Vancouver's Trade Economy: Growth, Agglomeration & Future

Introduction: Vancouver as a Trade City

Vancouver, British Columbia — host of the recent Winter Olympics — may have a burgeoning tourism industry, but the historic driver of the city's growth has been trade. The city was founded as a sawmill town, and the province's economy has long been driven by resource industries. This paper analyzes the development of Vancouver's trade economy and presents evidence that this economy continues to strengthen, showing no signs of agglomeration diseconomy yet.

Trade in the region was facilitated by the ease of shipping in protected waterways, the abundance of natural resources, the willingness of native tribes to trade, and the presence of multiple colonial powers operating in the area — English, Russian, Spanish, and American. The city of Vancouver developed as a major trade center because of a confluence of three strong influences.

Three Drivers of Vancouver's Trade Economy

The first was the development of a transportation infrastructure, shaped primarily by geography. Vancouver has a deep natural harbor at the entrance to a fjord, protected from the open ocean by islands. It also sits at the western edge of the North American continent, making it a natural terminus for the cross-Canada railroad and, later, the Trans-Canada Highway. In addition, its position north of the 49th parallel allowed trade to develop as part of the new nation of Canada, rather than having the city take a secondary position in the region to Seattle.

The second major influence is the abundance of natural resources in the vast but sparsely populated province of British Columbia. The province has developed agglomeration economies in forestry and mining — industries based on resource extraction in the interior of the province, with management and trade headquartered in Vancouver.

The third major influence was that, as a Pacific Rim city, Vancouver has long had a strong Asian population. Chinese laborers were imported to help build the cross-Canada railroad, and by the time the Chinese Republic was established, trade links had already been forged — to the point where Sun Yat-Sen visited the city. Over time, the influence of Asia on the city only increased. Vancouver became a hub for immigration from the Punjab and for refugees from Vietnam and pre-handover Hong Kong. This strengthened trade links between the city and Asia over the past several decades, leading to a resurgence in Vancouver's economy.

Having the people in place has made a considerable difference, but the geographic location — directly across the Pacific from northern Asia's manufacturing centers — has also facilitated the emergence of the trade agglomeration in Vancouver over the second half of the twentieth century. The city now acts as a gateway for goods entering North America, owing to its transportation links to the rest of Canada and its proximity to the United States.

Evidence of Trade Firm Clustering and Port Activity

There is evidence that trade firms are clustered. These firms are located primarily at critical trade loci: customs clearance and shipping firms at the airport, around the ports, downtown, and near the U.S. border. However, in today's world, physical location is not strong evidence of agglomeration in trade, as office tasks in particular can be conducted anywhere in the region (Port of Vancouver, 2008). The best evidence of a trade agglomeration is found in the data. The Port of Vancouver alone contributes $7.9 billion in GDP and $17.1 billion in economic output, and supports over 100,000 jobs in the region — approximately 8% of the city's GDP and around 9% of the province's total employment.

Trade through the Port of Vancouver — not including air, truck, and rail transport — amounted to 127.8 billion metric tons in 2007, valued at $75 billion. Vancouver is the largest port on the west coast of the Americas, despite the city ranking well down the list of the most populous Pacific Coast centers. Trade throughput provides greater insight than raw numbers alone: Vancouver handles 25% of new cars entering Canada — a total of 458 shipments in 2007 — despite having no automobile manufacturing and only 6% of the national population.

In addition to direct port activities, the trade sector comprises a wide variety of other companies. These include cargo terminals, cruise ship terminals, tugboats, shipping agents, government and administrative agencies, freight forwarders, suppliers, builders, trucking firms, legal agents, warehouses, and importer/distributors (Port Metro Vancouver, 2010). These firms are geographically scattered around the region, but they are all interconnected.

Conclusion: Vancouver's Place Among Global Trading Cities

Ultimately, Vancouver has taken its place as one of the world's major trading cities. The trade business has led to booming ports, a strong transportation infrastructure, and the creation of many companies both small and large. Global shipping firms all operate in the city and its environs. Smaller companies handle logistics and warehousing, in addition to the outbound flow of goods to the United States and to the rest of Canada. These businesses all end up supporting one another. They facilitate the development of infrastructure, which in turn generates more trade.