Proceedings of the Standing Senate Committee on
Transport and Communications
Issue 2 - Evidence - June 20, 2006
OTTAWA, Tuesday, June 20, 2006
The Standing Senate Committee on Transport and Communications met this day 9:32 a.m. to examine and report on current and potential future containerized freight traffic handled at, and major inbound and outbound markets served by, Canada's Pacific Gateway container ports, east coast container ports and central container ports and current and appropriate future policies relating thereto.
Senator Lise Bacon (Chairman) in the chair.
[Translation]
The Chairman: This morning we will be examining, in order to report on, current and potential future containerized freight traffic handled at, and major inbound and outbound market served by, Canada's Pacific Gateway container ports, east coast container ports and central container ports and current and appropriate future policies relating thereto.
This morning, from Transport Canada, we have with us Ms. Kristine Burr, Assistant Deputy Minister, Policy, Mr. Richard Saillant, Acting Executive Director, Rail Policy, Mr. Roger Roy, Director General, Economic Analysis, and Mr. Emile Di Sanza, Director General, Marine Policy.
[English]
Welcome to all of you this morning. We look forward to hearing what you have to say and will be asking questions following your presentation.
Kristine Burr, Assistant Deputy Minister, Policy, Transport Canada: It is a pleasure to appear before you today to discuss containerized freight traffic in Canada.
I would like to acknowledge my colleagues. On my left is Emile Di Sanza, Director General, Marine Policy and Richard Saillant, Acting Executive Director, Rail Policy. On my right is Roger Roy, Director General, Economic Analysis and Laureen Kinney, Director General, Marine Security. They will help respond to your questions. I will begin with a short presentation.
As you know, we are experiencing nothing short of a revolution in the nature of global commerce.
[Translation]
This revolution is based on the notions of global supply and the value chains that stimulate trade and international investments. Businesses take advantage of these chains and position their design, production, distribution, sales and customer support activities accordingly throughout the world, where their business is most justified. Thus, throughout the last decade, we saw the emergence of a globally and competitively integrated Asian economic force. It is led by China, Japan, India and Korea, and shows no sign of slowing down.
[English]
For a trading economy like ours, being a competitive player on this new playing field, attracting a steady flow of investment to our doorstep, and making inroads into Asia are essential to our economic well-being.
Our wealth, standard of living and jobs depend on Canada competing and competing successfully for market share and investment dollars. However, increasing trade and investment flows are one thing; having infrastructure to handle it is another.
One great challenge in transportation these days is responding to the system needs given the pace and breadth of change. The nation that finds the best policies to respond to transportation as a system may well be the one that does best in the competitive international marketplace
Increasingly, a system response requires integration of various transportation modes to be truly efficient. To achieve integration requires collaboration, even in circumstances where the players might not naturally cooperate or even be in competition.
One approach that has worked to improve transportation planning is the freight or gateway council model. There are four examples in Canada right now. Most famous is the Greater Vancouver Gateway Council, which has been in existence for 10 years and is the model on which several other gateway councils are patterning themselves. We have gateway councils as well in Montreal, Halifax and one is just being formed in Southern Ontario.
I do not want to oversell gateway councils or suggest that every region needs one, but I do think they have been, and can be, a useful model for galvanizing the interests of decision makers and transportation stakeholders. Gateway councils provide a forum for key stakeholders in a region to work collaboratively on addressing common challenges, identifying options, determining feasible solutions as well as resolving some of their own integration issues.
One thing we have discovered in looking at the challenges facing transportation today is that no single jurisdiction holds solutions at its fingertips. More and more, we must ensure that transportation stakeholders work collaboratively with every level of government to ensure the smooth flow of transportation.
The Greater Vancouver Gateway Council was one of the pioneers in this field in Canada. The consensus it created on what needed to be done in the lower mainland is one of the reasons why federal and provincial governments could respond to the emerging needs of the Asia-Pacific gateway relatively quickly and in a collaborative fashion.
Consider the rising demand. The Port of Vancouver is forecasting a tripling of container traffic over the next two decades, from 1.8 million containers to up to 7 million. We are seeing the same phenomenon in Prince Rupert as well, which holds significant growth opportunities.
In all, container traffic between North America and Asia is forecasted to grow from 15.3 million container units — or TEUs — in 2003 to 33.5 million in 2015, more than double. TEUs — or twenty-foot equivalent units which are container units — are a standard measure for container traffic.
We have to ensure, however, that we are taking the right steps today to handle these increases. The challenges are daunting. I am sure you are familiar with backlogs, border delays and bottlenecks that have that tied up goods, people and capital in recent years.
Essentially, we have to surmount these problems, ensure we continue to draw business to us, and make our country a natural destination for companies looking to extend their reach into North America. Otherwise, traffic will bypass Vancouver and Prince Rupert and travel by competitor ports in the U.S. and increasingly in Mexico.
Forecasts vary, but B.C.'s Pacific Gateway Strategy Action Plan projects that by 2020 total Asia-Pacific container traffic will increase by 300 per cent. In 2005, traffic shares recorded through Canada's Pacific gateway ports totalled 2.1 million TEUs, about 9 per cent of the total traffic on the West Coast.
By comparison, U.S. Pacific Northwest ports had about 3.9 million TEUs of total traffic, and the California ports about 14.2 million TEUs. Therefore, today we are relatively small players. However, both Vancouver and Prince Rupert enjoy natural advantages. By virtue of geography they are closer to China than ports to the south, and both have deepwater ports, ideal for the new post-Panamax vessels now emerging in international shipping.
Looking at the financial implications, the value of this trade is projected to reach $75 billion by 2020, up from $35 billion currently, contributing $10.5 billion annually to the Canadian economy. Long-term traffic demand projections indicate that Canada's West Coast ports can expect to handle between 5 million and 7 million containers, or TEUs, by 2020, compared to about 2 million today. To maximize growth opportunities, the B.C. port strategy identifies an ambitious target of capturing 9 million TEUs, up from 1.7 million by 2020, for a 17-per-cent market share. Therefore, the range is somewhere between 7 million and 9 million, in our view.
What will transpire remains to be seen but we have, over the past few years, attempted to verify these forecasts and feel that that range is probably relatively accurate.
Even under more consecutive scenarios, container traffic throughput of B.C. ports will grow to about 5 million TEUs in the next nine years, to 2015. This is an average annual growth rate of 10.2 per cent. We still have an incredible amount of our trade in the form of natural resources so, over and above the container traffic, our commodities are all also experiencing incredible growth right now, meaning that the port capacity is far more than just the container issue. We have to ensure that all goods flow efficiently.
[Translation]
Bridging the gap means first and foremost making good investments in keeping with the spectacular increases in traffic flow expected for our transportation network, and taking full advantage of the efficiency gains that can be derived from intelligent intermodal transport.
[English]
Examples of such recent investments include the development of a $175-million container terminal at the Port of Prince Rupert, and an investment of $160 million by Canadian Pacific Railway in 2005 to expand track in Western Canada by 12 per cent. These investments will help to improve the capacity of our transportation system, in particular of our rail corridors, to handle the growing container traffic at the ports of Vancouver and Prince Rupert. In addition, as you know, Budget 2006 announced a total investment of $591 million in the Pacific gateway, with most of the funding going toward infrastructure improvements, such as road upgrades and railway grade crossing projects.
[Translation]
These investments will help businesses reduce their transportation times and stock costs. This is a key element for businesses with large warehouses and vast distribution operations. These investments will help us deal head-on with the weakest link in the chain. However, having an effective gateway means more than simple investments in infrastructure. Rather, a framework that strengthens the effectiveness and competitivity of each link in the chain has to be established, a framework that will shed light on bottlenecks, backlogs, and other delays and one which will strengthen our competitive advantages as well as the confidence of the entire world in Canada's capacities.
[English]
It is also about partnerships. Clearly, moving the gateway into the future is a big job, too big for any one player. Transport Canada is working closely with the Province of British Columbia, the Prairie provinces, port authorities, railways and others to establish priorities for investment, determine whether regulations should be reformed and plan more effectively for future growth. Making Canada's West Coast into a true gateway will take time, and it will always be something of a work in progress as we continually adapt to changes in global commerce and ensure that we are making the right improvements to security, as well as the efficiency of the system, in order to reassure our trading partners and brand Canada as a safe and secure port of call.
In conclusion, the gateway is about more than infrastructure. It is about creating an integrated seamless Western Canadian hub that will sharpen Canada's competitive advantage and ensure that, as a country, we are heeding the call of new global realities. It will ensure that we are following the cardinal rule of our transportation system, strengthening each and every link in the chain.
Madam Chair, you had mentioned an interest in other ports in our national transportation system, including Halifax and Montreal, as well. While our primary focus to date has been on the Pacific gateway given the tremendous growth in West Coast traffic, we are also working with players in both Atlantic Canada and Central Canada, with a view to ensuring that all our gateways work well.
We would be happy to answer questions on anything you might choose to ask today. Thank you.
Senator Phalen: I do not know a whole lot about Canada Port Authorities (CPAs) so I would like to start at the beginning. We have boards in 19 of the largest ports in Canada. Could you tell me first how those boards are appointed?
Ms. Burr: Since the Canada Marine Act was introduced in the mid-1990s, they are appointed by a process which allows the users to nominate candidates, and those names are presented to, and chosen by, the government.
I will ask Mr. Di Sanza to go into more detail on the actual process.
Emile Di Sanza, Director General, Marine Policy, Transport Canada: As pointed out, one of the key components of the board of directors is the user nominees. It is important to make a distinction here. These are not representatives of the users on the board. This is a user committee established by the port under the provisions of the Canada Marine Act to be able to nominate individuals from within the user community who could serve on the board of directors. What is known as letters patent, or the mandate for each of the Canada Port Authorities, outline some of the modalities associated with which user groups are to be represented within that user-nominating committee.
The province, the federal government and municipalities also have nominees to the board. The actual number of board of directors will vary. The Port of Vancouver, for example, has two additional directors, principally to take into account the fact that it is a port that also serves the other Western provinces. However, for the most part, the general thrust is federal appointee, provincial nominee, municipalities and user nominating committee.
Senator Phalen: Could you explain the role of Transport Canada in managing the ports? Does the department have a role?
Ms. Burr: Do you mean in a day-to-day operational sense?
Senator Phalen: No, in an overall sense.
Ms. Burr: We set the policy framework through various pieces of legislation that govern port activity, principally the Canada Marine Act, but we also have policy people and program people available to deal with specific issues as they come up. From time to time, a port authority would want to change the nature of a piece of land. Generally, it is the letters patent that outline what they can do with specific properties that belong to the Crown, and they would need to consult with the department on matters such as this.
With respect to borrowing limits, at the moment, these are spelled out in the letters patent and any change would require a government decision. Therefore, they would apply to the department. The department would work with the port authority to bring a proposal forward for an increase to the borrowing limits.
I will ask Mr. Di Sanza to spell out in more detail other areas where we intervene.
Mr. Di Sanza: Within the context of the Canada Marine Act, the letters patent specific to each of the Canada Port Authorities as well as various regulations outlining the different operations at the ports, the board of directors generally runs the operations of each CPA. These are effectively autonomous bodies. Transport Canada does not have any say in the day-to-day operations of these ports, any of their business decisions, or any confidential leases or contracts in which they engage their terminal lessees or operators.
However, we do provide some degree of oversight and due diligence, where required. For example, we mentioned borrowing limits. If the board of directors of a port makes a decision to seek a higher borrowing limit — as a number of port authorities have done in the past — then the request is put in to the department. Typically, the department would undertake an independent financial assessment and, on the basis of that and consultations with the port authority, seek the proper authority from the Treasury Board to amend the letters patent, for example. Questions of land usage and changes to the activities that the ports are mandated to do in their letters patent would also require some degree of due diligence on our part. We do not get involved in the day-to-day operations or decisions of the ports themselves. However, we do conduct studies, as in the case in support of the Pacific gateway, and work with the ports in that respect in terms of understanding demand and supply and various supply-chain-logistic issues that might come into play.
Senator Mercer: I appreciate your presentation. However, as a senator from Nova Scotia, I am concerned that there appears to be an ongoing preoccupation with the Pacific gateway. I understand the need to continue to develop Prince Rupert and to maximize the potential of the Port of Vancouver. You mentioned the deepwater capabilities of both Prince Rupert and Vancouver. Do you not agree that we already have in Halifax two terminals with deepwater capabilities and that they are working at about 40-per cent capacity? If we concentrate on marketing ourselves a little better, then we could actually have some of the larger ships coming through the Suez Canal to the East Coast ports and perhaps even inland as far as Montreal.
You made a passing reference to Halifax but a detailed reference to Prince Rupert and Vancouver. One of my jobs is to ensure that Halifax, Montreal and Saint John, New Brunswick, do not fall off the radar screens of this committee, Parliament or anyone else who appears before this committee. Could you comment, please?
Ms. Burr: We are working with various players in Eastern Canada and certainly with the Halifax Port Authority. Karen Oldfield is a leader in her region in terms of promoting the interests of the Halifax Port Authority but more generally the Halifax gateway concept. Transport Canada has provided funding, along with the Atlantic Canada Opportunities Agency, for a feasibility study to start to pull together all of the strategy around a Halifax gateway council.
Referring to what I said in my presentation, one of the strengths of the Greater Vancouver Gateway Council, which was around for 10 years before we started to deal with the pressures of all this incremental growth from Asia and to Asia, was to bring the stakeholders together. The Halifax Gateway Council is at the beginning of what promises to be an extremely dynamic group. The Halifax Airport Authority is also involved. It is a broader initiative than just surface or marine transportation.
From what we have been able to tell in looking at various studies, one of the challenges in Atlantic Canada is the need for greater economic activity to support the flow of goods through the port. The fact that there is so much congestion in the Pacific now is leading to traffic going through the Suez Canal, as you mentioned. I know that the Halifax Port Authority and, indeed, Montreal and Saint John are hopeful this will lead to a growth in container traffic in these ports. We would support that.
Senator Mercer: I recently visited Taiwan. While there, I met with a group from the Halifax Port Authority who happened to be touring Asia at the same time. They had been touring through China, Japan, Korea, the Philippines and Taiwan.
While they may not have the same structure or history as the Greater Vancouver Gateway Council — our council is just new — you will find we are just as advanced, or maybe even more advanced, in some of our integration. I understand that in the Halifax Gateway Council we have everything, including Destination Nova Scotia which is tourism based, along with other economic activities.
You made the comment that you are looking for greater economic activity. I know this is a chicken-and-egg thing. If we were to take the capacity of the two terminals in Halifax and move them from 40 per cent to 80 per cent, thereby doubling their current activity, the economic spinoff in greater Halifax and, indeed, the entire Maritimes would be terrific, remembering how close we are to the major markets. We are much closer than Vancouver, although not necessarily as close as Montreal, to the major markets of the eastern seaboard of the United States.
I am concerned that we continue to talk about the need for us to show economic development when indeed this is what we are talking about when we talk about expanding the activities at the Port of Halifax. I suspect the same is true in Montreal.
Ms. Burr: We are working closely with the Atlantic Canada Opportunities Agency on ensuring that the business dynamic is there both ways. As transportation people, we will certainly be looking for every opportunity with the other stakeholders.
You mentioned tourism. We feel that one of the other areas of real opportunity for an Atlantic gateway concept is ecotourism with Europe. The Halifax Airport Authority is one of the leaders in looking for new opportunities.
I would like to stress that we do not think there is one simple gateway model. It is not a cookie-cutter approach. Each region will have its unique strengths and opportunities. The trick is to identify those and work with other parties to develop them.
I should mention that, through some of the infrastructure programs of the last few years, we have made some surface infrastructure improvements that will again support the Halifax gateway.
Senator Mercer: I am told one of the difficulties in the Port of Halifax is working closely with the railroad in getting the cooperation of CN to move containers. In your overall capacity, are you working both with the port and the railroad to help maximize the effectiveness and efficiency of the movement of containers from shipboard to railroad car and then out of the province to wherever its destination might be?
Ms. Burr: We have had discussions with both the port and the railroad. We are also having discussions with various shippers concerning matters touching on rail service.
One of the challenges that both railways face at the moment has been capacity. They are moving more and more to what they call scheduled services, although I think there have been a few hiccups along the way. However, we are working with the players in hopes of improving things.
Senator Tkachuk: You mentioned the significant number of containers moving into the Port of Vancouver and the Port of Prince Rupert. How many of those containers remain in Canada and what percentage goes directly south?
Ms. Burr: We were surprised to discover that currently only 7 per cent of the containers coming into Vancouver are going into the United States. Most of them are going into Central and Eastern Canada, which comes back to the senator's point about Halifax being a possible entry point as well for containers that are destined for the East. The intention of almost everyone involved in the Vancouver and Prince Rupert gateways is to grow container traffic into the United States.
You would want to grow the traffic because, by bringing more traffic into the United States, you will push down the unit cost of the containers, which will be a benefit to all of Canada. It will make transportation cheaper overall for Canada if we are sharing some of the costs with the broader North American market.
Senator Tkachuk: I may not have all the components, but ports are a federal responsibility and investments are necessary. Highways are provincial, railways are private, and then there is labour. Labour for the movement out of our ports of grain and other commodities has been an issue on the West Coast.
I have a lot of faith in the private sector responding to the markets, although I am not sure about the railroads. Nonetheless, there are also the provinces and highway traffic.
Is there some method of sharing information on what is happening so that they are prepared to take the traffic in order that we can prepare ourselves for the next 10 to 15 years? I do not think we can play catch-up in this game because of Seattle, Los Angeles and now Mexico on the West Coast, which is my major interest.
Ms. Burr: A couple of years ago there were capacity crunches. When we looked into it, we found one problem was that shippers were not necessarily informing the transportation service providers when containers would be arriving. It was almost like the Wild West. Ships were arriving in harbour ahead of time or at the wrong time, and there was incredible congestion in the Lower Mainland on the rails and the roads.
Last fall we did some work with WESTAC, an association of transportation stakeholders in Western Canada, including three of the four Western provinces and the major transportation providers. Transport Canada is a member as well. In conjunction with WESTAC, we had a conference to which we invited all the major commodity groups plus retail and shipping interests to provide forecasts of growth in their traffic out to 2015. WESTAC has produced a report. This was the first time that everyone came together and talked about their forecasts. We received feedback that the government needs to do more of that; the government needs to bring people together so that we can have a reasonably good assessment of the forecasted traffic demand over the foreseeable future. We will try to do this every couple of years.
On the other side of the equation, the availability of infrastructure, we work closely with provincial governments on highway investments. There are federal programs that provide funds and we try to encourage investments in the most strategically important infrastructure. Major highways and connection points at port or rail will be a priority in the future.
Senator Tkachuk: Does the Port of Vancouver stay open 24 hours a day? I heard that it is basically a daytime port.
Ms. Burr: Mr. Di Sanza will comment on that as he has been intimately involved in the trucking dispute over the last year and is familiar with changes in operating procedures.
Mr. Di Sanza: It depends on the terminal. The gate hours are determined by the terminal operators themselves in conjunction with the port depending on demand.
I understand there are currently no terminals open 24 hours a day. However, in the course of the last several months, the port has instituted extended gate hours for some terminal operators, particularly the busier ones, to ensure that there is greater efficiency and less congestion, particularly for trucks picking up containers.
The port has a plan to increase gate hours by two hours each year for the next four years so that it will ultimately be open 18 hours a day. They are doing that on a scaled basis to ensure there is alignment with surrounding communities in terms of increased truck traffic in the evening hours, so that there is no local opposition.
Senator Tkachuk: What is the percentage of boxes that arrive in Vancouver by truck versus rail?
Ms. Burr: About 65 per cent arrive by rail and the rest by truck.
Senator Tkachuk: That is substantial. Do they go east?
Ms. Burr: Most of them.
Senator Tkachuk: Wal-Mart, for example, is a huge customer of China. Someone told me that Wal-Mart buys even more than the entire U.S.
Where are all those containers unpacked for the Wal-Mart stores?
Ms. Burr: Some of it goes east in containers. Some of it is destuffed locally.
Mr. Di Sanza can comment further on that.
Mr. Di Sanza: A number of large retail operators such as Wal-Mart and Canadian Tire have set up destuffing operations in close proximity to the port. Typically, the containers are moved there by truck where they are destuffed and restuffed for distribution for the local, regional or Canadian market. In some cases, containers go directly to the East and are distributed from there. In many cases, they go through this intermediate process locally. From there, they typically move by rail, although in some cases by truck if they are going to the Western provinces.
Senator Merchant: I had heard that there may be something going on in Saskatoon. I am from Saskatchewan. Do you need to have places to store these containers? Is it possible that there could be inland terminals and something like that could go to a place like Saskatchewan?
Ms. Burr: There is a strong possibility that there will need to be what they call inland ports away from the port lands, particularly because the land close to the ports is valuable and it does not make sense to store empty containers. One of the challenges is figuring out where it makes the most sense to have these inland ports. A number of studies are underway right now. The Province of British Columbia is doing one for B.C., but there is also a study underway for all of Western Canada to determine what makes the most sense in terms of where you would actually locate these inland ports. The railways do not want to be stopping the train every hundred miles. They probably will only want a couple of inland ports.
We think the logical place would be somewhere where the intersection occurs between the rail lines and good highway services and infrastructure, probably fairly close to an urban setting. A number of cities hope to be inland ports. We are not sure at this stage what makes the most sense. In the end, it will probably be a commercial decision of the railways working with other partners.
Senator Austin: Coming from British Columbia, this is a significant topic and I want to explore a few questions with you.
Two-and-a-half years ago, we had an enormous rail congestion problem. All the West Coast ports in North America were taken by surprise by the volume of traffic that suddenly exploded from China in particular, on top of the normal increasing traffic from Korea, Japan and Taiwan. How were we able to resolve the congestion problem, the lack of rail capacity?
Ms. Burr: Although CN and CP already had a partnership arrangement in the Fraser canyon for a number of years, they traditionally have not shared each other's track. One of the significant things that happened as a result of these enormous problems two years ago is that CN and CP have now signed co-production agreements and are operating on each other's track, in some cases, and even using the crew of the competitor railway. In railway terms, this is fairly unusual. I am sure you are aware that railways like to control every element of their operation. This was borne out of a certain amount of crisis. I am told that it is working very well for the most part. I am sure there have been a few bugs to iron out along the way — a few shippers have told us that — but generally it is improving the operation day to day. More importantly, it is building capacity and giving time for perhaps some investments to be made in the infrastructure elsewhere.
Senator Austin: What rail investments are committed in the Fraser delta area by the two railways? What capital investments over what near-term time?
Ms. Burr: In the Fraser delta, I am not sure they have committed much.
Richard Saillant, Acting Executive Director, Rail Policy, Transport Canada: In that area, we are not aware exactly what the plans are. Obviously, there is always some toing and froing. CP for a long while said they were up to a plan for half a billion dollars in investments to enhance capacity. Lately, they have not been divulging much of that information and we are not exactly sure what the plans are.
To talk about capacity more generally, it is an elastic concept. Several factors go into capacity. Over the last two years, there was a major crisis and one of the issues facing us was that we realized the railways had been in a downsizing mode for a long while and then all of a sudden they had to adjust. We realized that, to build capacity, you need to work on many fronts, including trying to add rolling stock, crews, having better deployment, better management of crews and rolling stock, and also working on operations management and working with partners. The railways tend to view major investments as the last resort once they can clearly see that there is no more capacity to add in the system to other initiatives. That is understandable because right now they are seeing an increase in demand for their services but, in order to justify major investments, they need to ensure that this demand will be sustained. We are seeing that the railways are now earning their cost of capital, and we think it bodes well for future investments.
Senator Austin: It is a chicken-and-egg situation. The traffic appears and is not serviced so it goes somewhere else while the railways wait until the demand for their services is sustained over a period of time, all of which is a bit antediluvian. Do we have the capacity? I presume we do. I presume the department knows what the container export capacity is from Asian ports to North America. They know what number of vessels are container-carrying vessels, and they know the demand for consumer goods over the last five years. I can understand a short-term congestion, but none of this in terms of infrastructure development is hard to guess. The railways are a critical link in the aspirations of all our ports for moving traffic. They have concentrated, as was suggested, on north-south traffic rather than east-west- style traffic.
I will move on to Prince Rupert for a moment and ask you what is happening in terms of both the container port development and the railway capacity upgrade in that port?
Ms. Burr: The container terminal activity is proceeding. There were some issues around environmental assessment but I understand that, for the most part, those questions have been dealt with. Work is starting on construction of the first phase of the development. As you will recall, there was an investment in that container facility by the federal government and also by the Province of British Columbia. The port authority is starting to talk about Phase 2, which would be a further expansion, but the first phase would not come on stream until, I believe, 2007. There is a bit of time to get the first phase up and running, which is the primary focus.
I understand that CN has budgeted about $1.5 billion for investments in 2006. One area they identified for upgrade is the line from Prince Rupert, the old B.C. rail line in British Columbia. In addition, they have purchased a number of locomotives that they will dedicate to that line. There is no doubt they see this as a major opportunity into North America and are making investments in that part of their infrastructure. CP's proposed investments this year are between $810 million and $825 million.
I would caution, on both sets of numbers, that the amount of investment into just keeping the current infrastructure going is fairly sizeable, so not all that money means new capacity. It means continuing to maintain the infrastructure they have, but there is definitely an intention on the part of CN to expand their activities in B.C.
Senator Austin: What would the container capacity be in Phase 1 at Prince Rupert? How many containers would be described as capacity when Phase 1 is completed?
Ms. Burr: It would be 400,000 TEUs to 500,000 TEUs, which is a fairly significant investment and a tremendous investment opportunity for that part of Northern B.C. In the second phase, I believe they are aiming for 1.2 million TEUs, but that would be a few years hence.
Senator Austin: Switching back to Vancouver, you mentioned the 2006 Budget. My understanding is that you said there was $591 million, which is over eight years.
Ms. Burr: That is correct.
Senator Austin: With $19 million in this current fiscal year being earmarked, how will it be effective?
Ms. Burr: Environmental assessments and planning are required for major infrastructure projects. The cash flow there would be allocated to the start-up of a number of infrastructure projects, recognizing they will play out and roll out over a number of years. Some funds are being made available for intelligent transportation system upgrades to improve the capacity of the existing system. We are providing funds as well to the Canada Border Services Agency, and they would invest in infrastructure to improve their efficiency and also for staff for Prince Rupert. They would hire people in advance of the container facility being finished so they can train their staff fully and have them ready to go when the container facility opens in 2007.
Senator Austin: I am curious how the department sees its role in the Pacific gateway strategies. There is a gateway council. How do you interrelate to the existing gateway council? There was, in Bill C-68, a concept of a council that would take into account users' rights through to Ontario because Sault Ste. Marie is the major passage way for freight from the Pacific coast into the centre of the United States.
Is it contemplated that there will be some kind of advisory group to the federal side or is the department simply going to negotiate? Is the department a member of the current gateway council so it can negotiate with that council? With whom will it relate?
Ms. Burr: The final details on the modalities of the Pacific gateway are still being worked out. We would see ourselves supporting any initiative going forward. We work closely with the Province of British Columbia and actually the four Western provinces, focusing on the backlogs, bottlenecks and problems that impede the flow of goods from the West Coast through to central Canada. That would be our focal point and we would support whatever model the government chooses to introduce in the end.
Senator Austin: The answer is — there is no game plan yet.
Ms. Burr: I think it is under development.
Senator Eyton: It is lovely to be world competitive for a couple of reasons. One, you can assure yourselves that you are getting the best value for the dollar or getting more for less. Second, in the competitive marketplace, and we are largely talking North America because that is where we are located, you can take your share of the business, your share of the shipping.
My understanding is that we in fact do not really take our share of the container traffic in North America. We are running to 3 per cent or 4 per cent, which is significantly less than we should, even if we take the usual 10 per cent of whatever goes in the U.S. We are not doing as well as we should opposite the marketplace competition.
Who keeps track of the competition? I am worried that the conversation talks about "existing facilities" and "maintenance of existing facilities" and perhaps a small initiative here. This is relatively small dollars when you talk the $35 billion or $75 billion mentioned earlier. Who keeps track of what is happening? It is not static. Many things are happening in the Northwest, in California and the Northeast United States. Who keeps track of that? How does it get translated into action?
Ms. Burr: We try to keep track. It is challenging because there is no one single source of information. We have a fairly good handle on the Canadian situation. The Americans have very good data, generally. It is a bit more challenging with Mexico but there are conferences at which the three countries share information. We have done that recently at a short sea shipping conference held in Vancouver. Mr. Roy is our Director General of Economic Analysis and is responsible for producing data in our department.
Roger Roy, Director General, Economic Analysis, Transport Canada: The issue is extremely complex. We need to have comparable data from the different countries to keep track of what is going on in the North American context. In the early 1990s we started the Canada-U.S. transportation data interchange with the Americans. Then we got the Mexican government to participate as well. We meet once a year and exchange information on the transportation system of our respective countries so we can follow the flow, not so much from a domestic point of view but from an integrated North American approach.
We update information using the different system of data collection that exists in the three countries so it allows us to track down the evolution of the different ports, which flows are coming in at which ports, and from that port where they go within North America. We try to track down within the limits of the data; however, there are some comparison challenges when it comes to all the data collection processes that have been put in place in each of the countries.
Senator Eyton: I understand that and we are keeping track of things as they happen but I was more focused on new money going in. We are making some investments and they sound relatively small to me — I heard $130 million, $140 million, this kind of volume. I was looking for who keeps track of what is being done at the new port facilities and the new intermodel systems that are being invented and which are competitive to us — all of that.
Mr. Roy: I sense from your question that you would also like to see how this investment, made elsewhere, at the end may mean increased competition for the Canadian system. That is a challenge because it means you have to understand all of the players that come into play in the final decision of which facility will be used at the end.
If you look at shipping lines, for example, most of the containers are shipped by shipping lines that are members of conferences. There is no such thing as a long-term contract with a port when it comes to a shipping line. They will sign a contract for a fixed period of time and they will want to ensure that they can play out the market condition as the market evolves. That is why, when we were alluding to the rail investment and how challenging it is for the railways to know how much investment to make, there is no such thing as a 15-year contract with the shipping line. There are two- or three-year contracts. If you make an investment for 15 years, 20 years or 30 years or more, you want some degree of assurance that you will build a capacity that will be used to generate revenue. It is difficult to foresee commercial- related decisions for the Port of Vancouver, the Port of Prince Rupert, the Port of Montreal or the Port of Halifax. We try to track down how much investment is being made so that we can stay on top of what is going on. The issue is to convert that into the implication.
Senator Eyton: I was trying to see where we will be five years from now.
Ms. Burr: I would like to mention that there is some room for hope. Vancouver is the fastest-growing container throughput on the West Coast. Although we are small, they have been making headway. Some of the investments are being made by the private sector as well. There are terminal operators and the ports themselves have been making investments, so it is a larger amount than the dollars we have been discussing so far.
Senator Eyton: Is our market share in North America increasing overall?
Ms. Burr: Yes, but if we do not take action, it will not continue to increase; that is the crux of the challenge for us. Everyone else is trying to increase their market share as well.
[Translation]
Senator Dawson: I support Senator Mercer who commented on the strong tendency to consider the Western Canada as the biggest problem. The combined growth of Halifax and Montreal and of the ports in Eastern Quebec may not have been as phenomenal as the growth in Vancouver. But in spite of one of the perverse effects of decentralization, there has been real growth. Decentralization was a good idea; Halifax and Montreal are much more aggressively competitive than when we had the Canadian port authority. It tended to do some arbitration, to some extent. The disappearance of that type of arbitration is my biggest concern because we are missing opportunities to evaluate the east overall.
You have a Montreal council, a Halifax council. But is there an Eastern Canada council? Rather than this competition between Halifax and Montreal, people would realize that they have common problems and would ask how they should approach Transport Canada in order to take advantage of these opportunities for the future. The under- utilization Senator Mercer referred to is real. I understand that there are different markets. We have to develop competition with the United States in business with Eastern Canada. There is no more coordination with the disappearance of the Canadian port authority. Decentralization has its advantages, whether you consider the Port of Quebec or others. This has given them a great deal of independence to make more difficult regional decisions because the apparatus was much more cumbersome before. But there is a perverse effect, which is the lack of coordination.
I wonder how Transport Canada will do arbitration, when it must be done.
Ms. Burr: I think that people in Halifax and Montreal are starting to talk to each other a little.
I am going to ask Mr. Di Sanza to tell us whether greater coordination would be a possibility at this time.
Mr. Di Sanza: Although it is true that the ports of Montreal and Halifax are competeting on certain markets, there is nevertheless a fairly stable growth in both ports. The two ports do indeed have expansion plans over several years. Montreal, for instance, is forecasting an increase of 1.2 million containers, or TEUs, and expects an increase of more than 2 million around 2020. As for Halifax, they expect to go from 500,000 to 860,000 units. In both cases, growth is expected in their market.
We are working actively with both ports and their council, through the development agencies that exist in the Atlantic region and in the Quebec region. As you probably know, in the Montreal region there is a round table on transportation. We were active participants at this table, and continue to be. We work with the Province of Quebec and with certain ports along the St. Lawrence Seaway on the matter of short-sea shipping, where it may be possible to transfer containers from larger ships to smaller ones.
There are various possibilities for increasing market share, although, as you know, in the case of Montreal a large number of the containers that arrive there are routed to the United States. Montreal is a North American hub in this regard.
As for Halifax, they have done dredging work to accommodate larger ships — the next generation of large container ships — to allow those ships to dock in Halifax. They are well-positioned with regard to New York and New Jersey and even certain more southerly ports.
[English]
Senator Dawson: You said before that 7 per cent of what comes into Vancouver and Prince Rupert goes to the U.S — 93 per cent goes east. What happens when it goes east? When it gets to Sault Ste. Marie, does it go south? How much of the traffic that has gone east stays east all the way in Canada? Does some of it start dispersing itself in a north- south commercial environment with the U.S.?
One of the reasons we are studying this is we are trying to understand where the containers are going, where they can stop and be managed — whether it is in Alberta or Saskatchewan or in the inland port in Montreal. I understand the 7 per cent that goes to the U.S is easy to quantify because you can do it directly. However, on the 93 per cent that goes east, how do you know somewhere down the road that it is not going to the U.S. — or do you know?
Ms. Burr: We think we know and we think it is 7 per cent. That being said, this is an area where we want to do more research. Intuitively, you would think that when it gets to Sault Ste. Marie, there will be some containers going into the heartland of the United States. We think we have captured everything but I would be dishonest if I said we were totally confident with those numbers. This is an area we want to spend more time on over the next little while.
Senator Dawson: One of the things that was mentioned in camera was the fact that we have no GPS systems on containers. We have no electronic tagging of containers to know where they actually are going and where they are three days after they have left the port. Is that something you are studying or something the industry players are studying — either the shipping, train or trucking industries?
Ms. Burr: The rail industry carefully tracks what is going on in their system. I am wondering, from a security perspective, if Ms. Kinney wanted to comment on how we are trying to track containers right now.
Laureen Kinney, Director General, Marine Security, Transport Canada: There are a number of initiatives under way to trial — different methodologies to track containers and even their contents, in some cases. However, there is not an integrated system right now across different shipping companies or transportation modes to track the container, per se. That does not exist now but it is part of the future work being done on supply chain security, as well as for commercial reasons.
Senator Zimmer: My question is similar to the one Senator Mercer asked about Halifax. I am a senator from Manitoba and, as he is always campaigning — and rightfully so — for Halifax, I will do the same for Manitoba.
People forget that we do have a port in Manitoba — the Port of Churchill. I recognize it is seasonal and that sometimes makes it a disadvantage. The advantage is it is in the middle of the country — you can come right over the top of the world into the port at Churchill — and it is equally distant between the East and the West.
My question is — what developments need to take place in this port to accommodate future growth? As Senators Mercer and Dawson have pointed out, interrelated to that is an inland port in Winnipeg but again, if you cannot get it into Churchill, you are not going to get it into Winnipeg. What developments must take place to accommodate future growth in container traffic and, in your opinion, do we really have any hope of the Port of Churchill ever being a viable, developed port whereby it can accommodate an inland port in Winnipeg? Can we develop it to an extent that it really becomes a major port?
Ms. Burr: Over the last couple of years, since the port and railroad had employed Louis Dreyfus, I believe it was, to help with marketing, there was a significant increase in the activity at Churchill. I think, with a proper focus and a concerted effort, there is opportunity, particularly with Europe. I believe the Canadian Wheat Board as well has certainly used Churchill to advantage in many grain shipping years.
On the question of containers, if there were a longer shipping season, as everyone expects with global warming, there could be an opportunity to use the port more frequently than it is currently used. One of the challenges is that the rail line might need to be upgraded somewhat if there were significant increases in traffic. We would have to look at the entire system before I could give you a definitive answer.
The Manitoba government is focused on using Winnipeg as the hub to the U.S. and Mexico. Senators are likely familiar with some of the efforts to that end. Government officials have spoken to us about a midwestern corridor that would see Churchhill as part of the network.
Senator Zimmer: It is almost tragic that global warming could bring an advantage to something but, if there were a plus, that would be it. Thank you.
Senator Munson: This is an exploratory morning for the committee to glean the basic facts. You spoke of the year 2020 and a 300-per-cent increase, which could be a good news/bad news story. Two issues, security and the environment, would have to be considered in talks about programs underway and being developed. You said that millions of containers arrive in ports. With security being a big issue in this country, do you know how many of them are checked thoroughly? What might Transport Canada be able to do to check all of these containers, working in conjunction with Canada's security organizations? People live in fear of what might happen at our borders in light of what has happened globally.
Ms. Kinney: I will give you a brief outline of how the security system works for containers. Canada works with a holistic whole-of-government approach. Shortly after the tragic events of 9/11, the government set up the Interdepartmental Marine Security Working Group (IMSWG) to bring together all federal departments and agencies that have a role in marine security, including the two key players in container security, the Canada Border Services Agency (CBSA) and Transport Canada. The responsibility for bringing containers into Canada and checking their contents rests primarily with the CBSA. One of their programs performs target and risk assessment to identify the appropriate containers for the various checks and processes.
Other programs have been funded through the initiatives developed by the IMSWG to install additional radiation detection equipment at ports. I am unable to provide any details because this is not my specialty, but the group is in the process of completing a program to deploy radiation detection devices at major ports in Canada for screening containers. As well, they have other such capacities for screening.
An entire framework of security initiatives is in place to look at incoming vessels and their cargo. Transport Canada has the 96-hour report requirements whereby a ship coming into Canada must advise in advance where they are headed and where they have come from. It is a risk management system used to look at the highest risk and most critical areas first. One of those is the supply chain security issue. The World Customs Organization (WCO) set up a framework of standards in respect of container and cargo security. Discussions are ongoing at the International Maritime Organization (IMO) on some of those standards for container security, including tracking, reporting, information handling and inspections to develop an international approach. A number of trials and projects are underway to test out trusted shipper effects and other kinds of tracking initiatives, and to determine the best ways to manage these complex security issues.
Senator Munson: It is conceivable that many containers end up in the heartland of this country without being looked at in port.
Ms. Kinney: You would have to request more information on that from CBSA. They have a targeting matrix and an approach to identify the higher risk containers. They carry on inspections at random on a regular basis. Those inspections include the gamut of radiation detection devices, x-ray material and sampling of the air in containers, et cetera.
Senator Munson: Are we ready for this 300-per-cent increase?
Ms. Kinney: That figure is used in current planning by groups with a supply chain security focus. As Ms. Burr said earlier, one of the values of doing this as a group is being able to ensure that we look at the transportation system as a whole, at the actual steps in the supply chain and at the most effective areas to invest in first. Otherwise, large investments might yield little in return.
Senator Munson: It is understood that the transport sector generates about 30 per cent of greenhouse gases.
Ms. Burr: I believe it is 27 per cent.
Senator Munson: What will it be when we reach that 300-per-cent increase? How will we deal with it, given that our report card in that area is not good now?
Ms. Burr: One of the focuses of our current and future work is to try to pinpoint the intersection between road and rail, rail and marine, and road and marine to ensure a better and more efficient flow of transportation. We believe that to some extent, by using short-sea shipping and rail, we might be able to minimize the use of trucking by road in built- up areas. By increasing efficiency, we might be able to reduce idling and congestion, which is also a source of greenhouse gases. There is no doubt that the kind of growth we are talking about will have significant impact on any urban area. We will need to look closely at this in a holistic way as we move forward.
Senator Munson: Ports in Europe and Asia are perceived to be more efficient. Why is that? What lessons could we learn from European and Asian ports so that Canada can do a better job?
Ms. Burr: In many cases, particularly in Asia, they have had the luxury and sense of modernizing and investing in the most state-of-the-art technology and facilities. In contrast, Canada is working with older ports that need to be upgraded. At times, emerging nations can almost leap forward in terms of the benefit they derive from new investments because they do not have to revamp or rebuild.
There are also issues regarding the labour and work practices that are likely not the standard in Canada. That might have something to do with some of their perceived efficiencies. They also tend to operate 24 hours per day, which we might have to look at more. As Mr. Di Sanza mentioned, there are sensitivities in many of our urban centres to having roads or railroads operate 24 hours per day. There is a drawback to moving quickly to longer work hours for the Port of Vancouver. The company destination for trucks leaving the terminal would not be open throughout the night. Is Canadian society prepared to move to a different lifestyle in order to increase efficiencies throughout the transportation system?
Senator Munson: We will have to work a little harder. I lived in Asia for a long time. It is mind boggling that, while Singapore and Hong Kong have state-of-the-art technology imported from Europe and North America, they have labour practice situations that might be looser but they have all the technology to do better. I certainly do not know the answer but I appreciate your time.
Senator Tkachuk: We talked about unpacking boxes. Does the union travel with the containers — for example, the union that exists at the Port of Vancouver? When that box moves to Langley to unpack, does the union travel with it?
Ms. Burr: No.
Senator Tkachuk: Is it part of the port operation or a separate company that would handle this?
Ms. Burr: I will ask Mr. Di Sanza to comment. I am not familiar with that element.
Mr. Di Sanza: Different arrangements would be set up for the stuffing type of operations. Typically, they are not port operations. In some cases, a port may set up a subsidiary to engage in that kind of activity. It could also be a private enterprise, it could be specific to a particular large company to do that, or there could be involvement by the railways. There are different elements that could come into play in terms of these destuffing centres as they exist. We can do more research into it but, as far as I know, they are not port operations, per se.
Senator Tkachuk: I am trying to fill in some information here. We talked about the very large ships. What name did you use for that?
Ms. Burr: It was post-Panamax vessels.
Senator Tkachuk: My understanding is that Halifax is a real deepwater port as is Prince Rupert. How does Vancouver compare? Do you foresee in the future that it would be a place where large ships would come and then smaller ships would unload and move the stuff to New York or Philadelphia on the East Coast or to other cities on the West Coast, or do California and Seattle have the same capacity as, say, Prince Rupert and Halifax would have?
Ms. Burr: In terms of geography, the Prince Rupert and Vancouver ports are both real deepwater ports. Halifax is very deep as well.
There are differing depths at different ports along the North American coast but many of the port authorities have to dredge a great deal to get that depth, whereas we do not in most cases. Perhaps Mr. Di Sanza wishes to comment on that as well.
Mr. Di Sanza: Some of the very large vessels can probably now handle 8,000, 9,000, close to 10,000 containers. Those will call at specialized terminals. Certainly, Prince Rupert and some of the terminals at Vancouver might be able to accommodate that. Vancouver is well positioned to handle some of the larger vessels beyond the 6,000 TEU-type of operations. Halifax can probably accommodate some even larger than that.
Senator Tkachuk: When we look at port efficiency, one of the things that would have to be considered is the average waiting time of a ship that has come from wherever. It sits in the Port of Vancouver and waits to be unloaded. What is the average waiting time of a container ship that arrives in Vancouver or Halifax?
Mr. Di Sanza: Once again, these are handled by the terminal operators themselves. They start planning the arrival of the vessel weeks in advance. It is a fairly sophisticated operation in terms of unloading of the containers and setting them up so that they can best be handled efficiently in terms of their subsequent movement.
While we have been well aware that, in some instances during peak times, there have been some waits on the part of vessels arriving; for the most part vessels come in on schedule. Typically, the intent of the terminal operator is to minimize waits that might exist. It is under unusual circumstances where there may be a one- or two-day wait. That is expensive for the ship operators and not attractive for the terminal operator to have the vessels waiting. Whenever there is a disruption of a port you will hear about vessels waiting two or three days, sometimes longer periods of time, to be able to unload. However, that is not a normal practice at the ports that wish to be leading edge in terms of container traffic.
Senator Tkachuk: We have had some discussions in committee about what we want to look at — namely, containers, where they go and what opportunities are available for Canada, not only on the West Coast ports but also the East Coast. I will never forget Churchill. Are there any public policy areas that you, as officials from Transport Canada, think need to be covered — that is, areas where further study is needed and where we could focus? When we go on this trip, I am sure there are suggestions you may have where we may lack information or where you need information. There may be something that we may be able to help with.
Ms. Burr: We talk an awful lot about the supply chain and importance of the logistics. Networks go from Shanghai to Chicago or Shanghai to Montreal or somewhere in Europe to Halifax, and so on.
We do not understand it very well, and I think we recognize within the department that we need to get a much better handle on how decisions are made, and what are the bottlenecks that preclude efficient flows of containers and other goods. If you were to look at that, anything you found would be helpful to us. We acknowledge that we have more to learn in terms of ensuring an efficient and technologically efficient system if we are to compete over the next few years.
Senator Mercer: I want to clarify something you said not in a previous exchange, but in a previous set of answers you gave. You spoke of a need for some dredging at the terminals in Halifax.
The Fairview Cove container terminal, the newer of the two terminals, invested $100 million in capital improvements under a five-year plan. I am told they have brought to Halifax container bursts of a 55-foot depth, the deepest container bursts on the eastern seaboard of North America and that the Port of Halifax can handle the world's largest container vessels. I am concerned because you gave the impression that you felt more work was needed before Halifax could handle the deep bursts. Could you clarify that? My understanding is that we are ready now.
Mr. Di Sanza: What I meant to say was that Halifax has completed its dredging and they have gone from 14 metres to 17 metres. That allows them to accommodate the largest vessels — that is, the next generation of post-Panamax vessels. Indeed, the Fairview Cove container terminal now can accommodate that.
Senator Mercer: We are ready for business; we have an unused capacity of approximately 750,000 TEUs. We are at 500,000 TEUs now and that is only 40 per cent of our capacity.
We could do the first phase of Prince Rupert, plus another 50 per cent on top of that, if the traffic were there.
One problem that we have not discussed is the labour problem we are facing, not on the docks themselves with the freight handlers and stevedores but at the trucking end. My understanding, from discussions with people in the trucking industry, is that there is a shortage of long-haul truck drivers in this country. Indeed, some people in my province are turning business down because of the lack of availability of truck drivers, and then they go to the immigration system to try to facilitate bringing people to Canada who can do long-haul truck driving.
That does not meet the criteria set in our immigration policy. We are sophisticated in our immigration policy. We are looking for white-collar immigrants and entrepreneurs. The need for truck drivers is getting critical. Truck drivers are not available from our current pool of immigrants to do the type of trucking that we want, the long-haul, overnight trucking. The drivers probably need to come from Eastern Europe where they are used to long distances and the type of weather they would encounter here.
Is this a problem the department has identified? Is there an integration of the Department of Transport — if indeed it has the concern — with Citizenship and Immigration Canada to discuss the need to perhaps realign some of our criteria so that truck drivers can come into the country? These are good jobs, paying $75,000 to $100,000 a year and they are going unfilled because the people are not available.
Ms. Burr: It is a problem. There is a looming demographically driven problem in transportation generally. Workers in all modes, including rail and marine, tend to be older than in the average work force but it is particularly pronounced in trucking.
Senator, you have alluded to a couple of issues. One is that many people do not want to work the hours that long- distance truck drivers are called upon to work. The younger generation is not as ready to be away from home for a week or two weeks at a time. There is this recruitment issue.
There is also the fact that driving a long-distance truck today is fairly skilled employment. There is usually GPS and technology to master. If you are crossing the border, there are a variety of security and other issues with which you must be familiar.
This is something we have identified. We have raised this issue with immigration. You are right; they do not include truck driving in their definition of a skilled work force. That is a concern.
Individual provinces are working with Citizenship and Immigration Canada. If a province so chooses, it can put together a program to bring in any employee group. In fact, Saskatchewan did this a couple of years ago. They went to Britain to recruit and brought in about 150 truck drivers and their families. I think the understanding was that the employees would be prepared to pay their own way back if it did not work at the end of a certain period of time.
The attraction for the British truck drivers was that the cost of living is so high in Britain that to be able to go to Saskatchewan and own one's own home, a luxurious home relative to what one could afford in Britain, was a principal draw. The weather did not seem to be a problem.
Senator Mercer: No one told them about the weather; that is why.
Ms. Burr: Maybe that was it.
Senator Mercer: It is a dry cold.
Ms. Burr: I met with the Saskatchewan Trucking Association about a year ago and they had had no problems at all. The people had been there for a year and a half and it was working well. They had focused on Britain because they were mindful that they wanted to bring in a group of truck drivers who would be able to cross the border easily. Most of the trucking companies participating in the program were long distance, focused on north-south, and so they needed people who would be accepted at the border and it had worked well.
This is an area that we are working on with the provinces, with the departments of transportation. We have a federal-provincial-territorial process. One of the challenges is that we are not experts in human resource development. We have to reach out to the right department, at both the federal and provincial level, and bring them in. We really want to target trucking. It is a serious problem.
Senator Mercer: Would you have a report that you could share with us later that tells us who is active in this? You mentioned Saskatchewan. That is a good example. Would there be a report available that tells us which other provinces are involved in similar programs?
Ms. Burr: We are at the start of our work with the provinces and territories. We may be able to supply something in a few months' time. I will undertake to check to see if there is any material that we can provide to you in the meantime.
Senator Mercer: We would appreciate that. Thank you.
Senator Phalen: I have an environmental question. The Auditor General, in a letter to our chair on May 12, 2006, regarding chapter 7 of the Auditor General's 2005 report, said:
This audit found that Transport Canada had not acted on its commitment to identify discharges of effluent and waste at major Canadian ports. The discharges at the 19 Canadian port authorities have not been determined. Depending on the quantities released, sewage effluent and other chemical discharges can negatively affect aquatic ecosystems and human health.
Can you tell us the scope of the effluent problem in Canadian ports?
Ms. Burr: I am sorry, senator. I am not familiar with this area. It is not something I handle in the policy group. However, we can undertake to get an answer to your question and get back to you.
Senator Phalen: I would also like to know, in respect to that, whether there are discharge facilities at all the ports.
Ms. Burr: There should be but I will verify that.
Senator Phalen: What are the rules regarding discharge and who polices and enforces the rules?
Ms. Burr: We will get the answers to those questions.
Senator Phalen: Thank you.
Senator Merchant: In the beginning, you said that 7 per cent of the goods that come into our ports are going into the U.S., and you also said that we are in competition with Mexico.
In regard to our security, our maniacal concerns about security, which I imagine are expensive, and also our environmental concerns, can we stay competitive? Does this make goods going through Canada expensive and can we stay competitive with, say, Mexico?
Ms. Burr: I think we have to invest in security to ensure trade and commerce in this country. If you cannot convince your best trading partner that you are a secure port or transportation system, you are not going to have the trade to support the economy. We do not have any choice.
With respect to the specific question you are asking, I will ask Ms. Kinney to talk about what we are doing relative to working with Mexico and the United States.
Ms. Kinney: I would strongly support the previous answer in general. We recognize that Transport Canada, along with the other agencies, needs to look at security in particular and the balance between security requirements and the efficient and effective movement of people and goods, and also privacy issues.
Those are the three cornerstones that we look at, particularly the effective and efficient movement of goods. The risk-management approach we put in place is to look at the investments that are appropriate to get the highest practical levels of security, while at the same time not to cause an undue impact on the movement of goods and the cost to shippers. This is why in a number of cases we put in pilot programs or experiments.
Certainly, security has become as much a marketing tool as a real requirement for companies. Most of the ports of Vancouver, for example, do a significant amount of marketing of the level of the security regime that they have put in place. It is a balance that must be maintained and we focus strongly on that. I do not know if I can answer anything more specifically.
Senator Merchant: Things have become so expensive coming through Canada. I wonder if we can stay competitive and whether we are concerned about that.
Ms. Kinney: We work very closely with our trading partners, in particular the U.S.
For example, when the International Ship and Port Facility Security Code was developed internationally to look at the security of marine and trade and the marine transportation system, the implementation of that code in Canada was completed through the marine transportation security regulations. We worked hand in hand with the industry while we developed the approaches to this, and performance based a regulatory framework to allow for flexibility at each individual port and facility to see how they met certain performance expectations without being forced to build a wall that was always five or nine feet high. They could look at mixes of things that would meet their interests.
We also continue to work closely with the U.S. Coast Guard in the development of similar regulations to implement their versions of the International Ship and Port Facility Security Code. We arranged a bilateral agreement so there would be reciprocity. The security plans of a Canadian vessel would be recognized by the U.S. and vice versa.
We put a significant effort into ensuring that these security costs do not damage or undermine the competitiveness of our industry, and we look closely at keeping pace and slightly ahead of the international world. In fact, Canada is considered a world leader in implementing these areas, but we are staying in pace with our partners to ensure that prices and costs do not go up unduly for our industry.
Ms. Burr: I want to clarify that the 7 per cent I was referring to was actually for containers coming into Vancouver and the West Coast and going down into the United States. Montreal has a fair number of containers going into the United States. I did not want that to be misunderstood.
The Chairman: We appreciate your attendance this morning. Please send us information in answer to some questions, which the clerk will distribute to all members so we can profit from your knowledge. This is an interesting matter to study.
Next week the committee will not be sitting, so have a good summer vacation.
The committee adjourned.