Proceedings of the Standing Senate Committee on
Transport and Communications
Issue 3 - Evidence - October 4, 2006
OTTAWA, Wednesday, October 4, 2006
The Standing Senate Committee on Transport and Communications met this day at 6:42 p.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: Welcome, Minister, to your first meeting with the Standing Senate Committee on Transport and Communications.
We normally ask the minister how long he can give us.
The Honorable Lawrence Cannon, P.C., MP, Minister of Transport, Infrastructure and Communities: I am in no hurry.
The Chairman: I would ask that you begin by making your presentation, and then we will move on to the usual question and answer period.
[English]
We are here 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.
Minister Cannon, we are pleased to have you with us tonight. With you is Ms. Kristine Burr, Assistant Deputy Minister, Policy, and Mr. Emile Di Sanza, Director General, Marine Policy.
Mr. Cannon: I am pleased to appear before this committee today for the first time. Allow me to compliment the committee for its focus on a critical component in the global supply chain, namely container traffic.
Along with the people beside me, I am also accompanied by Helena Borges, Director General, Surface Transportation Policy, and Graham Pettifer, Chief, Security Marine Policy; they are here to lend support for more technical questions. Some appeared before this committee on June 20 of this year.
I will begin by providing some background on my expanded portfolio and how this coincides with some of the new challenges and opportunities we face in a rapidly changing global environment.
I will talk about current legislation as well as legislation you can look forward to seeing in the future.
[Translation]
As you can expect, I was delighted to see that transportation, infrastructure and communities would all be included in my responsibilities. It simply makes sense to me that these three areas be combined.
[English]
Transportation gateways and trade corridors reach from the heart of our cities, through networks that span our country to borders, ports and airports that link us to the rest of the world. One only needs to look at the automotive sector, for example. A vehicle part may cross the United States-Canada border an estimated seven times in the production of a vehicle. Canadian produced automotive parts can travel world-wide as inputs to other assembly processes based offshore.
We must ensure that federal policies and legislation continue to strengthen our national transportation system; getting them right matters for competitiveness, of course. Canada's new government understands the needs for integrated and coherent policies. This government understands the need for accountability. That is why, through Budget 2006, I was tasked with leading discussions with provincial and territorial governments to help define the federal role in infrastructure.
Now we hope that this will put federal funding on a predictable long-term track and ensure accountability to all Canadians for infrastructure investments by all governments.
[Translation]
We are supporting practical and specific measures in four interrelated areas: first, sustainable infrastructure; second, gateways and trade corridors; third, transportation security; and, fourth, strong communities.
Mainly, all of these new actions, as well as the crucial, ongoing work of transport, infrastructure and communities, will be supported by a foundation of sound management, focused and effective government, respect for jurisdiction, and a range of new measures to ensure transparency and accountability. I will be seeking input on how to implement these commitments.
I will be seeking to build meaningful partnerships to help us move forward. I am working with my counterparts in provincial, territorial and municipal governments, with my cabinet and caucus colleagues, and with all of you. I look forward to hearing the views of this committee as well, Madam Chairman.
[English]
Canada's new government has been moving forward on specific items in Budget 2006. It will advance the efficiency, safety, security and sustainability of the transportation system. In fact, in Budget 2006, this government committed to investing an unprecedented total of $16.5 billion in infrastructure initiatives.
A strong economy depends, in large part, on the confidence of both businesses and consumers in the safety and security of the transportation system as well as on the security of other types of infrastructure, including safe and clean water. Consequently, the budget included $1.4 billion for enhanced national security.
In June of this year, I was proud to stand with the Prime Minister when, as a result of this commitment, he announced an investment of $254 million over two years to bolster air, rail, transit and marine security measures that will help increase Canada's capability to detect and respond to a potential terrorist attack. Although Canada has always had one of the safest transportation systems in the world, this Prime Minister understood the importance of going further. He understood that the transportation sector is directly related to the economic well-being of Canada and indeed the safety of all Canadians.
[Translation]
At this point, I would like to return to and expand upon specific measures within one area mentioned earlier with respect to the mandate of this new portfolio — gateways and trade corridors. I want to be perfectly clear — for a trading economy such as Canada's, we must not only maintain our competitive advantage in a new era of global commerce, but we must continually strive to become more efficient and more competitive with the rest of the world.
[English]
In the last decade, we have witnessed the emergence of a globally and competitively integrated Asian economic force. It is led by Japan, China, India and Korea and shows no signs of slowing down. Quite simply, Canada must compete on this new playing field. Making inroads into Asia is essential to our economic well-being. Integrated transportation planning is key to the development of long-term solutions.
In your last meeting, Kristine Burr, Assistant Deputy Minister of Policy in my department, described the number of gateway councils we have throughout Canada and why it is important that these councils and the Government of Canada work together to better understand freight and passenger flows and the demands that are placed on the transportation system.
Ms. Burr also took the opportunity to impress upon you the magnitude of the change that is occurring with projections of exponential growth. Some of these numbers bear repeating. Container traffic between North America and Asia is forecasted to grow from 15.3 million container units in 2003 to 33.5 million in 2015. 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. These are more than just numbers. They represent opportunity, economic growth and jobs for Canadians.
However, there have been challenges on the way. You are all familiar with backlogs, border delays and bottlenecks, which have tied up goods, people and capital in recent years. We must address those challenges. Simply put, acting strategically to seize intersecting trade, transportation, and geographic opportunities will advance Canada's economic competitiveness.
We have significant advantages on our side, including geography. For example, both Vancouver and Prince Rupert enjoy natural advantages. They are closer to China than ports in the U.S, and both have deepwater ports, ideal for the new post-Panamax vessels now emerging in international shipping.
The Government of Canada recognizes these advantages and has been working in partnership with key public and private sector partners to address the need for more integrated approaches to transportation policy, planning and investment. In this regard, there have also been some new developments that have occurred since Transport Canada officials last met with your committee. I am pleased have this opportunity to bring them to your attention.
Because of the enormous growth in Asia-Pacific trade, we know that transportation patterns in the lower B.C. mainland are changing. These recent economic trends have generated strong support for exploring the potential for amalgamating the Vancouver, North Fraser and Fraser River port authorities. Since early July of this year, Transport Canada and the three port authorities have been in discussions on a new integrated port authority, with the development of a high-level business case being a critical component.
This port initiative is consistent with the development of the Asia-Pacific gateway and trade corridor. The benefits of an integrated port authority include improved land use planning, coordination of operations and a unified international port marketing strategy.
I am encouraged by the proactive role that has been taken by the port authorities, in concert with the federal government and other interested parties, in developing this promising opportunity. Perhaps most significant regarding the integrated approach of transportation policy, planning and investment, was the announcement in Budget 2006 of an investment of $591 million by the government in the Asia-Pacific gateway. This approach promises to maximize the contribution of Canada's transportation system to long-term prosperity.
Some competitive gains might be easily achieved through minor changes to public policy and regulation. When my officials consulted with stakeholders on freight intermodalism, some of our largest retailers told them that provisions in our customs tariff that limit the use of international marine containers in domestic commerce are creating inefficiencies in the supply chain management. Not only do the rules make it difficult for shippers and retailers to optimize their use of containers, they are also part of the explanation for the large number of empty containers that are regularly moved over our transportation system.
Transport Canada commissioned a review of the regulations governing international marine containers, which I believe my officials have provided to your committee. The issue is also mentioned in the material provided in response to the questions from your committee.
Stakeholders and experts have raised the tariff as a problem and we are examining it further through a study on the use of containers in Canada currently under way. We would welcome the committee's views on this issue.
[Translation]
Understandably, Madam Chairman, members of this committee have also expressed a desire to know what the government of Canada is doing with respect to security at our ports. I am happy to report that there are a number of programs in place.
First is the government of Canada's $115-million commitment to the Marine Security Contribution Program, which assists ports and marine facilities with security enhancements. In June, the prime minister's announcement allowed domestic ferries to be included as funding recipients under this program, giving them two additional years to apply.
Second is the marine transportation security clearance program, which was announced in June and builds on this government's commitments to secure our borders and strengthen national security. The program will reduce the risk of security threats by preventing unlawful interference with the marine transportation system. It would do so by conducting background checks on marine workers who perform certain duties or who have access to certain restricted areas.
This government recently contributed $500,000 to the International Maritime Organization's International Maritime Security Trust Fund. Canada's contribution is the largest contribution ever made to the fund by a single member state.
Finally, this government has also committed to enhancing policing at Canada's ports. Transport Canada is currently working with the RCMP and other agencies to develop options for an integrated and better coordinated approach to policing at ports. This is a priority for Canada's new government.
[English]
That is why we are working closely with the Canada Border Services Agency, other government departments and the rail and trucking industries to ensure the security of container traffic transiting in Canada.
While addressing challenges, we are keeping our number one priority, the safety and security of Canadians, at the forefront.
[Translation]
In the post-September 11 world, the federal government is taking very seriously the safety and security of its international border crossings — specifically, bridge and tunnel infrastructure — and this new legislation will give us the necessary tools to carry out this responsibility.
In other words, we are asking Parliament for the powers and the levers needed to continue developing efficient, safe and secure border crossings.
[English]
In closing, I want to thank you for the opportunity to speak to you today about the vision I have for this portfolio and the great work that lies ahead for us. I know you all have a strong interest in helping to move Canada forward as it addresses both its opportunities and its challenges in the changing world. The good news is that we are on the right track.
With our new department moving forward on transportation, infrastructure and communities, we will be able to fulfil this government's priorities and will have many opportunities for concrete improvements. Until then, thank you for listening and I will be listening to you all as well.
[Translation]
Honorable senators, I would like now to turn to any questions you may have.
The Chairman: Thank you, Minister. I would like to ask the first questions, and then I will hand over to my colleagues.
On August 8, we sent you a list of questions. I would like to discuss some of them so that we might better understand your approach to the problem we wish to study.
I would like to draw your attention to the first paragraph on page 2 of your letter, dated September 26. You state:
The government of Canada in general, and Transport Canada specifically, is responsible for promoting and shaping a climate for short- and long-term investment in transportation infrastructure through economic policy and regulation.
Yet, in the same breath, you add:
Private-sector entities make the majority of investment decisions.
You therefore seem to be of the view that it is mainly for the private sector, not the government, to lead the way in the field of transportation infrastructure. But, in response to question 6, you state that your 2003-04 consultation process confirmed that stakeholders view the market driven approach adopted by Transport Canada has valid.
You go on to say that the consultation process also revealed that stakeholders want more freight planning and better coordination between the different levels of government and the private sector.
What exactly do you see has being the rule of your department in freight planning, and where are you in terms of follow-up on the 2003-04 consultation processes?
Mr. Cannon: In light of the governance structures that are favored in, for example, our ports and our port authorities, investments are managed by boards of directors that have full decision-making powers.
When we talk about the role of the private sector, it is to this that we are specifically referring.
If I am not mistaken, the idea of a policy to encourage a virtually integrated network was born out of extensive consultation, including the consultations to which you referred.
Our government is continuing on the same track as the previous government, and we are providing the same level of funding. We are in the process of implementing a structure that will make us more competitive. This is something that we spoke about in the speech from the throne. This integrated network must serve as a basis and as an example. We would like to extend the practice to other Canadian regions that, although targeting different markets, are facing the same problems as we are. I am now going to ask Mr. Di Sanza to address your question on containers.
Emile Di Sanza, Director General, Marine Policy, Transport Canada: Consultations are indeed regularly held between port user representatives and stakeholders involved in the transport system supply chain, in other words, representatives from the trucking sector, railway sector, and so forth. For example, conferences have been held on the forecast demand for the transportation of various commodities through various ports. The purpose of such conferences is to ensure that railway and trucking companies will be able to deliver the goods to where they are required.
The Chairman: Our research staff came across an exhaustive study entitled Modal Integration in Support of Canada's Competitive Position in a Global Marketplace; it was carried out by Continuum Services, on behalf of Transport Canada, and was completed in 2002. The department has followed up some of the study's recommendations. I was wondering whether the study has been of any use to you thus far, because there is no point in reinventing the wheel.
Mr. Cannon: I am going to ask Ms. Burr to answer your question.
Kristine Burr, Assistant Deputy Minister, Policy, Transport Canada: We are indeed familiar with the study and have used it as the starting point for our work. We are studying some of the recommendations. In keeping with the study's principal recommendation, we are placing a great deal of emphasis on the idea of an intermodal system.
The Chairman: You seem to still be focusing on the first study; it might be worthwhile considering other approaches.
Ms. Burr: Yes.
The Chairman: Environmental protection is of concern to us all. The transport sector is responsible for almost 30 per cent of greenhouse gas emissions. The economic growth that we have witnessed over the past few years has resulted in a greater demand for transporting goods and, consequently, a significant increase in greenhouse gases. First, I would like to ask you what Transport Canada is doing to encourage industry to use green technology? Second, do you believe that government has a role to play in the introduction and implementation of environmental practices? Short sea shipping encourages an optimal use of waterways, contributes to combating congestion on our roads and, in term, helps reduce greenhouse gases. Would you be able to tell us about Transport Canada's most recent initiatives to foster the use of short sea shipping?
Mr. Cannon: While I do not want to spark a political debate here, it has to be remembered, for example, that the most recent report of the environmental commissioner soundly reprimanded the federal government for its lack of action. We are lagging far behind on this issue. My colleague the Minister of the Environment will be introducing a new approach to the environment in the near future. Our approach to the transport sector in its entirety will be key to resolving the problem of environmental degradation.
The Chairman: Do you believe that government as a supporting role to play in the introduction and implementation of sound practices?
Mr. Cannon: Government has considerable regulatory powers in many sectors, including this one. It also has a responsibility to move industry in the right direction.
The Chairman: What initiatives have Transport Canada undertaken to encourage short sea shipping?
Mr. Cannon: We held a meeting in Vancouver in April. It was the first meeting of its kind and brought together the sector's most important leaders, including the Mexican minister and the US secretary of transport. Canada has already made an important contribution to the development of a protocol and, thank to the work of our officials, we are continuing to move ahead with this initiative. I am going to ask Mr. Di Sanza to provide you with some additional information.
Mr. Di Sanza: Over the past few years we have held workshops across the entire country. We reached an agreement with the United States and Mexico to study best practices. We also approached the private sector and the port sector to see whether it would be possible to undertake joint pilot projects involving either studies or concrete initiatives. Short sea shipping services were introduced on the St. Lawrence River and other Canadian waterways.
We have also been looking at what is being done elsewhere, for example, short sea shipping has been in use in Europe for several years.
[English]
Senator Tkachuk: On page 4 of your presentation, you mention the value of trade in containers increasing from $15.3 million to $33.5 million in 2015 — a short period of 12 years. Is this container traffic evenly distributed among our Canadian ports or is it more focused in Vancouver? Do you have those figures?
Mr. Cannon: Senator, thank you for the question. On one of the questions you submitted, a breakdown is offered on the traffic in the various ports. I believe it is response B on question 3 in which we talk about Montreal, Halifax, Vancouver and Fraser River.
You are absolutely right to indicate that there is an increase in container traffic not only in Canada but also around the world. I had an opportunity to meet with some experts in that field from the United States who have been tracking the growth in container traffic around the world, and it is fairly significant. It is of course the way of the future. I strenuously believe that we have to be engaged in that process and we have to do everything in our power to help these trade corridors along.
As I was mentioning in French before to the chairman, it would seem to me that a seamlessly integrated approach would be the one to follow, which would give us a competitive edge with our American neighbours.
That being said, I would indicate that we have to be able to share best practices and move forward on those examples that give us the appropriate leverage. Of course a lot of money has been committed to that purpose, but beyond the money — and that is why I am coming back to the integrated approach of our department — this department offers the opportunity not only in terms of infrastructure but also in terms of regulations. We did not allude to the issue from a couple of years ago of trucking problems in the Vancouver port, but we do have the regulatory tools now to be able to have this integrated approach or at the very least move that forward.
Perhaps Mr. Di Sanza can speak to the numbers.
Mr. Di Sanza: In terms of magnitude, considering containers to and from Asia, by 2015 we are looking at about 13 million metric tons moving between Canada and Asia, including both imports and exports. In Western Europe we are looking at approximately 11 million metric tons. There is a higher number, a bit more growth, on the Asian side, which would tend to favour the ports in Western Canada.
However, there are various movements. There is contemplation now of coming through the expanded Panama Canal onto the East Coast; some of that traffic might end up at Halifax, a bit less at Montreal. There are various initiatives at play on the East Coast as well in terms of targeting India, for example, through the Port of Halifax via the Suez Canal. While Asia is certainly well-positioned for growth through the West Coast ports, there are a number of other elements in play on the global supply chain.
Senator Tkachuk: I know that we all want an integrated approach, which is a positive thing, but I have driven in Vancouver and they cannot even decide how to build a four-lane rather than a two-lane bridge. They have been discussing it for 20 years. Meanwhile in Hong Kong they built an island in the ocean and built an airport because they needed one. How are the highways? Are the Province of British Columbia and the City of Vancouver working together in a meaningful way to develop the traffic that will come to that port? Then you have to put it on a truck or a train and haul it out of there. Right now it is hard to get a car through some of that territory, let alone double the number of trucks that may be running through there.
Do we have any mechanisms among the three levels of government so that these things can be moved along, planned in the future in some way to allow this integration to really take place in a meaningful way?
Mr. Cannon: I do not know how to approach this question because I want to be able to defend TransLink and all the extraordinary work that they have done in Vancouver. As you know, Greater Vancouver does not have auto routes running into downtown Vancouver. The city is not equipped that way. TransLink and the Government of British Columbia have been extremely creative in developing the Canada line, in putting in the millennium network, and addressing these issues in many ways.
I have spoken with Kevin Falcon, Minister of Transportation for the Government of British Columbia, and the Premier of British Columbia as recently as last week, and we have shared common knowledge and common purpose on the new infrastructure program.
We have put an unprecedented $16.5 billion in Budget 2006 for infrastructure requirements. Whether through the gas tax that helps urban transit users or the highway and border infrastructure fund of $2.4 billion, that budget will help us with infrastructure problems including crossings into the United States or the design and the architecture of our national highway system. As well, we have put roughly $590 million into the Pacific Gateway project.
These amounts of money will reduce congestion, as you mentioned before, but at the same time give us the tools to be able to have this seamlessly integrated network, not only in the Lower Mainland, but also elsewhere throughout this whole trade corridor network. That is what we want to be able to do. We will be doing it also with the private sector's approach and their help, whether through public-private partnerships or, as I mentioned at the outset, what the harbour authorities are doing in their container traffic, the expansion of Delta Port, for example. Those are concrete examples of where this initiative is leading us.
Senator Tkachuk: In the Prairies we have our own issues with the Vancouver port, which is why we take such a strong interest in what is happening there.
The last time your officials were here, I believe we heard testimony that we do not get our fair share in Canada of the North American business at our ports; actually we get substantially less than what we would get if it were equally distributed by population. We are down the list there. It concerned us a little bit, but I was wondering whether we had focused on why that was. Is it a question of cost, marketing, access or efficiency? Do Transport Canada officials know why we have been falling behind and have not been more aggressive?
Mr. Cannon: There is no one particular reason. We can invoke geography. We can invoke a certain number of measures that deal with behavioural patterns regarding unionization, ways to speed up the delivery of services, a whole gamut of issues.
Our port authorities are addressing that. It is worth talking about the initiative of bringing together the three port authorities in Vancouver to be able to speak with one common purpose and have one way of doing things. That signals to our Asia Pacific partners, and to those who want to do business with us, that we are looking for ways to be most efficient and effective in delivering our services. The specifics of that I will leave to Mr. Di Sanza.
There are other issues, but the ones we have brought forward are the most important. Those we are trying to tackle as we speak. Canada offers an exceptionally strong potential to increase our capacity, and the general direction we are giving with our budget and the tone we are bringing to it is certainly going in the right direction.
Mr. Di Sanza: We have looked at the competitiveness of Canadian ports, an issue that has come to light in the last couple of years. Along with the port association and the ports themselves we have studied whether there are any systemic disadvantages for Canadian ports. Overall, it is clear that Canadian ports are doing relatively well in the way that they can attract new markets, how they operate, their governance structure and so on. We have examined whether their access to capital is in any way affected, notwithstanding the issue of borrowing limits, which we can discuss if you like.
For the most part, given that there is private investment at Canadian ports, there is no evidence to indicate that the ports are disadvantaged in any way. They are able to attract new markets. They are favourably positioned from a geographical point of view, in many respects. They have sufficient draft to attract the new post-Panamax vessels, both on the West Coast and on the East Coast, as evidenced by the extent to which Canadian ports are used for trans- shipment of containers to the United States markets.
There are many technical details associated with the overall efficient operation of the ports. Overall, the Canadian ports are well run. That is not to say they could not improve on a number of different fronts, and they have been tackling those areas themselves by looking at best practices from other ports and at the introduction of new technologies. A prime example is that the port of Vancouver has introduced longer gate hours, looking at performance tracking to see how long it takes for the containers to move off the docks onto the railways or trucks.
Senator Tkachuk: To follow up on the chair's question about previous studies, I would ask for a little guidance for us. Where are we weak in our research and knowledge on the issues that we are studying? Where would you like to see us focus our efforts when we meet with stakeholders involved in containerization and ports? We may not follow your advice, but we need your advice.
Ms. Burr: One of our preoccupations is that we do not have good data. While we are doing our best to stay on top of all of the trends and to carefully monitor emerging issues, certainly more could be done to understand how the system works in an integrated way. More and more, we need to appreciate the implications of international supply chains. It is an issue that goes well beyond our Canadian boundaries. We need to look right from Asia Pacific into the heart of North America or from Europe into the heart of North America. I am not sure whether that is relevant from your standpoint, senator, but it certainly is something we need to understand.
Senator Tkachuk: We have talked at length about following where the containers go.
Senator Munson: Welcome, minister. Moments ago, you talked about the borrowing limit. Some industry observers, including the Canada Marine Act review panel, have talked about this. I question the ability of ports to make necessary investments. Do you plan to make any changes to the rules governing borrowing authority?
Mr. Di Sanza: We have been looking at the issue of borrowing limits in the context of examining the extent to which the process that is presently in play with the Canada Marine Act could impede the ability of ports to borrow effectively. We are looking at it also in terms of whether it provides, particularly the larger ports, with the necessary flexibility to deal with some of the market pressures they are facing. We have gotten a fair amount of input from the port community in that regard, and we have done a number of assessments looking at possible options, including possible amendments to the Canada Marine Act.
Having said that, however, it is useful to point out that the ports that have come forward seeking increases in borrowing limits have received them. It is not as if the provisions in the Canada Marine Act are an impediment per se to borrowing limits. One also has to examine to what extent there is still some scope for ports to use the line of credit, if you will, that they have. For the most part, there is still a considerable scope for ports to use that. There borrowing limits are not maxed out.
Senator Munson: I do not like to get into politics, but you are the minister, and I am an accidental politician. In Atlantic Canada, we liked the idea of a ports police — at least, that was my perception some time ago. Somehow it made people feel more comfortable to know there was a separate entity to deal with the mass of containers at the port. I noticed that in the 2006 election your government, the new Government of Canada, committed itself to re- establishing the federal ports police. Are you still on track to do that? Obviously, from your perspective, it is a wise thing to do.
Mr. Cannon: On that specific issue, yes, we did recognize the importance of increasing our policing capacity in the ports. We are considering a variety of options. My colleague Minister Day is looking at ways of doing it. We are not tied necessarily to creating a new police force. We do recognize the importance of being able to reach out to get the expertise that is available. Why, for instance, should we go out and create a new police force when, in Halifax or in Vancouver or in Montreal, we can use the appropriate services that are already there, if there is a possibility of working with them? The bottom line on this, Senator Munson, is that we are committed to increasing surveillance and policing in our ports.
Senator Munson: So ``no'' to a separate police force that was there before.
Mr. Cannon: That is correct, yes. We are looking at the options of being able to do it. I do believe, sir, that that was made clear during the campaign. We were not necessarily tied to one specific option.
Senator Munson: I have a separate question about the railway association and being competitive with Mexico and the United States. From what I have heard, the railway association feels that taxes must be lowered to help railways invest in new engines and trains. The railway industry paid some $700 million in taxes in 2004. With the increase in container traffic, and in order to stay competitive or at least stay somewhere near the page, because we know the bulk of containers go through the United States, is there any proposal of lowering taxes?
Mr. Cannon: Being a former astute politician, as you pointed yourself out to be, or an accidental one —
Senator Munson: An accidental one.
Mr. Cannon: — and a full-time journalist, you know full well that that fiscal framework question should fall under the purview of my colleague Mr. Flaherty. In any government, the Minister of Finance has the final word on taxes.
I would say that there is not a tax burden strangling the industry. As a matter of fact, since Canadian National Railways was privatized — and I stand to be corrected on this — they are doing extremely well. That industry is doing very well. CN has been championed by its peers in the industry as being, over the last couple of years, one of the strongest recoveries, so kudos to the government that decided to go forward and privatize this.
There is still much work to be done in that area, of course, but I think that overall the industry is doing well and we are looking at ways to increase its efficiency.
Senator Zimmer: I would like to probe a little further on freight forwarders. Are Canadian third parties, such as freight forwarders, still unregulated, as they were a couple of years ago?
Mr. Di Sanza: The freight forwarding industry does not typically fall under transportation legislation. Normally it is governed by commercial law, very often under the purview and jurisdiction of the provinces. However, there are international practices that come into play. Freight forwarders are not specifically regulated in terms of the function that they play relative to the various modes of transport; nevertheless they operate in an environment where liability, limitations, insurance and so on are governed by various levels of government, both nationally and internationally.
Senator Zimmer: This is in contrast to the situation in the United States where, I believe, freight forwarders are subject to regulations. Shippers do not always feel confident that Canadian intermediates meet the basic qualifications to operate, which could obviously be viewed as a competitive disadvantage as we attempt to develop our intermodal transportation system.
Having said that, would this type of regulation be carried out by Industry Canada or by your department?
Mr. Di Sanza: To the best of my knowledge, were that industry to be regulated, it would fall under some sort of commercial regulation, were it to exist. However, that industry has evolved considerably, particularly in the last 15 years, during which time the Canadian transport sector was undergoing various changes of deregulation and it required the use of third parties, such as freight forwarders or various other forms of intermediary. There has been a degree of consolidation in that industry and many of those players are international players who operate in a multitude of different countries, so it is not strictly only Canadian operators.
There is also a difference in that, for example, some freight forwarders operating in the United States actually own transportation equipment, whereas normally that has not been the case in Canada.
Senator Zimmer: My next question is related to comments made by Ms. Burr concerning inland ports. You commented in June the Province of British Columbia is doing a study to determine the best location for inland ports that can be used for storage of empty containers. You also mentioned that a study is underway for all of Western Canada. Given the strategic location of my province, Manitoba, we are interested in exploring the potential use of Winnipeg as an inland container handling port. I know Senator Merchant and I am sure Senator Tkachuk also support this because if we get something they will be on my back to get it too. Therefore, I am interested in hearing your thoughts. I have a three-part question: first, has any information been gleaned from the Western Canada study; second, who is conducting the study; and third, when might we expect a report?
Ms. Burr: I believe, senator, and I will have to confirm this, that the studies are nearing completion but are not finalized yet. We have drafts of one of the studies, I think, but I will ask Ms. Borges, who is much closer to the file, to comment.
Helena Borges, Director General, Surface Transportation Policy, Transport Canada: The British Columbia study, which is taken on by the province, is just about complete, and it applies primarily to the geographic scope of British Columbia. The Western Canadian study we are doing jointly with three Prairie provinces, and we have officials from each of the departments of transportation on the steering committee. That study will look at the whole of Canada, but because of the special interest that is growing in the Prairies for using containers primarily for agricultural goods, we are focusing the effort there. The study just got underway so we do not expect results until the end of the year on the first part, which will tell us how and where the containers are moving. The second phase of the study, which will come in the new year, will examine whether there is a business case for using those international containers for domestic movements entirely. They are working very closely with us.
Senator Zimmer: Who is doing the study?
Ms. Borges: It is a consortium that has members from Western Canada and actually from Halifax.
Senator Zimmer: I commend the department, because to hear the phrase ``inland port'' in Winnipeg or Saskatoon sounds very innovative.
[Translation]
Senator Losier-Cool: I would like to follow up on Senator Munson's question on security, a subject that is addressed on page 6 of your brief. We know that security is currently at the forefront of Canadians minds.
Did you say to Senator Munson that re-establishing the federal ports police was, or was not, an option?
Mr. Cannon: I said that there was more than one option open to us, and that one such option would be to contract existing police forces. I used the example of Montreal, where the RCMP and the Sûreté municipale provide support when needed. The same is true in other cities. Our decision-making process is obviously guided both by the skill profile of the police forces in question and by cost. These are the factors that guide us when making a decision. Furthermore, as I said, my colleague Mr. Day, who is responsible for a good number of these questions, is currently studying the matter.
Senator Losier-Cool: Has Transport Canada set up pilot projects with either the RCMP or the other organizations that you mentioned? Are there any pilot projects? If so, could you tell us about them.
Mr. Cannon: I do not believe that there are currently any pilot projects underway.
Senator Losier-Cool: In the French version of your brief, in paragraph 4 of the section entitled ``Security,'' you refer to the fact that Transport Canada is developing options with the RCMP. Does this include pilot projects?
Mr. Cannon: Our expert has just come to the table, Senator.
Laureen Kinney, Director General, Marine Security, Transport Canada: No pilot projects have been set up with the RCMP to explore policing at ports. There are RCMP officers working in several ports, but we do not, as yet, have any pilot programs on policing at ports.
Senator Losier-Cool: Is it an option that you, or our committee, could study more closely before re-establishing a federal port police force?
Ms. Kinney: As the minister said, we have considered setting up such a project, but we are only at the beginning of the process. The idea would be to have an integrated task force to allow the RCMP to work with other police services to develop consensus and integrate their responsibilities.
Mr. Cannon: As I was saying earlier, Transport Canada, in conjunction with certain port authorities, has undertaken a pilot project to certify people who have access to restricted areas. Some sectors of Canadian ports are more sensitive than others, and our aim is to create a security perimeter and ensure that those who have access to restricted areas on a daily basis are accredited.
The project is in its infancy, as it were, but the first steps have been taken.
We believe that this project if another tool that will help us ensure port security.
Senator Losier-Cool: You have giving me food for thought. On another subject, could you tell us how many Canadians work in Canada's ports?
Mr. Di Sanza: That would depend on how you define the notion of a port employee. Some workers are terminal employees and others are port employees. I would have to check to be certain, but I believe that a recent study showed that some 95,000 people were directly or indirectly employed in Canada's ports. But it depends on the definition of port employee that is used.
We could check and I could let you know.
The Chairman: If you could please send it to our clerk.
Senator Comeau: Welcome, Minister. I listened closely to what you said, but I would like to draw your attention to what you omitted. You spoke about the Vancouver and Prince Rupert ports, and pay special attention to the Asia- Pacific region; should I read something into the fact that you said very little about the Atlantic ports?
Mr. Cannon: No, I do not think that you should read anything into it.
When the Minister of Finance tabled the budget, I believe that he clearly said that we would be moving ahead with the Asia-Pacific gateway and adjacent trade corridors. This does not however preclude us from undertaking other initiatives.
I have already had the opportunity to meet with people from Halifax ports, from the Sidney region, and so forth, members of the business community who are seeking to develop similar initiatives. I have also met with people from the St. Lawrence Seaway and the Great Lakes who also see incredible potential in their region.
As I said, the goal is essentially to undertaking other projects that — to go back to our original principle — will give us a competitive edge over our friends in the United States. We are open to all initiatives. The next step is to find capital and also develop projects.
As a government, we decided to begin with the Asia-Pacific initiatives; that does not, however, preclude us from undertaking; other similar initiatives in the near future, where we could use previously acquired best practices to foster economic development.
As a very wise politician once said, you cannot have social progress without economic development, and this government is fully committed to economic development.
Senator Comeau: Mr. Di Sanza made the point that there could be potential in the India-Suez-Halifax routes.
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Have you done any studies on that?
Mr. Di Sanza: Yes, we have embarked on looking at trade patterns on a global scale as they might affect various regions in Canada. The Halifax Port Authority has been very active in traveling to India and setting up arrangements with shippers based in India. They are looking at setting up regular services, as communicated, through the Suez Canal. That would also take advantage of picking up cargo in Europe and ensuring a balanced import and export service.
Senator Comeau: We often hear China referred to as the end-all-and-cure-all but, in fact, India is the second most populated country in the world and speaks one of Canada's official languages. India is an extremely democratic country and, I understand, the potential for growth is superb. There is much to be said about looking at countries other than China, which we are looking at of course.
Mr. Di Sanza: There is no question that Halifax has been looking at this as an innovative way of offering new services.
Senator Comeau: You might know about this than I do, but I hear that there is much cooperation among some of the ports people in Atlantic Canada, including Saint John, Halifax and Canso. It would seem that there is more interest in having a port authority for the whole of Atlantic Canada rather than port authorities for each individual port in Atlantic Canada. Have you sensed that?
Mr. Cannon: I will let Mr. Di Sanza respond to that. Certainly, there has been a great deal of interest generated by the port authorities on these initiatives of developing and better using our trade corridors. I would say that yes, the those rumors are true, and I have the same sense.
Senator Comeau: I was speaking to a senator from Saint-Pierre and Miquelon this week. He said that he wants to be more in touch with Atlantic Canadians and, in fact, lives in Atlantic Canada. We were wondering whether Saint-Pierre and Miquelon could be the gateway for some Atlantic Canadian products heading to the EU, although the EU currently has some barriers to some Atlantic Canadian products. I do not know whether it could be done, given all the physical considerations to develop a port, but I thought I would throw that in the mix.
Mr. Cannon: After witnessing the extraordinarily strong performance of the Prime Minister at the Francophonie summit and his great exchange and working relationship with President Chirac, perhaps that will happen in the future.
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Senator Comeau: I was there. He did an excellent job. I fully agree.
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Senator Munson: I am setting myself up but it does not matter. Has the problem not been dealing with the competitive interests between Montreal and Atlantic Canada? You are a Quebec minister, and perhaps politics gets in the way of good business, because we are talking container business. Currently, we are talking about the viability of container ports in Halifax and Saint John and, as the senator said, about moving things across the country. In the past, it was about politics and how it all works and who gets jobs and how do we satisfy things and how do we keep those horrible separatists away and keep this country unified and so on and so forth. I am an Ontario senator, but my heart is in Atlantic Canada.
Mr. Cannon: I can tell you, Senator Munson, years ago, along with the chair, I was a Quebec minister. We both sat in the same cabinet. I am now a Canadian minister, and I do have a seat in the province of Quebec. Any time there are gains for Atlantic Canada, any time there are gains for Ontario, any time there are gains for B.C., there are also gains for Quebec, and vice versa. Clearly, I do not want to get into that kind of dialogue.
Senator Munson: You talked about best practices earlier in your speech.
Mr. Cannon: That is correct, and best practices can be found across the country, wherever you come from.
Senator Munson: I am glad to hear that.
The Chairman: I do not know whether I should have given you that question, as a Quebecer.
Senator Christensen: Thank you, Mr. Minister, for being with us. I have a personal interest in the container industry because it all started in the Yukon with the White Pass & Yukon Route Railway in the late 1940s servicing the Yukon and having problems with trans-boundary issues and pilfering and building a container ship and starting that particular industry.
On page 4 of your presentation you have a projection up to the year 2015 and into 2020. These are the years they tell us that with global warming the Northwest Passage will be open. Senator Comeau was concerned that you had not mentioned the East Coast, and I am concerned because you are not mentioning the Arctic coast, which can and probably will by those dates be integral, certainly for container ships travelling between Asia and Europe. The Panama Canal will still be used, I am sure, but not to the same extent, because the Northwest Passage cuts off several days.
In our infrastructure, which you have emphasized in a number of areas, we have good east-west corridors, but we do not have north-south corridors. We have the Dempster Highway, which goes to the McKenzie Delta; we have the Port of the Churchill, and we have a highway that goes up into Yellowknife. I see no mention here at all of any of these things. If we are planning other things, we should be factoring that in as well. The years 2015 and 2020 are not far off. What is being done in that area?
Mr. Cannon: I have two general observations, senator, and thank you for your question. It is an important one, and it does bring the focus to many issues you live with in the northern part of the country.
I would say at the outset that our government is committed to asserting Canada's sovereignty in that area as the ice flows seem to be melting. Obviously there are problems. Ice roads that were there for a number of months are not there any more, so other means of transportation have to be utilized. That is a concern. Through DND and through the Prime Minister's visit to the northern part of the country last month or a month and a half ago, the government is sending a strong message to Canadians that we do want to assure Canada's sovereignty in that area.
I would also say that the whole infrastructure program is one that, if I distinguish it from the previous government, over the last several months we have been consulting with the provinces and territories. I have had the opportunity of meeting the premier of the Northwest Territories and exchanging with him and his ministers on extremely important infrastructure issues and how we can move forward. This government is committed to being able to use our infrastructure dollars to move forward on that basis.
The other component is the whole initiative that came out of the budget in terms of finding secure long-term funding. I believe that through our infrastructure programs and our initiatives to assert our sovereignty in the northern part of the country, we will be able to find the money required to support those initiatives that are most needed.
Senator Christensen: Are you and your department looking at the feasibility study done between Alaska and the Yukon on the extension of the railroad up through British Columbia and into the Yukon?
Ms. Borges: We actually did a feasibility study back in 2000-01 when the subject first came up. The conclusion was that there was not a very strong business case for a rail link. We communicated that to the Yukon government. We also discussed it with our colleagues in the United States. Since then, the Yukon government and the Alaskan government have conducted an extensive study that we hope is to be completed by the end of the year. Early indications are that the business case may not be there.
In Canada, the government does not fund the freight railways. They build their own infrastructure. If there is a business case, we believe that the private sector should be and would be at table. I can tell you that at least one of the Canadian railways is interested in that study and is paying close attention to it, but the business case has to be there. It is very expensive infrastructure, and before they would venture to build something like that, they would want to know that the freight potential and the trade potential are there.
Senator Christensen: The argument has always been that if Prime Minister Macdonald had waited until there was a business justification for building the railroad, we would never have had a railroad across the country.
Senator Tkachuk: On exactly that very point, there is always an argument about what should come first, the transportation or the product. Do you wait till the people get there and then build a railroad? Has there been any discussion about the government assisting in building that railroad as part of our attempt to link the country together? There is a strong case to be made for that. If you do not build a highway to the lake, no one will go to the lake. There is no business case until you build the highway, and then suddenly people start going to the lake. The same thing would happen here. If you built a railroad, then business would come and people and goods would move back and forth with great ease. However, I am a simple boy from the Prairies, so what do I know? I wanted to make that point, as a right- wing Conservative who does not believe in any government money for anything, according to the Liberals.
Senator Christensen: The north-south links are very weak. We have to factor that in as global warming progresses and we consider new railroads and new corridors. As Senator Tkachuk said, the North has a huge mineral and raw materials potential for the rest of Canada, and once you put a railroad in, it makes the shipping of those ores much more viable. You do not need to have a major mine. You can do it with smaller mines, which cause less environmental damage. It just keeps rolling and getting better all the time. It provides a back haul for the freight to come in on the railroads. The potential is certainly there. We should be looking at those corridors in the long term. Again, all of these things will be happening between now and 2020, so they should be part of the equation.
Mr. Cannon: I want to reassure you we are working with officials in the territories. We have had strong representation on the issue of building a bridge across the Mackenzie River in Yellowknife, so there is a commitment there. It is even a public-private partnership project.
We are working with officials. I explained to you before the way this portfolio works. It is a component of infrastructure; it requires federal/provincial/territorial cooperation. I know my colleague Jim Prentice is working very closely on the Mackenzie Valley pipeline issue, and he has announced that he is working there. That is another way of getting the economy rolling.
Last week I was in Sept-Îles with former Prime Minister Brian Mulroney. Twenty years ago, he worked with Premier Bourassa to set up an infrastructure in Sept-Îles which led the way to create one of the strongest aluminium companies in North America. There are both advantages and inconveniences to that debate. In that case, the cooperation between the federal and the provincial governments, between two people who trusted each other, worked extremely well for the benefit of the people who live in the area of Sept-Îles and for our aluminium industry, which is the strongest in North America.
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The Chairman: I have one last question, Minister. On page 5 of your presentation you speak about recent economic trends and several high profile reports. You mentioned strong support for exploring the potential for amalgamating the Vancouver, North Fraser and Fraser river port authorities. Do I understand that you are making an announcement this evening?
Mr. Cannon: No, Madame — I nearly said Madame Minister, out of habit. I was referring to an initiative that we launched 3 months ago following discussions with the British Columbia Minister of Transport and my colleague, Mr. Emerson. We discussed the matter and concluded that it would make good commercial sense and be in the interest of sound management practice to enter into a dialogue. I know that discussion is currently under way among the three port authorities. They are working with teams of specialists and the report should be tabled within the next few months.
Mr. Di Sanza: That is correct; indeed the three port authorities have contracted Intervistas to manage the process. We are also working in the very close cooperation with the three port authorities to ensure that the project moves ahead quickly.
The Chairman: If it were to go ahead, you would have to amend the Canada Marine Act, as it does not currently allow mergers.
Mr. Di Sanza: Once we see what sort of government's models the three port authorities propose, we will look at our options.
The Chairman: Minister, thank you very much for having made yourself available to our committee. A little compliment before you go, you and I both went to the right school! You mentioned those days a few times this evening, and it brought back fond memories. It was a school that taught us the importance of knowing your subject matter!
Congratulations and, once again, we thank you and your departmental colleagues for being here.
The meeting is adjourned.