The Supply Chains Of China Vs. Canada

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The Supply Chains of Canada v.s. China

Diana Suchodolski

Wayne State University

Introduction:

This report will analyze the political, environmental, social, technological, legal and

economic aspects of China and Canada in a PESTLE analysis. Political differences can be found

in the structures of each country’s respective governments and how laws play their part in the

logistics and supply chain areas. Focusing on the impact logistics operations may have on the

environment, our analysis highlights the different acts and regulations and how they influence

business activity. Certain social aspects may influence business structure and work conditions in

each country and is a key factor to consider when attempting to understand each country’s

supply chain logistics. Each country will try to leverage the technologies that provide the greatest

value to the efficiency and operation of the many supply chains that exist within each. Analyzing

business laws and lawmaking highlights the impact laws can have when operating in either

China or Canada. Our analysis compares the difference in economical strength each country

possesses and how this has an effect on supply chain and logistics.

Political:

The political stability and political doctrine of a nation is extremely important when it

comes to doing business in a country. The politics of a host nation can affect the speediness, the

efficacy, the profitability, and the ease of doing business. Canada and China have vastly different

political systems and in turn, have vastly different business environments. China is a one party

communist dictatorship, while Canada is a parliamentary democracy and constitutional

monarchy with a variety of different political parties.

The authoritarian nature of the Chinese government can be a positive and a negative for

foreign companies considering investing in a factory in China. On the positive side, China’s

authoritarian political nature has been known to make construction of factories and facilities

extremely fast when compared to their Western competitors. On the negative side however,

China’s politics have a history of damaging foreign companies’ ability to do business effectively.

For instance, foreign companies are required to create a joint venture with a Chinese citizen or a

Chinese company in order to open a business in China (McDONALD, 2018). China also has

developed a notorious reputation for forcing foreign companies to restructure their business so

that the Chinese government has a say in how the company is run and a say in who gets

appointed to the company’s board of directors (McDONALD, 2018). China has also begun to

punish foreign companies that express political views counter to China’s political interests

(McDONALD, 2018). China made headlines with this practice in 2019, when they began to

drain the NBA and the Houston Rockets of tens of millions of dollars until they issued a public

apology, and punished the Houston Rockets’ general manager because he signaled support for

the Hong Kong protests (Rogin, 2019). This often hostile political environment experienced by

foreign businesses operating in China and its consequences, is something that should be seriously

analyzed and considered by presumptive investors before committing to investing in a factory in

China. Taken as a whole, China’s authoritarian political environment is most likely a net

negative for the vast majority of businesses, as the price of admission is too high for most

potential investors to bear.

Canada on the other hand has a democratic parliamentary system. This system also has

positives and negatives for potential investors. On the positive side, Canada has a good track

record when it comes to protecting intellectual property rights and allowing foreign companies to

operate independently from the Canadian government. On the negative side, Canada’s politics

favor a more protectionist business agenda that has been known to be harder on foreign

companies than domestic companies. Canada also has a reputation for having a lot of political

fired tape” that makes investment in Canada more difficult and takes longer. For instance,

Canada has a law that requires foreign businesses to make an appeal to the minister of industry (a

political appointee) on why it would be a net benefit to Canada to have their business invest

(Burney, 2011). If the minister of industry decides a foreign company will not be a net benefit,

their request to invest is denied (Burney, 2011). If the business’ request is granted, then the

business now must repeat the process with local and provincial governments (Burney, 2011). On

the positive side, Canada currently has a free trade agreement with the United States as per the

USMCA. Canada is also ranked as one of the most politically stable nations in the world,

meaning that chances of political and civil upheaval, or political gridlock is low (Canadian

Economy, n.d.). The political environment in Canada is overall highly conducive to doing

business, and most investors would find the political environment when it comes to business

investment, semi accommodating if not a little annoying.

Environmental:

The two countries, Canada and China, do not have a great deal in common when it comes

to their environmental policies. In fact, the two powerhouse nations have drastically different

policies and put an emphasis on different things in terms of the environmental regulations

associated with their supply chains. The Canadian government has held strict environmental

policies for multiple decades, whereas the People’s Republic of China has only begun to initiate

strong policies in the past six years, enacting their first blanket policy in 2014. Environmental

policies and regulations are being enacted now more than ever due to the rising concern for the

planet and the shift in the general publics’ mindsets. People’s ideas of what is right and wrong in

terms of pollution has changed dramatically in the past few decades. This all directly impacts

supply chains for a multitude of reasons. Supply chains are forced to abide by these

environmental policies which can impact the ways they do business. It puts regulations on their

factories and demands a certain level of corporate social responsibility to be shown in order to

appease the public and the communities in which their factories are located.

Canada has a primary law, The Canadian Environmental Protection Act established in

1999. This law grants federal authority and allows their government to regulate a very large

range of environmental concerns (Government of Canada). The primary concern of this act being

pollution prevention. Along with The Canadian Environmental Protection Act, there are a

number of other acts passed by the Canadian government to support environmental protection.

These acts are more case-specific and discuss the protection of many natural environments.

These acts include the Department of the Environment Act, Water Governance and Legislation,

Lake of the Woods Control Board Act, and The Weather Modification and Information Act. The

Department of the Environment Act was initially enacted in 1971 with the purpose of having a

large impact on the environment and climate change issues arising in Canada and globally. This

act also helped to preserve the natural environment of Canada by means of providing

meteorological services and creating other policies and programs to meet the environmental

objectives.

However, the most effective rule or requirement enacted by the Canadian government is

the Administrative Burden Baseline Initiative. This initiative requires all departments and

agencies to establish a baseline count of federal regulatory requirements that impose an

administrative burden on the business. It also requires businesses to annually update and report

publicly upon the fulfillment of baseline requirements (Transport Canada). This is an extremely

effective measure because of the fact that it forces Canadian businesses to hold environmental

standards for themselves and ensures they will follow through by making reporting annually a

requirement for all. There are currently fifty-one regulations associated with the Administrative

Burden Baseline Initiative.

China is a nation known for its mass pollution due to the density of their population.

However, in the last decade they have improved their environmental legislation a great deal. The

law that has made the largest impact on the environment of China is the Environmental

Protection Law, established in 2014. This law focuses on protecting and improving the

environment through having a firm grip on the pollution and public hazards present in China

(China Dialogue Network). Along with this, they have enacted many new regulatory authorities

to monitor corporate and industrial pollution in the country. Regulatory laws are extremely

strictly enforced in China. There are often on-site inspections to ensure all businesses are

following environmental guidelines and everything is above the board.

Another beneficial law the Chinese government has enacted is the Environmental Impact

Assessment Law, this law requires companies to investigate the effect of projects on the

communities as well as the environment before they begin construction on the project (Chun,

Zhang). This is extremely relevant to the supply chain due to the fact that if a company was

intending to build a new factory to increase the span of their supply chain, they would need to go

through these assessments before even being able to break ground. Along with these laws, they

also have several laws that not only apply to corporations but also apply to the general public.

These laws include the Atmospheric Pollution Prevention and Control Law and the

Water Pollution Prevention Law.

All of these factors have a large impact on the way businesses operate their supply chains

due to the fact that each policy, law, and regulation forces supply chain managers to take these

rules into consideration when they are thinking about the factories they are using, or planning to

use, for manufacturing and the transportation methods which they are choosing to deliver their

materials. This is especially true in countries like China, who in recent years have found clear

evidence that they are an extremely large contributor to world pollution. Canada, on the other

hand, is not a large world polluter, but they seem to take a great deal of preventative and

precautionary measures to avoid an increase in their overall pollution, and hopefully influence a

potential decrease with these policies.

Social:

There are differences and similarities between Canada and China when it comes to the

social work environment. The normal working conditions in the two countries are similar but

have some key differences. The wages paid to employees between the two countries is vastly

different. Both countries have an issue with poor working conditions sometimes. It is a complex