agglomeration of industry dependent on port services is another facet of the port's role in a regional economy. As Boschken (1988) argues, "[pjorts stimulate economic development by virtue of their strategic location in the transportation network. To minimize total transportation costs of raw materials and finished goods an infrastructure of industry and commerce develops around ports ..." (p. 24). For example, the Vancouver area became an important wood processing centre with its water and rail access, and abundant supply of timber (Hardwick, 1974). The region is also a large consumer of imported goods. The commodities shipped via a port can reveal the level of industrial impact on the region. Bird (1971) states that "[tjhere are those cargoes that move 'through' a seaport considered as a gateway; and there are those that are delivered at... terminals for immediate storage and, most often, for first processing in the port area" (p. 15). The economic impacts of the two roles will differ with the gateway port serving a larger hinterland with less local industrial development dependent on the port, while the other will be characterized by extensive industrial processing located near the port for access to foreign markets. The port's economic influence in the region is dependent on the agglomeration of port-dependent industries (Bird, 1971; Norcliffe, 1981). 6 For Canadian ports, this type of industrial development is not as prevalent as it is in the U.S., Japan, and Europe, for example. Norcliffe (1981) cites the dominance of staple exports (including grain, iron ore, coal, fish, and forest products) as creating less economic development near port communities than is visible at other ports where manufacturing is concentrated. The Port of Prince Rupert is a classic gateway port serving its greater hinterland more than its immediate urban hinterland. While employment is drawn from the surrounding area, little industrial development has occurred. The Vancouver area port system tends to combine functions, being predominantly a gateway for bulk and container goods. However, a specialization in the production of wood products is present, as is, for example, the use of aggregate, limestone, and gypsum in production plants located along the Fraser River. 1.3: The Post-War Growth of Trade. The post-war boom in international trade required ports to expand and respond to the needs of shippers. Between the years 1955 and 1981, the total volume of international seaborne trade increased from 800 million metric tonnes per year to 3,320 million metric tonnes per year, although since 1984 the growth rate has declined (Beth, Hader, and Kapper 1984). In relation to total world trade, shipping activity accounts for over 80% in value terms and 99% in volume terms (Branch, 1988). Ports respond to the requirements of shippers. The ship design and route that reaps the greatest financial return will drive the development and look of port infrastructure (Bird, 1971; Hoyle and Pinder, 1981). The containerization of general and some bulk cargoes is the most recent example of the need for ports to 7 provide appropriate facilities, or face declines in cargo volumes. For example, in the 1960's, some shippers changed their choice of port from San Francisco to Oakland, as a result of Oakland being the first to invest in modern container facilities (Chilcote, 1988). The presence of new container cranes, however, does not guarantee shipping business. This reflects the changing needs of shipping liners, which in an effort to reduce costs, have concentrated on fewer ports. The prohibitively high investment needed to adapt ports to the needs of new ship design relegates many ports to secondary status, and contributes to the focus of port activity and growth at fewer ports. This phenomenon, termed 'load centring1, has led to success at some ports, and to failure at others. The rapid growth of the Port of Tacoma and the loss of business at the Port of San Fransisco are relevant examples. In the mid-1970's, two container cranes were constructed at a Fraser Port terminal; however, the cranes have yet to operate at full-capacity. In this atmosphere of increased competition and high costs, ports have become more capital intensive, thus shedding the dependency on a large labour pool. As a result, the community surrounding the port has become more independent of the port's economic influence, and the port has retained less of its original economic influence. Harrison (1978) states that ports were originally "considered to be of high economic importance to the cities in which they find themselves" (p. 2). However, he goes on to conclude that the relative economic significance of a port is diminishing and that "ports are increasingly less dependent on the urban area" (Harrison, 1978, p. 3). Writing about Canadian ports, Norcliffe (1981) notes that the traditional labour intensity of ports was never fully present in Canada because of the dominance of staple exports. 8 This notable lack of employment in Canadian ports of the past, has worsened in today's mechanized arena of port operations. "Nowadays Canadian port operations are remarkable for the few jobs created in handling very large volumes of cargo" (Norcliffe, 1981, p. 152). Advances in ship design and cargo handling technology has decreased the need for masses of stevedores. Bulk carriers are loaded using automated conveyances, while the container revolution in cargo transport has virtually eliminated break bulk shipping in large developed ports. As a result, the ranks of the longshoremen have been virtually cut in half (Randell, 1988). 1.4: Vancouver and Fraser Port. In Canada, the building of the trans-continental railroad was an integral component of the increased demand for port services. For Vancouver, the arrival of the railroad in 1886 ensured that the Lower Mainland would become the focal point of regional population and economic growth (Ireland, 1978). The arrival of the railroad expanded the initially restricted hinterland to include the interior of the province, but more importantly, also the eastern regions of Canada and the United States. The Vancouver area port system was given another boost after the Federal Government takeover of the Canadian Northern and Grand Trunk Pacific Railways (incorporated into the Canadian National system), in 1918 and 1919 respectively. Soon after, federal transport policy designated the portion of track to Vancouver as the railway's mainline, at the expense of Prince Rupert (Foreward, 1984). Thus, the political will of Ottawa complemented the benefits of Vancouver's proximity to western United States markets, and ensured its dominance over any other Canadian westcoast rival. 9 Today, approximately 40% of all of Canada's international shipping trade takes place on the Canadian westcoast (Statistics Canada, 1992b). The Vancouver port system handles the vast majority of this cargo and has become the gateway for trade with the rapidly expanding markets of Pacific Asia. 1.5: Conclusion. A seaport has several roles that give it regional and national importance. The description of a port as a transshipment point for goods entering or leaving a country defines its role within the transportation infrastructure of a country. As part of this transport system, the port is an integral link between the supply and demand for goods. By virtue of its location, the port becomes an attraction for industry looking to reduce shipment costs. Other industry agglomerating near the port, such as shipbuilding and repair industries, are able to offer a unique service, necessary only at water side locations near active shipping routes. However, the port is not only part of a nation's capital infrastructure and an attraction for industry. The port is also people. Employment benefits accrue to the region as ports draw labour from surrounding communities. Ports also require various goods and services to operate, thus creating a further economic stimulus in the region. These port expenditures - employee incomes and purchases of goods and services -- create spin-off effects throughout the regional, and national, economy. Thus, the port community's reach extends beyond the confines of the docks and storage areas to provide benefits for the greater community. While labour activity 10 has declined as a result of increasing productivity in the loading and unloading of ships, the port remains an integral part of the nation's trading system, and the region's concentration of industrial activity and employment. In the Vancouver region of British Columbia, the port system provides services to various foreign and domestic shippers, and employment to the surrounding communities. No other area on the westcoast of Canada rivals the metropolitan Vancouver region - in terms of population and economic activity. It is the designated transport hub of the Province: a transportation hub of which the port system is a major component. 11 CHAPTER 2. PORT ECONOMIC IMPACT METHODOLOGY. Chapter 2 introduces the methodology of economic impact assessments, specifically in the evaluation of port facilities. The chapter begins with an introduction to economic impact assessment. The discussion distinguishes between impact and evaluation analysis, then introduces three techniques used in economic impact identification: the economic base model, income-expenditure model, and input-output model. The second part of the chapter reviews port economic impact literature and discusses several attempts to introduce a methodological template for port economic impact studies. The objective of this section is to establish the definition of port activity upon which this thesis is based. The chapter concludes with a discussion of the impact model used in the 1981 Fraser Port economic impact study, and the model chosen for this study. 2.1: Defining Economic Impact Studies. Two widely used economic assessment methodologies are economic impact analysis and cost-benefit analysis. A differentiation of the two will help the reader to understand the limitations of an economic impact study and the proper use of impact estimates. Each has a separate objective and distinct product. 2.1.1 Cost-Benefit Analysis. Cost-benefit analysis attempts to evaluate public project alternatives for economic efficiency, given a prior knowledge of objectives and values (Davis, 1990). 12 Quantifiable economic, social, and environmental costs are subtracted from project benefits revealing a net economic value to society, be it negative or positive. Cost-benefit analysis measures the value of a project through the identification of relevant costs and benefits, as defined by the objectives of the planning authority, or society in general. A cost-benefit study provides information to assist policy makers in choosing between alternative policies or projects. Analysis involves those costs and benefits that are quantified in similar terms, generally dollars; however, incorporating non-market costs and benefits into the assessment is possible if values can be determined. The product of a cost-benefit analysis is a comparative assessment of the values of several public project options, expressed in terms of net present value and cost benefit ratios: if the net present value (benefits - costs) is positive, the cost benefit ratio would be less than one and the particular option would produce an overall benefit to society - assuming that the analysts were able to identify and value the appropriate components of benefits and costs (van Kooten, 1993). 2.1.2 Economic Impact Assessment. An economic impact study quantifies economic impacts produced by the expenditures of a project or activity within a given region. As Davis (1990) explains: "Economic impact studies are based on conditional predictive models of economic analysis, that is, models which are designed to produce 'if...then' statements of the type: If, under assumptions a, b, and c, a stimulus x is applied to the local economy, then impacts y and z are likely to result" (p.5). Economic impacts include employment, income, value added, and sales effects, each of which is determined and presented separately: no aggregation among the various 13 components is undertaken. Impact analysis estimates the positive, or negative, impacts associated with a project. The economic impact study does not, however, evaluate a project for costs and benefits, be they economic, social, or environmental. While the two assessment theories are complementary, the components and products of each differ markedly. An economic impact assessment is a quantitative approach incorporating as few subjective values of the population, or analyst as possible. Apart from the the underlying assumptions of the impact technique chosen, no values necessarily guide the outcome of a study. Conversely, evaluation analysis requires that a prior knowledge of the planning or economic objectives (values) of the project must be known. Cost-benefit analysis then evaluates the project in terms of those objectives, or values. Impact assessment does not evaluate the merits of a project in social or investment terms (van Kooten, 1993). A further difference between the two assessment models is that cost-benefit analysis attempts to estimate foregone opportunities and extra benefits created by a project, while impact assessment estimates the change in the economy resulting from a particular economic stimulus. Cost-benefit analysis goes beyond what impact analysis does by looking at opportunity costs and benefits that reveal a with-without picture of the project. Impact analysis examines absolute effects; evaluation analysis examines marginal effects, then compares them to other means of attaining the particular planning objectives. As Davis (1984) states "economic evaluation analysis requires the information yielded by economic impact analysis, and more. Evaluation analysis requires also the regional economic objectives relevant to the stimulus or project in question and information 14 regarding the extent to which these objectives are served by the project's impacts" (3-4). When conducting an economic impact study, analysts attempt to quantify a portion of the socio-economic system. This view of a regional economy provides one foundation upon which our socio-economic relationships exist. A combined assessment of the impacts and values associated with the economy, environment, and society leads to a more accurate evaluation. Economic impact assessments reveal only one feature of the intricate socio-economic nature of a region. One should view an economic impact assessment report with this understanding. 2.2: Defining Economic Impacts. Economic impacts are the effects of regional growth (or decline) associated with a particular stimulus (positive or negative) on regional demand. Economists divide economic impacts into a primary, or direct, impact, and a secondary impact comprised of indirect and induced portions; adding the primary and secondary impacts reveals the total economic impact of the activity under study. Although the impact models in this discussion can estimate these effects, they do so with some variation. The discussion of impact techniques elaborates on these differences. 2.2.1 Direct Impact. Direct or primary impacts include economic activity such as employment, labour income, and sales that are directly involved with the project under assessment. In the case of Fraser Port, the direct economic activity includes the employment, labour income, and sales involved with the movement of cargo. 15 2.2.2 Indirect Impact. Indirect impacts result from primary businesses purchasing goods and services. To supply these products, other businesses are necessary and must employ workers, provide salaries, and pay taxes. Thus, extra business is created to meet the needs of the original primary activity. Indirect impacts do not cease with this initial secondary spending. Suppliers to the primary business must also purchase goods and services from other firms. These other firms must employ staff and purchase further inputs to operate. Thus, indirect impacts continue through an economy: each business requires its own suppliers of goods and services, and so the spending continues. Each successive circulation, however, is subject to leakages in the form of taxation, savings, and imports. The extra rounds of spending that result from the original direct expenditure become increasingly smaller until no further indirect impacts occur. 2.2.3 Induced Impact. Induced impacts result from the direct employees spending their incomes. Employees purchase, among other things, groceries, clothes, and personal services throughout the year. In turn, the businesses supplying the goods and services to the employees must also employ staff, and pay incomes. The second round of activity creates further purchases, and thus the respending process 16 continues. The respending continues through the economy until leakages once again reduce the extra economic activity to zero. 2.2.4 The Multiplier. An "economic multiplier" is a number that embodies all or a portion of the secondary spending described above; the multiplier is the ratio of the total (primary plus secondary) impact to direct impact. The economic growth models discussed in the next section are used by economists to estimate a multiplier, which may then be used to determine total impacts. For example, if $500 of direct gross domestic product (GDP) from an activity under assessment has a total (direct plus secondary) impact of $750, then the total GDP multiplier is equal to 1.5 ($750/$500). The secondary impact portion is equal to $250 ($750 - $500). While the use of a multiplier appears simple, its determination is much more complicated. The technique most appropriate for the assessment will be guided by the need for accuracy, the region in question, and the availability of existing multipliers. 2.3: Defining Economic Impact Models. To determine the magnitude of regional growth and to estimate economic multipliers, hence total economic impacts, economists have created several models ranging from the less accurate and technically simple, to the more accurate, but technically difficult. Each of the models estimates economic impacts, although with some variation as indicated in the summary on page 11. The models outlined below range respectively from simple to complex: economic base analysis, income-expenditure analysis, and input-output analysis. 17 2.3.1 Economic Base Model. The economic base model separates the economy into a basic, or export, sector and a non-basic, or service, sector. The principle of the model is that regional income is a function of the export sector (Richardson, 1979). Thus, regional income expands only as a result of export growth. To use the model for impact assessment, analysts must first quantify the basic portion of the regional economy. Once established, analysts can use the data to derive an employment or income base multiplier. The economic base model rests on the assumed relationship between exports and total economic activity. When a positive or negative change to exports occurs, the total economy alters by a multiple of that change. The economy is represented in the base model by Y = E + S, where Y is total economic activity; E is the export, or basic, activity; and S is the service, or non-basic, activity. Further, the service sector is assumed to be a stable function of the base sector; thus S = kE, where k is the ratio of service to export activity (Richardson, 1979; Davis, 1990). Consequently, the original equation may be written as: Y = (1 + k) E. The total economy, then, is a product of the export sector and the multiplier (1 + k), or (1 + S/E). The size of the export base affects the multiplier; thus an accurate estimation of the basic sector translates into a more accurate multiplier. An underestimation of the basic sector leads to an overestimation of the multiplier, and subsequently, of the total impact. The technique produces a multiplier based on consumer spending, thereby estimating induced impacts. An accurate estimation of the basic sector is a difficult task. Several methods of base identification exist, including exercising one's own judgement, conducting a 18 large survey of regional industry, using the minimum requirements technique, and employing the widely used location quotient technique. The 1981 study of the Fraser Port used location quotients to estimate the basic sector. The location quotient technique assumes that if the regional percentage of employment in an industry exceeds the percentage of national employment in the same industry sector, then basic employment exists. Mathematically, the location quotient (LQ) is defined as: LQj = (R/R) / (N/N), where Rj is the amount of regional employment in sector i; R is total regional employment; Nj is the national employment in sector i; and N is total national employment. If LQ is greater than 1, export related employment exists in the region. Basic employment is equal to Rj- R (N/N) where Rj is the actual regional employment in sector i; and R(N/N) is an estimate of regional employment needed to satisfy local demand in sector i. Thus, the technique estimates the portion of employment required solely for the production of exports. Various authors have questioned the economic base theory and the location quotients technique (for example Leigh, 1970; Moody and Puffer, 1970; Davis, 1975; 1990). Leigh (1970: 205) found in his examination of the Vancouver area that location quotients "do not clearly identify or rank those industries that constitute the economic base of the city. For this reason, estimates of basic employment derived from location quotients tend to be under-estimates ... ." Only location quotients much higher or lower than 1 showed reasonable levels of accuracy in comparison to actual levels of exports. As Moody and Puffer (1970) concluded, the "statistical results [of their investigation] cast doubt on the usefulness of the urban base multiplier theory" (p. 97). 19 Davis (1975) found in his comparison of economic base and input-output multipliers for Vancouver, B.C. that location quotients lead to an overestimation of the multiplier. A failing of the location quotient technique is that it, suffers from the disadvantage that the results it produces vary substantially with the level of aggregation, or the number of economic sectors adopted. The higher the level of aggregation, the more heterogeneous is the composition of each economic sector and hence the greater is the 'product mix' problem in the determination of basic employment... (Davis, 1975, p.3) The "product mix" problem is similar to averaging where high and low values in a range are represented by mean values. The reason, Davis states, for the high value of the base multiplier in his study is "the understatement of exports from the metropolitan economy due to the level of aggregation" (p. 3). Several assumptions accompany the economic base model. One, as mentioned above, is that the export sector is considered to be the prime determinant of regional growth. The model ignores possible growth sources of increased consumption, government spending, and import replacement. The existence of a strong service sector has also been found to provide a stimulus for regional growth. Richardson (1979) cites work by Green (1966) and Blumenfeld (1955) who established links between the service sector and regional growth. A second assumption involves product homogeneity. Economic base theory assumes that each commodity exported from the region provides an equivalent growth stimulus. Thus, the production and export of one commodity would have the same linkages to the service sector as any other commodity included in the 20 analysis. However, as Richardson (1979) states, differences "arise from variations in inter-industry linkages associated with particular export sectors ... and variations in the consumption pattern of workers employed in particular export sectors" (p. 90). While the homogeneity problem may be somewhat remedied by producing regional multipliers for more than one industry, at some point of separation input-output analysis becomes more appropriate. A third assumption involves the absence of inter-regional trade linkages. This assumption implies that the local economy does not respond to changes in economic activity in other regions. Exports from one region, for example, may stimulate an increase of income in the importing region, thus inducing higher demand and a further increase of exports from the first region. Obviously, many combinations of inter-regional linkages are possible. The final assumption outlined here involves the existence of an unlimited supply of resources to respond to increased export demand. This assumption evolves from the demand orientation of economic base theory, which does not consider supply side constraints (Richardson, 1990). Constraints include not only the ability to produce and supply the inputs, but also the earth's potential to supply the necessary raw materials. Unlimited increases in demand would likely result in supply shortages in which case production would fall short of demand, input prices would rise, and imports, thus leakages, might be necessary to fulfil demand until the economy reached its new equilibrium. Despite its various shortcomings, however, Chang (1978) and Davis (1990) find that the use of the export base technique for small resource dependent economies is an acceptable method to approximate regional economic activity. The economic 21 base model and location quotients technique remain attractive as simple and inexpensive methods of approximating economic impacts. However, the model is not suitable for large or economically complex regions such as metropolitan areas. 2.3.2 income and Expenditures Model. The Income-expenditure model is not as widely used as the economic base method. In Kaufmann's (1979) investigation into port economic impact studies, only the Port of Los Angeles/Long Beach assessment used the income-expenditure approach. However, as Davis (1983) points out, the "income-expenditure approach to impact analysis offers a number of advantages over the economic base model. In particular, it is a more flexible tool of analysis enabling the analyst to treat import-replacement in the port-region appropriately as an income generator" (64). The income-expenditure model (the Keynesian multiplier model) is based on the spending of income. The definition of local income is equivalent to that of a national economy; that is, Y = C + I + G + E - M. Regional growth occurs through a change in one or more of regional income's (Y's) components. As evident in the right hand side of the equation above, consumption (C), investment (I), government expenditures (G), and import replacement (a decreasing M) join exports (E) as sources of growth. In comparison to the economic base model, the income-expenditure model incorporates more sources of regional growth. A simple income-expenditure multiplier is based on marginal propensities of consumption, savings, taxes, and imports. Savings, taxes, and imports are leakages to further spending, therefore the greater their marginal propensities, the 22 smaller the multiplier. The income-expenditure model can incorporate many characteristics of the economy, making the multiplier far more complex. Similar to the economic base model, the income-expenditure multiplier is based on consumer spending, and thus produces induced impacts, given the prior knowledge of the direct and indirect impact components. Several assumptions are inherent in the model. As with the economic base technique, the model's coefficients remain constant over the period of analysis. Marginal rates of saving, local consumption, import, and taxation remain fixed and produce a static multiplier. Obviously, this constancy does not hold in the actual economy. For example, a change in real interest rates or inflation may alter the marginal propensity to consume. An assumption of social homogeneity is also inherent in the model. Each member of the community is assumed to have an equal propensity to consume and save. This assumption does not reflect differences between income levels or among community groups. Local producers are also considered homogeneous in that each is assumed to have identical production functions. The model further assumes that the producing sectors face no capacity constraints. Consequently, each producing sector can meet an increase in demand with no supply constraints limiting increase to production. 2.3.3 Input-Output Analysis. Input-output (l-O) models are intricate tables, or matrices, showing the inter-relationships between the production of goods and services (outputs) and the 23 purchases of goods and services (inputs) for a defined region. The father of modern input-output analysis, Wassily Leontief (1986), describes the model as "a method of systematically quantifying the mutual interrelationships among the various sectors of a complex economic system" (p19). The tables reveal, for every dollar of output, the value produced and consumed in each sector represented within the model. Tables are constructed in a square, industry-by-industry form, or in a rectangular, commodity-by-industry form. The number of industry and commodity sectors can vary from fewer than 30 to several hundred; a greater number of sectors creates a more accurate table. The Canadian Input-Output tables, for example, are in a commodity by industry form and consist of 216 industry sectors and 627 commodities (Statistics Canada, 1991). Analysts can theoretically construct tables for areas as large or as small as desired. A square input-output table locates the producers of goods and services along the rows, and the purchasers of goods and services along the columns (Miller and Blair, 1985). The intersection of a row and column represents the relationship between the two activities. If the producer supplies goods to the purchaser, a figure at the intersection represents the value of that industry's purchases from that producer. The tables aggregate the entire purchase and output pattern of an economy into industry sectors. The last entries in the rows of the table are final demand and total output. At the end of each column is total value added and total purchases. The total output of the rows equals the total purchases of the columns. To identify economic impacts, the tables work as follows. Each industry sector is represented as a producer and consumer of goods and services. To produce its 24 output, each sector consumes various inputs. When the final demand for the output of an industry sector increases (decreases), interrelated sectors providing inputs must meet that increase (decrease) in demand by increasing (decreasing) their production. The increased production creates a further demand stimulus on producers that again requires another round of production increases, and so on. The total change in the economy is the sum of all the changes to each of the sectors, or the total change in output. The impacts described in the preceding paragraph relate to the purchases of goods and services by business, or the indirect impact. The input-output (l-O) model producing these impacts is termed an "open" model (Miller and Blair, 1985). To estimate the impact of wages and salaries, or the induced impact, the l-O model requires the addition of a household sector. Incorporating the household sector into the model establishes human capital as producers supplying labour, and purchasers buying the necessary inputs to survive. With the incorporation of the household sector, the model is termed "closed" with respect to households (Miller and Blair, 1985). As with the previous models discussed, the l-O model is based on several assumptions. Values used in the construction of an input-output table remain constant, relating to the particular time period when the data was collected. Technological change and the variability of prices tend to alter inter-industry relationships in the actual economy. The older the model, the more conservative (liberal) an assessment is likely to be as a result of economic growth (decline) in ensuing years. 25 A further complication evolves from aggregating industries and producing what is termed a "product mix problem." Industry sectors are aggregations of businesses that are similar but have different purchase and output patterns. The industries may produce similar items, but use different inputs of different value. This aggregation of business activity creates a product mix problem whereby individual business characteristics are averaged out. Thus, for example, the high productivity of an efficient producer would be represented by an average value when aggregated with the low productivity of less efficient producers. The final assumption in this discussion involves the linearity of the production functions used in the construction of an 1-0 model. The model assumes that for each dollar increase of input, a constant increase of output results. Consequently, the existence of internal economies of scale are not incorporated into the model, nor the possibility of a change in the price of inputs due to increased external economies of scale or other exogenous effects. 2.4: Summary of Models. A major difference between 1-0, and economic base and income-expenditure models is that an 1-0 table uses production functions and yields multipliers for each industry sector represented in the model, while the latter two techniques are generally associated with one function that produces one multiplier for all industry sectors in a region. The multipliers produced also have some variation. Economic base and income-expenditure techniques produce induced, or consumer spending, multipliers, while the input-output model produces indirect multipliers, and with a closed model, induced multipliers as well. As a result, when using a multiplier, analysts must provide the appropriate information to generate the total, 26 direct + indirect + induced, impacts. Davis (1990) presents a clear explication of the differences: For both the economic base and income-expenditure models, the analyst must supply the multiplicand consisting of the direct and indirect components. The ... models then yield, via their consumer spending multipliers, the total (direct + indirect + induced) component. In contrast, the input-output model, with its focus on interdependences between producing sectors of the economy, provides the indirect impact. Given the direct impact as the multiplicand, the l-O multiplier constructed from the open model yields the direct plus indirect impact; the closed model multiplier provides the total impact (p. 93). Each of the theories presented involves trade-offs between accuracy and technical difficulty. The method chosen to assess economic impacts rests on the availability of existing multipliers, technical ability, time, and resources. Input-output derived multipliers provide the most accurate method when available for the region under study; however, they are the most costly and time consuming to prepare. Often national and some regional l-O tables will exist for the particular region under assessment and provide the best means of impact identification. For smaller regional assessments, however, economic base and income-expenditure models may offer the more practical solution. 2.5: Port Economic Impact Studies. The above models can be used to assess both future and existing projects and activities. Ports are one activity that have received substantial attention from impact analysts. Primarily, port economic impact studies have been used for public relations programs (Chang, 1978); however, information gained through an impact 27 study may also be useful for port planning. If the latter is the objective, then much more detail is required to provide an accurate assessment of changes to port services resulting from variations in export and import demand. Davis (1983) outlines three weaknesses of port impact studies: "1 . the definition of the primary impact; 2. the determination of the total impact; and 3. the value of such studies in the evaluation of changes in the level of port services" (p.68). The 1981 and 1993 Fraser Port studies are more public relations tools than planning tools. Thus, the first two concerns are the main focus of the following section. 2.5.1 Defining the Primary Activity. Definitions of primary port-activity vary from study to study and have resulted in problems of comparability between, or among, studies, and has raised concern over the theoretical basis of port economic impacts. The 1978 Maritime Administration (MARAD) report, entitled the Economic Impact of the U.S. Port Industry, stated that: the source of the problem has not been the lack of port studies, but rather the over-abundance of conflicting approaches, the use of vague terminology, and especially the absence of solid theoretical foundations. What is important is the fact that no official definition of a port industry exists within the governmental reporting system. Because of this void a superfluity of inaccurate definitions has emerged (p. 15). Davis (1983) and Yochum and Agarwal (1987) question the appropriateness of some impact definitions. As Davis (1983) states: the "specific economic activities included in the primary impact vary from study to study... [and are]... partially attributable to the lack of a commonly accepted definition of activities necessary for 28 port operation" (p. 62). The 1978 study of the U.S. port industry found in its review of port impact studies that port activities follow three definitions. The first is a narrow definition that includes only stevedoring, terminal operations, and container stuffing and destuffing. The second definition broadens the first by including some production activity located within the port's area. The final definition adds all production activity that transports its goods by using the port's facilities. Waters (1977) also presents a critical assessment of port impact studies. His main criticisms are the inability of port impact studies to act as planning tools for future facility development and the lack of examination into the incremental effect of changes to public investment. He also questions the adequacy of Keynesian and economic base multipliers. Waters considers the use of cost-benefit analysis as a more reasonable path to achieve adequate port assessments, and proposes the use of input-output multipliers, rather than economic base or Keynesian multipliers, as a means to assess the full regional impact. Since the late 1970's, several reports have attempted to strengthen the weaknesses of port economic impact studies. Definitions have become more consistent and port impact "kits" have appeared to help standardize the port economic impact process. Input-output models have also become the chosen methodology, strengthening both the results and comparability of port studies. The Economic Impact of the U.S. Port Industry (MARAD, 1978) was an initial attempt to overcome port assessment deficiencies. The study's objective was to assess the economic impact of the U.S. port industry and to establish a theoretical foundation for future port assessments. Two concepts of port activity emerged: port-industry, and other port-dependent industry. 29 Port-industry has a narrow focus intended to reflect the role of the port as a provider of transportation services. The study defined the port industry as "any economic activity that is directly needed in the movement of waterborne cargo" (MARAD, 1978, p. 17). Included in this definition are stevedoring, water and land transportation, warehousing, freight forwarders, customs agents and brokers, finance and insurance, and government services. Port-dependent industries are those that must use the port. Exporters and importers using the port fall into this category, as do water-related industries such as shipbuilding and repair. The 1978 Economic Impact of the U.S. Port Industry, as the title implies, assessed only the impact of the port-industry category. A second report, the Port Economic Impact Kit, (Arthur D. Little Inc, 1979) emerged a year later in 1979. Definitions in the kit are consistent with those presented above; however, the focus on establishing a dependent relationship between port-users and the port, if a port-dependent section is to be included, is more pronounced. The kit is in the form of a workbook with sections to help define the study, conduct the survey, generate multipliers, and present the results. The estimation of economic base multipliers is discussed and the use of l-O multipliers, where available, is suggested. Each section contains sequential procedures to complete the necessary stages in the assessment process. The intention of the report is to improve the accessibility to economic impact assessments for small to medium sized ports. Another study, released by MARAD in 1982, is entitled The Regional Port Impact Model Handbook. The report is another impact workbook; however, it presents a 30 more detailed discussion of port impact theory and uses a regional 1-0 model to assess economic impacts. The report consists of two volumes: Volume one describes the methodology and its application; Volume two is a user's guide for the regional 1-0 model that has been adapted for use in port impact assessment. The package includes a computer software program to lead the analyst through the assessment process. The definition of port industry in the 1982 kit is consistent with those above. Similar to the 1978 MARAD study, this impact kit is mostly concerned with an assessment of port-industry activity. The 1982 kit refers to port-dependent industries as port-users and stresses the need to establish dependency. To include port-users in an assessment requires that the "locational dependence of an industry on a port can be established ... [and that port dependent users]... would be presented in the context of an analysis of industries which are located in the region due to the existence of the port" (MARAD, 1982, p. 18). The study acknowledges that the level of port-user dependence would be difficult to establish, and further considers that the port-industry category provides the most relevant picture of the role and impact of a port. The report attempts to provide improved access to economic impact analysis for non-economists and non-mathematicians. The computer package and input-output model, however, is designed for the U.S. economy and is not useful in a Canadian context: inter-industry linkages differ between U.S. and Canadian regions, thus making the multipliers inappropriate for Canadian analyses. The final report reviewed here, the Port Economic Impact Kit (Temple, Barker, Sloane, 1985), is an update of the 1979 kit. The 1985 version attempts to address 31 some of the complexities and ambiguities of the 1979 impact kit. The report addresses problems with the economic base methodology, industry definitions, and data requirements by providing alternatives to the survey, and an 1-0 software package to generate total impacts. To overcome the problem of establishing port dependency, the kit re-defines local port-user. The kit recommends that analysts examine all producers who use the port, irrespective of their dependency. The objective is to examine the activity that does exist, and that provides employment and generates business activity in the region. Industry dependency on a port becomes irrelevant. The kit acknowledges that determining port-dependency is difficult, especially when alternate ports exist in the region. Often the shipper's choice of port is determined by cost or other business considerations such as diversification of transport services, connection to land transportation, cargo handling facilities, and ship turn around time (Kargl, 1993). While the 1985 package is instructive in terms of how to prepare and analyse the direct impact and how to present the results, the kit's input-output software package is not useful in Canada, again due to its U.S. focus. Each study stresses that if an impact study is to include port-industry and port-dependent, or port-user, industry, the categories must be assessed separately. The 1982 study states that the "port industry deals only with the movement of cargo and does not include production by exporters or other production that takes place in factories located on the waterfront... The regional impact of such activities should be measured separately" (pp. 16-17). The Port Economic Impact Kit (Arthur 32 D. Little Inc, 1979) states that "port-industry firms should always be included and treated separately from port-dependent firms" (p. 24). Two reasons are behind this need for separation. One is that the objective of the analysis should be to evaluate the functions that are specific to ports; the study should assess those activities that relate directly to the existence of the port. The second reason is that adding the two categories in order to provide a total impact double-counts the port-industry sector. The transactions flow of an exporter includes expenditures for transportation. For example, the exporter purchases shipping services from a shipping agent who arranges for rail, truck and/or water transport. Thus, the assessment of a producer in the port-dependent category includes, in its indirect impact, the services of the port-industry. Unfortunately, the possibility of double-counting may be more deeply rooted in l-O port impact studies. Double-counting in transport related input-output analysis may also occur within the port-industry category, once again as a result of indirect impacts being included in the direct impact of a project or activity. Included in the port-industry sector are various activities directly involved with the movement of cargo (e.g. the terminals, customs brokers, stevedores, shipping agents, and port-dedicated rail activity). The expenditure patterns of these activities may be inter-related such that one is an indirect impact of the other. For example, a producer contracts a shipping agent for $100 to ship its cargo overseas. If the shipping agent were to retain the entire $100, the direct sales impact of the shipment would be $100; however, the agent may arrange for other port services on the producer's behalf. The shipping agent may pay the terminal a $25 passage fee. Stevedores are hired by the shipping agent, or terminal, for $25. 33 Finally, the shipping agent pays the Harbour Authority $30 for the ship's harbour dues. Each of these businesses comprises the port-industry category. As a result, the original $100 of direct payment made by the producer rises to a direct impact of $180. But $80 is actually part of the original $100, so double-counting has occurred. Generating indirect and induced impacts accentuates the error. Unfortunately, the above scenario is only one possible pattern of exchange. In another scenario the problem may not appear because the producer pays for each service separately. The difficulty in eliminating the source of double-counting, or establishing the extent of the problem, is due to the multitude of possible expenditure scenarios (Kargl, 1993), and that no input-output sector exclusively treats port-industry activity. No specific discussion of a method to eliminate or reduce the port-industry double-counting problem is available. Without a detailed study into the magnitude of double-counting within transport related input-output studies, an adjustment of the impacts is difficult. Such an analysis is beyond the scope of this study; thus, only an acknowledgement of the problem is possible. Necessarily, the figures in this assessment, and any economic impact assessment, should be taken with caution. 2.6: Economic Impact Model Used in the 1981 and 1993 Fraser PortStudies. The 1981 economic impact study of Fraser Port uses the economic base methodology to derive multipliers. The study also uses input-output multipliers for the Vancouver Lower Mainland (see Davis, 1974) and then compares the two results. A critique of the 1981 study is the subject of Chapter 4. 34 Input-output multipliers were chosen for the 1993 assessment of Fraser Port for several reasons. Two reasons are the accuracy of the methodology and its accessibility. Statistics Canada maintains a national and inter-provincial l-O model, and the Central Statistics Branch in Victoria, B.C. maintains an l-O model for the Province of B.C. Input-output has also become the most widely used methodology for port economic impact assessments. Consequently, the results of this study should be more accurate and comparable to other port studies. A further reason is that using an economic base or income-expenditure model requires the calculation of multipliers. Insufficient time and staff were available to derive such multipliers for the Fraser Port study. Finally, both the economic base and income-expenditure techniques are inappropriate for large and complex economies such as the Vancouver Lower Mainland. As a result, 1-0 multipliers were used for reasons of accuracy, appropriateness, and available time. The impact study assesses two categories of port activity. The first follows the definition of port-industry as outlined previously; the second, termed port-associated, follows the port-user definition of MARAD's 1985 Economic Impact Kit. Establishing port-dependency in the Vancouver region would have been difficult with alternate transport facilities available nearby. The study acknowledges that the impacts of port-users are not a result of Fraser Port, but are impacts associated with cargo transshipped via Fraser Port. The two categories are discussed in full in Chapter 5. 35 CHAPTER 3: INTRODUCTION TO FRASER PORT. 3.1: Location of Fraser Port. Fraser Port is located in the Lower Mainland of British Columbia, near the city of Vancouver. The region is home to approximately one half the population of British Columbia, or over 1.6 million*, and is the third largest metropolitan area in Canada. According to the 1991 Census of Canada, an estimated 750,000 people were employed in various goods and services industries - an increase of over 150,000 from 1986. Business and personal services dominated the local economy accounting for approximately 44% of total labour, while transportation, communications and utilities represented 11% of regional employment. The jurisdiction of the Fraser Port covers the Fraser River as outlined in Figure 3.1. Bordering on nine municipalities, the Port extends eastward from the Strait of Georgia along the Fraser River's central and lower arms to Langley, and also includes the Pitt River. The following municipalities are adjacent to Fraser Port: Coquitlam Pitt Meadows Surrey Delta Port Coquitlam Maple Ridge Langley Richmond New Westminster * The population estimate is for the Vancouver Census Metropolitan Area comprised of Vancouver, Richmond, Delta, Burnaby, District and City of North Vancouver, West Vancouver, Lions Bay, Bowen Island, Surrey, Belcarra, Anmore, Port Moody, Coquitlam, Port Coquitlam, Pitt Meadows, Maple Ridge, White Rock, and the City and Township of Langley. 36 Strait of Georgia FRASER ~*yPORT Dots outline the Jurisdiction of the Fraser River Harbour Commission U.S. Bordar 3.2: The Lower Mainland System of Ports. Fraser Port is administered by the Fraser River Harbour Commission (FRHC) and is part of a regional port system that also includes the North Fraser Harbour Commission (NFHC), and the Port of Vancouver administered by the Vancouver Port Corporation (VPC). The two Commission Ports are dwarfed by the VPC, whose jurisdiction includes Vancouver's inner and outer harbour, and extends to Roberts Bank near the mouth of the Fraser River's south arm. The Vancouver Lower Mainland is known as the Pacific Gateway and its ports are the focal point of Canada's shipping trade with the Pacific. Together, the three ports handled over 100 million metric tonnes of cargo in 1992. Table 3.1 provides a comparison of tonnages handled at Lower Mainland ports. A more comprehensive description of Fraser Port cargoes is presented in Section 3.7. Table 3.1: Comparison of Lower Mainland Ports, in metric tonnes, 1992. Cargo Inbound tonnage Outbound tonnage Total tonnage Fraser Port* 10,823,044 8,887,749 19,710,793 North Fraser Port** 10,786,150 6,933,823 17,719,973 Vancouver Port Corporation*** 5,817,000 57,489,000 63,306,000 * Fraser River Harbour Commission Statistics, 1992. ** North Fraser Harbour Commission: 1992 Annual Report. *** Vancouver Port Corporation: 1992 Port of Vancouver Fact Sheet. Evident is the overwhelming dominance of the VPC in local port activity. The VPC is dominated by bulk export shipments of forest products, coal, potash, and wheat. The North Fraser Harbour Commission handles mainly domestic shipments of 38 wood products and aggregate. Figure 3.2 illustrates the dominance of the Port of Vancouver and the relative position of each of the Lower Mainland ports. Several reasons explain the dominance of the Port of Vancouver. First, Vancouver Port became the focal point of shipping activity with the arrival of the Canadian Pacific Railway in 1887 (Ireland, 1978). While each regional port benefited from the arrival of rail, the Port of Vancouver clearly emerged as the dominant facility. Vancouver Port's potentially largest competitor was Prince Rupert; however, financial difficulties and demand shortages led to a Federal takeover of the Canadian Northern and Grand Trunk Pacific Railways (incorporated into the Canadian National system) in 1918 and 1919 respectively. This takeover was soon followed by the designation of the rail's mainline to Vancouver, thus relegating Prince Rupert to branch line status (Forward, 1984). 39 A second reason for Vancouver's dominance is its water depth and shelter that provided a logical focus for the development of the inner harbour, as opposed to the Fraser River, which was and remains prone to silting. Third, the large harbour did not restrict ship movement and allowed for longer term anchorage while awaiting cargo. Fourth, Federal Government interest in the Port of Vancouver as the region's central port, combined with local initiatives (notably the Canadian Pacific Railway's focus on the City of Vancouver as the focal point of regional growth and activity), ensured the port's dominance over its Fraser River rival (MacDonald, 1982). Today, the Port of Vancouver is congested and constrained by the size of its natural harbour. As a result, each of the region's ports (including Prince Rupert) has enjoyed growth. Each port provides service to specific domestic and international markets; however, the Port of Vancouver remains dominant in terms of total tonnage specializing in international bulk and container cargo. Ports in the U.S. Pacific Northwest also vie for the region's shipping traffic. The ports of Tacoma and Seattle focus heavily on container activity. In 1991, the Puget Sound ports handled over 2 million TEU (twenty foot equivalent unit) containers (Port of Tacoma Annual Report, 1992; Port of Seattle Annual Report, 1991). The ports also handle wood products, automobiles, and general break bulk cargo. In contrast, the Port of Vancouver handled just over 441 thousand TEU's, while Fraser Port handled only 14,000 TEU's. 3.3: History of Fraser Port. The birth of non-aboriginal trade and shipping activity on the Fraser River dates back to the mid-1800's. During the 1850's-60's, shipping traffic on the river was kept busy transporting people and goods between Victoria and the mainland 40 (Gresko and Howard, 1986). The gold rush of 1858 brought a rash of fortune seekers who travelled via the Fraser River en route to gold fields in the Caribou. During this period, cargoes shipped via the Fraser River included furs, timber, and agricultural products. For many years, the city of New Westminster vied with Victoria and Vancouver for greater port activity, and to become the focal point of regional development. However, the arrival of the Canadian Pacific Railway, at first to Port Moody in 1886, then to Burrard inlet a year later, ensured that Vancouver would become the dominant city on British Columbia's westcoast (Ireland, 1978). Growth of shipping activity on the Fraser River was hampered by recession and war from the early 1900's to the Second World War. World trade did not increase and provide growth and prosperity for Lower Mainland ports until after 1945 when economic growth returned. 3.4: Fraser Port Administration. Jurisdiction over Canadian ports was assumed by the Federal Government through the British North America Act of 1867. Today jurisdiction is controlled through the 1981 Constitution Act (Transmode, 1988). Fraser Port received its original Commission status by Federal legislation in May of 1913 under the title New Westminster Harbour Commission. In 1964, the Federal Government passed a new Harbour Commission Act. The new act gave Harbour Commissions greater local control over port development (Goss, 1983). A year later, the New Westminster Harbour Commission was renamed the Fraser River Harbour Commission (Gresko and Howard, 1986). The Harbour Commission Act was last amended in 1982. Today, five Commissioners govern the Harbour - three 41 appointed federally, while the Port's nine municipal neighbours appoint the remaining two. The Harbour Commission Act of 1982 designates the terms and conditions of Harbour Commissions (Transmode, 1988). Harbour Commissions are responsible to the Federal Minister of Transport. However, Commissions are not an agent of the Crown and as such are not subject to the Financial Administration Act; thus, spending authority rests with the individual Harbour Commission. In contrast, Port Corporations are Federal Crown Corporations and are subject to the Financial Administration Act. Borrowing capital and investment is also restricted for the Port Corporations. Harbour Commissions are authorized to retain profits, and raise funds either through chartered bank lending, or the issuance of debentures. This structure allows Port Commissions to pursue its own development and land use goals more easily. A Commission may also invest in bonds at the Federal, Provincial, and Municipal levels. Administrative powers given to Commissions include the regulation of navigation and cargo handling, land development and expropriation, collection of fees and tolls, and the ability to enter into contracts. 3.5: Fraser Port Facilities. Fraser Port terminals include Fraser Surrey Docks, Annacis Terminals, and Fraser Wharves. The Fraser River Harbour Commission is a landlord port; thus, its facilities are not operated by the Commission, but are leased on a long term basis to private operators. The Harbour Commission also administers over 600 hectares of industrially zoned land. 42 Fraser Surrey Docks is located on the south bank of the river opposite New Westminster and operates under a long term management agreement. Its facilities include two container crane berths, plus four berths used for other general and bulk cargo. Several storage sheds combine to provide 245 thousand square feet of storage space. Rail and truck switching yards are also located adjacent to the docks. Commodities shipped via Fraser Surrey Docks include forest products, steel, and various general cargoes. Annacis Terminals and Fraser Wharves are automotive import facilities. Over 300 thousand automobiles and trucks arrive annually from Japan, Korea, and Mexico. The automobiles are off-loaded and temporarily stored while awaiting shipment to points across Canada. At any one time Annacis Terminals is capable of storing up to 25,000 vehicles, while Fraser Wharves can store up to 18,000 automobiles. Annacis Terminals operate under a long term agreement while Fraser Wharves operates independently on private land, thus under no long term agreement with the Harbour Commission. However, its cargo is shipped via Fraser Port, and as such, the facility is closely tied to the Harbour Commission. The remainder of Fraser Port cargoes are shipped directly to production plants and mills along the Fraser River shoreline. Lafarge Cement and Tilbury Cement import large amounts of aggregate and gravel for the production of cement products. Texada Lime and Island Paper import limestone directly to their facilities via Fraser Port. Various forest products, ranging from raw logs to sawdust and hogfuel, are shipped to various mills located near the Fraser including International Forest Products, MacMillan Bloedel, and Canadian Forest Products Ltd. 43 3.6: Transportation Infrastructure. An integral component of a port's facilities is its access to rail and road services. Five railways provide service to the region. Burlington Northern provides access to the United States, while Canadian Pacific and Canadian National Rail service destinations within Canada. British Columbia Railway and the Southern Railway of B.C. provide access to additional points in B.C. Major highway arteries are nearby, extending south into the United States, and north and east within Canada. 3.7: Physical Characteristics. Fraser Port is constrained by its natural environment. River ports are noted for their generally shallow draft that limits the size of vessels (Bird, 1971). As a result, the larger bulk and container ships are unable to enter the port. Fraser Port's ability to attract the fast growing and lucrative container service market or larger bulk vessels is hampered by the restrictive water depths of the Fraser River. At present, the maximum draft of vessels entering the Fraser River is 10.7 meters. Ongoing dredging is required to ensure that sufficient depths are maintained. In areas prone to heavy silting, training walls have been constructed to narrow the river's main channel, thus increasing the current and allowing the river to flush itself. In future, while improved dredging and channelling technology may lead to greater river depths, the George Massey Tunnel ultimately restricts the size of vessels entering the south arm of the river, as a result of its 12.5 meter low water allowance. In comparison, the Port of Vancouver has a low tide depth of 15 meters in the Inner Harbour, and 20 meters at the Roberts Bank facility. 44 3.8: Fraser Port Cargo Statistics. Fraser Port handles numerous domestic and international commodities. The following section describes various characteristics of Fraser Port cargoes. The section is divided into international and domestic shipments. All data in the following illustrations are from the Fraser River Harbour Commission statistics for 1992. 3.8.1 Total International and Domestic Shipments. In 1992, Fraser Port handled 19,710,793 metric tonnes of cargo, 88.6% of which was domestic. Figure 3.3 compares domestic and international cargoes shipped via Fraser Port. The overwhelming dominance of domestic tonnages is evident. Figure 3.3: Domestic and international cargo shipped via Fraser Port, 1992 (in 1,000 tonnes). I International Cargo (2,265) H Domestic Cargo (17,445) • Total Cargo (19,710) mm 45 3.8.2 International Shipments. In 1992, international cargo shipments totalled over 2.2 million metric tonnes. Commodities are shipped to, or received from, the United States, Central and South America, Europe, Africa, the Mid-East, Asia, and the Pacific. Table 3.2 shows the various international commodities shipped through Fraser Port and their corresponding tonnages. Table 3.2: Fraser Port international export and import shipping statistics, 1992 (in metric tonnes). EXPORTS Cement Chemicals General Cargo Heavy Equipment Lumber Metal (Non-Ferrous) Other Paper Pulp Steel Wood Products Wood Chips TOTAL 1992 103,487 5,592 37,109 1,137 775,847 4,335 942 28,825 193,209 70,184 43,002 79,055 1,343,084 IMPORTS Autos* General Cargo Heavy Equipment Metal (Non-Ferrous) Other Steel Wood Products TOTAL 1992 308,391 359,141 4,197 551 7,434 239,300 3,242 922,256 Outbound Tonnage 1,343,084 Inbound Tonnage 922,256 TOTAL INTERNATIONAL TONNAGE 2,265,340 * Reported by number of automobiles. International exports: In 1992, a total of 1,343,084 metric tonnes of international exports passed through Fraser Port facilities. Outbound cargo dominated the international category accounting for almost 60% of total tonnages. 46 Forest products dominated the Port's international exports. Lumber, plywood, chips, pulp, and paper combined to represent approximately 83% of all international export cargo. Lumber alone comprised 58% of international exports. Pulp and paper, accounting for over 200,000 tonnes, also contributed substantially to that total. International imports: In 1992, Fraser Port international imports accounted for over 922 thousand metric tonnes. Automobiles, and steel products are the two largest single commodities entering the port. General cargo imports accounted for 360 thousand tonnes, or 39% of international import tonnages. General cargo includes ceramic tiles, furniture, alcohol products, food products, and various household goods. Steel imports (including plate, beam, pipe, coil and wire rod) accounted for a further 26% of international imports. 3.8.3 Domestic Shipments. Domestic cargo is the largest category of Fraser Port tonnages. In 1992, total inbound and outbound domestic cargo approached 17.5 million tonnes. Table 3.3 outlines the various domestic commodities shipped through Fraser Port in 1992. Domestic Outbound: In 1992, domestic outbound cargo amounted to almost 7.5 million tonnes. Forest products dominated the category, accounting for approximately 88% of domestic outbound cargo tonnage. Cement and aggregate combined for a further 6.7%. 47 Table 3.3: Fraser Port domestic outbound and inbound shipping statistics, 1992 (in metric tonnes). OUTBOUND TONNAGE Aggregate Cement Chips General Cargo Hogfuel Logs Machinery Pulp Sawdust Steel TOTAL 1992 286,700 218,957 3,841,580 291,313 377,710 2,157,240 300 22,500 213,765 134,600 7,544,665 INBOUND TONNAGE Aggregate Chips Coal General Cargo Gypsum Liquids Limestone Logs Lumber Paper Pulp Shakes Steel Fish TOTAL 1992 1,618,601 519,485 10,100 365,954 191,893 7,501 1,162,567 5,707,487 7,700 121,275 83,066 12,020 4,100 28,758 9,900,788 Outbound Tonnage 7,544,665 Inbound Tonnage 9,900,788 TOTAL DOMESTIC TONNAGE 17,445,453 Domestic Inbound: Over 5.7 million tonnes of logs passed through Fraser Port in 1992. Wood products - including logs, chips, lumber, and paper - dominated the category with a 66% share. Aggregate and limestone combined for 2.78 million tonnes, or a 28% share. Inbound tonnages dominated the total domestic cargo category with a 66% share. 3.8.4 Exports by Region. Asia dominated the international export category in 1992. Over 52%, or 700,913 metric tonnes, of total export activity occurs with Japan, South East and East Asia. The majority of exports to this region are forest products. European, African, and Middle Eastern countries received 344,483 tonnes of cargo shipped via Fraser Port 48 for a 25.6% share of export activity. The U.S. received almost 13%. Figure 3.4 presents the regional destinations of Fraser Port international cargo exports. 3.8.5 Imports by Region. Asian countries also dominated the import category with a 44% share of total international imports. The majority of cargo of Asian origin included automobiles and steel products. Figure 3.5 presents the regional origins of Fraser Port international cargo imports. South and Central American countries accounted for close to 34% of international imports entering Fraser Port. Imports from this area included automobiles from 49 Mexico, heavy equipment and machinery from Brazil, and steel from Trinidad. Various regions ship general cargo consisting of numerous items including ceramic tiles from Italy, alcohol from France, Spain, and Italy, and furniture from Italy. Figure 3.5: International imports by region of origin, 1992. International Imports TSOB by Region mmtmmmm 1 1 . 1 % 3 3 . 7 % 4 4 . 1 % 8.5% 2.6% • Asia (406,252 Tonnes) f j Pacific (23,707 Tonnes) • United States (78,693 Tonnes) • South and Central America (310,959 Tonnes) M Europe (102,504 Tonnes) 3.9: Conclusion. Fraser Port contributes to the trade and commerce of Canada through its transport role. While the Port appears to specialize in domestic cargo, and forest products in particular, it also serves as an important automotive import centre. As well, the 50 mills and processing plants depend on the Fraser waterway to ensure the movement of their goods. Fraser Port also functions as an economic generator in the regional and national economy. The spin-off effects of port activity and spending extend the economic impacts of the Port across the nation. The following chapters quantify those economic impacts related to the operation of Fraser Port facilities and the various industries associated with Fraser Port cargoes. 51 CHAPTER 4: A CRITIQUE OF THE 1981 FRASER PORT ECONOMIC IMPACT STUDY. The purpose of this chapter is to critically examine the 1981 Fraser Port Economic Impact Study (Austin and Powell, 1981) and to propose methods of avoiding such recurrences. The chapter focuses on the application of port economic impact theory, as outlined in Chapter 2. However, the 1981 report is not assessed in terms of the assumptions and theoretical shortcomings of economic impact methods present in all impact studies. Rather, the chapter examines the problems specific to the 1981 impact report. The 1981 economic impact study of Fraser Port used the 1979 (Arthur D. Little Inc.) Port Economic Impact Kit as its template. The procedures of the impact kit involve identification of port-industry and port-dependent industries, a survey of firms for revenue, expenditure, and employment data, determination of the economic base of each industry sector, calculation of economic base multipliers, and the presentation of results. The kit also recommends the use of input-output multipliers where available. 4.1: Results of the 1981 Fraser Port Economic Impact Study. The Fraser Port study assesses ten industry sectors based on 1980 data. Each industry sector is evaluated for its employment, labour income, and sales impacts. Initially, the report divides port activity into port-industry and port-dependent 52 categories; however, no such categories appear in the final results section. The following industry sectors are assessed and impacts presented as shown below: 1. Business and engineering services 2. Chemicals 3. Fishing 4. Manufacturing boat building, seafood processing 5. Metal fabricating industries 6. Non-metallic industries 7. Other services marinas, moorage 8. Trade automobile importers, importers, sales 9. Transportation customs brokers, freight forwarders, railroads, shipping agents, stevedoring, terminals, towing, trucking, 10. Wood products wood manufacturing, log storage The economic base technique was used to determine employment and labour income multipliers. Location quotients identified basic activity. Employment multipliers estimated by using the base technique range from 1.45 for wood industries to 3.48 for other services. Port-industry related multipliers include 1.39 for shipbuilding and repair, 3.07 for transport industries, and 2.57 for trade related industries. Income multipliers were also estimated and were identical to the employment multipliers. Following the assessment of a total impact for each sector, the results were combined to produce total employment and income impacts of Fraser Port. The study did not provide separate results for port-industry and port-dependent categories. A total sales impact was determined from the results of the economic base analysis based on labour income to sales ratios. Ratios were calculated for each sector by 53 using direct income data from the study's income impact calculations, and direct sales data from the survey results. Total sales impacts were then determined by dividing total labour income by the income to sales ratio. Input-output sales multipliers from An Interindustry Study of the Vancouver Lower Mainland by Davis (1974) were also used to estimate total sales impacts, which were then compared to the economic base results. Davis' multipliers include 1.69 for trade and transport industries, and range from a low of 1.49 for wood industries to 1.97 for non-metallic products. Note that the Davis l-O multipliers produce both indirect and induced impacts while an economic base multiplier produces only induced impacts. The economic base results exceeded the l-O impacts by 40%. The total economic impact figures from the 1981 Fraser Port Economic Impact Study are: direct employment impact 10,897 total employment impact 33,211 (in full-time equivalent positions) direct income impact $250,603,000 total income impact $767,314,000 direct sales $2,104,964,000 total sales $5,149,758,000 total sales (l-O multipliers) $3,442,766,000 4.2: Review of the 1981 Results. Do the results of the 1981 report overstate the economic activity of Fraser Port? An economic impact is a result of a project or activity that injects or sustains a monetary flow into a region. Economic impact studies estimate the direct and 54 secondary effects of that flow. In 1981, Fraser Port was said to create over $5 billion of total sales, over $767 million of total labour income, and over 33 thousand total employment positions. The study implies that these impacts occurred as a result of the operation of Fraser Port. While the production and service activity assessed in the study may produce such impacts, the Port is not the creator as the economic impact assessment implies. The operation of the wood industry in B.C., for example, is not an indirect or induced result of Fraser Port. In short, the 1981 Fraser Port study overstates the economic impacts generated by the operation of the port. The overstated impact estimates of the Fraser Port study are the result of several errors. To begin, the aggregation of port-industry and port-dependent categories was incorrect. Second, the analysts did not rigourously establish the existence of dependency between the port and its "port-dependent" producers. Third, the report erroneously presented the results as total, direct and indirect impacts by misunderstanding the product of base multipliers. A final concern involves the estimation of secondary impacts. The analysts were faced with a lack of employment and income data for several industry sectors. To overcome this problem, previous growth rates were used to update the last available figures. This procedure produced several incorrect base estimates and subsequently produced inaccurate base multipliers. The following discussion expands on these problems. 4.3: The Division of Port Activity. The 1979 Port Economic Impact Kit instructs analysts to divide primary, or direct, activity into port-industry and port-dependent categories, and to maintain the separation during and after the assessment (Arthur D. Little Inc., 1979). The final 55 results then reveal the economic impact of the port divided into port-industry and port-dependent portions. Problems created by aggregating the two categories are twofold: (1) the assessment does not reveal impacts related to the expenditures of port activities; (2) the port-industry impact is double-counted when it is added to port-dependent industry. The formalization of the port-industry definition provides a basis upon which port analysts can effectively focus on activity directly related to port operations. As stated in the MARAD 1978 Economic Impact of the U.S. Port Industry the "definition [is] based on a new system concept which [takes] into account the total function of ports as providers of specific and distinguishable services in the movement of waterborne cargo" (p. 17). The definition provides an identification of activities to include in the primary impact of a port. From this primary base, an assessment can then estimate impacts related to the expenditures of "port activity." The 1981 study did not retain the definitions of port activity outlined in the impact kit. Subsequently, what is actually assessed in the report is not clear. Port activity mixes with production activity, business activity, and primary activity. An understanding of the flow of impacts is not apparent in the analysis, and creates a high probability of double-counting as each activity relies on the other for goods and services and the spending of incomes flows into various sectors. Double counting is the result of adding the same impacts twice. Expenditure flows follow indirect and induced channels until leakages deny any further spending. If activity from those indirect or induced channels is considered part of the direct impact, then estimating the spin-off effects through multiplier analysis will double count the indirect activity and all its secondary spending. For example, if activity A 56 has secondary impacts of b, c, and d, then the total impact of activity A = A + b + c + d. If activity b is also assessed for its impacts and added to the total impact of A, then b and all its secondary impacts are counted twice: i.e., the total impact would beA + b + b + c + d. Assessing and presenting A and b's impacts separately avoids this problem. This double-counting scenario occurs in the 1981 Fraser Port study. Transportation, business, engineering, and other services are indirect impacts of the producing sectors that make up the port-dependent category. Adding port-dependent impacts to port-industry impacts double-counts the impact of port-industry activity. 4.4: Port Dependency. The object of assessing port-dependency is to determine the portion of a business1 activity that relies on the existence of the port (Port Authority, 1978; 1982). To include an industry in the port-dependent category, a dependent relationship must be established between the port and industry, that is, without the port, dependent activity would cease to operate. If dependency is not established, the port-dependent results cannot be attributed to the port. As the 1982 port impact handbook states: "if the locational dependence of an industry on a port can be established, then ... analysis can be used to assess the impacts of that industry on the region" (MARAD, 1982, p. 18). Port dependency, strictly defined, assumes that alternate port facilities or transport modes are unavailable. In Vancouver, where alternate ports exist, this dependency is extremely difficult to determine. The 1981 report did not sufficiently 57 justify dependency between industry and Fraser Port. The survey questionnaires used in 1981 queried businesses about the amount of business activity that occurred with Fraser Port, but not about activity that occurred because of Fraser Port. The report attributed $5 billion of sales activity to Fraser Port, yet the processing activity was not dependent on the port. In consequence, the impacts should not be presented as resulting from port operations. Fraser Port does not create the production, export, and import activity that uses its facilities. However, Fraser Port does generate the activity directly related to the movement of cargo, or the port-industry activity. While production activity results from the port's demand for goods and services, this portion is captured in the assessment of the port-industry activity. The port-dependent activity in the 1981 Fraser Port study should have been presented separately and in the context of impacts related to, or associated with, Fraser Port. 4.5: Incorrect Presentation of Results. The study presents the results as total (direct plus indirect) impacts. However, an economic base multiplier does not estimate indirect impacts. The multipliers used in the study generate induced impacts. Thus, the study's representation of the results is inappropriate and misleading. The base model produces, through its "consumer spending multiplier, the total (direct + indirect + induced) component" (Davis, 1990, p. 93). However, the report states that the results are the total (direct and indirect) impacts. When using a base multiplier the multiplicand should consist of the direct and indirect impacts associated with the activity under assessment. The direct and indirect activity is 58 then multiplied by an induced multiplier, thereby deriving the total (direct, indirect, and induced) impacts. Omitting the indirect impacts from the analysis underestimates the full extent of the total impacts. The input-output multipliers used in the study are from a closed version of the Vancouver Metropolitan 1-0 model; thus, they include indirect and induced portions of the secondary impact (Davis, 1974). For non-economists this difference may seem trivial; however, if the goal is a proper understanding of Fraser Port impacts, the figures are misleading. Economists reviewing the impact figures, but not the methodology, would assume that the total, direct plus indirect plus induced, impact of Fraser Port would significantly exceed the $5 billion figure presented in the study. The preceding three arguments - separation of port-activity, dependency between port and industry, and presentation of impact results - can be taken a step further: the final Fraser Port figures do not reflect the impact of Fraser Port, but the total impact of the exporting sectors assessed in the report. As stated, the direct and indirect impacts belong in the multiplicand of an economic base multiplier analysis; the result being the total impact of direct activity. The so-called port-dependent industries purchase goods and services necessary for their operation. This spending creates the indirect impacts of the exporter category. Included in these indirect impacts are the services of shippers and transportation activity. Thus, Fraser Port is an indirect impact of the study's port-dependent industries. Combining the two groups and applying base multipliers yields the total (direct, indirect, and induced) impact of the exporter group, not the Port. Thus, the $5 59 billion attributed to Fraser Port is the impact of the industries considered port-dependent. A separate treatment of port-industry and port-dependent industries would have established truer results. The importance of this separation was apparently not fully understood by the 1981 analysts. Perhaps, however, the 1979 Impact Kit did not stress or explain the importance sufficiently. A separate treatment of port-industry activity reveals a more realistic portrayal of Fraser Port activity. A separation of the 1981 results is undertaken in section 6.11 of Chapter 6. The results are then compared with the 1993 estimates. While the adjusted results are not corrected for their upward bias due to the higher base multipliers, a cautious comparison is possible. 4.6: Calculation of the Secondary Impact. A problem encountered by the analysts was a lack of regional employment and income data for five of the ten industry sectors. To overcome this deficiency, the analysts used industry employment and population growth rates for the 1961-1971 period to update employment figures from 1971 to 1980. This assumes that the 1971-1980 period enjoyed economic conditions and growth levels similar to the 1960's. This assumption is unwarranted and resulted in an incorrect estimation of base activity and subsequent multipliers. The estimated 1980 employment figures were used to determine the export base using location quotients. Location quotients were introduced in Chapter 2. A location quotient (LQ) is defined as: 60 LQj=(R/R)/(N/N), where Rj is the amount of regional employment in sector i; R is total regional employment; Nj is the national employment in sector i; and N is total national employment (Davis, 1990). The following growth formula was used to estimate 1980 industry employment levels from 1971 employment data. A ratio of the percentage growth in employment of industry i from 1961-1971, to the percentage growth in population for 1961 to 1971 was multiplied by the population growth for the years 1971 to 1980. The product is the percentage increase in industry employment in that sector from 1971 to 1980. The percentage increase was then applied to appropriate industry employment levels of 1971 to produce an estimated 1980 employment figure. The process mathematically is: %Lj(6-|.7i) /%P(61.71) * %P(71-80) = %Li(71-80) where %L,(6i-7i) is the percentage change in employment in industry i from 1961 to 1971; %P(6i-7i) is the percentage change in population from 1961 to 1971; %P(7i-80) is the percentage change in population from 1971 to 1980; and %Lj(7i-8o) is the estimated percentage change in employment in industry i from 1971 to 1980. The estimated level of employment is then calculated as: %Lj(7i-80)* Lj7i = Lj80 where Lj71, Li80 is the level of employment of industry i in 1971 and 1980 respectively. Using non-metallic industries as its example, the 1981 study estimated the 1980 level of non-metallic industry employment at 3,787. The LQ was estimated to be 1.2, hence basic employment was thought to exist. 61 Basic employment is equal to Rj- R (N/N) where Rj is actual regional employment in sector i, and R(N/N) is an estimate of regional employment needed to satisfy local demand (Davis, 1990). The estimate, R(N/N), was estimated as 3,187. Thus, the basic portion of non-metallic industries equals 600 (3,787 - 3,187). A multiplier of 2.7 was derived using this data. That the above calculation is in error can be inferred from the 1981 Census results. Non-metallic industry employment in 1981 was 3,115 for the Vancouver Census Metropolitan Area. The location quotient for non-metallic industries equals 0.83*. Therefore, according to the technique, no base activity exists. The accuracy of the location quotients used in the analysis is questionable, especially given the extrapolation of data from previous growth rates. The study's 1980 non-metallic employment estimate is based on a 1961-1971 growth rate of 32.4%. However, from 1971 to 1981, employment growth based on Census data for non-metallic industries was 8.9%. Also, the average rate of GDP growth in the 1970's was 5%, while the 1960's increase was over 6% (Statistics Canada, 1988). 4.7: Conclusion and Recommendations. Numerous academic articles exist that question the assumptions, and attempt to overcome the deficiencies, of the techniques used in the 1981 study (Leigh, 1970; Waters, 1977; Chang, 1978; MARAD, 1978; 1981; Arthur D. Little Inc., 1979; Davis, 1985; Yochum and Agarwal, 1987). Unfortunately, inadequate attention was given by the 1981 Fraser Port assessors to the critiques available. *LQj = (FtyR)/(Nj/N) = (3,115/632,191) / (71,295/11,877,035) = 0.83 62 The generation of base multipliers contributed to the overstated impacts; however, more damaging was the treatment of the port-industry and port-dependent activity. Taking greater care in defining, categorizing, and assessing the industries included in the study, and in organizing the final direct impact would have contribute to greater accuracy. The port-industry and port-dependent industry must be assessed and presented separately to avoid double-counting the port-industry sector, and consequently misrepresenting the port's role in the region. Attributing the impacts of port users to the port, without establishing a dependent relationship, implies that the port is essential for production. The 1981 study did not establish that dependency. To have done so would have been a difficult task in the Vancouver region where alternate ports exist. One approach that avoids the need to establish dependency is to admit the impossibility (for most ports) of determining dependency and include all port users. The impact study for this thesis replaced the port-dependent category with a port-associated category. While terminology does not alter a relationship, a caveat accompanying the term is that the impact figures should not be considered a result of port operations, but simply as economic activity associated with the port. The 1985 (Temple et a\)Port Economic Impact Kit suggests this approach after acknowledging the probable unlikelihood of establishing port-user dependency. 63 CHAPTER 5: FRASER PORT ECONOMIC IMPACT STUDY METHODOLOGY. 5.1: Purpose and Scope. The purpose of this thesis is to assess the economic impacts that resulted from the operation of Fraser Port in 1992. The following discussion introduces the definitions of port activity used and presents a practical explanation of the assessment process. The impact assessment of Fraser Port considers two distinct categories of port activity. The first follows the definition of port-industry discussed in chapter 2. Port-industry is defined as activity that facilitates or is involved in the movement of cargo. The following list presents those businesses considered port-industry: Terminals Customs brokers Shipping agents Dredging activities Harbour Commission Tugs and towing Pilotage services Ship chandlers Ship brokers Stevedores Port-dedicated transport The second category of port activity is termed port-associated and involves industry activity associated with Fraser Port, but not involved with the movement of cargo. This definition follows the recommendations of the 1985 economic impact kit. Port-associated activity is comprised of, first, exporters and importers who ship goods via Fraser Port, and second, shipbuilding/repair, and marinas/moorage -activities that are more water related than port related. Because the 1985 impact kit's definition rejected the need to establish a dependent relationship between the 64 port and its users, no dependency is assumed; thus, attributing impacts to the existence of the port would be erroneous. Port-associated impacts related to imports and exports represent activity that results from the production or distribution of goods shipped through the port; the port's contribution to that impact is through its transshipment function. Marinas/moorage, and shipbuilding/repair are placed in the port-associated category because they are not necessary for the transshipment of goods. However, these activities are often located at, or near, ports. All business activity in the port-industry category is located in the Vancouver Lower Mainland. However, the input-output multipliers used to determine the various economic impacts produce estimates at the provincial and national levels. As a result, the derived impact figures relate to B.C. and Canada. But, because the primary port-industry data originates from the Vancouver Lower Mainland, a majority of the B.C. impacts relate to the Vancouver region. The secondary impacts also occur predominantly in the Vancouver area owing to the high concentration of port-related service activity. Port-associated producers of various food and agricultural products, forest products, mineral products, and chemicals are located across Canada. Shipping agents were unwilling to provide the necessary information to identify the originating province of all exports. To attribute any portion of the goods exported via Fraser Port to any particular province would have been erroneous. Consequently, only the national impacts were determined; no provincial impacts are presented for the port-associated sector. 65 5.2: Evaluation of Port-Industry and Port-Associated Impacts. The port-industry and port-associated categories are assessed and presented separately. All collected data and the presented economic impacts relate to 1992. Port activity in the ensuing years will reflect the impacts derived in this study, given stability in cargo tonnages and port handling productivity. The data required for the study consisted of sales revenue and employment figures, commodity tonnage statistics, commodity price information, and impact multipliers. Data sources included direct survey information, Statistics Canada import and export data, the Statistics Canada Input-Output Division, and the Fraser River Harbour Commission and its associated terminals. 5.2.1: Port-Industry Methodology. Estimating the economic impacts of port-industry activity involved identifying firms with business connections to Fraser Port facilities, surveying the firms for employment, income, and corporate tax data, and analyzing the data for the total impact on the province and nation. The following steps were used to determine the direct and secondary impacts of the port-industry sector: 1.) Identification of Port-Industry Firms: Sources for the port-industry company data base include the 1981 Fraser Port economic impact study survey list, selected issues of Harbour and Shipping 66 Magazine, the Fraser River Harbour Commission, and Fraser Port terminals. The initial list contained approximately 200 firms. Telephone contact was made with each company to determine its relevance to the study. The final number of companies included in the port-industry category totalled 128 (see Appendix 6). 2.) Survey Questionnaire Process: A survey of the 128 firms was necessary to obtain relevant employment and labour income data (see Appendix 1 for a list of companies surveyed). Each of the companies received a survey by mail or fax. All 128 companies were contacted with 94, or 73.4%, providing the requested information. The remainder were either not involved with Fraser Port, or not interested in completing the survey questionnaire. This response rate is considered high. Discussion with Commission officials determined that the majority of Fraser Port business activity was captured in the 73% response rate. Information from non-response companies deemed important was extrapolated from returned survey information, or was estimated by Harbour Commission officials. The port-industry survey questionnaire was designed for simplicity to ensure a high response rate. The questionnaire was developed after reviewing several port questionnaire formats and through discussion with port officials, industry specialists, and analysts at the Input-Output Division of Statistics Canada. The questionnaire contained three questions: operating or sales revenue, employment, and corporate taxes paid to government. The port-industry questionnaire is presented in Appendix 2. 67 After two weeks from the original date of mailing, companies who had not responded were contacted by telephone. Each subsequent week, contact was made with non-response companies to obtain the survey data. The entire process took approximately eight weeks to complete. To ensure confidentiality, all survey responses were destroyed following the transcription of data. 3.) Aggregate Firm Responses: A Lotus 123 spreadsheet was used to organize and aggregate the survey responses. The data was compiled into seven Standard Industrial Classification (SIC) categories: SIC 455, services incidental to water transport; SIC 412, highway and heavy construction; SIC 453, railway transport industries; SIC 454, water transport industries; SIC 456 truck transport industries; SIC 459, other services incidental to transportation; and, SIC 779, business services. The spreadsheet was designed to aggregate the data and estimate the direct, indirect, and induced impacts. See Appendix 2 for the summary aggregation and multiplier calculations. 4.) Statistics Canada GDP, Employment, and Labour Income Multipliers: Direct and indirect GDP, employment, and labour income multipliers were obtained from Statistics Canada. The GDP and labour income multipliers are based on one dollar of output while the employment multiplier is based on one thousand dollars of output. Unfortunately, Statistics Canada no longer produces a closed version of the input-output model that would generate induced multipliers. "[I}t appears preferable ... that Statistics Canada not offer mechanical impact solutions with partial closure on 68 consumption. Such an analytic tool is too simplistic, and the results may be doubtful and debatable" (Statistics Canada, 1991b, p. 15). Several reasons for the use of a open l-O model are given by Statistics Canada. One is that only consumer spending is considered within the closed model. Thus, the spending effects of increased profits that can lead to greater capital spending, or research and development is ignored. A second problem involves the homogeneous propensity to consume that is inherent in the l-O model. People of different incomes, different debt loads, from different regions, and with different cultural spending habits reduce the likelihood of a constant propensity to consume. Statistics Canada concludes that "in a more general context... [t]he value of such a[n induced] multiplier may in fact not be very credible when we consider dimensions such as monetary policy, inflation, interest rates, and exchange rates' (Statistics Canada, 1991b, p. 15). Induced multipliers were estimated from results of a previous impact study of a Lower Mainland port. The results from the 1990 Vancouver Port Corporation (VPC) economic impact study provided the necessary information to generate induced multipliers for three general categories: terminals, port related services, and transportation. Fraser Port port-industry categories were assessed using the appropriate VPC induced multiplier. While this method provides only an approximation, it does help to reveal the total impact of Fraser Port. However, the reader should be aware of the unsophisticated method used to derive the induced multiplier and the potential for inaccuracy. Please see Appendix 3 for the calculation of the induced multipliers. 69 5.) Calculation of port-industry impacts: The sales revenue data provided by the respondent firms was sufficient to generate GDP, employment, and labour income direct and indirect impacts. The provincial and national GDP and labour income multipliers are based on $1.00 of an exogenous industry output shock. The direct and indirect employment multipliers are based on $1,000 of an exogenous industry output shock. Sales figures for each industry sector were multiplied by the appropriate l-O coefficient. For example, to estimate the direct GDP impact of water transport and related services (SIC 455) in B.C., the total sales revenue from that sector, $88,150,347, was multiplied by the direct GDP multiplier of 0.45678. The result, $40,265,315, equals the direct GDP impact generated by the sale of goods and services by water transport industries. The direct plus indirect impacts were estimated using the appropriate impact multipliers provided by Statistics Canada. Induced employment impacts are based on one full-time equivalent position, while induced GDP and labour income impacts are based on $1.00 of direct GDP and labour income respectively. See Appendix 4 for the calculation of provincial and national impacts of the port-industry category. 5.2.2: Port-Associated Methodology. Port-associated activity is separated into two sections: (1) exports and imports; (2) marinas/moorage and shipbuilding/repair. The port-associated methodology section proceeds first with the export and import categories, followed by marinas/moorage and shipbuilding/repair. 70 Export and Import Methodology: The commodities shipped through Fraser Port arrive from, and are destined to, various locations within Canada. Due to the difficulty of accurately determining these locations, the study focuses on the national impacts only. Also, the study presents only direct and indirect impacts of the export and import commodities due to the unavailability of induced multipliers for each industry sector. As a result, the figures given are conservative. The VPC induced multipliers used in the port-industry evaluation are for terminal operations, port-related transportation, and port-related services; thus, they were considered to be inappropriate to use with various commodity producing sectors. The VPC induced multipliers are based on income levels and spending patterns of port related employment and would not accurately reflect the many producing sectors under assessment. To determine the impacts related to imports and exports, it was first necessary to identify and value the commodities shipped via Fraser Port. Harbour Commission statistics provided commodity tonnages for domestic and international cargoes. For several commodities - general cargo, chemical, steel, and metal products - the published Fraser Port statistics were too aggregated and lacked descriptive detail to assign values. In order to gain a more detailed account, shipping manifests for 1992 were examined. The manifests provided information that allowed chemicals to be disaggregated into specific organic and inorganic descriptions; steel products were disaggregated by type of steel product, such as plate, rods, or beam. The general cargo category proved most difficult to determine. General cargo consisted of food products, alcohol, construction 71 materials, household goods, and other miscellaneous products. In some cases, general cargo was described simply as 'general cargo.' Several sources were used to value the export and import commodities. A survey of producers located along the Fraser River was used to obtain average values for cement, limestone, aggregate, fish, and some forest products. Seventeen producers were surveyed with 100% providing information (see Appendix 1 for a list of surveyed companies). The port-associated questionnaire is found in Appendix 1. The majority of the remaining values were available from Statistics Canada Export by Commodity (1992b) and Import by Commodity (1992c) releases. Where no exact matches or insufficient commodity detail was possible, an average value of similar products was used. The Council of Forest Industries (COFI) also provided some forest product information. Finally, commodities that could not be valued from the above sources were assessed using an average value of all Fraser Port cargo. See Appendix 5 for a presentation of commodity values and impact calculations. Estimating port associated impacts: To determine economic impacts associated with the commodities, a producing sector had to be identified. Domestic outbound, international exports, and domestic inbound cargoes were assessed for their backward linkages to the nation's production process. This was done in two stages: first, the commodity values were assigned to an appropriate producing industry; second, the employment, labour income, and GDP impacts associated with the cargo were estimated using Statistics Canada multipliers. The producing sectors that ship goods via Fraser Port consist of forest products, cement products, chemical 72 products, agricultural products, non-ferrous metal production, non-metallic mining products, and other export products. The domestic inbound results should not be added to the impacts of the export sector in order to determine a total impact of port-associated industries. Combining the impacts of inbound commodities with those of outbound commodities would cause partial double-counting of the domestic import results. In 1992, approximately 66% of Fraser Port's total domestic cargo shipments were inbound. Included in this percentage are aggregate, logs, limestone, and gypsum, much of which is processed and later exported via Fraser Port. Subsequently, various imports contribute to the value added of Fraser Port exports. To estimate impacts related to international imports, the forward production linkages of commodities arriving at Fraser Port would have to be identified. The difficulty in determining the economic contribution of international imports stems from the virtual impossibility of tracing their final destination, or forward linkage, to the economy. Imports such as steel products, for example, are used in the fabrication of numerous articles whose final shape is indeterminable at the semi-processed stage. Commission statistics did not reveal final or intermediate destinations, and shipping agents would not provide specific customer information; thus, international imports could not be assigned to any one receiving sector of the economy. As a result, international imports are only presented for their value Marinas/Moorage and Shipbuilding/Repair Methodology: The assessment of marinas/moorage, and shipbuilding/repair activity was similar to the method used for the port-industry category; however, only direct and indirect 73 impacts are presented The relevant businesses were surveyed for their business activity and GDP, employment, and labour income impacts were calculated using Statistics Canada direct and indirect multipliers. All companies in this category provided the necessary information. A list of these port-associated companies can be found in Appendix 1. Caution should be taken when interpreting the results of the shipbuilding category because of the yearly fluctuation in shipbuilding activity. For example, in 1992, a Fraser River shipyard was engaged in the construction of a B.C. ferry and employed an unusually large workforce. 5.3: Conclusion. The port-industry assessment focuses on the economic impacts generated by the daily operations of Fraser Port. The assessment provides an insight into the port's operation, the magnitude of its role as an economic generator, and specifically its economic contribution to the local, provincial, and national economies. The most appropriate reflection of Fraser Port's economic role in the region evolves from the port-industry assessment. The results of the port-associated section reveal economic impacts in the national economy that various commodities shipped via Fraser Port generate. Fraser Port's significance in this impact results from being a component within the transportation network. The port takes part in the transportation and distribution process, but one should not consider it essential for the production or existence of an industry producing or receiving a good. The port-associated analysis quantifies the economic activity that the port is associated with, not what the port creates as a result of its daily operation. 74 CHAPTER 6: FRASER PORT ECONOMIC IMPACT ASSESSMENT RESULTS. The results of the Fraser Port economic impact assessment are presented in two parts: port-industry impacts, and port-associated industry impacts. The chapter continues with a comparison of the current 1992 Fraser Port results with the 1981 study of Fraser Port, and the 1990 economic impact study of the Vancouver Port Corporation. The port-industry category includes those industries directly involved with the movement of cargo, whether this be handling, brokering, or providing the ability for ships to call at the port. Port-industry includes: Terminals Railways Stevedoring companies Trucking Shipping agents Dredging activities Tugs and towing Ship brokers Pilotage services Customs brokers Harbour Commission Ship chandlers 6.1: Provincial Impacts of Port-Industry Activity. Direct sales revenue for the port-industry community totalled $258,755,484 in 1992. This revenue translated into payments for services, goods, and wages that produce secondary impacts. Table 6.1 shows the GDP, employment, and labour income impacts for port-industry firms in 1992 (all figures shown are in 1992 dollars). 75 Table 6.1: Economic impact of the port-industry sector, B.C., 1992. Direct Impact Indirect Impact Induced Impact Total Impact GDP ($) 124,625,526 63,307,019 60,272,072 248,204,617 Employment* 2,113 801 474 3,389 Labour Income ($) 93,601,119 40,688,239 35,343,143 169,632,501 Gross domestic product (GDP): The port community contributes to the value of goods shipped and as such, adds to the GDP of the region and nation. In 1992, Fraser Port contributed over $124.6 million of direct GDP to the province of B.C. The successive rounds of secondary economic activity increased the GDP impact of Fraser Port by over $123.5 million . The total GDP impact in B.C. of Fraser Port reached approximately a quarter of a billion dollars in 1992. Employment: The various businesses included in the port-industry category provide direct employment for 2,113 full-time equivalent positions. The largest employers are terminal operators, followed by tug and towing companies operating on the Fraser River. The expenditures of port-industry businesses for goods and services, and for wages and salaries create numerous opportunities for the non-port community. This spending created an additional secondary impact of 801 indirect jobs and 475 Measured in terms of full-time equivalent positions. 76 induced employment opportunities. In 1992, the total employment impact in B.C. of port-industry activity was 3,389 full-time equivalent positions. Labour income: The port community provided its workers with over $93 million of direct wages and salaries. That payroll provided, on average, a salary of approximately $44,000 per direct worker. A further $76 million of secondary labour income brought the total impact of the port-industry community to over $169.6 million. 6.2: National Impacts of Port-Industry Activity. The economic impacts of the port-industry community extend across Canada. Table 6.2 shows the B.C. and Canadian impacts for port-industry firms. Table 6.2: Total economic impacts for B.C. and Canada. B.C. Canada Total GDP ($) 248,204,617 274,082,396 Total Employment* 3,389 3,764 Total Labour Y ($) 169,632,500 187,758,391 * Measured in full-time equivalent positions. In 1992, port-industry activity contributed over $274 million of GDP to the Canadian economy. The total employment impact across Canada resulting from the operation of the port was approximately 3,764 full-time employment positions. The total labour income impact exceeded $187.7 million, or over $49,000 per port related employee. 77 6.3: Economic Impact of the Port-Associated Sector. The port-associated sector includes the many importers and exporters who use Fraser Port to ship goods. The commodities arrive from and are destined to various locations throughout Canada. Establishing the final destination of any commodity is problematic as such specific cargo information is unavailable. Consequently, the impacts discussed below reflect Canada as a whole. Further, international imports are presented for their value only, because of the inability to accurately determine a final or intermediate destination. The port is also associated with activity attracted to the area for water access, though not directly related to the movement of cargo. Shipbuilding/repair, and marinas/moorage are not directly involved in the movement of cargo, thus are more river related than port related. Nevertheless, they are part of the port or harbour community, and are assessed accordingly in the port-associated section. 6.3.1: Export and Import Commodity Value. In 1992, over 19 million tonnes of cargo passed through Fraser Port with an estimated value of close to $6.1 billion, $4.2 billion of which results from international exports and imports. Table 6.3 shows the export and import tonnages and dollar values for 1992. 6.3.2: The Export Sector. As shown in table 6.3, international and domestic outbound cargoes exceeded 9 million tonnes with a value of over $1.3 billion. The economic activity required to produce these commodities is substantial. In terms of direct and indirect GDP 78 impact, the export cargo contributed over $1.3 billion to the Canadian economy (see Table 6.4). Direct and indirect employment neared 19,000 with a labour income impact of over $641 million (see Tables 6.5 and 6.6). Table 6.3: Total inbound and outbound tonnages and values, 1992. Total Outbound Domestic International Total Total Inbound Domestic International Total Total Outbound and Inbound Domestic international Total Tonnes 7,544,665 1,459,266 9,003,931 9,900,788 806,073 10,706,861 17,445,453 2,265,340 19,710,793 $ Value 925,706,056 378,719,967 1,304,426,024 940,830,802 3,853,770,006 4,794,600,808 1,866,536,858 4,232,489,973 6,099,026,831 Forest products: In 1992, the forest products sector accounted for the largest share of outbound cargo. Forest products include logs, chips, hogfuel, sawdust, plywood, lumber, shakes and shingles, pulp, and paper. Forest products commanded 83% of all international outbound cargo and 88% of domestic outbound cargo. A total value of approximately $1.1 billion was calculated for this sector (see Table 6.4). In 1992, the processing of forest products passing through Fraser Port generated over $442.6 million of direct GDP and a further $480.5 million of indirect impacts for a total GDP impact of over $923 million. 79 Table 6.4: Export sector distribution of port-associated GDP impacts for Canada, 1992.* Industry Sector Forest products Cement products Chemical products Agricultural products Non-ferrous metals Non-metallic mining Other export products Total Sector value 1,097,641,655 18,180,525 18,868,669 36,226,325 11,637,060 4,694,892 117,176,898 1,304,426,024 Direct GDP Impact ($) 442,688,475 8,921,365 6,689,959 15,333,517 3,353,102 2,802,881 52,261,344 532,050,643 Indirect GDP Impact ($) 480,574,443 6,229,739 7,515,568 12,604,333 5,377,253 1,197,345 39,319,877 552,818,558 Total" GDP Impact ($) 923,262,918 15,151,104 14,205,527 27,937,850 8,730,355 4,000,226 91,581,221 1,084,869,201 * Appendix 5 presents the multiplier calculations of these impacts. ** Total impact includes direct and indirect impacts only. In terms of employment, the forestry sector associated with Fraser Port generated over 7,900 direct full-time equivalent positions. Indirect employment increased the total number of positions to over 16,000. Table 6.5 shows the industry sector employment for 1992. Direct labour income in the forest products sector equalled approximately $288 million, or over $36,000 per employee per year. The indirect impact totalled in excess of $280 million for a total direct and indirect labour income impact of approximately $568.2 million (see Table 6.6). Cement products: Cement products had a total domestic and international export value of approximately $18 million in 1992. The direct GDP impact associated with this 80 production activity was $8.9 million; the multiplier effects contributed a further $6.2 million for a total direct and indirect impact of over $15 million. Table 6.5: Export sector distribution of port-associated employment impacts for Canada, 1992 (in full-time equivalent positions).* Industry Sector Forest products Cement products Chemical products Agricultural products Non-ferrous metals Non-metallic mining Other export products Total Direct employment 7,934 160 108 296 47 39 1,015 9,599 Indirect employment 8,803 109 108 228 79 22 709 10,058 Total** employment 16,737 269 216 524 126 61 1,724 19,657 * * Appendix 5 presents the multiplier calculations of these impacts. ** Total impact includes direct and indirect impacts only. The direct employment impact of the production of cement passing through Fraser Port was approximately 160 and contributed to a total employment impact of 269. Direct labour income in the cement products category bettered $5.5 million and led to a further $3.5 million of indirect impacts for a total labour income impact of over $9 million. Chemical products: Approximately 5,422 tonnes of chemicals were shipped through Fraser Port in 1992 with a value of over $18.8 million. The direct GDP impact of the chemical production approached $6.7 million with a total direct and indirect GDP impact of $14.2 million. 81 In terms of employment, the chemical industry associated with Fraser Port provided over 100 direct jobs and over 200 direct and indirect full-time equivalent opportunities. The direct labour income of the associated chemical products industry surpassed $3.4 million with a total labour income impact nearing $7.1 million. Agriculture and food products: In 1992, Fraser Port agriculture and food product exports included lentils, canary seeds, canned seafood, sugar, and other processed and semi-processed goods. A total of approximately 46,000 metric tonnes of food were exported via Fraser Port in 1992. The approximate value of the food products was in excess of $36 million. The direct GDP impact in Canada associated with the food products reached $15.3 million. Adding the indirect multiplier effects brought the GDP contribution to a total impact of approximately $28 million. In 1992, direct employment related to the agriculture and food products reached 296, with a direct labour income impact of approximately $9.5 million. The total direct and indirect employment impact surpassed 500. Direct and indirect labour income in the agricultural sector was greater than $18 million. Non-ferrous metal production and non-metallic mining: Non-ferrous metal products include nickel, zinc, and other non-iron based metals. Approximately 4,865 tonnes of non-ferrous mineral products were shipped through Fraser Port in 1992. The value of these products was $11.6 million. 82 Table 6.6: Export sector distribution of port-associated labour income impacts for Canada, 1992.* Industry Sector Forest products Cement products Chemical products Agricultural products Non-ferrous metals Non-metallic mining Other export products Total Direct labour income ($) 288,164,056 5,572,513 3,431,743 9,497,093 1,819,803 1,339,286 33,216,151 343,040,645 Indirect labour income ($) 280,067,879 3,472,455 3,646,488 8,520,745 2,564,013 697,366 26,469,704 325,438,650 Total** labour income ($) 568,231,935 9,044,968 7,078,231 18,017,838 4,383,816 2,036,652 59,685,855 668,479,295 * Appendix 5 presents the multiplier calculations of these impacts. ** Total impact includes the direct and indirect impacts only. As Tables 6.4 - 6.6 indicate, the production and distribution of these metals contributed $3.3 million direct GDP and $8.7 million total GDP to the nation's economy. The production was made possible by 47 direct and 126 total full-time positions, with a direct labour income of $1.8 million and a total labour income impact exceeding $4.3 million. Non-metallic mineral products exported via Fraser Port include aggregate, gravel, rock salt, and limestone. The cargo had a value of approximately $4.7 million with a direct GDP impact of $2.8 million and a total GDP impact across Canada of over $4 million. Direct employment was 39 and total employment reached 61. Direct labour income was over $1.3 million and contributed to a total impact of $2 million. 83 Other export products: Other export products include scrap steel, machinery, equipment, and other unspecified cargo shipped in containers. An approximate value of these cargoes is $117 million. An estimation of the contribution to the economy includes $52 million in direct GDP across Canada, over 1,000 direct full-time equivalent jobs, and over $33.2 million in direct labour income. 6.3.3: Fraser Port imports. In 1992, 10,706,861 tonnes of international and domestic imports passed through Fraser Port. The total value approached $4.8 billion with international imports accounting for 80% (see Table 6.3). International Imports. In 1992, the value of international imports reached over $3.8 billion. Automotive imports led the international import sector with a value of approximately $3.5 billion. The second largest import category was steel products with a total landed value of approximately $209.9 million. An estimated $10.4 million of food products entered Canada through Fraser Port. Food products ranged from soft drinks, to wine and other alcohol products, to pasta and coffee. The remainder of the international import commodities includes $2.4 million of non-ferrous metals, wood products valued at $855 thousand, $20.5 million of heavy equipment, and approximately $52 million of general cargo. Table 6.7 presents the values of Fraser Port international imports. 84 Table 6.7: Commodity value of international imports Import Automotive Products Food Products Steel Products General Cargo Value ($) 3,566,085,530 10,406,076 209,910,735 52,506,691 Import Non-ferrous Metals Wood Products Heavy Equipment Total shipped via Frase Value ($) 2,448,531 855,432 20,558,082 3 ,862 ,771 ,077 Domestic Inbound Commodities. The domestic inbound category includes forest products, aggregate and gravel, gypsum, limestone, coal, steel, fish, and general cargo. In 1992, a total value estimated for this sector was over $940.8 million. Forest products dominate the category with a 90% share of the total value. The figures provided relate to production in B.C. The domestic inbound results should not be added to results of the export category. For example, gypsum, aggregate, gravel, and limestone are used in the production of goods that are later exported via Fraser Port. Thus, the export impact includes portions of the domestic inbound impacts. Because the commodities are arriving via the water, it is assumed that the originating and impacted province is B.C. Statistics Canada (1992a) reveals that domestic waterborne trade in B.C. is virtually all intra-provincial with an almost 1-1 relationship between domestic outbound and inbound shipments. Table 6.8 shows the domestic inbound commodity values and GDP, employment, and labour income impacts for 1992. GDP impact: In B.C., the direct GDP contribution of industries producing domestic inbound products was approximately $315.7 million. The total direct and indirect GDP 85 impact of the domestic inbound sector approached $656.5 million. The direct GDP impact of the forest industry was $282.8 million, with indirect impacts contributing to a total impact of $596.8 million. Table 6.8: Dome labour income im Commodity Forest products Aggregate/gravel Gypsum Limestone Coal Steel Fish General cargo Total stic inbound comrr pacts for B.C., 199 Value 848,359,055 11,330,207 4,797,325 4,500,000 505,000 3,664,033 53,202,300 14,472,882 940,830,802 lodity values and ( 2. Direct GDP Total GDP 282,817,378 596,782,865 3,274,883 7,711,452 1,386,619 3,265,107 1,300,680 3,062,745 240,309 339,754 1,118,593 1,742,321 21,153,767 33,862,732 4,445,490 9,681,538 315,737,719 656,448,515 3DP, employment, Direct Employ. Total Employment 6,051 11,992 143 211 61 89 57 84 6 8 19 31 503 751 114 218 6,954 13,389 and Direct Labour Y Total Labour Y 249,014,727 433,796,876 3,274,883 4,990,956 1,386,619 2,113,222 1,300,680 1,982,250 161,019 223,473 850,019 1,296,042 16,799,158 24,507,959 3,992,312 6,583,505 276,779,418 475,494,282 Employment impact: The number of full-time equivalent workers directly employed by the associated industries was 6,954. A indirect impact of 6,435 employment opportunities brought the total direct and indirect impact to 13,389. The forests sector related to Fraser Port domestic imports contributed 6,051 direct jobs and 11,992 direct and indirect jobs to the B.C. economy. Labour income impact: In terms of labour income, the direct impact of domestic imports was approximately $276.8 million. The total direct and indirect labour income impact neared $475.5 86 million. Direct labour income related to the forest industry accounted for $249 million in B.C. with a further $184.8 million in indirect labour income. 6.3.4: Shipbuilding/Repair and Marinas/Moorage. The following section outlines the impacts of shipbuilding/repair, and marinas/moorage. The figures for shipbuilding/repair should be viewed with caution due to the yearly fluctuations in construction activity. Vitos' Shipyard activity included construction of a superferry for the B.C. Government that substantially increased shipbuilding activity within Fraser Port in 1992 and 1993. Impacts are provided for B.C. and Canada, and the secondary impact includes indirect portions only. Table 6.9 shows the GDP, employment, and labour income impacts for B.C. and Canada. Table 6.9: Economic impacts for B.C. and Canada, 1992. Direct (BC) Indirect (BC) Total B.C. Total Canada GDP Impact ($) 16,779,738 3,487,971 20,267,709 35,581,246 Employment Impact* 421 90 511 819 Labour Income Impact ($) 16,172,768 2,477,297 18,650,065 24,591,344 *Full-time equivalent positions. GDP impact: In 1992, the provincial direct GDP impact of this port-associated category reached approximately $16.8 million. The total direct and indirect GDP impact in B.C. was $20.3 million. Across Canada, this port-associated activity contributed $35.6 million to the nation's GDP. 87 Employment impact: Direct port-related activity employed 421 persons, with shipbuilding/repair jobs accounting for the greatest share at 367. Indirect impacts consisted of 90 employment positions, bringing the total employment impact in B.C. to 511. Further opportunities across Canada brought the national total to 819 full-time equivalent positions. Labour income impact: The provincial direct labour income impact of these port-associated activities approached $16.8 million. Shipbuilding/repair accounted for $15.3 million. Total labour income in B.C. reached $18.6 million and close to $24.6 million across Canada. 6.4: Comparison of the 1981 & 1992 Fraser Port Economic Impact Studies. A comparison of the 1981 and 1993 studies is possible if the port-industry impacts from 1981 are separated from the report's tables. Caution must be taken when interpreting the results given the use of different multipliers. Also, the figures generated for the 1981 study are based on 1980 data and relate to the Vancouver Census Metropolitan Area (CMA), while the 1992 results reveal provincial impacts. However, as stated in Chapter 5, with sources of primary data and a concentration of service activity centred in the Vancouver area, a majority of the 1992 B.C. impacts are attributable to the Lower Mainland. Figures are adjusted to 1986 dollars based on the Statistics Canada Consumer Price Index for the Vancouver CMA (Greater Vancouver Regional District, 1993). 88 In 1980, port-industry activities generated approximately $169,343,460 in direct sales revenue compared to $188,891,503 in 1992. A 12% increase in sales revenue occurred over the eleven years. From 1980 to 1992, direct Fraser Port employment increased by 17% from 1,810 to 2,113. Direct labour income increased by 22%, from $55,958,910 to $68,328,817. In terms of direct labour income per employee, workers employed in port-industry activities earned an average wage of approximately $30,917 in 1980. By 1992, the average wage had increased by 5% to $32,337. 6.5: Comparison of Fraser Port and Vancouver Port Corporation Port-Industry Results. In 1990, the Vancouver Port Corporation (VPC) released an economic impact study (Coopers and Lybrand,1990). The definition of port-industry used in the VPC study is identical to that used for the Fraser Port study. Both studies also used the Statistics Canada Interprovincial l-O model to generate direct and indirect impacts; induced impacts used in the Fraser Port study were estimated using VPC study results (see Appendix 3). The comparison is made here to examine the relative position of Fraser Port in the region, and to assess the accuracy of the Fraser Port results. As shown in Chapter 3, VPC handles over 3 times the tonnages as Fraser Port, with 63 million tonnes compared to 19.7 million tonnes respectively in 1993. In terms of total GDP, the VPC generated approximately $923.1 million in B.C., compared to 248.2 for Fraser Port. Across Canada, the total GDP impact of the 89 VPC and Fraser Port reached $1,028.8 million and $274.1 million respectively. The results can be compared by looking at the ratio of GDP per tonne. The VPC ratio, using the figures for B.C., reveals a GDP per tonne of $14.65; the Fraser Port figures for B.C. produce $12.60 of GDP per tonne. The difference between the two ratios may be explained by the variability in cargo type and commodity value associated with each port. The relative closeness of the ratios, hence, lends justification to the Fraser Port results. Further comparisons between the studies are possible. Examining labour income reveals that the studies have comparable impact results. The average direct income impact from the Fraser Port study is approximately $44 thousand compared to a VPC average direct wage of approximately $46 thousand. Tables 6.10 compares labour incomd and employment impacts for the Vancouver Port Corporation and Fraser Port. Table 6.10: Comparison of VPC and Fraser Port port-industry employment and labour income impacts for B.C., 1992. Fraser Port Port of Vancouver Direct employment 2,113 9,165 Total employment 3,389 14,501 Direct labour income* $93.6 $427.5 Total labour income $169.6 $775.3 Average direct income $44,298 $46,645 *ln millions. 6.6: Conclusion This chapter reveals the economic significance of Fraser Port in terms of its contribution to the employment, labour income, and gross domestic product of B.C. and Canada. The port-industry category describes the day to day operation of port services, from the loading and unloading of cargo to the many services essential 90 for the movement of cargo. The port as a generator of economic activity is reflected through the port-industry activity. The chapter also discusses the many goods that are transshipped via the port. The value of these shipments and the economic activity required to produce them is described in the port-associated category. This activity, however, should not be attributed directly to the existence of Fraser Port. With the location of the Port of Vancouver, North Fraser Port, Prince Rupert Port, and the port system of Washington State, it is unlikely that the demise of Fraser Port would entirely disrupt the production of its port-associated customers. In comparison to the Port of Vancouver, Fraser Port is dwarfed in terms of quantity and value of cargo. However, the relative contribution of Fraser Port is comparable, although that may be more a reflection of regional union cohesiveness and employer organizational collaboration than for any reasons of productivity. The comparability between results perhaps best serves as a check for the Fraser Port figures. 91 CHAPTER 7. SUMMARY AND CONCLUSIONS. This chapter summarizes the relevant points of discussion and the results of the analysis. It also discusses some conclusions that may be deduced from the results and process of impact identification. Included in the conclusion are perspectives on the application of impact assessment theory, and problems encountered during research. 7.1: Summary. The purpose of this thesis is twofold: first, it is a study of the practical application of economic impact analysis; and second, it is an examination of economic impact methodology in general, and port economic impact analysis in particular. Fraser Port, located in the Lower Mainland of British Columbia, serves as the case study. The thesis attempts to quantify the economic activity directly related to the port's operations. How many jobs does the port help to create? How much income is generated by port related businesses? What is the port's contribution to provincial and national GDP? From an understanding of the direct economic activity of the port, one is then able to estimate, using economic multipliers, the extra, or spin-off, economic activity associated with port related business and personal expenditures. A port's role in a nation's trading system is to provide transshipment services for exporters and importers. Ports are one of many links in the process of goods production and goods consumption. As such, a port is associated with many industries whose goods are traded around the world. The placement of ports in 92 this transportation and trading network also creates an attractive location for industries looking to tap into the overseas demand for goods. Thus, the agglomeration of industries near port facilities can be significant. However, a port is also a provider of employment and an important member of the greater regional community. 7.1.1: Port Activity Definitions. Attempts to define direct port activity have resulted in a standardized port-industry category, and a second more liberally interpreted category of port-users. The definition of port-industry has become accepted as most related to the general operations of the port. Port-industry includes the businesses involved with the movement of cargo and is comprised of shipping terminals, stevedores, Harbour Commission, shipping agents, customs brokers, ship brokers, pilotage services, port-dedicated land transportation, tugs and towing, harbour maintenance services, and ship chandlers. Port-user activity can have a broader interpretation, thus making its impact figures less comparable across studies. Port-users can include importers, exporters, and other activity not involved with the movement of cargo, but in some way associated with the port, for example found within the port's jurisdiction. Interpretation on this point can be broad from including industry located within the ports jurisdiction and using the port's shipping services to activity located in industrial parks operated by the port, but in no way associated with the cargo entering or leaving the port. An optimal method of assessing the port's contribution to, or impact on, this category remains unclear. Studies by MARAD (1978, 1982) suggest that an industry's dependence on a port must be established prior to assessment. This belief stems 93 from the perceived intent of a port impact study, which is to determine the economic activity created, or driven, by a port through its daily operation of providing transshipment services. Most ports, however, no longer have a captive shipping market that could be termed dependent. Extensive transportation networks in highly industrialized countries combined with today's competitiveness for the provision of port services means that no one port has a captive market. In British Columbia, several ports vie for cargo activity, while Washington State ports, namely in Seattle and Tacoma, compete directly with B.C. ports for business. As a result, determining any industry-port dependency is difficult. The position of this thesis, as recommended by the Port Economic Impact Kit of 1985, is to assess the level of activity associated with the cargoes transshipped through the port and to clearly state that dependency should not be assumed. The port-associated category used in this report follows this approach (the latest economic impact study of the Vancouver Port Corporation also adopted this approach, although it calls the activity "port-facilitated"). The port-associated category is comprised of all exporters and importers who ship goods via the port. Two other non-cargo related activities included in the port-associated group are shipbuilding and repair, and marinas and moorage -- activities that, while not involved with shipping or producing cargo, remain related to the port. 7.1.2: Fraser Port. The Fraser River has been a focal point of shipping activity for over 150 years. Shipping activity at the New Westminster port has waxed and waned over the years, through peace time and war, economic booms and busts. Today, the Fraser River Harbour Commission overseas the operation of the port, its three terminal 94 facilities, and various commercial land holdings. In 1992, Fraser Port cargo throughput approached 20 million metric tonnes. Automobiles, forest products, steel, lime, gravel, and numerous food products are shipped via the port. In relation to other local ports, Fraser Port is the second largest, being heavily overshadowed by the Port of Vancouver. The operation of the port provides numerous employment opportunities for local workers, and contributes substantially to the GDP of the province and Canada. 7.1.3: Lessons of the 1981 Fraser Port Economic Impact Study. Prior to commencing the study for this thesis, an examination of an earlier economic impact study of Fraser Port was completed. Several lessons were gleaned from the study. The economic impact study of Fraser Port in 1981 has three major faults: first, it added the port-industry and port-dependent results, thus attributing an overestimated impact to the port. The result was that the study presented an impact related more to the industry shipping goods via Fraser Port, than the port itself. Second, it did not rigourously establish dependency between industry and the port: a requirement suggested by the impact kit that provided direction, and accepted by the 1981 analysts. Third, some of the multipliers used were inflated as a result of the use of a growth model to update ten year old employment data. To avoid the mistakes made by the previous analysts the following steps were taken. First, the two categories of port-industry and port-associated (equivalent to the 1981 study's port-dependent category) were separated by the method of analysis, and presentation of results. Further, it was clearly stated that the two categories should not be combined to form a total Fraser Port impact. The result 95 was one presentation of impacts generated by the operation of the port, and another of the industrial activity associated with the movement of cargo through Fraser Port terminals. The second mistake was, thus avoided by analyzing the impacts as discussed. The third problem was overcome by using input-output multipliers from Statistics Canada. By taking these three steps a more accurate and representative picture of Fraser Port activity should result. 7.1.4: Port-Industry Results. The Fraser Port study uses the most accurate economic impact multipliers available, but they provide only provincial and national perspectives and do not reveal specific regional impacts. As a result of the central location of both the port and its suppliers of goods and services, however, one can assume that a majority of the provincial impacts occur in the Vancouver Lower Mainland. All data collected for this study is for 1992. To determine the economic activity resulting from the operation of Fraser Port a survey of companies identified as port-industry was undertaken. The survey provided the necessary sales revenue and employment information to produce direct sales and employment impacts. Corporate taxation information was also asked for; however, the response to this question was very poor, and thus not included in the results section. Statistics Canada national and interprovincial direct and indirect GDP, labour income, and employment multipliers were applied to sales revenue data to produce direct and indirect impacts related to Fraser Port operations. To estimate the induced impacts of the direct activity, induced multipliers were determined using the results of the 1990 economic impact study of the Vancouver Port Corporation. 96 In 1992, Fraser Port directly contributed approximately $125 million to provincial GDP, and a further $124 million of indirect and induced GDP for a total provincial impact of close to a quarter billion dollars. These impacts generate activity throughout Canada. The total, direct, indirect, and induced GDP impact in Canada related to Fraser Port operations surpassed $274 million. Provincial direct employment was approximately 2,113; a further 1,276 indirect and induced jobs brought the total employment impact to roughly 3,389. Across Canada, total employment resulting from Fraser Port operations was close to 3,800 The direct labour income associated with the provincial activity was $93.6 million, and approximately $170 million in total income. The total labour income impact across Canada was approximately $188 million. 7.1.5: Port-Associated Results. The results of the port-associated category include direct and indirect impacts only, as no industry specific information was available to help determine an induced impact coefficient. The assessment and presentation of port-associated export and import activity is separated into further sub-categories. Domestic and international outbound cargoes comprise one category. Production linkages to this group were easily identified and multipliers were available for each producing sector. Domestic inbound cargo could be easily traced to production activity in B.C., where the relationship between domestic outbound and inbound cargoes is almost 1-1 (this reflects B.C.'s relative isolation from other coastal areas of Canada). International inbound cargoes could not be traced to forward production or consumption with any accuracy. As such, only the dollar value of imports entering Canada via Fraser Port is given. 97 The above categories should be assessed and presented separately. To aggregate the results to produce a total Fraser Port impact would misrepresent the economic role of Fraser Port and would incorrectly inflate the results. Combining the impacts would cause portions of the results to be double-counted. For example, domestic inbound cargo includes aggregate rock and gravel used in the production of cement products. A portion of the cement products made from those inputs are then shipped out of Fraser Port. Totalling the two impacts would double-count the inbound portion. Combining port-associated and port-industry results is also not recommended, again for reasons of double-counting. In 1992, Fraser Port's domestic and international outbound cargos were valued at approximately $925.7 million and $378.7 million respectively, for a total outbound cargo value of $1.3 billion. Domestic and international inbound cargoes were valued at $940.8 million and $3.8 billion respectively, for a total of about $4.8 billion. The total value of all commodities passing through Fraser Port in 1992 approached $6.1 billion. Domestic and international outbound cargo includes forest products, cement products, chemical products, agricultural goods, non-ferrous metals, non-metallic mining products, and various other general cargo goods. The direct and indirect economic activity associated with the production of these commodities includes approximately $1.1 billion of GDP, 19,657 jobs, and an associated $668.5 million in labour income. Domestic inbound cargoes were associated with $656.5 million of GDP, 13,384 jobs, and $475.5 labour income. The domestic inbound category is comprised of 98 aggregate and gravel, coal, gypsum, limestone, steel products, fish, and other general cargo. International imports, valued at approximately $3.8 billion, included automobiles and parts, steel, non-ferrous metals.food products, wine and spirits, heavy equipment, wood products, and general cargo. Shipbuilding/repair, and marinas/moorage businesses located within Fraser Port's jurisdiction added to the economic impact associated with the port. In B.C. in 1992, a total of 421 direct jobs and 90 indirect jobs were associated with this activity. A direct labour income impact of $16.2 million, and a direct plus indirect labour income impact of $18.7 million was associated with this employment. The direct GDP contribution of this activity to the B.C. economy was over $16.8 million, with a further $3.5 million of indirect GDP. Across Canada, the total economic activity associated with the shipbuilding/repair, and marinas/moorage businesses located within Fraser Port's jurisdiction accounted for over 819 direct and indirect jobs, $24.6 million of labour income, and contributed $35.6 million to the nation's GDP. 7.2: Conclusion. 7.2.1: Application of Port Economic Impact Theory and the Legitimacy of Results. A shortcoming of earlier port economic impact studies was due to the lack of an accepted definition of port activity. The result was an inability to compare assessment results across ports because of a wide a variety of interpretations of port activity, and a less than full understanding of the economic activity generated by port operations. Efforts of the late 1970's and 1980's have helped to focus the many approaches. The port-industry category adopted for this study now appears to be accepted as most appropriately representing the economic activity associated 99 with the daily operation of a port and the movement of cargo. Other related activity, such as port users, may be assessed, but should be separated from the port-industry activity. The greatest future contribution to port economic impact methodology would be a specific port industry sector in national and regional input-output tables. Other problems and questions regarding port economic impact approaches may lessen the accuracy of results. A significant contribution to the quality of an assessment rests with the ability of the analyst, the time frame involved, and the cooperation of the community being studied. The following discussion introduces some of the problems encountered during the analysis and how they may affect the final results. If the Fraser Port assessment results are to be used for public relations purposes, then the approach used in this study is acceptable. The use of a port-industry and a port-associated category to organize the various economic impacts of port-related activity provides port managers with a 'macro' view. However, if the desire of the port authority is a detailed analysis of the marginal effects of changes related to imports and exports for port planning purposes, then more detailed work is necessary. For the latter type of study, a fuller understanding of the relationships between cargo throughput and economic activity is required. The intent of the Fraser Port study is to provide information to be used for public relations purposes, thus the less rigourous assessment should provide a general picture of port activity. The quality of the results depends to a large degree of the quality of information provided by the port community. The survey used for this study attempted to infringe on the respondents as little as possible, and so to help ensure accurate 100 and prompt returns. A high response rate, 73%, was obtained through diligent follow-up and clarification. However, the possibility does exist that the more recalcitrant respondents provided rough guesstimates, which could reduce the accuracy of the final figures. Data were checked with other related responses and if any glaring discrepancies were found clarification was sought. Unfortunately, no greater control was available; however, few problems were encountered. The interprovincial and national multipliers provided by Statistics Canada may also lessen the accuracy of the final figures. The interprovincial model was last updated in 1984, while the national model is from 1987. However, while somewhat old they are the most accurate available to analysts, given time and budget constraints. Because the Statistics Canada models only provide direct and indirect impact multipliers, the induced impacts for this study were estimated using multipliers derived from the 1990 Vancouver Port Corporation (VPC) economic impact study. The VPC study used 1984 interprovincial and 1987 national multipliers, supplemented with induced multipliers derived using an econometric approach. For the Fraser Port study, the induced multipliers were estimated by subtracting the Statistics Canada direct plus indirect multipliers from a total impact multiplier derived from the results of the VPC study. Once again, a degree of error is likely introduced; however, the method provided a rough estimate of the induced activity. To calculate the port-associated import and export impacts, a total dollar value for each commodity had to be determined. Per tonne values were obtained from either the producers, or through the use of Statistics Canada export and import information. The use of Statistics Canada sources required a detailed description of each commodity. Harbour Commission statistics were highly aggregated; thus, in many cases the necessary level of detail was not readily available. For example, 101 the most difficult category to value was general cargo. Shipping manifests revealed much of the necessary information; however, exact commodity matches were sometimes difficult to achieve. For some minor tonnages, even when the necessary detail was available, Statistics Canada sources provided only a total value of the cargo entering Canada, but not total units, thus an average per tonne estimation was impossible to determine. The commodities and unaccounted tonnages that could not be assigned specific dollar values were assessed using average values of imports and exports. This process leads to a less accurate assessment of the impacts associated with the commodities. Finally, the impacts relate to a given time period -- in this case, 1992. The fluctuation in port throughput will have an effect on the impact of port activity from year to year. However, the results should remain fairly robust until such time as a change in port productivity, port growth, or inter-industry relationships alters the magnitude of impacts. 7.2.2: Fraser Port Methodology Revisited The purpose of this final section is to highlight particular areas of the methodology that, given the opportunity, might be handled differently. An estimation of port-industry impacts specific to the Vancouver Lower Mainland is one potential area where more research could have improved the results. This study assumed that, because of a concentration of Fraser Port's activity in the immediate region, a majority of the provincial port-industry impacts occurred in the Lower Mainland. Statistics Canada employment and income information by occupation could be used to estimate appropriate regional weights for port-industry 102 categories. Chapter 6 could then include Lower Mainland impacts along with provincial and national impacts. The port-associated category proved the most difficult and time consuming to assess. This, to a great extent, was due to a lack of detailed cargo information and at times inappropriate groupings. While a highly detailed accounting of cargo throughput may not serve the port's needs, it would have saved numerous hours of searching through shipping manifests. The usefulness of a detailed cargo accounting was not understood at the onset of the study. In future, if a detailed listing of cargoes is not readily available, a first order of business would be to produce the required listing of cargo following Statistics Canada classifications. Where Statistics Canada commodity value information is not available to estimate per tonne values, a survey list would be compiled to obtain average price information from importers and exporters. Finally, the port-associated assessment became (necessarily) disjointed in both its analysis and presentation. The impact of international imports had to be kept separate from other port-associated results, as did the impacts associated with domestic inbound cargoes. This port-associated approach stems from a difficulty in port studies to show industry dependence on a particular port's operations. For the general reader, the plethora of numbers and impacts is, understandably, an area of confusion. In future, it would be instructive to examine only the port-industry sectors and then their relationship to both outbound and inbound cargoes. A simple method of doing this could be to determine per tonne estimates of labour activity for each port-industry sector. This approach would likely need more than one year of data in 103 order to smooth any irregularities, and may, unfortunately, make this approach difficult. 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Personal interview. Fraser River Harbour Commission. Sept 22. KargI, Ed. (1993). Personal Interview. Fraser River Harbour Commission. July 15. 111 Appendix 1. Survey List: Port-Industry and Port-Associated Businesses Port-industry 1. ABC Customs Brokers 2. Adanac Custom Brokers Ltd. 3. Allworld Shipping Ltd. 4. Anchor Shipping Limited 5. Anglo Canadian Shipping Company 6. Annacis Auto Terminals Ltd. 7. Arnold Brothers 8. Arrow Transportation Systems Inc. 9. Arya Marine Supply 10. Asia Trading Co. Ltd. 11. Auto Haulaway (West) Ltd. 12. British Columbia Railway 13. Blaicklock Bros. Ltd. 14. Burlington Northern Railway 15. Burnaby Tugboats Ltd. 16. Burrard Towing Co. Ltd. 17. Burton Delivery Service 18. Canaan Shipping Co. Ltd. 19. Canada Maritimes Agencies Ltd. 20. Canadian Freightways Co. Ltd. 21. Canadian National Railway 22. Canadian Pacific Railway 23. Canadian Stevedoring Co. Ltd. 24. Canadian Transport Company Ltd. 25. Cargomaster Services Inc. 26. Cascadia Container Line 27. Catherwood Towing Ltd. 28. Chemainus Towing Ltd. 29. Cole Freight International 30. Cole McCubbin Ltd. 31. Columbia Customs Brokers Ltd. 32. Compass Marine 33. Courtney Agencies Ltd. 34. CTL Westrans 35. Canada Customs: Marine Operations 36. Davidson & Sons Custom Brokers 37. Delta Aggregates Ltd. 38. Delta Catalytic 39. Empire International Stevedoring Ltd. 40. Empire Shipping Co. Ltd. 41. Federated Customs Brokers Ltd. 42. Firebird Trucking 1 12 43. Fraser River Harbour Commission. 44. Fraser River Pile & Dredging Ltd. 45. Fraser Surrey Docks Ltd. 46. Fraser Tugboat Ltd. 47. Fraser Wharves Ltd. 48. G.M. Patry Ltd. 49. Global Marine Canada Ltd. 50. Greer Shipping Ltd. 51. Borgerson Co. Ltd. 52. Hanlon Construction Ltd. 53. Icecorp 54. Inchcape Shipping 55. International Chartering Services Ltd. 56. International Longshoreman's & Warehousemen's Union 57. J.B. Ellis & Co. Ltd. 58. Jagro International Inc. 59. K. Line Canada Ltd. 60. K. Barre, Montreal Shipping 61. Kerr Steamship Co. Ltd. 62. Kuehne & Nagel Inter. Ltd. 63. Ladner Tug and Barge Ltd. 64. Lamina Pile Driving Ltd. 65. Landmark Customs Brokers Ltd. 66. LEP International Inc. 67. Livingston International 68. Lygon Shipping Group Ltd. (DBA Lygon Group) 69. Maersk Canada Ltd. 70. Manhattan Shipping (Canada) Ltd. 71. Mariner Towing Ltd. 72. Maritime Operations Canada Ltd. 73. Miller Contracting Ltd. 74. Milne & Craighead 75. New Westminster Dept: Canada Customs 76. Nippon Express Canada Ltd. 77. Nootka Shipping International Ltd. 78. Norsk Pacific Steamship Can. Ltd. 79. North Pacific Shipping Co. Ltd. 80. Northwest Pile Driving Ltd. 81. Pacific Central Carriers 82. Pacific Coast Shipping & Agency Co. Ltd. 83. Pacific Customs Brokers Ltd. 84. Pacific Pilotage Authority 85. Pacific Rim Stevedoring 86. Pacific Rim Waterways Inc. 87. Pacnord Agencies Ltd. 88. Peace Bridge Brokerage Ltd. 89. Prefered Service 90. Probyn E.R. Ltd. 91. Public Works Canada Ltd. 113 92. Ranger Transport 93. Reimer Express (Pacific) Ltd. 94. Riverside Towing Ltd. 95. Rivtow Marine Ltd. 96. Robinson Heath Western Ltd. 97. Saga Forest Carriers Intl. (Can.) Inc. 98. Schenker of Canada Ltd. 99. Seaboard Shipping Co. Ltd. 100. Seaport Pacific Services Ltd. 101. Seaspan International 102. Seatrade Shipping Ltd. 103. Seawood Shipping (B.C.) Ltd. 104. Shields Navigation Ltd. 105. Sinotrans Canada Inc. 106. Southern Railway of B.C. Ltd. 107. Spence & Young (Can.) Simpson 108. Star Shipping (Canada) Ltd 109. Swiftsure Towing Co. Ltd. 110. T S E Ship Chandler 111. Tidal Towing Ltd. 112. Tri-Line Expressways 113. Union Tug and Barge 114. United Maritime Suppliers Inc. 115. Valley Towing Ltd. 116. Van-Kam Freightways Ltd. 117. Vancouver Customs Brokers Ltd. 118. Vancouver Harbour Ship Supply Ltd. 119. Well-Worth Trading Co. Ltd. 120. Western Navigation Ltd 121. Western Stevedoring Co. Ltd. 122. Westminster Tugs 123. Westward Shipping Ltd. 124. WheatlyBros. 125. Williams Moving International Port Associated 1. Bella Coola Fisheries Ltd. 2. Canadian Forest Products 3. Cleanwood Preservers Ltd. 4. Columbia Bitulithic Ltd. 5. Con-Force Products Ltd. 6. Construction Aggregates Ltd. 7. Delta Cedar Products Ltd. 8. Domtar Chemicals Group, Wood Preserving Div. 9. Domtar Const. Materials,Gypsum Div. 10. International Forest Products 1 14 11. Lafarge Canada Inc. 12. Long Beach Shellfish 13. MacMillan Blodell 14. B.C. Packers Ltd. 15. Shearer Seafood Products Ltd. 16. Teal Cedar Products Ltd. 17. Texada Lime 18. Tilbury Cement Ltd. 19. Captain's Cove Marina 20. Deas Harbour Marina 21. Ron Francis Marine Ltd. 22. Shelter Island Marina 23. Speed's Industrial Marine Parts Ltd. 24. Trites Marine Services Ltd. 25. Wes Del Marina 26. West Bay Boat Builders 27. Vito Steel Boat & Barge Const. Ltd. 1 15 Appendix 2: Survey Questionnaires Port-industry Questionnaire. Fraser River Harbour Commission: Economic Impact Study Questionnaire All information will be held in the strictest confidence by the Project Coordinator. * Please answer the following questions for your latest fiscal year. * Please provide information only for those operations associated with the Fraser River Harbour Commission, or those which relate to operations within the Fraser Port's jurisdiction. Respondents Name: Company: Position: Telephone: Type of business/ SIC code if known 1. Total sales revenue: $. 2. Average number of full-time equivalent employees: (two half-time positions would equal one full-time position) 3. Annual taxes paid to: local govemment(s) $. " provincial government $. federal government $. Comments: Thank you for your cooperation. Would you like a copy of the final results of the survey? yes_ no All information is confidential and used in determination of industry aggregates only. Please return in the self-addressed stamped envelope provided in the package to the Fraser River Harbour Commission. For more information please contact Sinclair Tedder at the Fraser Port, 524-6655, or at The University of British Columbia, 822-4409. 116 Fraser River Harbour Commission: Economic Impact Study: Port-Associated Industry Questionnaire All information will be held in the strictest confidence by the Project Coordinator Data is for determination of industry averages only. * Please answer the following questions for your latest fiscal year (1992). * The aim of this questionnaire is to determine the tonnages and average value of commodities which move via the Fraser River. If any of your imports or exports are transported via the Fraser, please list the commodities below. The commodities can be domestic and international. If neither imports nor exports move via the river please indicate "no river dependency" and return the questionnaire in the envelope provided. * The statistics you provide should be disaggregated by specific commodity. For example, hydrated and quick lime or crushed limestone, gravel, gypsum, pulp and paper, lumber, shingles rather than lime or forest products. * If you require further space please use the back of the questionnaire. Any comments would also be appreciated. Respondents Name: Position: Company Name: Telephone:. Type of Business/SIC code if known: 1. Commodity statistics: Exports only Domestic cargo exports - please list the types of cargo, tonnage, and value. Commodity Tonnage Value international cargo exports - please list the types of cargo, tonnages, and value. Commodity Tonnage Value 117 2. Commodity statistics: Imports only Domestic cargo imports - please list the types of cargo, tonnages, and value. Commodity Tonnage Value International cargo imports - please list the types of cargo, tonnages, and value. Commodity Tonnage Value 3. Please indicate if any of the commodities listed are shipped via the Fraser Surrey Docks, or if they are transshipped directly to or from the river at the production facility. If a mixture exists please attempt to estimate the value shipped directly and through the Fraser Surrey Docks or other facility. Thank you for your cooperation. Would you like a copy of the final results of the survey? yes no_ All information is confidential and used in determination of industry aggregates only. Please return in the self-addressed stamped envelope provided in the package to the Fraser River Harbour Commission. For more information please contact Sinclair Tedder at the Fraser Port, 524-6655, or at The University of British Columbia, 822-4409. 118 Appendix 3: Calculation of Induced Multipliers. To calculate a set of induced induced multipliers appropriate for use in the Fraser Port study, information from Statistics Canada and the 1990 economic impact study of the Vancouver Port Corporation (VPC) was used. The VPC study used the 1984 Interprovincial l-O model to determine direct and indirect impacts., and the 1987 National l-O model for Canada wide direct and indirect impacts To estimate induced impacts, a multiplier was estimated using an econometric model of the Canadian economy, maintained by Data Resources of Canada. For the Fraser Port study, labour income and employment induced multipliers were found by subtracting Statistics Canada direct plus indirect multipliers from total, direct plus indirect plus induced, multipliers derived from the VPC study. Estimates of total (direct, indirect, and induced) employment and income multipliers used in the VPC study were found by dividing direct activity by total activity. To determine GDP multipliers, the relationship between GDP and labour income in national income accounting was used. GDP induced multipliers were calculated based on a ten year average 77% ratio of labour income to GDP. Induced employment, labour income, and GDP multipliers were generated for B.C. and Canada. Calculations were determined for three groups of activity based on the 1990 VPC study: terminals, port related services, and port related transportation. The VPC study uses an identical definition of port-industry. While the three categories aggregate industry sectors and may affect the accuracy of the multipliers, the estimates were the best available at the time. The following are those activities included in the three VPC categories: comprising the VPC terminal sector are tugs 1 19 and towing (SIC 454),stevedoring, terminals, Harbour Commission, pilot services, ship brokers, and ship agents (SIC 455); comprising the VPC port related transportation sector are railway (SIC 453) and trucking (SIC 456); and comprising the VPC study port related services sector are dredging (SIC 412), freight forwarders (SIC 459), ship chandlers (SIC 599), and customs brokers (SIC 799). Employment Multiplier Calculation: B.C. Multipliers Canada Multipliers Terminals SIC Per VPC study 454.455 Per Stats Can Induced mult. Port related transportation SIC Per VPC study 453. 456 Per Stats Can Induced mult. Port related services SIC 412, Per VPC Study 459.599. Per Stats Can 799 Induced mult. 1.72970 -1.68034 0.04936 1.5376 -1.3114 0.2262 1.3662 -1.1437 0.2225 1.97514 -1.65590 0.31924 1.68914 -1.51195 0.17719 1.42019 -1.16448 0.2557 Employment induced liers are based on 1 direct full-time equivalent position. Labour Income Multiplier Calculation: Terminals SIC 454,455 Per VPC study Per Stats Can Induced mult. 1.8652 -1.54624 0.31896 2.01576 -1-59347 0.42229 120 Port related transportation SIC 453, 456 Per VPC study Per Stats Can Induced mult. 1.75418 -1.30134 0.45284 1.87657 -1-56559 0.31098 Port related services SIC 412, 459,599, 799 Per VPC Study Per Stats Can Induced mult. 1.73899 -1.29266 0.44633 1.79625 -1-30707 0.48918 Labour income induced multipliers are based on one dollar of direct labour income. GDP Multiplier Calculation GDP induced multipliers are based on a Labour Income to GDP ratio because no direct GDP figures are given in the VPC study. The ratio used to adjust the labour income multiplier is based on a ten year average from 1983 to 1992. Ten year average of labour income to GDP, 1983 -1992. 1983 1984 1985 1886 1987 316275 405717 350274 444735 374805 477988 390435 505666 427186 551336 = 0.78 = 0.79 = 0.78 = 0.77 = 0.77 1988 1989 1990 1991 1992 471325 603356 507600 651616 516437 667843 511831 674388 516996 687334 = 0.78 = 0.78 = 0.77 = 0.76 = 0.75 Average labour income to GDP ratio: 77.3%. 121 The GDP induced multiplier is found using the equation, GDP(ind)i=LY{ind)i/.773 where GDP(jnd)i is the GDP induced multiplier for sector i, LY(jnd)j is the labour income induced multiplier for sector i, and .773 is the ten year average labour income to GDP ratio. Terminals SIC 454,455 B.C. 0.31896 = 0.41263 0.773 Canada 0.42229 = 0.54630 0.773 Port related transportation SIC 453, 456 0.4528 0.773 = 0.58582 0.31098 = 0.40230 0.773 Port related services SIC 412, 459,599, 0-44633 0.773 = 0.57740 0.48918 = 0.66737 0.733 The GDP induced multiplier is based on one dollar of direct GDP. 122 Appendix 4. Calculation of Port-Industry Impacts Direct and indirect multipliers for B.C. are from the Statistics Canada Interprovincial Input-Output Table from 1984, and, for Canada, from the Statistics Canada National Input-Output Table from 1987. Induced multipliers were derived as shown in Appendix 1. Revenue, GDP, and labour income are given in dollars; employment is in full-time equivalent positions. Port-industry sectors: SIC 455: Service industries incidental to water transport - stevedoring, terminals, port authority, ship brokers, ship agents. SIC 412: Highway and heavy construction - dredging, piers. SIC 453: Railway transport industries - terminal rail operation. SIC 454: Water transport industries - tugs and towing. SIC 456: Truck transport industries - transfer trucking. SIC 459: Other services incidental to transportation - freight forwarders. SIC 599: Wholesale trade - ship chandlers. SIC 779: Business services - customs brokers. Port-Industry Economic Impact Calculations GDP Calculations, B.C. ($) SIC 455 412 453 454 456 459 599 779 Total Direct Sales Revenue 88,150,347 31,498,405 12,100,000 69,442,479 30,428,379 10,198,125 12,010,000 4,927,749 258,755,484 GDP impact Indirect GDP impact Direct + indirect GDP Induced GDP impact Total GDP impact D i r e c t M u l t . 0.45678 0.45714 0.58035 0.45678 0.44954 0.54510 0.73929 0.62954 impact Direct I m p a c t 40,265,315 14,399,181 7,022,235 31,719,936 13,678,774 5,558,998 8,878,873 3,102,215 124,625,526 63,307,019 187,932,546 60,272,072 248,204,617 Indirect M u l t . 0.72117 0.67291 0.74338 0.72117 0.63105 0.73099 0.85772 0.83041 D i r + In d i r I m p a c t 63,571,385 21,195,592 8,994,898 50,079,833 22,242,841 7,454,727 10,301,217 4,092.052 Induced I m p a c t 16,614,677 8,314,087 4,113,766 13,088,597 8,013,299 3,209,765 5,126,661 1,791,219 123 E m p l o y m e n t Ca l cu la t i ons , B.C. S IC 455 412 453 454 456 459 599 779 Direct e Indirect Direct + Induced Sa les Revenue ($ '000's) 88,150 31,498 12,100 69,442 30,428 10,198 12,010 4,928 D i r e c t M u l t . 0.00852 0.00894 0.01134 0.00852 0.01399 0.02439 0.01827 0.03333 mployment impact employment impact indirect employment employment inpact Total employment inpact Di rect I m p a c t 268 108 787 259 143 293 90 164 2,113 801 2,914 475 3,389 Indirect M u l t . 0.01432 0.01462 0.01475 0.01432 0.01850 0.02874 0.02120 0.03812 D i r + In d i r I m p a c t 451 177 1,024 436 189 345 104 188 Induced I m p a c t 60 24 178 58 32 65 20 37 Labour Income Calculations, B.C. ($> SIC Sales Revenue D i r e c t M u l t . Di rec t I m p a c t Indirect M u l t . D i r + l n d i r Impact Induced I m p a c t 455 412 453 454 456 459 599 779 88,150,347 31,498,405 12,100,000 69,442,479 30,428,379 10,198.125 12,010,000 4,927,749 0.32545 0.38461 0.4443 0.32545 0.322 0.52382 0.61948 0.45498 28,688,530 12,114,602 5,376,030 22,600,055 9,797,938 5,341,982 7,439,955 2,242,027 0.50322 0.54816 0.55678 0.50322 0.43454 0.64117 0.69594 0.58099 44,359,017 17,266,166 6,737,038 34,944,844 13,222,348 6,538,732 8,358,239 2,862.973 9,150,494 5,407,110 2,434,481 7,208,513 4,436,898 2,384,287 3,320,675 1,000,684 Direct labour income impact 93,601,119 indirect labour income impact 40,688,239 Direct + indirect impact 134,289,358 Induced labour income impact 35,343,143 Total labour income impact 169,632,500 124 GDP Ca lcu la t i ons , Canada ($) SIC Sa les Revenue 455 88,150,347 412 31,498,405 453 12,100,000 454 69,442,479 456 30,428,379 459 10,198,125 599 12,010,000 779 4,927,749 Direct GDP impact Indirect GDP impact Direct + indirect impact Induced GDP impact Total GDP impact D i rec t I m p a c t 40,265,315 14,399,181 7,022,235 31,719,936 13,678,774 5,558,998 8,878,873 3,102,215 124,625,526 80,488,002 205,113,529 68,968,867 274,082,396 D i r + l n d M u l t . 1.64221 1.80601 1.56237 1.64221 1.69090 2.01726 1.32387 1.23279 i r Dir + l nd i r I m p a c t 66,124,103 26,005,065 10,971,329 52,090,795 23,129,438 11,213,944 11,754,473 3,824,380 I n d u c e d I m p a c t 21,996,942 9,609,581 2,825,045 17,328,601 5,502,971 3,709,908 5,925,493 2,070,325 Employment Calculations, Canada SIC 455 402 453 454 456 459 599 779 Sales Revenue ( $ , 0 0 0 . ' s ) 88,150 31,498 12,100 69,442 30,428 10,198 12,010 4,928 Direct employment impact Indirect employment impact Direct + indirect employment Induced employment impact Total employment impact D i r e c t D i r + l n d i r D i r + l n d i r I m p a c t M u l t . Impact 444 175 1,152 429 223 530 119 191 268 108 787 259 143 293 90 164 2,113 1,150 3,264 501 3,764 1.65590 1.61499 1.46276 1.65590 1.56115 1.80868 1.32679 1.16448 I n d u c e d I m p a c t 86 28 140 83 25 75 23 42 125 Labour Income Ca lcu la t ions , Canada ($) SIC 455 412 453 454 456 459 599 779 Sales Revenue 88,150,347 31,498,405 12,100,000 69,442,479 30,428,379 10,198,125 12,010,000 4,927,749 Direct labour income impact Indirect labour income impact Direct plus indirect impact Induced labour income impact Total labour income impact Direct I m p a c t 28,688,530 12,114,602 5,376,030 22,600,055 9,797,938 5,341,982 7,439,955 2,242,027 93,601,119 54,504,171 148,105,290 39,653,101 187,758,391 Indirect M u l t . 1.59347 1.69954 1.50716 1.59347 1.62403 1.79973 1.28062 1.17423 Dir + lndir Impact 45,714,312 20,589,250 8,102,537 36,012,509 15,912,145 9,614,125 9,527,755 2,632,656 Induced I m p a c t 12,114,879 5,926,221 1,671,838 9,543,777 3,046,963 2,613,191 3,639,477 1,096,755 126 Appendix 5: Calculation of Cargo Values and Associated Impacts 1. International Commodity FOREST PRODUCTS Lumber Wood Chips Pulp Paper Plywood Shingles Other wood products Exports. F o r e i g n Outbound Tonnage 775,847 79,055 193,209 28,825 36.626 1,069 5,307 TOTAL FOREST PRODUCTS 1,119,938 $ Value Per Tonne 132 650 550 1,800 522 CEMENT PRODUCTS & MATERIALS Cement 103,487 75 GENERAL CARGO Food Products Total $ Value 115,626,230 10,435,260 125,585,850 15,853,750 24,173,160 1,924,200 2,770,254 296,368,704 7,761,525 Lent i ls Canary Seed Pink Beans Sugar Yellow/Green Peas Seafood Barley Beans Cherr ies Canned Berries Alfalfa Cubes Yellow/Brown Mustard Oats Rapeseed/Flaxseed Canned Asparagus French Fries Other TOTAL FOOD PRODUCTS OTHER GENERAL CARGO Rock Salt Crushed Bath Small Arms/Ammunit ion 35,428 1,921 1,008 1,154 2,073 2,187 66 315 171 184 76 100 46 310 873 39 81 46,032 106,239 695 20 463 303 59 620 300 5,990 130 598 2,855 3,000 140 1,368 152 283 3,588 726 1,286 28 242 * * 16,403,164 582,063 59,472 715,480 621,900 13,100,130 8,580 188,370 488,205 552,000 10,640 136,800 6,992 87,730 3,132,324 28.314 104,161 36,226,325 2,974,692 168,190 7,244 *,** Please see notes at the end of the appendix. 127 40 70 107,064 153,096 3407 14,488 238,490 3,403,104 39,629,429 Tote Bags Poly Liners Total other TOTAL GENERAL CARGO CHEMICALS AND FERTILIZERS Sodium Chlorate Potasium Chloride Magnese oxide Calcium Hydrochlorite Amonium Nitrate Sodium Benzoate Black Carbon Sulphur Fertilizer Copolymer Resins Dowlex Pentaerythritol Benzaldehyde Other TOTAL CHEMICALS MINERAL PRODUCTS Fused Magnesia Ferro-nickel Zinc Lignum pitch Bentonite (Clay) Molybdenite Concentrate TOTAL NON-FERROUS MINERALS Steel (Scrap) HEAVY EQUIP/MACHINERY Agricultural equipment Heavy equipment parts Mining equipment and parts Agricultural implements Other (includes electric motors, auto body equipment, machine parts, hydraulic equip.,etc) TOTAL HVY EQUIP/MACHINERY 1,137 945,380 80 58 36 150 138 40 6.3 55 136 1,699 2,346 74 39 565 5,422 1,681 79 2,936 110 18 41 4,865 70,184 1,137 432 188 93 44 380 432 122 719 1,799 191 1,130 787 196 1,910 3,169 5,000 1,535 2,645 1,510 3,965 1,025 1,562 549 486 5,750 50 1500 500 500 370 370 34,560 7,076 25,884 269,850 26,358 45,200 4,958 10,780 259,760 5,384,131 11,730,000 113,590 103,155 653,367 18,868,669 6,665,165 80,975 4,586,032 60,390 8,748 235.750 11,637,060 3,509,200 648,000 94,000 46,500 16,280 140,600 TOTAL INTL ASSOC VALUE 1,459,266 378,719,967 128 2. Domestic Outbound. Commodity Domest ic Outbound Tonnage Value Per Tonne T o t a l V a l u e FOREST PRODUCTS Wood Chips Sawdust Hogfuel Logs Pulp TOTAL FOREST PRODUCTS 3,841,580 213,765 377,710 2,157,240 22,500 6,612,795 CEMENT PRODUCTS & MATERIALS Cement 218,957 Aggregate 286,700 Gravel TOTAL CEMENT PRODUCTS 505,657 SINGLE PRODUCTS Steel General Cargo Machinery TOTAL SINGLE PRODUCTS TOTAL DMSTC OUTBOUND 134,600 291,313 300 426,213 7,544,665 40 6 5 292 650 * 6 50 * * * * 153,663,200 1,182,120 1,888,550 629,914,080 14,625,000 801,272,950 10,419,000 1,720,200 12,139,200 6,730,000 105,455,306 108,600 112,293,906 925,706,056 TOTAL INTERNATIONAL AND DOMESTIC OUTBOUND TONNAGE AND VALUE Tonnage $ Value 9,003,931 1,304,426,024 3. International Imports. Commodity Automobiles (in units) NON-FERROUS METALS Copper/Brass Other F o r e i g n Inbound Tonnage 308,391 28 523 V a l u e Per Tonne * * 4,500 T o t a l V a l u e 3 ,566.085,530 95,031 2,353,500 129 TOTAL NON-FERROUS 551 2,448,531 STEEL PRODUCTS plate beam pipe coi l wire rod b i l l e ts other TOTAL STEEL PRODUCTS Wood Products Heavy Equipment GENERAL CARGO Soft Drinks Mineral Water MSG Coffee Pasta Olive Prods Tomato Prods Corned Beef Lentil Seeds Wine /L iquor Canned Mandarin Calcium silcone Rock Salt Gypsum Silica Sand Liquid Asphalt Ceramic tiles Red Clay Vases Decorative Stones Rubber Hose Auto tires Wheels Porcelin Insul F u r n i t u r e Other TOTAL GENERAL CARGO TOTAL INTL INBOUND 38,878 11,141 34,059 79,707 64,833 7,581 3,101 239,300 3,242 4,197 25 45 92 621 348 566 522 86 40 3187 135 59 69,771 50,000 60,000 5,900 7,078 525 1,462 15 134 60 121 1,958 47,642 242,958 806,073 464 1,385 1,540 403 1,230 340 894 265 * •k * 1,438 2,000 1,517 2,556 775 3,891 700 * 1,295 1,364 28 25 15 300 * * * 8 4,241 * * * * * * * * * * 18,039,392 15,430,285 52,450,860 32,121,921 79,744,590 2,577,540 2,771,260 203,135,848 857,929 19,810,467 13,350 16,470 132,296 1,242,000 527,916 1,446,696 404,550 334,626 28,000 6,085,347 174,825 80,476 1,953,588 1,250,000 900,000 1,770,000 5,745,924 660,089 11,696 65,311 857,600 58,440 117,665 2,465,244 53,095,436 26,342,109 3,853,770,006 130 4. Domestic Inbound. Commodity Logs Shakes Lumber Paper Pulp Chips Aggregate Liquids Limestone Gypsum Coal Steel General Cargo Fish TOTAL DMSTC INBOUND Domestic Inbound Tonnage 5,707,497 12,020 7,700 181,546 83,066 519,485 1,618,601 7,501 1,162,567 191,893 10,100 4,100 365,954 28,758 9,900,788 Value Per Tonne 115 1,350 149 550 650 40 7 105 * 25 50 894 * * 1,850 Tota l Value 656,362,155 16,227,000 1,147,300 99,850,300 53,992,900 20,779,400 11,330,207 787,605 4,500,000 4,797,325 505,000 3,664,033 13,685,277 53,202,300 940,830,802 TOTAL DOMESTIC AND INTERNATIONAL INBOUND CARGO 10,706,861 4,794,600,808 5. Summary TOTAL INBOUND TONNAGE AND VALUE Domestic International Total Tonnes 9,900,788 806,073 10,706,861 $ Value 940,830,802 3,853,770,006 4,794,600,808 TOTAL OUTBOUND TONNAGE AND VALUE Domestic International Total 7,544,665 1,459,266 9,003,931 925,706,056 378,719,967 1,304,426,024 TOTAL INBOUND AND OUTBOUND TONNAGE AND VALUE Domestic International Total 17,445,453 2,265,340 19,710,793 1,866,536,858 4,232,489,973 6,099,026,831 131 6. Port-Associated economic impact by industry sector, Exports. GDP Calculation, Canada Industry Sector Sector/SIC Value ($) Wood industries SIC 251 287,489,814 SIC 252 24,173,160 Paper & allied products, SIC 271 Pulp 140,210,850 Paper 15,853,750 Logging industry SIC 041 629,914,080 Non-metall ic industries SIC 354 cement 18,180,525 Quarry & sand pit SIC 082 1,720,200 Other prods, industries SIC 591 10,645,880 Machin/equip manufacturing SIC 319 ag.equip. 648,000 SIC 319 mfg, eqp. 46,500 SIC 319 oth.eqp. 343,200 SIC 311 Ag prods 16,280 Chemical products SIC 371 organic 1,070,112 SIC 371 inorgan. 17,798,557 Primary metal industries SIC 295 11,637,060 Misc non-met mines SIC 062 rock salt 2,974,692 GDP M u l t 0.3682 0.3747 0.4505 0.4299 0.4092 0.4907 0.5743 0.6779 0.3779 0.3779 0.4062 0.3426 0.2319 0.3619 0.2881 0.6101 GDP Impact ($) 105,865,249 9,057,441 63,163,586 6,816,161 257,786,038 8,921,365 987,962 7,216,949 244.892 18,890 129,702 5,578 248,127 6,441,832 3,353,102 1,814,919 GDP Mu l t 0.846 0.819 0.8458 0.8295 0.839 0.8334 0.8441 0.8975 0.6383 0.6383 0.6701 0.579 0.6962 0.7563 0.7502 0.8566 GDP Impact ($) 243,227,863 19,797,818 118,588,935 13,150,369 528,497,913 15,151,104 1,451,986 9,554,358 413,625 29,681 229,975 9,426 745,012 13,460,515 8,730,355 2,548,240 Agricultural products. SIC 101-14 food 36,226,325 Other Products 105,477,038 0.4233 0.4233 15,333,517 0.7712 27,937,850 44,645,332 0.7712 81,344,155 TOTAL EXPORT GDP IMPACT 1,304,426,024 532,050,643 1,084,869,201 132 Employment Caiculation. Canada Industry Sector/SIC Wood industries SIC 251 SIC 252 Paper & allied products, Pulp Paper Logging industry SIC 041 Sector Value ($ '000."s) 287,490 24,173 SIC 271 140,211 15,854 629,914 Direct Emply M u l t 0 0 0 7 1 0.0102 0.0036 0.0055 0.008 Direct Employment Impact 2,053 246 502 87 5,046 Indi rect Emply Mul t 0.0163 0.019 0.0107 0.0121 0.0157 Total D + 1 Employment Impact 4,700 460 1,502 192 9,883 Non-metallic Industries SIC 354 cement Quarry & sand pit SIC 082 Other prods, industries SIC 591 18,181 1,720 10,646 Machin/equip manufacturing SIC 319 ag.equip. 648 SIC 319 mfg. eqp. 47 SIC 319 oth.eqp. 343 SIC 311 ag prods 16 Chemical products SIC 371 organic SIC 371 inorgan. Primary metal industries SIC 295 Misc non-met mines SIC 062 rock salt Agricultural products. SIC 101-14 food Other Products TOTAL EXPORT 1, EMPLIMPACT 1,070 17,799 11,637 2,975 36,226 105,477 ,304,426 0.0088 0.0065 0.0129 0.009 0.009 0.0094 0.0189 0.0024 0.0059 0.004 0.0094 0.0082 0.0082 160 11 138 6 0 3 0 3 105 47 28 296 862 9,593 0.0148 0.0119 0.0172 0.0143 0.0143 0.0148 0.026 0.0083 0.0116 0.0109 0.0137 0.0145 0.0145 269 20 183 9 1 5 0 9 207 126 41 524 1,525 19,657 133 Labour Income calculation. Canada Industry Sector/SIC Wood industries SIC 251 SIC 252 Sector Value ($) 287,489,814 24,173,160 Paper & allied products, SIC 271 Pulp Paper Logging industry SIC 041 140,210,850 15,853,750 629,914,080 Non-metallic Industries SIC 354, cement 18,180,525 D i rec t Income M u l t 0.2574 0.2808 0.1566 0.2275 0.2886 0.3065 Direct Labour Income Impact ($) 73,994,128 6,788,549 21,955,617 3,607,362 181,818,400 5,572,513 Indirect Income M u l t 2.1544 1.9981 2.4948 1.9614 1.8337 1.6231 Total D +l Labour Y Impact ($) 159,409,251 13,563,927 54,775,532 7,075,553 333,407,673 9.044,968 Quarry & sand pit SIC 082 1,720,200 0.2527 434,712 1.6553 719,574 Other prods, industustries SIC 591 10,645,880 0.4958 Machin/equip manufacturing SIC 319 ag.equip. SIC 319 mfg. eqp. SIC 319 oth.eqp. SIC 311 ag prods Chemical products SIC 371 organic SIC 371 inorgan. Primary metal industries SIC 295 11,637,060 0.1564 Misc non-met mines SIC 062,rock salt 2,974,692 0.3041 Agricultural products. SIC 101-14 food 36,226,325 0.2622 648,000 46,500 343,200 16,280 1,070,112 17,798,557 0.2707 0.2707 0.2864 0.3426 0.1114 0.1861 Other Products TOTAL EXPORT LBR Y IMPACT 105,477,038 1,304,426,024 0.2622 5,278,334 175,414 12,588 92,904 5,578 119,253 3,312,489 904,574 9,497,093 27,651,333 343,040,645 1.2806 1.6363 1.6363 1.6071 1.6897 2.8863 2.0329 1,819,803 2.409 1.456 1.8972 1.8972 6,759,540 287,033 20,597 149,306 9,426 344,204 6,734,026 4,383,816 1,317,078 18,017,838 52,459,953 68,479,295 134 7. D o m e s t i c i n b o u n d e c o n o m i c i m p a c t s , B .C . Domestic inbound cargoes arrive from destinations within B.C. Thus, they are assessed for their backward linkages to the B.C. economy. Direct and indirect impacts are calculated using Statistics Canada Interprovincial multipiers from 1984. GDP Calculation, B.C. Cargo Value ($) Forest Products Logs 656,362,155 Sawmill prods. 38,153,700 Pulp 53,992,900 Paper 99,850,300 Dir GDP Direct GDP Mu l t Impact ($) 0.3591 235,699,650 0.30581 11,667,783 0.20953 11,313,132 0.24173 24,136,813 Ind GDP Total D+l GDP M u l t Impact ($) 0.70271 0.73482 0.68822 0.70461 461,232,250 28,036,102 37,158,994 70,355,520 Aggregate/Gravel 11,330,207 Gypsum 4,797,325 Limestone 4,500,000 0.28904 3,274,883 0.28904 1,386,619 0.28904 1,300,680 0.68061 0.68061 0.68061 7,711,452 3,265,107 3,062,745 Coal 505,000 0.47586 240,309 0.67278 339,754 Steel 3,664,033 0.30529 1,118,593 0.47552 1,742,321 Fish 53,202,300 0.39761 21,153,767 0.63649 33,862,732 General Cargo/ 14,472,882 Liquids 0.30716 4,445,490 0.66894 9,681,538 Total 940,830,802 315,737,719 656,448,515 Employment Calculation, B.C. Cargo Forest Products Logs Sawmill prods. Pulp Paper Value ($) 656,362 38,154 53,993 99,850 Dir Empl Mult 0.00745 0.00804 0.00493 0.00589 Direct Empl Impact 4,890 307 266 588 Ind Empl M u l t 0.01457 0.01734 0.01163 0.01141 Total D+l Emf Impact 9,563 662 628 1,139 135 Aggregate/Gravel 11,330,207 Gypsum Limestone Coal Steel Fish General Cargo/ Liquids Total 940,831 ,  4,797 4,500 505 3,664 53202.3 14,473 0.01265 0.01265 0.01265 0.01167 0.00517 0.00946 0.0079 143 61 114 6,949 0.01865 0.01865 0.01865 0.01585 0.00856 0.01411 0.01503 211 89 84 8 31 751 218 13,384 Labour Income Calculation, B.C. Cargo Value ($) Forest Products Logs 656,362,155 Sawmill prods. 38,153,700 Pu lp 53,992,900 Paper 99,850,300 Aggregate/Gravel 11,330,207 Gypsum 4,797,325 Limestone 4,500,000 Coal Steel Fish 505,000 3,664,033 53,202,300 General Cargo/ 14,472,882 Liquids Dir LY Direct Labour Y Mu l t Impact ($) 0.3076 201,896,999 0.30581 11,667,783 0.20953 11,313,132 0.24173 24,136,813 0.28904 3,274,883 0.28904 1,386,619 0.28904 1,300,680 0.31885 0.23199 161,019 850,019 0.31576 16,799,158 0.27585 3,992,312 Ind LY Mu l t 0.52777 0.61175 0.42518 0.41153 0.4405 0.4405 0.4405 0.44252 0.35372 0.45489 Total D+l LY Impact ($) 346,408,255 23,340,526 22,956,701 41,091,394 4,990,956 2,113,222 1,982,250 223,473 1,296,042 0.46066 24,507,959 6,583,505 Total 940,830,802 276,779,418 475,492,282 136 8. Por t -assoc ia ted sec to rs : SIC 327: Shipbuiding and repair industry. SIC 965: Theatre,sports,and recreational services-marinas and moorage GDP Calculations, Canada SIC Sales Revenue 327 31,855,780 965 1,969,125 Direct sales revenue Direct GDP impact Indirect GDP impact Direct + indirect GDP D i r e c t M u l t . 0.4905 0.58629 impact Direct Impact 15,625,260 1,154,478 33,824,905 16,779,738 18,801,508 35,581,246 Dir + l n d i r M u l t . 2.17608 1.36809 Dir+lndir Impact 34,001,816 1,579,430 Employment Calculations, Canada SIC Sales Revenue ($ '000's) 327 31,856 965 1,969 D i r e c t M u l t . 0.01836 0.01389 Direct employment impact Indirect employment impact Direct + indirect employment Direct Impact 585 27 612 207 819 Indirect M u l t . 0.02455 0.01889 Dir+lndir Impact 782 37 Labour Income Calculations, Canada SIC Sales Revenue D i rec t M u l t . Direct Impact Indirect Mu l t . D i r + i n d l r Impact 327 31,855.780 965 1,969,125 0.48057 0.43869 15,308,932 863,835 1.53236 1.31107 23,458,795 1,132,549 Direct labour income impact Indirect labour income impact Direct plus indirect impact 16,172,768 8,418,576 24,591,344 137 GDP Calculations, B.C. SIC Sales Revenue 327 31,855,780 965 1,969,125 Direct sales revenue Direct GDP impact Indirect GDP impact Direct plus indirect GDP D i r e c t M u l t . 0.4905 0.58629 Direct Impact 15,625,260 1,154,478 33,824,905 16,779,738 3,487,971 20,267,709 Indirect M u l t . 0.58857 0.77108 Dir + indir Impact 18,749,356 1,518,353 Employment Calculations, B.C. SIC 327 965 Sales Revenue ($ ,000. 's ) 31,856 1,969 D i r e c t M u l t . 0.01153 0.02719 Direct employment Impact Indirect employment Impact Direct + indirect employment Direct Impact 367 54 421 90 511 Indirect M u l t . 0.01403 0.03225 Dir+lndir Impact 447 64 Labour Income Calculations, B.C. SIC Sales Revenue 327 31,855,780 965 1,969,125 D i r e c t M u l t . 0.48057 0.43869 Direct Impact 15,308,932 863,835 Indirect M u l t . 0.55139 0.55106 Dir + Indir Impacts 17,564,959 1,085,106 Direct labour income impact Indirect labour income impact Direct plus indirect impact 16,172,768 2,477,297 18,650,065 138 * The category includes more than one product and price. The total value is based on the sum of each product's total value. For example, export lumber products include spruce, fir, and pine of different grades and sizes. Price information was obtained from the B.C.Council of Forest Industries (COFI), and the mills located along the Fraser River. Mill prices were used with the quantity of products associated with the particular mill. The remainder of the lumber tonnages were valued using the COFI spruce/fir/pine average price. A second example is the automotive sector. Automobile imports include cars and trucks. To determine a total value, the automobiles had to be disaggregated into counlry of origin and automobile make. Values from the Statistics Canada Commodity Imports by Country could then be used to determine a conlry of origin value, and consequently and total Fraser Port automobile import value. Fraser River Harbour Commission provided statistics showing the quantity of automotive imports by country of origin. The quantity of different makes, however, had to be estimated using data from the Commodity Imports by Country publication. For example, a percentage of total automobiles entering Canada in the less than or equal to 1000CC displacement gas engine category was calculated for Japan. The quantity of automobiles entering Fraser Port from Japan was then multiplied by that percentage to provide a Fraser Port quantity of 1000CC automobiles. A per unit landed price for 1000CC automobiles was calculated for Japan and applied to the quantity, thus producing a total value for Japanese 1000CC automobiles entering Canada via Fraser Port. Values were calculated in this manner for eight automobile sectors representing over 90% of total automobiles entering Canada and for each country shipping automobiles via Fraser Port. ** The commodity values are based on average prices of similar commodities. 139 

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