Proceedings of the Standing Senate Committee on
Transport and Communications
Issue 7 - Evidence - February 7, 2007
OTTAWA, Wednesday, February 7, 2007
The Standing Senate Committee on Transport and Communications met this day at 6:15 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: I want to call this meeting of the Standing Senate Committee on Transport and Communications to order. This evening, we have as witnesses, Mr. Dominic Taddeo, President and Chief Executive Officer, Port of Montreal Port Authority, Mr. Jean-Luc Bédard, Vice-President, Operations and Harbour Master, and Mr. Robert Masson, Vice-President, Marketing and Development.
As you know, for some time now, we have examined these matters, which are important for us, and I think that our visit here this evening is of great importance to committee members. We would like to welcome you on behalf of all the senators here present.
First we will be listening to you, and then the senators will have a lot of questions to ask you.
Dominic J. Taddeo, President and Chief Executive Officer, Port of Montreal: Thank you, Madam Chairman, for the opportunity to come and present the Port of Montreal and its fundamentally important strategic role in container shipping and as a hub for Eastern Canada.
First of all, on behalf of the board of directors, and the general management of the Montreal Port Authority, I want to thank you for this opportunity to appear before you this evening to discuss the containerized freight transport system in Canada and its competitiveness, both in Canada and in the international North American market.
The work this committee is currently doing on the issue of containerized freight transport affords an excellent opportunity for the industry to make known its important role in the competitiveness of Canadian industries, particularly the economic lever role of a port and its operations in the success of a city, region, province and even a country.
In that respect, the Port of Montreal, which links the city to more than 80 countries around the world, is a light, a leader in its sector and a model of efficiency for the industry in North America. In particular, it is a driver of economic development for Montreal, Quebec and Canada as a whole.
With your permission, in the next few minutes, I will be giving you an idea of the port's importance in our economy.
In addition, throughout my presentation, I will be answering the questions the committee has submitted to us in order to provide it with food for thought on intermodal transport issues.
Here is a photograph of the Port of Montreal and its structure. As you know, it is a profitable, independent federal agency established by the Canada Marine Act on March 1, 1999.
Our board of directors consists of seven members. The three levels of government — federal, provincial and municipal — appoint one director each, and the other four members are appointed by the Minister of Transport on recommendation by, and in consultation with, port users. The chairman of the board is elected by the members.
In this document, you will find the members of our current board of directors: Mr. Marc Bruneau, Chairman, was appointed two years ago; Mr. Jeremy Bolger, Vice-Chairman; Ms. Diane Provost, whose term has just been extended by the City of Montreal, which appoints one person; Mr. Raymond Massi, Chairman of our Executive Committee, whose term will expire at the end of the month; Ms. Michèle Gouin, whose term was extended today by the Government of Quebec; and Mr. Normand Morin, who was appointed by the Minister of Transport barely two months ago. The management of the Port of Montreal is represented by me, Mr. Jean-Luc Bédard, Mr. Robert Masson, Mr. Jean Mongeau, who is absent today, and Ms. Sylvie Vachon.
The mission of the Port of Montreal is to provide its clients with efficient port facilities and services in an environmentally friendly manner and to increase and promote the competitive advantages of the Port of Montreal.
Our objective is to promote business development, improve the competitiveness of the port system, ensure financial self-sufficiency, optimize the effectiveness of human resources and maintain good community relations.
You no doubt noticed on the last slide that, last year, we celebrated the 175th anniversary of our institution, in Montreal and in Canada.
Here is another picture of our port.
[English]
The Port of Montreal is the number-one container port in Eastern Canada and the gateway to the North American industrial heartland. It is the dominant port on the transatlantic trade route; the closest port to central Canada and the U.S. Midwest and Northeast; and the only container port located on the St. Lawrence River. The shipping industry is committed to Montreal as an international and intermodal hub. It has invested over $1 billion in ships and handling equipment in the last 20 years alone and it links Montreal to over 80 countries around the world.
[Translation]
Here are some significant facts about the Port of Montreal: a multifunctional port spread over 25 kilometers on Montreal Island; we have our own 100-kilometer long railway system, operated by our employees, which is directly linked to the CN and CP systems; four of the most efficient container terminals in North America; a grain terminal and a Maritime terminal; a dry bulk terminal at Contrecœur; a 375-hectare land reserve at Contrecœur. We operate our own power system, our own sewer system, our own water system and our own private service road in the municipality of Montreal, south of Rue Notre-Dame.
We are a veritable city within a city. We generate an estimated $2 billion of economic impact per year and 18,000 direct and indirect jobs. Our port infrastructures meet the ISPS code and are among the safest in the world.
Turning to the advantages of the Port of Montreal, we are a model of efficiency: an enviable geographic position on the St. Lawrence River, 1,600 kilometers in the continental heartland, a place where three major systems — river, rail and road — converge, and we have been operating 12 months a year since 1964, even in winter.
[English]
We are proud that nine of the world's top 12 container lines come to the Port of Montreal: Maersk is number one in the world; Mediterranean Shipping Company is number two; CMA CGM is number three; Hapag-Lloyd is fifth in the world; APL, Senator Lines, OOCL, NYK Line and MOL. That is on the container side. I would like to point out that back in 1974 only two major shipping lines used the port as a gateway.
The major bulk carriers using the port are Fednav International Ltd., Canada Steamship Lines Inc., Canfornav Inc., Algoma Tankers, Seaway Marine Transport, Upper Lakes Group Inc. and Petro-Nav Inc. We then have the domestic carriers that service Montreal, Newfoundland and the Îles de la Madeleine out of Montreal. We are a terminus port for Océanex Inc., which has just built a $59-million ship to service Montreal and Newfoundland. They also go to Halifax, but the bulk of their business is through the Port of Montreal.
[Translation]
Transport Nanuk and the C.T.M.A. group are mainly for cabotage on the St. Lawrence.
As regards the competitive advantages of the Port of Montreal, we are served by two of the largest North American railway carriers, CN and CP; a terminal port that allows higher ship rotation and the preparation of unit trains by destination — I will explain that to you later, if you wish — directly linked to the highway systems to the markets of Quebec, Ontario and the northeastern U.S. states.
It is a completely integrated hub: a rail-road system: direct connections to the main arteries. Transportation efficiency: 55 per cent of movements are by train, for containers, with CP and CN, and 45 per cent by road, and there are more than 25 trucking companies.
Here is a picture of our intermodality, a picture that you will recognize: Jacques-Cartier Bridge and access to the Port of Montreal, which is adjacent. The railway system that you see here runs partly through the Old Port and toward the east, where our terminals are.
As I said earlier, it is an integrated hub. Number of trains entering the port: every week, we have 45 intermodal container trains, which means that there are 45 leaving the port. Three unit trains/unit train loads of grain per week, five unit trains/bulk unit train loads per week. Approximately 2,000 trucks use the Port of Montreal each day.
We are at the centre of a diversified and well-integrated logistical chain: terminal operators, coast guard, dock workers, railway transports, truck drivers, freight forwarders, shipping agents, warehouses, government agencies, longshoremen and checkers, shipping line pilots, shipping agencies. So we have to operate in all these areas and closely monitor what is going on in all fields.
We also have another major advantage at the Port of Montreal: industrial peace with the longshoremen and checkers, whose contract will terminate in December 2008. The employees of the Port of Montreal have five collective agreements. We have signed with the people of four of those five agreements until 2011, and the fifth, with the railway system, is being resolved until 2012. We have 325 employees at the Port Administration as such.
Now I am proud to show you a table indicating total traffic.
[English]
The total traffic handled at the Port of Montreal is indicated in this chart. As you can see, the breakdown is mainly solid bulks like grain; liquid, which is petroleum; and then other merchandise which makes up the container traffic. You can see our growth from 2002 to 2006 and beyond in 2007. On the container side, we go from 9.1 million tonnes to 12 million tonnes. Last year was our best year in the history of the port, with a total traffic of 25.1 million tonnes.
What has transpired in Montreal from 1960 to 2007? On this slide, you will notice the dramatic growth we have had in the containers. In 1960, we handled 3.4 million tonnes of general cargo, mostly not containerized. Today we have up to 11.8 million tonnes, and it is largely containerized. That is an increase of 243 per cent. We have transformed this port from mainly a bulk port that handled grain and petroleum to respond to the international requirements of international trade and to take advantage of our privileged geographic location to become the dominant leader that we are in the North Atlantic. I have more facts to prove that to you.
We also have grain elevators. At one time Montreal was the gateway for grain out of Western Canada. Today there is only one functioning grain elevator. In 1980 in Montreal we handled 8.5 million tonnes of grain. Now we handle between 1.2 million and 1.8 million tonnes. I make a pilgrimage to the Wheat Board once a year to ask how I can better help them, to the chagrin of the Port of Quebec, which has a private elevator. Ours is a public elevator. We have to protect 77 per cent of the capacity of the elevator for the Wheat Board, which means that we can do business with private operators for only the other 23 per cent. That is okay; it is still very profitable, which is why we keep it going.
On international container traffic in the North Atlantic, 96 per cent of our business is with Europe and the Mediterranean. We deal with all the countries of Europe and are now starting to penetrate into the Eastern Bloc countries that are opening up.
Domestic traffic on the container side is mainly with Newfoundland, a bit with CTMA Group.
Our strength in Montreal, as shown in the graph on page 13 of our presentation, is that we are the fastest and most direct link to Toronto, Detroit, Chicago and New York. There is a new link that you will see at the bottom — Freeport. I will get into that later when I talk about the new shipping lines that are using Montreal. You also see there the ports we go to in Europe.
On the North American East Coast, the Port of Montreal ranks third on the container side after New York and Hampton Roads. We do more business than Baltimore, Halifax, Philadelphia or Boston. Halifax is always referred to as a deep water port. In news reports we hear about Halifax and Vancouver, never about Montreal. However, we are the hub; we are the gateway; we have the potential to grow, with all due respect to Halifax.
On interior container traffic in Canada, we do 60 per cent of our container business in Canada and 40 per cent in the United States. In the United States we do 15 per cent of our business in the Northeast, going all the way into Rhode Island, Connecticut and Massachusetts. We hurt the Port of Boston. Shippers come through Montreal or New York to go to Boston.
We do 75 per cent of our business in the United States in the Midwest, because of our rail connection. We were the precursors to free trade. You will recall that in 1984 Canada went ballistic because Mr. Mulroney wanted free trade. Montreal had already started to penetrate north-south into the United States with CP in 1980. We had already created our corridor, which today is the latest buzz word — gateway.
I wrote letters to the industry in 1986 thanking them for using the Port of Montreal system, the Port of Montreal gateway. Of course, when Mr. Lapierre came up with the term ``gateway'' three years ago, I responded, ``The more things change, the more they stay the same.''
To illustrate why we are an integrated hub, look at the distances from Montreal to Toronto, Detroit, Chicago versus Halifax, New York, Virginia and Baltimore.
[Translation]
We are the international port nearest the industrial heartland of North America, the one offering competitive access to the major markets of Canada and the American Midwest.
[English]
It is 1,300 kilometres from Montreal to Chicago. It is double that distance if you go through Halifax. It is four times cheaper to move as far inland as possible by water than to move by rail or truck. We worked to make it a success. We took advantage of our situation.
Here you can see the rail movements for Canadian and American traffic and the truck movements. As indicated at the bottom, you can reach Toronto in 10 hours, Detroit in 23 hours, and Chicago in 33 hours. Ten years ago we used to get to Chicago in 72 hours. With CP and CN we put together an integrated system. We now prepare the block trains, the unit trains, on our docks. I will explain to you later why we are the most productive terminals not in only Canada but in all of North America. We reach Chicago in 33 hours and we are aiming for 24 hours with CP and CN.
This slide shows what is happening on the Northeast Coast. From 2001 to 2005, in the ports with which we compete — Boston, New York, Delaware River, Baltimore and Virginia — the number of total containers handled went from 1,687,656 to 1,920,312 — an average growth of 3.3 per cent. In Montreal, that number went from 843,325 to 1,078,492 — an average growth of 6.3 per cent. There was growth of 4.3 per cent in total containers handled in this market. That is why we say we are the leader. We back our statements with facts. In the last five-year period, there has been a 30.3 per cent growth in containers in Montreal.
The next slide shows what is happening with Canada at the East Coast ports. In Montreal, from 2001 to 2006, traffic increased from 989,427 TEUs to 1,288,910 TEUs — an increase of 30.4 per cent, where TEUs are twenty-foot equivalent units. With all due respect to Halifax, they had about a 1 per cent growth.
We are a leader on the North Atlantic. On the TransAtlantic to Northern Europe, England, et cetera, Montreal and New York shipping lines are even at 38 per cent each. The other ports are at 24 per cent.
Over the years we have done marketing and capacity studies. We have undertaken another capacity study because we are running out of space on the Island of Montreal. We have embarked on a major review of our container handling capacity to accommodate growth. This study validates the traffic growth potential on the North Atlantic trade and the Port of Montreal for the next 10 years. An independent study by IBI Group confirms that. It confirms that plans for infrastructure improvements will meet the needs for additional capacity and growth.
This is the study of Moffatt & Nichol, a Canadian-based company. They have an office in Vancouver. This is confidential data, but we have to share it with you. It deals with the throughput in Montreal and the acreage of our terminals. The productivity is 7,719 TEUs per acre. That is a little stamp of land backed up into Notre Dame Street.
We are a terminus port, which means that the container ships arrive in Montreal, are completely emptied, are completely reloaded. Within three and a half days they head back to Europe and then are back to Montreal seven days later.
Vancouver is a booming and growing port. It handles more containers than Montreal, but they have fewer tonnes in their containers because they are bringing in toys, clothes and Christmas goodies, whereas we are bringing in wine, scotch and knocked-down auto parts. Our containers carry more tonnes than the containers in Vancouver.
This slide shows the productivity of the container terminals. You will notice that the productivity of Montreal when compared to Halifax is almost double. We also see New York, Los Angeles and Long Beach. Compared to Rotterdam, Singapore and others, Montreal ranks in the top five in productivity. The longshoremen like this because when they negotiate they can say, ``We are good, we are smart, we are kind; give us more money.''
Security is a priority for us. Since 1998, we have built a state-of-the-art integrated security video surveying system which today encompasses some 150 cameras over our 25 kilometres on the Island and extending to the South Shore. We were the first Canadian port to obtain accreditation under the ISPS code. We did so 42 days before the deadline of July 1, and we have just been reaccredited for another five years. We have made spent over $8 million in capital expenditures on security projects, and we plan to spend another $11.2 million in the next four or five years.
Our control centre is state of the art. People who come to see it, as Senator Mercer did, cannot believe it. We have everything: online, the AIS automatic identification system and the Coast Guard. We can see where the ships are in the Gulf of St. Lawrence. We know where the icebreakers are. We have water level forecasts. The shipping lines loading their ships can zone in with the Internet and do their planning for their ships to come into Montreal. It is state of the art and we are very proud of it.
Since 1997 we have provided security through a private security firm. Guards patrol the port 24 hours a days, seven days a week. We are fully integrated with the RCMP, the Combined Port Investigation Unit, immigration, the Sûreté du Québec and customs. We have so far issued 7,000 identification cards. The RCMP, customs and various police forces have full access to our port property and our real-time video camera network and they are situated in our building.
Since 2000, we have been partners with the Canadian and U.S. police forces and customs authorities as well as the Port of Halifax and the Canada-United States Cargo Security Project.
In April 2006 we were commended by the U.S. Coast Guard, who, with Transport Canada, did an audit on security best practices on the joint training of security agents, the integration of communications systems, the sharing of video camera images, and the security detection and intervention capacity. We were the port that told Transport Canada, ``If you want to deal with our terminal operators, you go through our port administration.'' Our board is responsible to manage this and we will assume the responsibility.
The other ports in Canada have not done that. They have told Transport Canada to deal directly with the terminal operators. So be it. Vive la différence.
The National Port Enforcement Team mixed investigation security unit based at the port building includes the RCMP, Canada Border Services Agency, immigration, Transport Canada, the Sûreté du Québec and the Montreal police. The Montreal Port Authority collaborates fully with Canada Border Services Agency, CBSA. The inspection facility is provided nd paid for yearly by the Montreal Port Authority; we provide their facility and we pay for it.
CBSA has two VACIS vehicle and cargo inspection systems at the port and they are in the process of installing radiation and scanning portals in Montreal. We can discuss that later because we do not agree with the way they want to do it, but we will collaborate, whatever decision is rendered by the powers that be.
There is a continuous presence of U.S. customs officers at the port.
The Canadian government's Marine Transportation Security Clearance Program is to come into force in Montreal on December 15, 2007. We recommended that regulations recently promulgated apply to all workers and individuals who access the Port of Montreal infrastructure and terminals. The same exists in the ports in Florida and will be applicable to all ports in the United States by 2009.
We say that because that is not what has been promulgated. There is a screening process, but there are certain people who do not have to have a clearance; we do not agree with that.
We are the only port in Canada to insist that all export containers coming into our port must be sealed. We transferred the responsibility to where it belongs. The stevedores did not like that, but we insisted.
[Translation]
We are going to stop fooling around. They all have a seal.
[English]
For security, we spend $2.5 million annually for our activities.
Let us talk about the environment. We protect the environment, a value inherent to our mission. We have an environmental policy and an environmental management system in effect. We have a full-fledged environment team consisting of four people working with all port users.
We have 977 hectares of property, of which we have evaluated 99 per cent. Only 1 per cent, 13 hectares, do not meet the requirements and mitigation procedures have been put into place. Within three years, those things will meet the environmental norms of the Canadian government. In the last two years, the cost has totalled $3 million for expertise and environmental projects. We know we have to do that.
Regarding financial data on the Port of Montreal from 1980 to 2006, very little is known. Prior to 1980 the Port of Montreal used to lose money. Since 1980 we have been making net profits.
[Translation]
The net profit is $301 million.
[English]
The cash flow, as you know, is net profit plus depreciation, which amounts to $587 million. As I said earlier, we have spent $432 million to rebuild the port. It has not cost the taxpayer or the federal government one penny; there have been no subsidies whatsoever. We do not cry on anyone's shoulders.
We have paid dividends in that same timeframe to the federal government, to the tune of $148 million to our shareholders, but the terms changed in 1999 with the introduction of the new act, which is a gross revenue charge, with which we disagree.
Then there is the gross revenue charge, which we disagree with, but we pay it to the tune of $148 million to our shareholder, the federal government, and we have paid taxes to the City of Montreal, close to $90 million. I say that because we compete with American ports and they collect taxes from their citizens to expand, market and sell their port. In Canada we have a law that says grants in lieu of taxes. We pay based on certain evaluations.
We receive few or no services. We have our own roadway, which we pave. We have our own electrical system. We buy the electricity from Hydro Quebec and sell it to our customers; we are the only facility I know of in Quebec that does that. We buy our water from the City of Montreal. We have our own watering system. We clean our own roads. We do our own snow removal and garbage removal. The only thing the city provides is fire service, and the last time there was a fire was about 18 years ago. We pay; it is a reality and we have to be good corporate citizens, but a true businessman would ask why are we paying if we are not getting any service.
[Translation]
For the future, we anticipate continuing growth and profitability for the Port of Montreal. This is very important for us.
[English]
There is our forecast for container growth for the next five years. We are forecasting an 18 per cent increase over that five-year period, an average increase of 3.3 per cent. How will we respond to that increase? There are our capital projects approved by the board. Every year we present a five-year corporate plan to the board. In the next five year period, we will spend $175 million to continue to take care of this port. We will continue to be a major player in the Canadian economy. Beyond 2011, we think we will spend a minimum of $195 million.
You ask yourself the question: Can the Port of Montreal afford it? We say yes. Our net profit will be $37 million; our cash flow will be $150 million.
Our property costs will be $176 million. You say, where do we get the rest? We have $100 million in the bank. The Port of Montreal adopted a policy that when we have our corporate plans and our capital budgets approved, we always have $50 million in the bank. That is a directive I put in place back in 1974 when I was Director of Finance. I became CEO in 1984. Successive boards have agreed with that policy. We keep that money for a rainy day. Our planning process is serious; we are not making a shopping list, because we know we have to keep that $50 million there. Then over the same time we will pay $75 million.
[Translation]
The Port of Montreal is an incalculable advantage for the exporters of Montreal, Quebec and Canada as a whole. It is and will remain a constant work in progress in order to meet growing demand. First, on Montreal Island, for the container market and in the future, relying on its land reserves in Contrecœur.
[English]
I could tell you about the myths that still exist about the Port of Montreal, but I think I will stop here. Before the end of the discussion, if you allow me, I would like to talk about the myths. It saddens us because we know we are important.
I am now ready to answer questions. I will answer them as candidly and as honestly as I have always done and then we have some additional comments to make.
[Translation]
The Chairman: My first question concerns labour relations at the Port of Montreal, which seem to be working out for the best. In 2005, you signed a new collective agreement between the port and the Maritime Employers Association that will be in effect until 2008. The collective agreement of the professional and technical employees was ratified and will be in effect until 2012.
In view of the increasing pressure to improve the efficiency and performance of ports, I would like to know the impact of the climate, which is very competitive for employees, and how they are adapting to the rapid introduction of new technologies. How do you view the future of labour relations? Don't you anticipate any difficulties? How can past difficulties help you adequately identify the major issues in this area?
Mr. Taddeo: First, the Maritime Employers Association is completely independent. We do not negotiate with them. They hire the longshoremen and checkers. The Maritime Employers Association represents the shipping lines and dock workers.
[English]
They also represent the stevedoring companies that hire the longshoremen. With the arrival of the major shipping lines over the years, the stevedores now know the importance and the shipping lines do as well. That is why you will have peace in labour to 2008.
[Translation]
In my opinion, that will continue because each party realizes it is important. No real threat will come from the longshoremen.
The longshoremen have asked that the threshold be raised — as you know, their wages are guaranteed — and the industry has accepted. Relations are good. About 10 years ago, with the industry and AEM, we installed a simulator at the Port of Montreal, somewhat like CAE. In other words, there is a module in a building on the docks where the longshoremen train themselves. The port paid $600,000 at that time, we continue paying for electricity, the building is provided free of charge, and we also continue to ensure that there is equipment. I went there to take a test, and, thank God, fortunately I am not a longshoreman, because not a lot of containers would arrive on the boat or get off the boat, because I missed a lot.
[English]
That is a true story. It is quite a technique. They are sitting 30 metres in the air. It is a cold, windy day, and they are playing with all these little gadgets. Productivity is second to none.
Over the years now they have understood labour peace. Communication has improved dramatically in Montreal. They all know they are team players. We created special committees at the Port of Montreal to alleviate the situation of the bad reputation. We have a marketing committee that meets twice a year, a competitive committee where all the players come in, including the stevedores and the checkers. We brought them in on the committee meetings and said, ``You are part of our success. Come and tell us what you like and do not like. Hear what the other people have to say.''
The Port of Montreal has a marketing tour six times a year. In this marketing tour, we go to Toronto and Boston and have receptions with the industry. We bring the president of the union and the checkers, and we pay so that they can hear firsthand from the importers and exporters about using the shipping lines and the port as a gateway and how important that is. I am extremely confident that it will continue. We signed our employees to 2011, which is unheard of, and now with the railway to 2012, which is also unheard of.
[Translation]
The Chairman: I think that what we have just seen is significant; of all the international ports on the U.S. East Coast, Montreal is probably the one that offers the best access and, as you said in your presentation, quick, direct and economical access to the markets of Central Canada and the American Midwest.
For the period ended in 2005, traffic in containerized goods at the Port of Montreal increased by 2.6 per cent, from what I have read, over the previous year. That is an encouraging figure; however, you know as well as I do that container ships are tending to get bigger and deeper. We are on perhaps the fourth or fifth generation of ships, what are called the post-Panamax and post-Panamax Plus ships.
The Port of Montreal currently receives Panamax class, that is third generation ships. How does the port intend to position itself in future? Is it possible to consider welcoming post-Panamax ships in future? Can Montreal continue to expand and grow with a fleet of ships of that size?
Mr. Taddeo: Ships of 8,000, 9,000, 10,000 and 12,000 containers are not a concern for us; they have never been a concern for us. The strength of the Port of Montreal is that, since it is a terminal port, the shipping lines that come to Montreal live with the reality of the St. Lawrence River and its depth. Of the existing regular fleet, 54 per cent of the ships that navigate the waters can come to Montreal. If you include 5,000-container ships, you add another 19 per cent. In our opinion, our strength has been to work with these lines and to grow.
Your question is very appropriate because, in 1970, Transport Canada conducted a study that said, ``Don't go to the Port of Montreal,'' because we were the first port to handle containers in Canada, in 1967; 11,374 containers, the year of Expo 67. The study stated: ``Ships will be getting bigger, and Canada will suffer because, being an exporter country, we will not be able to serve and provide our services and trade with other countries with a port that is 1,600 kilometers inland and where water levels are too low. Ships will go to more than 1,000 containers.'' So they built a terminal in Halifax; that was their idea. The Halterm terminal was built for that reason, followed by the Brunterm terminal, in New Brunswick.
As for the shipping lines, there was a kind of shift, but they saw the light and, at one point, they said, ``We are going to adjust to the reality of Montreal, with its winters, with its depth,'' and the ships started to get bigger. They came with ships of 4,200 containers.
[English]
Orient Overseas Container Line is now undertaking a study to bring into Montreal ships of up to 4,400 containers or 5,000 containers by widening the ship and living with the reality of our depth, which is now 37 feet or 11.3 metres. We deepened the channel twice, first to 36 feet and then to 37 feet.
As well, with the new technology, the navigation aids, the GPS and all the equipment that the captains have on board their ships, they are telling us you have to have a reserve, you have to protect the environment, you have to be safe and secure.
[Translation]
But the pilots still say that the coast guard maintain too big a margin of safety, that there is still some depth. Except that, for Montreal, with ships of 4,200, 4,400 containers, at some point, the market will be saturated, but profitability, ships will still come to Montreal. The shipping lines that are there still operate in Montreal, and that is why they come to Montreal because it is closer to the markets and easier to reach their clientele. They are living with this reality. We are very confident.
The other thing is that we are a terminal port.
[English]
We say in the slide show that we are the closest inland port to the markets. The shipping lines all jumped on that, and the importers and exporters followed them. We have the number-one and number-two containers lines coming to Montreal.
I talked to you about Freeport. In order to alleviate the congestion in the West Coast ports through the Panama Canal with their 5,200 TEU ships, Mediterranean Shipping Company, MSC, bought the ports of Freeport. They built berths to accommodate six ships. Freeport is now a hub. From Freeport, they are moving the commodities not only to Montreal and North America but also to Europe. That is an advantage for Montreal. The latest I have heard is that now they are also looking at using Montreal as a hub to go to Cuba, which they are allowed to do. All this concentration is being made. I am not saying this because I am a federalist and I love this great country, but because I consider the reality of commerce, interchanges and costs.
You heard lately that Maersk left the port of Halifax. That is a sad case. Ten years ago, Maersk wanted to go to Halifax as their hub. They are negotiating Halifax vis-à-vis New York to build a new container terminal. At that time, I told Mr. Cauchon and Mr. Chrétien that I did not think Halifax was a viable alternative as a hub because the Maritime provinces were asking for $40 million from the federal government. I said to them, ``You can give them that, but you can bet your bottom dollar that if you give Halifax $40 million, Quebec will scream, and so will Montreal.'' That being said, one must look objectively at transportation and the costs and all that we have done in Montreal over the years. By the way, every 15 months we update our matrix with respect to costs and routes. I remember telling Mr. Cauchon that I think Maersk was playing Halifax against New York, and they did end up in New York. New York is deepening its channel, and the shipping lines are saying, ``How can we get to the markets faster?'' Those bigger ships that do not come to Montreal are going to Halifax to offload 400 or 500 containers, and then they have to go on, so they are trying to reduce the number of port calls. To do that, they will go to the closest point.
Maersk and MSC are re-routing their traffic. MSC is the latest one. They are increasing their traffic through Montreal by over 160 per cent. They are dissatisfied with the service they are getting out of the Port of New York to Detroit, because 95 per cent of New York's traffic is trucks, so they are using Montreal as a gateway. It is faster to use Montreal. They are re-directing their American-based cargo that could go to New York with their ships to Montreal. Now others are doing the same thing. I do not think they have told Halifax yet, but they will find out.
All I am saying is that because of the success in Montreal those shipping lines have, they are saying, ``We are going to go where we make the bucks and get the service.'' I am being blunt, but that is what they are doing. They are using us because we have put into place, going back 25 years, a system that is unique. It is second to none, including what exists in Singapore, on the trucking side and on the dispatching side. The Port of Long Beach/Los Angeles came to Montreal to see our intermodal system. Our ancestors in Montreal saw far. They had a vision. They brought the railway right on the docks. We have taken advantage of that. At containers can go from the containership either to a truck or to a rail car, and then we pull the railcar to our interchange point for CP and CN locomotives.
Imagine 12 different shipping lines coming into the port from various ports in Europe on three container terminals. We have put a system in place that allows us to prepare dedicated unit trains to Chicago from 12 different lines on three different terminals. When those containers come in at the Cast Terminal, that is the Chicago batch. Then, it hooks up with our locomotives until the Racine Terminal, Chicago batch. After that, it goes to the interchange part and CP picks up the train and off they go; and CN does the same thing. Organizing that took a lot of time. We put it into place quietly, with many arguments in the process and many meals at Italian restaurants to convince them that we could help them. That is in place and will continue to grow. CN and CP people work side by side with the port.
We have done the same thing with the water levels because water is crucial to us. We have a conference call every Friday with Hydro-Québec, particularly in difficult times. They might tell the Port of Montreal that they will stop the water flow and drop it 6 inches or 12 inches. We might ask them to wait until Saturday afternoon or Sunday morning. We do that for the bulk ships and the petroleum ships, but mainly for the container ships. We worked hard to put that arrangement into place, and that is why we are where we are.
To answer your question, yes, I have been asked about the bigger ships for a long time and their impact on the Port of Montreal, and I said ``none.''
[Translation]
People answer me: ``That is because you are protecting your job, Mr. Taddeo.'' That is not the case because I will no longer be there. As you no doubt read in the newspapers, my term at the Port of Montreal will expire at the end of this year. I will be 68 years old next month, and the time has come to pass on the torch. My successors will therefore continue the job.
[English]
Too much of it is intertwined, when you have nine of the top twelve shipping lines. The only ones that do not come are from China, Costco; and Japan; and Evergreen out of Taiwan. We do not have to have them and they can go to Vancouver, Prince Rupert or Long Beach. We are not in their market.
The other encouraging thing for us is that the growth out of Europe will be strong this year. Our market is Europe and that is where we concentrate our efforts. The growth there will be stronger than the Canadian economy and the U.S. economy. This is all based on facts. I know I get keen and emotional about this but these are all facts.
[Translation]
The Chairman: You mentioned that the Port of Long Beach, in Los Angeles, has developed a quite innovative program by the name of PierPASS to facilitate trucking at all times. I would like to know whether the Port of Montreal has developed similar initiatives. What possible ways are there to increase container handling without expanding more?
Mr. Taddeo: We have the same system. We are open from six o'clock in the morning.
The terminal has eight different container companies, with competing clients, and 12 trucking companies come and pick up the goods. With the system that we have put in place, these trucking companies can call and get information by e-mail, fax or telephone. We tell them to show up at a given time. They arrive, the pass is ready, they go and pick up their cargo and they leave. We have more than 2,000 trucks.
Moreover, the Mayor of Montreal was telling me about the trucks on Notre-Dame Street and the port trucks. First, they are not port trucks.
[English]
Second, the reality is that 83 per cent of the trucks on Notre Dame Street in Montreal do not use the Port of Montreal. It is for the industries on the Island of Montreal but people see the importance of the port now. The unions are wise and when they want to get something, they shut down the port to get it.
[Translation]
In short, we already have the PierPASS system.
[English]
Senator Tkachuk: Thank you for that enthusiastic presentation. It was good, exciting and interesting. We have heard a lot about the problems of ports in Canada. It was nice to hear someone so enthusiastic and seemingly successful in this business.
I have a couple of specific questions and a couple of general questions. So that the committee has on the record the correct ownership information, who are the shareholders of the Port of Montreal?
Mr. Taddeo: The only shareholder is the federal government. They created a law that gives us the management as an autonomous board and they do not interfere. Ottawa names one person to the board; the Province of Quebec names one person; the City of Montreal names one person. They cannot be political or related. Then we have a users committee, a nominating committee, which recommends to the minister people to sit on the board. Those seven people get together and elect a chair and vice-chair.
I am glad you asked the question. When that law was being promulgated, Montreal said to the federal government that the government is the shareholder and the person named by the Prime Minister's Office should automatically be the chair of the board. Ottawa said no to that because it wanted it to be democratic. Then we said, the government is the shareholder and will continue to be the shareholder.
The federal government is the shareholder of all port infrastructures but, in the process, they commercialized the ports. The next step would have been to privatize the ports, like CN and Air Canada. Montreal and Vancouver pushed for that and we were really close to being fully privatized like the ports in England and in New Zealand. However, someone at Treasury Board said that the ports would create wealth for Canada. So, the government provided the tools for the ports to be a commercial operation, while remaining the shareholder. That gives the minister and the government the right to take the territory from us, should it want to, but there has been no interference.
Government officials said that instead of paying dividends, we would pay to the government a gross revenue charge based on our total revenue. We objected in Montreal but we were told that if we pay on dividends based on net profits, we would pad our expenses. They were telling me that our auditors and board members do not know what they are doing and we would increase the expenses to lower the net profit to pay a lesser dividend to the government.
For Montreal, we have had to pay an extra charge of $2 million over the last six years to the federal government for very little service, if I may say. The federal government is the shareholder.
Senator Tkachuk: You calculate the amount payable to the federal government as a dividend. Does the board decide what it shall be or do you base it on a tax model?
Mr. Taddeo: The formula is prescribed by the federal government.
Senator Tkachuk: Do you think it is too high?
Mr. Taddeo: No, we pay it and get along. We were asked to express our point of view. We expressed it and now we live with reality. We would prefer to pay on a dividend basis because we could use that extra $2 million. We were the first board in Canada to introduce an incentive plan in 1986, which was ten cents per tonne. People thought, ``That Italian man in Montreal is nuts.'' In 1985, the average wharfage charge to come through our facility on the containers was $2.25 per tonne. In 2007, the average charge is $2.41 per tonne. That is an increase of only 16 cents per tonne over 22 years.
Senator Tkachuk: We are blessed with the rail service that we have out of Montreal to the interior of the United States. What is the percentage of containers moved out of Montreal by truck and by rail?
Mr. Taddeo: By rail, it is 60 per cent and by truck, it is 40 per cent.
Senator Tkachuk: What does Canada have to do to increase its competitiveness and capture more of the North American container market?
Mr. Taddeo: Well, I will talk about Canada in general.
Senator Tkachuk: Talk specifically about Montreal if you wish.
Mr. Taddeo: I do not know if you remember the late Ron Huntington, who was a good friend of mine. When he saw the Montreal model, Vancouver was not the gateway to the U.S. Midwest. Montreal was the gateway. We did a pan- Canadian study when he was chairman of Canada Ports Corporation. I was on his committee and we travelled to put into place what Vancouver now has so that we could penetrate the U.S. Midwest, because that is where our growth will come. Vancouver is the main port for the western provinces. As Vancouver has said, for the Asia-Pacific routes the infrastructures have to be developed quickly. There should be a special fund for port infrastructure, but the law does not allow that. Article 25 says that we are not allowed subsidies.
In the case of Prince Rupert, it is fine to go to the bank when they have to borrow money, but for the country of Canada, it is urgent. In our case, Notre Dame Street, we have been talking about it for 30 years — paralysis by analysis. It is not verbal diarrhea. Unbelievable.
Senator Tkachuk: Like building a bridge in Vancouver.
Mr. Taddeo: I think we need two more bridges in Montreal, but no one wants to hear about it. That is what I think has to be done, and that is where the federal government has to concentrate its efforts. It is a priority to build that infrastructure. The ports in key strategic locations are doing their job and dealing with the industry because they gave us the tools to do it.
When I first started, I could not make a move without talking to someone in Transport Canada. It was highly centralized with the National Harbours Board. Over the years, the ports police and Canada Ports Corporation were disbanded because of Ron Huntington. He listened to people who said they wanted ports to be commercialized.
I know I am sidetracking, but in Montreal we used to have 120 policemen costing $44 million a year to patrol salt, grain, sugar and steel and containers that stay on our docks for 12 hours. They had shotguns in their cars. To do what? Who will steal steel? Or salt?
Before we disbanded the Ports Canada Police, each port, starting with Montreal, called in the RCMP and they created a committee with the RCMP, the Sûreté du Québec, the City of Montreal Police and Canada Customs. We said, ``This is what our policemen do. Tell us how you think we can be more productive, more profitable. Is there another way to provide the security required?'' We are not allowed to investigate. Thankfully, that is the responsibility of customs and the police. They said, ``You do not need all of these people around. What you need are cameras and a state-of-the-art system; you can hire a security firm and you can interface.''
That is just what we have done. We have memorandums of understanding with the City of Montreal and with customs, and they have access to the port. Whenever they decide to seize a ship, I am the last one to know. I want to be the last one to know. That is the way it should be. That is their job. We make it easy for them to do their job. However, the RCMP — and that is the irony of what you read in the papers about what is going on — now say you should have a Ports Canada police department. If the federal government wants to have it, so be it. The reason it was disbanded was commercial; we did not just abandon it or throw it away. We were preoccupied with crime and so forth. It was the opposite. The Ports Canada police did not have powers of investigation or powers of arrest. Now the government is looking at it again. The system was put into place in all the ports in Canada with the idea that if the ports can do the job properly by interfacing with other police, that is their job.
There has not been a container of marijuana or heroin found in the Port of Montreal. The RCMP told me that in the last three years the drug traffickers are using other ports and gateways. This is not official, but they said that is what is happening because organized crime know that the RCMP are there. They are visible and we make sure that we promote that fact.
To answer your question, yes, the federal government is a shareholder.
This country is the best country in the world. I have been fortunate to travel to many places like all of you. We have to take advantage of our strength, which is our water system and our great expanse with 35 million people, and concrete steps are being taken. I see what they are doing with Prince Rupert on the infrastructure side, on the rail side with CN and CP and on the road. It is a priority; it has to be a reality. It has to happen.
In Montreal, 70 per cent of our container business is not for the province or for the city. It is for Ontario; that is where the manufacturing plants are. It is for the distribution plants in New York, Albany and Burlington, and it is to reach the United States. That is why we have a land bank on the south shore. That was not done blindly, but after proper analysis. It is within our federal territory; it is half a mile to Highway 30, which now will be a reality to bypass Montreal, which is what should happen. It is starting to happen but it is taking too long.
Senator Tkachuk: You have mentioned decentralization, local autonomy, and improving the infrastructure. Can you give us some principles that we can take with us? I think you hit on two very important ones.
Mr. Taddeo: A key factor was when the law changed in 1999 to give us even more autonomy. Our board members are now more conscious, the governance is there, and we know we have to make profits and we make sure we do while remaining competitive.
Senator Tkachuk: I am from Saskatchewan. Does the Port of Vancouver ever phone you to get your advice on creating labour peace?
Mr. Taddeo: We are two different worlds.
Senator Tkachuk: What you described to me would be heaven on the West Coast.
Mr. Taddeo: Labour trouble is a reality worldwide. When the longshoremen decide they will get stubborn, they will. As you know, they all have job security, like pilots.
Senator Phalen: I am not sure where to begin, being the poor cousin from Nova Scotia.
You do not believe that these large Panamax ships will affect your port in Montreal?
Mr. Taddeo: Not at all. They have not and they will not in the future because they do an around-the-world service.
Senator Phalen: Are the largest ones on stream yet?
Mr. Taddeo: The 8,000 TEU ships are being used and the 12,000 TEU ships are out.
Senator Phalen: Will the St Lawrence Seaway handle 8,000 TEU ships?
Mr. Taddeo: No, the Port of Montreal cannot handle those. The seaway is even less able to handle them, as it has only 27 feet or nine metres of water.
Senator Phalen: What is the limit for the seaway?
Mr. Taddeo: The seaway does not handle any container ships. The ships stop at Montreal, where we can go to 5,000 TEUs. We are in a niche market. The bigger ships deal mainly in Asia; they are doing what is called around-the-world service. We are not now and never will be in that game.
Senator Phalen: Witnesses before this committee have suggested that there is a need for inland terminals to ease the congestion in Vancouver and Prince Rupert. Do you see a need for that in Montreal?
Mr. Taddeo: Inland terminals already exist in Detroit, Toronto, Chicago and outside of Montreal.
Senator Phalen: Where are they outside of Montreal?
Mr. Taddeo: In Côte Saint-Luc and along Highway 13 where CN is, and now CP is building a new facility in Rigaud, maybe 35 miles west of Montreal. They bought land and they are looking around. The big thing for Montreal is that the inland terminals are where you want them to be. They are in Vaughan near Toronto, in Detroit and in Chicago. In Montreal, most of the business for the local market is done by trucks, not rail. The containers pass by the Port of Quebec and Quebecers look at the container ships and dream they will handle it one day but they will not. Then the cargo goes back to the City of Quebec by truck.
Senator Phalen: We have heard that to enable Canadian ports to take full advantage of the increase in container traffic, the federal government needs to focus on cabotage rules, tariffs, security restrictions and the gateway concept. What changes in federal regulation would most benefit the Port of Montreal?
Mr. Taddeo: We already have all of the things you mentioned. We have created a council to look at the St. Lawrence-Great Lakes trade corridor project. I am a member of that council, which is chaired by Madeleine Paquin. That corridor has been a gateway for the last twenty years.
However, few people realize that the seaway is closed for three and a half months a year. The container ships do not now and will never go on the seaway. The Port of Montreal put an end to the primacy of seaway. The seaway handles mainly bulk. In its heyday the seaway handled 80 million tonnes of goods including oil, minerals, and grain. Today it handles 40 million or 45 million tonnes. Some people think the future is short sea shipping, that the seaway will be a gateway and we will take the containers off the ships in Montreal and put them on barges and move them to Toronto, Detroit and Chicago by the seaway. However, that was tried and failed. That is why Montreal became the hub that it is. First, the shipping lines said that using the seaway was too costly, and it is closed in the winter. Instead, the railways told the importers and exporters that they could have a deal and for 12 months. Second, it was too costly to move a container. If you were to do it by barge out of Montreal and ship a container to Chicago, it would take 120 to 130 hours, compared to 33 hours by train.
Our biggest customers in Detroit are Ford, Chrysler and GM — just-in-time inventory. We bring in knocked-down auto parts from Stuttgart to Montreal that end up in either Detroit or, believe it or not, New Mexico through the Port of Montreal. Few people realize or understand that.
That is the reality. The seaway is there and it could help, but it would be mainly the cabotage. It would be domestic; it would not be the heavy containers. On the cabotage, you have Oceanex, which deals with Newfoundland, Montreal and Halifax. Of course, the ships are fully loaded with container goods when they go to Newfoundland, but they come back empty to Montreal.
Senator Phalen: If the larger ships come into Halifax, would it be an advantage to Montreal if the freight were broken down at that point and short sea shipped to Montreal?
Mr. Taddeo: No, not at all. That is what I am saying. The shippers will not do that because it is not cost-effective in terms of dollars or time. The ships that go to Halifax never come to Montreal; they go to New York. New York is deepening its channel. Shippers are saying, ``Why service Ontario out of Halifax when we can do it out of New York? CP has a rail connection into New York.''
Senator Phalen: Is it not true that New York is silt and even with dredging will keep filling in, making the port unable to take the larger ships?
Mr. Taddeo: New York is taking them now, sir.
Senator Phalen: Is New York taking the 12,000 TEU ships?
Mr. Taddeo: No, not the 12,000 TEUs.
Senator Phalen: That is what is coming on stream.
Mr. Taddeo: Yes, I know, but there are only three coming on stream. Ships of 7,000 TEUs and more represent 8 per cent of the total current fleet. Those bigger ships are going to the ports on the West Coast, like Vancouver, Los Angeles and Long Beach.
On the East Coast, they are going to Hampton Roads, not too much to Baltimore and some to New York. We see a movement now to Savannah and Charleston. Charleston is becoming a major hub. They have created a rail link into the U.S. Midwest to handle the commodities on those bigger ships.
[Translation]
Senator Dawson: In 1979, I was a member of the Transport Committee when we debated the issue of the Cast terminal between Quebec City and Montreal. I entirely agreed that centralizing containers in Montreal was a logical decision. Moreover, the success of the Port of Quebec today is attributable to that.
Which leads me to tell you that that was somewhat the spirit that guided us. I hope that our purpose is not to put the Port of Halifax in competition with the Port of Prince Rupert or that of Montreal. In the spirit of containerization, we wondered what the West Coast, Central and East Coast ports would need so that we could assist them. Earlier you talked about potentially subsidizing capital to expand certain ports, whether it be on the East Coast or on the West Coast. That is what we want to talk about. In my mind, it is very clear — even if the people from the East and West tease each other — it is competition with the United States and the growth that will happen with Asia. As you admitted, the gifts that come through Asia are your objective.
We are going to Vancouver and Prince Rupert in three weeks, and our purpose is to help them expand that market. I see that you are monitoring the committee's proceedings very closely. As the doctors say, ``Above all, do no harm.'' Keep monitoring what we do and what we say, and, if you think that we are headed in the wrong direction, do not hesitate to intervene directly with the committee. You can do business with me if you want, and please be assured that we are here to defend your interests collectively, not to choose between the East Coast and the West Coast.
Asia for you is very clear. It is not a market in which you are competing, either with Halifax or with the West.
[English]
Mr. Taddeo: You asked about the tariffs. Back in 1991, because we wanted to encourage the use of Canada as a gateway to Europe, the Port of Montreal introduced a special tariff of $1 per tonne for containers that would be drop- shipped in Vancouver, railed to Montreal or Halifax and sent to Europe. It did not work because it was too expensive.
[Translation]
Senator Dawson: We have been told on a number of occasions that Halifax is operating at 40 per cent under capacity, if I am not mistaken, and that, before developing elsewhere, we should fill up Halifax. Have you yourselves assessed your under-capacity? Or what opportunity do you still have for expansion as opposed to the arguments that come from other ports?
Mr. Taddeo: That is still a major issue in Montreal. I showed you the productivity figures earlier. If we had normal productivity in Montreal, we would have no more room for traffic. That is why we bought the reserves in Contrecoeur in 1989, when Ronald Corey was chairman of the board — with André Gingras, Bernie Finestone, names that you are familiar with, because I had told them: we have to prepare for the future. One day there will be no more room on Montreal Island. There is so much economic, socio-economic and environmental pressure. You are here, we love you, you are bothering us. It is a little like Gerry Kramer's book on Vince Lombardi.
[English]
It is a love-hate relationship. We used to love to hate Vince, but we played for him. They played with broken ankles and broken toes.
[Translation]
It is a little like that in Montreal. We are bothering people, but we are important for the economy in Montreal: there are 18,000 jobs, economic impact and so on. The study we are conducting is to optimize the operation of our terminals with a space of five additional hectares. That is all we have left on the island for a container. In my mind, the day will come when, whether we like it or not, a railway company, a ship builder, a stevedoring company will go to Contrecœur and build the necessary terminals there.
So Montreal is still here. There are places on Montreal Island where we could also expand. Mr. Drapeau told us, ``I will give you Bellerive Drive any time.'' The BAPE ruled in 1983 that we could not touch it. Perhaps one day. Things can change.
We want to cooperate, but there is increasing pressure on port infrastructure located in the heart of the city. That is our major fear. In our case, it is containers. There is a major debate in Montreal on the traffic to Newfoundland and on investment that has been made. They tell me, ``Mr. Taddeo, you cannot handle elsewhere.'' People tell me that. That makes no sense. We do not believe that we cannot handle elsewhere. We have conducted studies, we have spent a million dollars. I am not the one deciding. I have experienced people around me. Raymond Lemay, Yvon Lamarre and Sam Elkas were there. They are not minor players. They said that this infrastructure had to be protected. So, in our view, within eight years, we will have reached our full capacity on Montreal Island.
[English]
How can we overcome that if we do not have any more room on the Island of Montreal? You overcome it by putting in more cranes and more people, but then you are talking costs.
The beauty of our system is that ideally, if you go beyond 250 metres, you get into a double handling. Then it is too costly and too slow. However, we have that in Montreal so we have taken advantage of our smallness.
I was Chairman of the International Association of Ports and Harbors, the first Canadian to hold that post. I am proud of that, but when they came to Montreal in May 2001 and saw our port, they could not believe it — that ships came in 1,600 kilometres from the ocean, unloaded, handled their business on those little spaces, reloaded and moved on.
[Translation]
That is the situation for Montreal, and that is why we bought a reserve on the South Shore. Whether it is Montreal or Contrecoeur will not trouble a person who is exporting from Stuttgart to Detroit.
Senator Dawson: Do you see Contrecoeur as an ``inland'' facility or simply as an expansion of the port?
Mr. Taddeo: Contrecoeur is for the future; it is expansion. It is not a move. There are still some Montrealers who think we should move. This is not a move. On the contrary. Another factor on Montreal Island is that we serve the local industries: salt, sugar, coal, Molson, molasses, steel mills and so on. All that is on Montreal Island. People have told me over the years: ``Dominic, move all that to Contrecoeur, and we will build condominiums, parks.'' That will require bridges and that will cost a lot of money.
Senator Meighen: I very much liked your presentation. As a Montrealer by birth, I no longer recognize my port. In the good old days, the port hardly operated at all.
[English]
I was on the Standing Senate Committee on National Security and Defence four years ago when the national ports police was disbanded. The police told us that they had no presence in the port, that theft was rife, that crime families ran the place, that they had no control. I arrive here tonight and I find it is paradise.
You have an integrated policing system, I gather. Do they patrol the port? Do they inspect on a spot basis or a random basis in the port? Have you any statistics demonstrating the decrease of theft and pilferage?
Mr. Taddeo: I am glad you asked that question.
Senator Meighen: I thought you would be.
Mr. Taddeo: First, we go back a bit to the journalists, the media. As a matter of fact, I was personally disappointed that that committee did not come and meet with the port. I will use that word; I will not let my emotions get carried away. They visited Vancouver and Halifax. They never came to Montreal.
Senator Meighen: Who did not?
Mr. Taddeo: The Standing Senate Committee on National Security and Defence.
Senator Meighen: We were in Montreal.
Mr. Taddeo: Yes, but not at the port. Anyway, the same police that told you we were rife are the ones who said that we do not need a police force. I was dying to tell somebody, but nobody asked me. Now I can say it. The police are the ones. With Ron Huntington we created committees made up of policemen who are the experts: RCMP, City of Montreal, Sûreté du Québec. They told us that we did not need those guys, that we could do it. That is their job, with all the connections.
I wanted to answer the other question now. The question was asked at the Port of Montreal; I know the answer that it is a holistic approach sounded like something from church.
In Montreal, customs inspect 4 per cent to 5 per cent of the import containers. It is their call. We have no say. We handled 1,300,000 containers last year and 600,000 are imported.
Senator Meighen: That is a large percentage. Do you mean destuffed?
Mr. Taddeo: No, they call the shots. They come in and say, ``We want to inspect that container,'' and they strip it, or they pass it through the VACIS machine.
Senator Meighen: You said 4 per cent to 5 per cent?
Mr. Taddeo: Yes.
Mr. Bédard: That is for both activities.
Mr. Taddeo: Our statistics show that in Montreal, from 1996 to 2006, the number of stolen containers is as follows: 1996, one; 1997, one; 1998, one; 2000, four; 2001, one; 2002, one. Since 2003, no containers have been stolen. When that report came out, André Arthur, who is now my deputy, was on the radio. Do you know what he said on the radio? ``Do not ask yourself why there is organized crime in the Port of Montreal. The head of the port is of Italian origin.'' That is a true story. I sued him. You had better believe it. He backtracked and then the lawyers got into the act and they told me, ``Dominic, what you are asking for, an apology, is too strong.'' I said, ``No I want an apology or I will sue.''
Now, customs handles seizures, as you know. We have to make sure these people have all the necessary tools, and they have. They have access to our port 24 hours a day. We said to the RCMP, ``Come into our building.'' They have access to our cameras. They can do what they want, when they want, how they want. We want them to do it. However, we also have obvious security people and inspectors in the port. As with dangerous goods, we have to issue the permits. We work closely with customs and the police.
There were four import seizures in 1996, two in 1997, eight in 2000, one in 2001, two in 2004 and three in 2006. We also have police interventions: 17 in 2003, 11 in 2004, 2005 and 2006. For opened containers, because of the kids on the railway tracks, there were 18 last year, compared to 36 in 1995, so that has decreased. In 2006, there were four instances of open containers at interchanges.
Those are the statistics, and we work closely with customs and the police. Again, we were the leaders vis-à-vis the things we put into place, and I say that with all humbleness.
I come back to what has been put in place in Canada regarding access to our terminals. We did not want to be difficult or different and argue with lawyers and so on. We said to Transport Canada, ``Wait a minute. We have a board. You have given us jurisdiction over all this infrastructure. Our board has a responsibility to make sure that all the environmental, operational, health and other rules of Canada are respected, so why not security? For security, come through the board.''
[Translation]
We will act reasonably.
[English]
We will make sure that our terminals respect the ISPS code; we have done that and it has worked beautifully.
[Translation]
Senator Meighen: I congratulate you for that because the proof is there.
Mr. Taddeo: People always get the wrong impression, and that is one myth I wanted to talk to you about.
[English]
For us, it is an insult when you say that crime controls the port. It means that I, my people and my board members are all a bunch of crooks.
[Translation]
Senator Meighen: I knew that you wanted to talk about myths, so I gave you the chance.
Mr. Taddeo: Thank you very much. That is one of the myths.
Senator Meighen: I have one final question. How did the employees react with regard to the background check?
Mr. Taddeo: Ah, but it has not been done yet. That will start in December.
Senator Meighen: Then how will they react?
Mr. Taddeo: Well, that is the issue. You asked the right question. The longshoremen and checkers have convinced I do not know who that we should not request background checks from everyone, just from people in key positions. They say that organized crime is concerned with longshoremen, but the longshoremen, who are supposed to have a criminal record, will not be inspected. That is a dichotomy in our view. We think that the checks should be done from top to bottom, like in the United States.
[English]
First, that is not what is being promulgated. Second, Transport Canada has come out with what they call zones: zone one and zone two. A port is an airport. In the Port of Montreal, for example, this is a terminal. On the terminal you have a substation, reefer containers, container cranes and trucks. Longshoremen go from zone one to zone two. They said, ``This guy can go to zone two but not to zone one.'' As I said, a port is all one zone. We explained that until we were blue in the face. I think Senator Meighen understands that the longshoremen are assigned every day to different positions. They do not always go to the same place. They can go one day to a passenger ship, one day to a grain ship, one day to a bulk ship, one day to a salt ship, one day to a sugar ship. We said that to us the whole infrastructure, the whole terminal, be it in Halifax or in Vancouver, should be subject to clearance procedures. As I said earlier, we have always collaborated and cooperated and we will continue to do so. We expressed our case. We said we want to keep pace with the Americans. To us, everybody should be cleared. However, that is not what is being promulgated.
We have the letters to substantiate our position. You can see the discussions we have had. It is the same thing with the installation of the radiation portals that are being installed. We have had all kinds of debates with customs. The containers coming in are inspected for uranium. It will be controlled out of Ottawa. There will be someone sitting in an office and the lights will come on. Three containers come in: container A; container B, suspicious; container C, stop the show. They say container B has to be left on our docks. I have a responsibility to protect people and safety. I do not have a responsibility to inspect. That container you said is suspicious should be off my docks, so they should assume the responsibility. We got legal advice. We sent them a letter last week, which I have here. We said, ``Fine. You say you want to leave it on our docks. It is your responsibility.''
I am not being difficult. I am just making sure that I, as a CEO, and my board, in good corporate governance, know where we stand and where they stand. If something goes wrong, we have expressed our point of view, but we go along with the rules.
Senator Tkachuk: After the 2004 security report was published, did the board of directors of the Port of Montreal send a letter to the chairman of the committee asking the committee to clarify the record and attempting to clarify the record?
Mr. Taddeo: No, we did not. The reason we did not is because our records show that to us that problem did not exist. Those people told us there was not a problem. I go back to the Ports Canada board under Ron Huntington. The vice-chairman was a person well known in Montreal, Bernie Finestone. We came to Ottawa, and he said to the Ports Canada police, ``If our port has criminals in the port, I want to know who they are. I have a responsibility as the vice- chair of the board.'' We were told, ``It does not concern you. It is our issue. We are not telling you as a board member who is a criminal and who is not. It is our issue, not yours. Your job is to make sure that you use this infrastructure to promote Canadian business, not to worry about security and crime. That is our job.'' That is what the law says. The question was raised. Perhaps we should have invited the committee to come.
That report also says that Agriculture Canada had a free hand in all that and that they were part of the port. We have nothing to do with them at the Port of Montreal. Again, it comes back to myths and image. People talk about the longshoremen of the Port of Montreal, the trucks of the Port of Montreal, the crime of the Port of Montreal, but the Port of Montreal is a facility and many people are involved.
Senator Munson: Your presentation was exciting. I cannot believe, though, that there is not one thing wrong somewhere within the Port of Montreal about which you are really angry. It cannot be all good. I am just curious; there must be something you want to get off your chest tonight.
Mr. Taddeo: Of course we have irritants.
Senator Munson: We can talk about those. Within this huge, competitive world, you described Montreal as a niche world, and then there also the big new world of Panamax. You called yourself a strong federalist and said that this is the best country in the world. What is Halifax's strength?
Mr. Taddeo: Halifax has always said that on the great north circle route they are a gateway, and they are. Hopefully they now have the opportunity to attract some business from India. I was with Karen Oldfield, CEO of the Halifax Port Authority, in China two and a half years ago. She told China Ocean Shipping and Orient Overseas Container Line that they can get to Halifax as easily as they can get to Vancouver, and she is right.
Senator Munson: Are you saying that there is room for everybody, that you are competitive but there is room for others?
Mr. Taddeo: Of course.
Senator Munson: Given the bigger ships from India, would it not be logical for the Port of Halifax to expand?
Mr. Taddeo: That is what they are banking on. They have just opened an office in India, and if I were there I would do the same thing. They are banking on India's being the next big growth country, through the Suez Canal, and they will be able to take advantage of that. However, the factors of the marketplace are such that their job is to go.
Canadian Tire is opening a big distribution centre in Halifax with Consolidated Fastfrate, and the reason is that they are attracting and picking up some of the business coming out of Asia through the Suez Canal. We are as well, for that matter, because some of that business is being drop-shipped in a port in southern Italy called Gioia Tauro, and the ships that can come to Montreal go there and bring the cargo through Montreal, not only for Montreal but also for the United States.
Halifax is a deepwater port open 12 months a year, but it is in a big competition. Its big disadvantage is that is it just too far from the markets on the inland side. That is what I see. I have always seen that. I believe the facts speak for themselves. CN committed to Halifax, as you know. We told CN to come to Montreal because we are closer, faster and more reliable, but they said, ``No, Halifax is our port.'' When the shipping lines that make the decisions start losing money, they start looking at alternatives. Now they can go to New York; they service Ontario out of New York, as well as Montreal.
Bernie Finestone used to say to me that CP is not our friend because they can compete with us out of New York. I told him I knew that but it was part of the game of the business. That is how it works.
We know the bigger ships are out there as well, but we are not in that market. Even the Asian business is coming through the Panama Canal and being drop-shipped to Freeport, or through the Suez Canal and being drop-shipped in Gioia Tauro.
We will not have rapid growth there. Our strength will continue to be Europe, the Mediterranean and the Eastern block countries. The strength for Halifax will hopefully be to take some business away from the West Coast ports and India. However, it is there and it is going to service the country and it will help the country but it is something for them to do. It is their challenge.
Senator Munson: I understand you are retiring. Why not go work in Halifax?
[Translation]
Mr. Taddeo: No, I am a Montrealer, a Quebecer, a federalist and vive Montréal!
[English]
I have nothing against Halifax. They do not have a hockey team. We have a so-so hockey team.
Senator Munson: That is what I thought. You guys looked like the starting front line for the Montreal Canadiens.
You believe in this niche market and that the ships the size we are talking about, 5,000 or 4,000 TEUs, will still come to Montreal year in and year out for years to come. As a committee, we are working in this big world of Panamax. I think we had forgotten what you have told us tonight about this other world that will still exist from your perspective and your experience. Is that right?
Mr. Taddeo: Yes, the facts are here. Even 56 per cent of the ships on order, the new ships coming in, are of the capacity that can come to Montreal. Of the newer ships being built, only 22 per cent are over 7,000 TEUs. In Montreal our strengths are Europe and fast, rapid, reliable service. The shipping lines are living with the reality and they are widening the ships so that they have more profitability.
Everyone is talking about the post-Panamax ships, but there will not be that many on the market. In any case they are for the slower trades and to go to the outer reaches and to the deep-water ports. That is why we are not concerned.
I am not blindly saying that we are not concerned. We have done studies and had meetings with the shipping lines and the commitment is there. Hapag-Lloyd has a 40-year commitment in Montreal. That line has signed a contract and guaranteed 2 million tonnes of business for 40 years. The facts speak for themselves.
CP has signed a 25-year contract deal with Hapag-Lloyd and with the other major shipping lines using Montreal. Of course, contracts can be broken, but they did not put all those people, all that equipment, all that infrastructure into place to want to disappear from the Port of Montreal. The hinterland will remain and will continue to grow.
Senator Munson: Are you satisfied that the Port of Montreal gets its fair share of the political pie? Politics are played throughout governments at all times, whether in Halifax, Vancouver, Quebec City or Montreal.
Mr. Taddeo: I am, and so is my board. We have never complained. We have always stated our case and then lived with reality and made adjustments. However, there are certain groups of people that do not think so. I have been told by certain people that if we were a sovereign country, Montreal would be better off. I tell them to go ahead and keep thinking it. I have said to them that the federal system has never hampered the Port of Montreal.
[Translation]
That is rubbish. It is not true.
[English]
When I give those facts, I have even had the Bloc Québécois come to see me. I am asked the same questions and I say no.
[Translation]
It is there, and it is growing.
[English]
What is the problem? We even have had the dilemma of me having to personally go to the U.S. in 1976 to talk to importers and exporters. They were being told not to use Montreal, that Quebec would be separating, and that they speak only French. I had to tell Americans that we were okay. Some people think that, but I do not think that and neither does my board.
Over the years we have stated our case. We have had disappointments but we have carried on. We are happy. We are successful. We would like to have more freedom.
You were asking about how we invest our money. Under the new law, as you know, the pension fund we now manage is our pension fund and we can invest it as we wish. However, the Canada Marine Act limits us as to how we can invest the monies generated from our profits, the $100 million that we have. They money is basically in bonds, which is okay. It is safe and secure, but we are not taking full advantage of that commercial aspect.
Another irritant is that we have to pay the rental costs for customs. We pay $450,000 a year for the customs offices. Why should we pay? The RCMP in our building pay us rent but for customs they threw the law at me. I objected but someone in the Ottawa said that we have to provide a facility and pay for it.
We pay for the maintenance dredging into the Port of Montreal. We argued against that until we were blue in the face. Every year we have to dredge between Quebec City and Montreal. It is silt. Trois-Rivières does not pay, Sorel does not pay, Bécancour does not pay, and Quebec City does not pay.
[Translation]
But we pay $50,000 a year in Montreal.
[English]
That is $1 million right there. The fact that we now pay on gross revenue charges instead of dividends costs us another $300,000 or $400,000 a year. Now we are up to $1.2 million and we pay it.
These are irritants, but that is realty and that is our contribution, as I tell our board, as a good corporate citizen. We will live with it, although it is not fair. We were told categorically by Transport Canada that we have to pay. We deepened the channel at our expense. It cost us $9.2 million to deepen the channel from 36 feet to 37 feet. My board said that we would have a loss and then the minister would have to come in. I said no. To get to our infrastructure that we built, which cost $425 million, we need to have that channel. The shipping lines committed to building wider ships in order to come to Montreal. We amortized the cost over 25 years.
Those are steps we have to do. We have to be innovative. I am proud to say that the federalist system never really injured us. That is why I am a proud Canadian and a proud federalist. There have been arguments along the way, but that is Canada. We have to argue a bit.
The Chairman: Are there any other questions, senators? The presentation was quite clear.
[Translation]
The Chairman: Mr. Taddeo, we would like to thank you for appearing and for your enthusiasm.
Mr. Taddeo: The pleasure was mine.
The Chairman: We will be travelling to Montreal as soon as possible to see what you are telling us.
Mr. Taddeo: I made the invitation through Senator Mercer. We will be pleased to give you a tour of the port and to show you our model and the infrastructure.
In closing, I would like to talk about the myths because a number of Montrealers are here this evening.
[English]
Please let me go over the myths. I made a speech two years ago at the Chamber of Commerce and I talked about the myths of the Port of Montreal. In French, the myth is about ``boules à mites'' — mothballs. We had a canister of peppermint candies that looked like mothballs and we gave one to each of the 800 people attending as they arrived.
The first claim is that the St. Lawrence Seaway would kill the Port of Montreal. When the system was centralized in 1936, the National Harbour Board was taking power out of our hands and the port survived. Then the seaway was built and the board of trade and the chamber of commerce said that that would kill the Port of Montreal, that the ships would bypass it, which has not happened. Then the deregulation I talked about happened, and the megacontainer ships began, starting with 1,000 TEU ships. We were told to forget it; they would have to build a terminal in Halifax.
With respect to navigation on the St. Lawrence and St. Lawrence Seaway, people confuse us all the time. They see me in the winter and think that we are sitting on our bums doing nothing, that the port is closed. No, I just gave up the gold-headed cane. It is a tradition. It means that the port is open.
The Port of Montreal and the old port are different things. We are feeling a lot of pressure to give up port infrastructure in the inner harbour. I understand we must collaborate, but I am being accused of being too tenacious, obstinate and close-minded. We have a mission. There is business on Bickerdike basin. We spent $15 million to upgrade that terminal. Oceanex spent $60 million and for the kind of ship that can fit in that basin. Empire Stevedoring spent $4 million to build cranes to fit into that terminal.
The shipping industry is a vestige of the old economy. I think I have indicated that we are not. We do not care about security. It is not true that we have absolute power, that we can do what we want, when we want and how we want.
After the Senate came out with the report, we had a big press conference. The media said, ``Don't tell us you cannot do anything about organized crime on the port.'' Come on. I told them we do not have investigative powers. It is not our job. It is the policemen's job, and we give them the tools to ensure they can do their job properly.
Then people think we are a burden on the taxpayers. That is still a myth. To this day, the politicians in Montreal believe that myth.
[Translation]
``Mr. Taddeo, the money comes from Ottawa. What is your problem about giving us more in taxes?''
[English]
With regard to the tax, because we are not a privatized corporation, we make sure we pay the city our fair share of taxes, but not a penny more. They would like to see more.
As a matter of fact, the Federation of Canadian Municipalities is coming to Ottawa on Friday. They will be asking for more money from the federal government, which is okay. They want to be helped, and they are seeking assistance from the ports.
With respect to the competitive aspect of shipping lines in this country, at some point you reach that break-even mark. Fortunately for Montreal, with all the studies we have completed, even with the dollar increasing or decreasing, over the years we have created a confidence among the shipping lines, importers and exporters that they can come through Montreal. I cannot see that confidence in our reliability disappearing.
These people are signing confidential and long-term contracts. That is why I am so confident, optimistic and enthusiastic, not because everything is rosy. We have many challenges and stresses. We have to worry about several things, but our biggest concern right now is saturation.
I am confident about the studies we are doing and the partnership we have created with the stevedoring companies. They invest the money. The cranes in Montreal cost $10 million each. They spend that money.
I just came back from Hamburg, and I will be going back again and then to Geneva. I talked about our incentive plan. When we introduced it, we were accused of not knowing what we were doing. At that time, I explained to Mr. Mazankowski that 50 per cent of our container business back in 1986 consisted of 5.2 million tons or 500,000 containers. Fifty per cent goes to the United States and 50 per cent goes to Canada.
Again, with all due respect to Halifax, I explained to him that traffic that goes to the United States out of Montreal will be lost to Canada. It will not go to Halifax. We showed him the facts. We spent big money completing in-depth studies with experts in the field, and we gained the confidence of the shipping lines to show us their real costs. Not the published figures, but the real costs.
[Translation]
How much does it cost you to go through Montreal, compared to New York or Baltimore?
[English]
That is why I came back to the question of infrastructure. It is crucial for the success of this country. The more we can do, the faster we can do it and the better we can do it, the more we will all be winners. We are and will continue to be an exporting nation. We are a major gateway.
[Translation]
The Chairman: Thank you for your visit and à bientôt.
[English]
Senators, you have all received the letter I sent yesterday or today regarding the trip to Vancouver and Prince Rupert. Please let us know before the end of the week if you will be available during the week of March 12 so we can make arrangements.
The committee adjourned.