Proceedings of the Standing Senate Committee on
Transport and Communications
Issue 8 - Evidence - February 21, 2007
OTTAWA, Wednesday, February 21, 2007
The Standing Senate Committee on Transport and Communications met this day at 6:18 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.
[English]
The Chairman: Today, we continue our study on the current and potential future of containerized freight traffic.
We are pleased to have as our witness tonight from the Government of Nova Scotia, the Honourable Angus MacIsaac, Deputy Premier and Minister of Transportation and Public Works; and David Oxner, Director, Gateway Initiative, Department of Transportation and Public Works, Nova Scotia.
Mr. MacIsaac, please proceed.
Hon. Angus MacIsaac, M.L.A., Deputy Premier and Minister of Transportation and Public Works, Province of Nova Scotia: Thank you very much, Madam Chairman and senators. I appreciate the opportunity to present before the committee this evening.
I will speak with you about great opportunities ahead for trade in the east — both the Far East and the East Coast of Canada. The Far East is not as far away as we once thought. Canada's East Coast sees the enormous growth in Asia as an opportunity of a lifetime for a Canadian gateway through Nova Scotia. Transport Canada defines gateway as a geographic area through which cargo and/or passenger traffic flows via a variety of modes on its way from origin to ultimate destination.
As we all know, Nova Scotia has served as a gateway for Canada and North America for a long time. The early settlers to Canada came through Nova Scotia. During the two world wars, Nova Scotia played a key role in sending supplies and troops to Europe, and welcomed women and children who sought safe refuge from the war. Today, the ocean continues to play a significant role in many communities around the province.
Nova Scotia handled more than 3 million air passengers and more than 200,000 cruise passengers in 2006. The province is strategically positioned to increase capacity with new U.S. pre-flight clearance and initiatives under way with the Atlantic Canada Cruise Association.
Nova Scotia has the deepest North American Atlantic coast container port, and is able to accommodate the world's largest container vessels. The Port of Halifax has two transshipment terminals with 900,000 20-foot equivalent units, TEUs, and can expand to 1.2 million TEUs. The province has excellent short sea shipping to Newfoundland and Labrador, New England, St. Pierre and Miquelon, the Caribbean, central Canada and Cuba. CN provides twice daily, double-stacked rail service to central Canada and the United States markets, and has excellent road links as well.
From 1991 to 2001, the Port of Halifax grew at the same rate as other North American ports. From 2001 to 2005, our growth has been slower, due to market consolidation and the fact we are at the end of the line when it comes to Asian traffic moving to East Coast ports via the Panama Canal. In terms of volume, we are currently a small player with room to grow. Halifax has a diverse distribution in its matrix mix. Our eggs are not all in one basket or, in this case, in one market.
Canada's transportation system moves more than $1 trillion of goods each year, or $2 million a minute. Transportation is one of the country's largest economic sectors and employs a workforce of more than 800,000 people.
Growth in global trade is being driven by Asian countries. This growth is largely through container traffic. Five of the busiest ports in the world are in China. Indicators of the size and power of the Asian region include large ports, buildings, electronic manufacturing facilities and a quarter of the world's individuals with financial assets in excess of $30 million U.S.
Worldmapper is a program that takes data and then shapes or rescales the world based on the information. This map of the world is based on geography. If we pay attention to North America, the yellow mustard colour of India and the green of China, let us use this map to show why the world is changing and having an impact on Nova Scotia as a North American gateway.
Look who is manufacturing computers. If we looked at this map five years ago, it would have shown a different picture. Who is buying those same computers and how are they transported to North America? They travel via containers. The entire world combined handles one third of the volume of containers handled by China.
Territory size shows the volume being loaded and unloaded. From 1995 to 2001, Asia replaced Europe as the world's number one trading region. Since 2001, Asia has dominated world trade. What does this change mean for Nova Scotia and for Canada?
Nova Scotia has two key federal priorities and gateway is one of them. Our government sees the huge economic opportunity gateway can have in our province, the Atlantic region and Canada. One of our key objectives is to ensure the federal government understands the national significance of Nova Scotia's role in the global supply chain and the trade competitiveness of our country.
Atlantic Canada is a small local market. We need to be cost- and time-competitive with key Canadian and United States markets. As mentioned previously, the Port of Halifax has a good market mix. It services several international markets and is competitive when it comes to moving goods into central Canada and the central United States.
For Canada to remain competitive on the world trade stage, the nation needs two front doors for Asian traffic. We have the Pacific. We need the Atlantic for Asian traffic travelling through the Suez Canal.
Nova Scotia's vision is to create a gateway for the economic benefit of the province, the Atlantic region and Canada as a whole. Last May, the province hired CPCS Transcom and Drury Shipping Consultants to provide expert advice on the gateway opportunities for Nova Scotia. The consultants identified a number of measures that need to be taken to capitalize on our gateway-related opportunities. They described what the province's role should be in what is primarily a private-sector-dominated area of activity. I want to underline that point — that the private sector will drive all this activity.
They told us there is a gateway-related opportunity around an air cargo facility at the Halifax International Airport, and that the development of the U.S. pre-clearance services at the Halifax Robert L. Stanfield International Airport is a major gateway asset.
In terms of crews, there are opportunities around the home porting of smaller niche, European-based cruise ships in North America. However, by far the most significant opportunity for Nova Scotia in the area of gateway is container traffic, which will be transported from Asia to North America via post-Panamax ships travelling through the Suez Canal.
Our consultants recommended working with the Halifax Gateway Council and the Halifax Port Authority to develop Halifax's full capacity. They also identified the need for a new greenfield container terminal in the future. Currently two private sector groups are actively exploring opportunities around greenfield sites for container terminal development in Nova Scotia.
From a strategic point of view, we see these initiatives as private sector-driven, with the province playing a supporting role. We also see the need to position gateway in the national interest.
What is driving this opportunity? Nova Scotia's geographic position makes us a first-in and last-out port on the Suez route. The growth of the Indian market is key. Congestion on the West Coast ports and capacity constraints on the Panama Canal are directing traffic to the Suez Canal, as shippers are concerned about the reliability and predictability of their supply chain.
Currently, 78 per cent of Asian traffic travels to the West Coast of North America; 21 per cent goes through the Panama Canal to the East Coast; and 2 per cent travels through the Suez Canal.
The Asian Pacific Foundation of Canada states:
A combination of factors, ranging from West Coast and Panama Canal congestion, importer risk aversion and larger container ships, is helping Halifax and other East Coast ports capture a growing share of North America's Asian trade.
It is anticipated that the Suez Canal percentage of Asia to North America container traffic will increase significantly over the next few years.
West Coast North American ports experienced congestion in 2004. Ships sat at anchor waiting for a dockside berth to unload. Containers were crammed on the terminals, and the rail and truck routes were clogged. The West Coast ports are located in major urban areas with little room for expansion. A number of changes were made to the ports to improve efficiency, but Drury Consulting predicts that congestion will recur within the next three years. This congestion will drive Asian traffic to the Suez Canal, as shippers look for predictable and reliable port operations.
You might ask, why not send more ships via the Panama Canal? You cannot, because the Panama Canal already operates at 91 per cent capacity. In August of 2006, 90 ships were backlogged and the canal found a way to turn this problem into a cash advantage. They have a daily lottery where ships can bid to move to the front of the line. In August, a container ship paid $220,000 U.S. on top of the other canal fees to move to the front of the line.
The puzzle is coming together: West Coast port congestion, Panama Canal constraints and the fact that the Panama Canal can handle only a third generation container vessel of 4,000 TEUs. There is one more piece to the Suez puzzle, which I will talk about shortly.
Halifax has a definite advantage when it comes to trade with India. We are closer. Larger ships carrying more cargo and lower fuel costs contribute to the Suez Canal advantage. With regard to India, here is a quote from the February issue of The Economist:
. . . if you measure things by purchasing power parity, India should soon overtake Japan and become the third biggest economy, behind only America and China.
The third piece of the Suez Canal puzzle is the commissioning of larger container ships. There are 287 confirmed orders for new, larger container ships on the books to be delivered by 2010. The majority are over 6,000 TEUs. Remember, the Panama Canal can handle only 4,000 TEU ships. Drury Shipping and Consulting predicts that the majority of these ships will be deployed on the Suez route.
We now have six generations of ships with the launch of the Emma Maersk in August that can carry 9,000-plus TEUs. Container ships are becoming bigger. We need deep harbours and capacity to accommodate the new larger ships.
The Suez Canal has the capacity. Halifax, Nova Scotia, has both the capacity and the deep harbours.
Drury Shipping and Consultants say a number of factors need to be present to grow the Suez Canal traffic. As you can see, a number of these items are aligned and it is anticipated that the volume of Asian container traffic moving via the Suez Canal will grow significantly in coming years.
New York is a must-stop port of call. Eighty per cent of container cargo entering the port is consumed within a 300- mile radius of New York City. A massive dredging project is currently underway in New York harbour and is scheduled to be completed around 2009.
Nova Scotia's attractiveness as an international transportation gateway is expected to grow substantially as the Panama Canal reaches effective capacity, as West Coast North American ports become capacity-constrained and as the post-Panamax vessel supply expands.
We asked Drury to predict the timing around the Suez growth and the volumes Nova Scotia could anticipate. The consultants provided what they characterized as a conservative traffic forecast.
Currently, Halifax has spare capacity and we can grow without any infrastructure investment. What we need is assistance with marketing. We need senior public officials who are prepared to participate in trade missions to build awareness of Canada's Atlantic gateway to Asia. Our study identified a number of initiatives that need to be undertaken by the private and public sectors to take maximum advantage of the opportunity.
What is Nova Scotia's competitive advantage and why are we so interested in establishing a Nova Scotia gateway? We are well positioned because of geography. Nova Scotia is the closest North American port to the Suez Canal and we enjoy a first-in and last-out status on the Suez route.
The rail system serving the province has capacity to handle more traffic, and we have truck access to Atlantic Canada, Quebec, Ontario and New England.
We are congestion-free and have the ability to handle additional traffic now. Halifax currently handles 550,000 TEUs annually, with the ability to grow to 900,000 TEUs. We have not had a labour disruption in more than 20 years. Labour peace is a big plus with shippers and shipping lines.
We are cost-competitive with central Canada and the U.S. Midwest.
At present, over 75 per cent of Halifax container traffic is loaded onto railcars for delivery to clients in Central Canada and the U.S.A. Of this amount, 30 per cent goes directly into the United States. Shippers mitigate risk by using multiple ports to ensure reliability and predictability.
Take Consolidated Fast Freight, for example, a B.C.-based company that currently operates out of a temporary facility while their new facility is under construction in Halifax. The company unloads 40-foot Canadian Tire containers in Halifax. Their cross-dock operation then loads the Atlantic Canada freight onto tractor-trailers and the other goods are loaded onto 53-foot containers for either tractor-trailer or rail delivery to Quebec and Ontario.
This example shows the private sector taking advantage of opportunities in Asian traffic and the Port of Halifax.
Every time a container ship docks in Halifax, it creates over 3 person years of employment. These figures are for 2004, which show the Port of Halifax contributes approximately $900 million in economic activity and $259 million in wages.
Look how this economic activity benefits the three levels of government in tax revenue collected. Many other jurisdictions see the potential of the gateway and are spending millions and billions of dollars to take advantage of the opportunity. As mentioned previously, New York is working on a massive dredging and blasting project to ensure its harbour can accommodate the largest ships. The Panama Canal has approved a widening and deepening project worth 55 per cent of their total GDP. Canada must ensure it does everything it can to capture the business and maintain our standing in the global supply chain.
Transport Canada is the lead federal department on gateway. Finance Minister Flaherty in his document, Advantage Canada, stressed the important role of gateways in terms of national competitiveness. The document said there would be a separate fund for gateway. Previously, it appeared that gateway funding would come out of the Highways and Border Infrastructure Fund, HBIF. Transport Canada has identified what they call five lenses or criteria through which all future gateway and trade corridor initiatives must pass to receive federal funding. As Transport Canada puts it, each area must be completed with compelling analysis.
For Canada to take advantage of Nova Scotia's geographic location to capture Suez Canal traffic, we need to move quickly to target the opportunity. We need to engage the government of Canada fully through Transport Canada and the Atlantic Canada Opportunities Agency, ACOA. We need to develop the Atlantic gateway strategy with the other Atlantic provinces. We need an investment in marketing and infrastructure to lure the opportunity here and be ready to service it. Gateway is a hot topic with a number of strategic policy think tanks producing several gateway studies. In August of 2006, I hosted a meeting with the Atlantic ministers of transportation from PEI, New Brunswick, Newfoundland and Labrador. At the meeting, we agreed to work together and invite Transport Canada and ACOA to develop an Atlantic gateway strategy. An intergovernmental senior officials committee is now working on the development of such a strategy. We have also partnered with a Greater Halifax Partnership and the Halifax Regional Municipality to provide funding for studies on a trans-load facility and an inland container terminal. Both these studies have a number of strategic partners. As I said before, the private and public sector are fully engaged in this opportunity, as evidenced by the number of studies underway. Halifax has pursued gateway-related opportunities since the Booz Allen Hamilton study was commissioned in 1996. The Halifax Gateway Council was formed in 2003 by private sector businesses engaged in the transportation sector to bring strategic focus to Halifax gateway assets. The Halifax Port Authority and its partners have invested millions of dollars to prepare for the growth in the Suez Canal traffic. They have opened a sales office in New Delhi, and partnered with the 125-year-old Indian firm, Jeena and Company, as the port sees India as a key developing market.
Macquarie Bank Limited of Australia has recently purchased Halterm Limited container terminal in Halifax. Macquarie is one of the largest infrastructure investment companies in the world. Ceres Terminals Incorporated is purchasing two additional super post-Panamax cranes at a cost of $20 million, adding additional rail capacity and building a new truck terminal to improve turnaround times. Orient Overseas Container Line, OOCL, and China Shipping already call on Halifax with Asian goods travelling through the Suez Canal. Canadian National, CN, is a partner with the Halifax Port Authority and is examining the potential of building a trans-load facility in Halifax. Consolidated Fastrate Inc. and Armored Transport also operate trans-load facilities in Halifax. They have invested millions in the construction of new facilities. Transport Canada is currently developing a national policy framework document around gateways and trade corridors. Nova Scotia is following this development with keen interest.
Nova Scotia enjoys a positive working relationship with the Atlantic Canada Opportunities Agency, which shares our vision of the Atlantic gateway. ACOA has engaged in a number of initiatives, and currently is assessing the business case for the Atlantic gateway, which will address the key criteria identified by Transport Canada. The Province of Nova Scotia is committed and engaged to pursue this significant opportunity. We have assigned senior staff to work full-time on the gateway initiative, and we plan to add two more full-time positions to the province's gateway team within the near future.
Briefings have been held with senior Transport Canada officials and several other key public- and private-sector stakeholders. Nova Scotia is working with ACOA on the development of the Atlantic Canada business case project, and the development of an Atlantic gateway strategy. We will continue to champion the cause with both the private and public sectors, in an effort to convince key decision-makers of the significance of Atlantic gateway opportunity.
We will also continue to pursue the possibility of a federal financial commitment to the development of the Atlantic gateway. Planning is underway for the premier symposium on gateway to encourage the private sector around our vision for the Atlantic gateway. This event will take place in the spring. Premier Rodney MacDonald is expected to announce the establishment of a provincial gateway advisory council at this event. Nova Scotia will reach out to central Canada shippers who recognize the value of a Port of Halifax as we build support and momentum for the Atlantic gateway. Also, we are working on a marketing video to promote Nova Scotia and the Atlantic gateway.
Let me outline some of the challenges. Positioning the Atlantic gateway within the national interest will require private sector leadership. We are developing a regional strategy, which focuses on gateway infrastructure of national significance. The window of opportunity is narrow. Our competitors are working hard to seize the emerging opportunity and we need to move quickly to obtain a piece of the action. Early initiatives need to focus on growth strategies for the Atlantic gateway, and we need to continue to build regional support through the senior officials committee, which includes Transport Canada and ACOA. We must engage Nova Scotia stakeholders to ensure a focussed strategy. Nova Scotia must identify early quick wins to help seize the opportunity.
All the research points to the fact that the Suez Canal will emerge shortly as the third all-water route. The question is, does Canada want a share of this business? I can tell you that Nova Scotia will work with its partners to ensure that we do not miss the boat.
In closing, the Atlantic gateway represents an opportunity of historic proportions for Nova Scotia, the Atlantic region, and Canada as a whole. Business from Southeast Asia and the Indian subcontinent is incremental, and it did not exist 10 years ago. Canada's only way to capture a significant share of this business is with a gateway based in Nova Scotia.
The Chairman: Thank you, minister. You have answered most of my questions. I still have some. The strategy of an Atlantic gateway is important of course for the development of the Halifax port. However, other ports exist with significant potential in Atlantic Canada. Canso in Nova Scotia is an example. Saint John in New Brunswick is another example. How do you envisage the participation of ports other than the Port of Halifax in the development of an Atlantic gateway.
Mr. MacIsaac: That is a good question because, in my presentation I spoke of the fact that Halifax has room to grow. However, if the growth in traffic through the Suez Canal from the subcontinent of India and China grows as we anticipate it will grow, we will soon need additional capacity in the Atlantic region to handle the volume of traffic that potentially could come to this part of Canada. The study I had mentioned that we had undertaken looked at the need for a greenfields site and, obviously, the Strait of Canso is an important element in that. Currently, private sector interests are looking at the Strait of Canso as a potential development, or for potential development. We need to recognize that we have these assets. The growth of those assets will occur through private-sector development decisions. We need to ensure that those involved in the shipping industry understand and know the significance of Nova Scotia as a port of call in North America, as the traffic comes through the Suez Canal. I believe, first and foremost, that our biggest challenge is to capture the business imagination of the shipping world and for the shipping world to see the advantages of Nova Scotia as the first port of call coming in and the last port of call going out. If we can do that, then we can ensure tremendous development, not only for Nova Scotia, but for Atlantic Canada and all of Canada.
Consider the alternative. If we fail in our objective and these ships, the larger vessels coming through the Suez Canal on their way to North America, do not begin their ports of call in North America at Nova Scotia, then they will begin somewhere south of Canada. All of the container traffic destined for Quebec, Atlantic Canada, Ontario and the Midwest of the United States would then not flow through Canada, but through American ports and the United States to their destinations. The challenge that faces us is to ensure that we develop a natural east-west trade pattern with respect to our country, as the goods could flow from the ports in Atlantic Canada into Central Canada and from there to the Midwest of the United States.
The Chairman: Minister, in your presentation you highlighted the role of the private sector to drive the gateway development, and again, in your answer, you mentioned the private sector. What can the federal government do to facilitate the process?
Mr. MacIsaac: The federal government can assist in three areas of activity. One is marketing, to ensure that we do the job we need to do in the shipping industry. It is interesting that the shipping industry is not the only one making the decisions now. Those who buy the services from the shipping industry are beginning to make those decisions. Companies such as Canadian Tire and Wal-Mart are taking a real interest, not only in hiring somebody to transport their goods, but in knowing all the details and the best place to land those goods. Marketing involves not only the shipping industry, but those who use the shipping industry as well.
Second, to be competitive and successful in having ships make their port of call at Nova Scotia, the real challenge for us is to make sure the ships come back. We can do that by making certain that we are the most efficient port of call that they experience in their round trips. If we can achieve that objective through training, research and development — researching how we configure the terminals, how we train our personnel and how the lifts operate — then we can go a long way to ensuring that not only do we attract the first piece of business through marketing, but we retain that business through efficient activity at the port itself.
The third area where the government of Canada can be helpful — this is where they can be helpful to Nova Scotia, New Brunswick, Newfoundland or Prince Edward Island — is to develop needed infrastructure to accommodate the increased traffic as a result of successes in promoting the ports. That development can include an inland terminal, ensuring an easy flow of goods on the highway routes that we talked about, and other areas that are infrastructure- related.
First and foremost, however, we need help to ensure that we market the gateway and to ensure that gateway is recognized as a Canadian objective: not only an objective for Atlantic Canada, but a Canadian objective and an opportunity for Canada to grow.
Senator Munson: I have a brief supplementary question on the marketing component our chairman talked about. How much money is the federal government putting into this marketing scheme you talk about? Is it a few hundred thousand dollars? Is it millions of dollars? Is the federal government a full marketing partner in what you have described to us?
Mr. MacIsaac: From the gateway perspective, currently no money has been identified in that area. That is not to say that the Government of Canada does not help in trade missions and things of the nature, but we see this as being an opportunity where we need to respond in very specific terms with respect to marketing.
Senator Munson: Has the federal government given you any sense of encouragement that they are ready to be a player with the Province of Nova Scotia in your marketing scheme?
Mr. MacIsaac: We are working hard to convince them they should be with us. They still open their doors to me when I come by. We will continue to do that, and I hope we will make allies in that regard tonight.
Senator Munson: How much do you think you need?
Mr. MacIsaac: That is a good question because we certainly need a significant amount of money on an ongoing basis to market continuously the potential of Atlantic Canada with respect to the new world of container shipping. Whether we look at an initial $10 million to $15 million of marketing capacity, it is difficult to say. If we look at the Port of Halifax, which currently has an office in New Delhi, then that office is part of that marketing. The Port of Halifax is involved in that activity and we need to do more of that marketing and be supportive of those kinds of initiatives.
The area where I believe we could stand a significant amount of money is in the area of training, research and development of our competitive business in the operation of the port itself. I do not have the exact number. That is something we still need to work through, and we are addressing that issue through some of these studies currently underway.
This issue speaks to point made by Transport Canada. We are not unsympathetic to the point they make. Transport Canada says we need to develop longer term policies and strategies with respect to the development of gateway. Many questions are unanswered. I do not disagree with the fact that questions are unanswered in terms of how much money is required to do specific items. I feel strongly that we do not have the time to answer all the questions before we begin the activity of marketing: before we begin the activity of becoming competitive, and position ourselves to deal with infrastructure questions. These ships will ply the waters of the Atlantic Ocean by 2010. The decisions taken by the shippers and the people who use their services will be made likely in 2009. How much time do we have to do all the planning and the detail that needs to be put in place? We do not have that time. We need to plan concurrent activity with respect to marketing, training, becoming competitive and at the same time, develop longer term strategies that will stand us in good stead, to achieve the success we need to achieve in the short term.
If we do not achieve that success in the short term, then all the theories, business plans and everything else will collect dust on the shelves because we will have missed the opportunity to expand that business.
The Chairman: Collaborating efforts have been made among the main players involved in this initiative of an Atlantic gateway.
You mentioned that you have meetings with other provinces. Has an ongoing dialogue been established with Nova Scotia and other provinces?
Mr. MacIsaac: I will begin the answer to that question, and then I will ask my colleague, Mr. Oxner, to add to it.
At our meeting in August of 2006 with the transport ministers of Atlantic Canada, I sought their support for the Gateway Initiative. They agreed, and they signed a letter with me to Transport Canada and to ACOA asking them to become involved with us. I made reference that we now have a committee of officials. Mr. Oxner will pick it up from there.
David Oxner, Director, Gateway Initiative, Department of Transportation and Public Works, Nova Scotia: A committee meets of senior officials from the four Atlantic Provinces, ACOA and Transport Canada. We have established terms of reference and objectives around creating an Atlantic gateway strategy. We are also working on the five criteria that Transport Canada identified that need to be addressed in terms of compelling analysis, as the minister mentioned earlier.
The spirit of cooperation around the table is positive. Everyone is working and understands the opportunity. As well, as the minister alluded to, last year he was able to convince the other Atlantic transportation ministers to form this committee. Since that time, the Council of Atlantic Premiers met in December, reaffirmed the work of the committee and supported the concept of an Atlantic gateway strategy.
Senator Phalen: You have covered the whole area, making it difficult to ask questions but I will try.
Because of the depth of the harbour, I understand that Montreal is restricted to 4,000 or 5,000 TEU ships. However, Halifax will be able to handle the larger post-Panamax container ships.
Will this ability to handle the larger containers balance the geographic advantage Montreal has of being closer to the Americans?
Mr. MacIsaac: We do not see any real competition, if you like, between the interests of Montreal and the interests of a gateway in Atlantic Canada. As I understand it, Montreal deals almost entirely with European traffic that goes back and forth between Montreal and Europe.
The potential that we believe exists for Atlantic Canada is in relation to the Asian traffic that would flow through the Suez Canal on the much larger vessels that will come into play, as I indicated earlier, in about 2010. We believe that both Montreal and Atlantic Canada can flourish in the modern transportation world.
Senator Phalen: Will competitive pricing be an advantage for the province?
Mr. MacIsaac: Obviously, because of the fact that we can handle much larger containers, we would have the cost of scale advantage and if we become efficient, that advantage will stand us in good stead.
I still believe that the business we want to attract to Canada is not business that would be in competition with Montreal.
Senator Phalen: If we attract this business, what will it do for the infrastructure?
Mr. MacIsaac: In time, this business will provide us with challenges for the infrastructure. Reference was made to the Strait of Canso, for instance. If that port and the private interests there were to develop, we would need to address immediate infrastructure needs. We would need railway and, especially, highway adjustments but that will occur in any case.
We would need to complete the twinning of Highway 104 in the eastern end of Nova Scotia much more quickly than would otherwise be the case.
Senator Phalen: I asked that question for a reason. Recently, the federal government made a commitment towards the western gateway of somewhere around $500 million. About $350 million of that money has already been committed to infrastructure — highways and bridges. Are we looking at anything like that amount in Nova Scotia?
Mr. MacIsaac: In Nova Scotia, we do not have the same level of congestion that exists on the West Coast. I want to make that situation clear to the committee.
The West Coast has, and continues to have, real congestion issues that require the building of infrastructure and bridges on the West Coast to be able to handle the traffic that currently flows through that area.
For us, if can achieve the objectives that we believe we can with respect to the growth in container traffic through the Suez Canal with the larger ships that are out there, we need to upgrade our basic transportation system.
The issue is not so much congestion as ensuring that the quality of roads and rail are up to the needs of the increased traffic travelling on them.
Senator Phalen: I read research that said Atlantic Canadian ports would be greatly aided by non-spending federal policy change, such as harmonized regulations on truck size and weight, permitting road trains and a new fee structure for short sea shipping. Do you have any comments on that?
Mr. MacIsaac: As transportation minister, I can tell you it is a huge challenge to achieve the objectives you allude to. Every time we attempt to achieve a standardized licensing or set of regulations, it means something new for each jurisdiction. We all know and understand the challenges that go with imposing something new.
Therefore, we must work at those objectives, but I can tell you they are not easily achieved. If we are able to put those challenges within the context of becoming more competitive, and we can demonstrate real advantage, we would have more success.
Senator Phalen: Professor Michael Ircha of the University of New Brunswick told this committee that, in his opinion, there is a viable greenfield site for a new container terminal in Canso.
Professor Mary Brooks, on the other hand, suggested that Canso would need a rail link that was stronger and more viable than is currently there. That is the first problem. In addition, the right land may no longer be available. My understanding from her when I asked this question was that she is not sure whether that land is available any more, and that someone in that port facility has bought up some land.
Is the province doing anything to protect those land sites for further use?
Mr. MacIsaac: If you were party to my last 24 hours, you would appreciate how significant that question is. We do have the land.
Senator Phalen: Good for you.
Mr. MacIsaac: We have an ample supply of land, and we have had it for more than enough years. We are pleased that people are currently showing interest in using that land. Availability of land is not a challenge in the least, but we currently have rail traffic in that part of the province regularly. The increase in traffic would require, no doubt, an increase in the level of maintenance on the rail and the rail bed, and a spur to be built into the port itself. However, that requirement would be part of the business case for developing the port, and the cost of building that spur would be included.
Senator Phalen: I am glad to hear that. When I asked Professor Brooks that question, she threw me a curve, saying that land may no longer be available.
Mr. MacIsaac: It certainly is available.
Senator Merchant: Minister, you said that one way the federal government can help to develop the gateway is with the infrastructure. Federal contribution programs, such as the Canada Strategic Infrastructure Fund, generally require funding partners, so the provincial government, and sometimes municipalities, must share in the costs. How much does the Province of Nova Scotia plan to commit to intermodal infrastructure investments in the next five years? Which projects benefiting intermodal container transportation are the province's highest priority, and why? What share of project costs do you think the federal government should contribute?
Mr. MacIsaac: In the past, in most of our arrangements with the Government of Canada on highway projects we have shared construction costs on a 50/50 basis. We must purchase the right-of-way and such things on our own. Of the total cost of building the roads, we contribute about 60 per cent and the federal government 40 per cent on the programs you have referenced.
We are anxious to conclude a new agreement with the Government of Canada with respect to additional highway funding. We anticipate a 50/50 model similar to the one we have used in the past. I would not turn down a 70/30 model, with the federal government picking up 70 per cent, but I have not noticed that proposal in any of the correspondence I have seen.
In our national highway system, our 100-series highways, we still have a significant amount of work to complete on Highway 104, which goes east from New Glasgow to the Canso Causeway. We have more work to complete on Highway 125 in Cape Breton and, of course, Highway 101 and Highway 103 need additional funding.
Not all of these projects can be related directly to gateway. On infrastructure, we need an agreement with the Government of Canada that deals with highways agreements unrelated to gateway. Some highways would be partly gateway and some would be partly the responsibility of the national highway system.
Senator Merchant: That is your highest priority?
Mr. MacIsaac: The highest priority is reaching an agreement with the Government of Canada to put money into the 100-series highways. We try to do our highway budgeting in such a way that we can provide matching dollars to any agreement we reach with the Government of Canada,
Senator Merchant: Can you comment on the impact of security requirements on the containerized freight transportation system, and do you have any suggestions for improvement?
Mr. MacIsaac: I did not touch on security, but it is obviously a major issue with respect to transportation. I believe that one of our great advantages in Atlantic Canada would be that our ability to provide security is considerably greater than in other locations. Due to the history of our area and the way we have developed, we have been able to do things without security being a major issue, at least to date. Historically, security has not been a major issue, which allows us to plan and provide for enhanced security into the future.
Senator Merchant: Can you comment on environmental regulations and standards?
Mr. MacIsaac: We require that the activities of any private-sector group meet provincial and federal environmental standards. We require that any company we deal with agree to environmental assessments and that these companies adhere to the laws of Nova Scotia and Canada.
Senator Zimmer: Thank you for that impressive and detailed presentation.
Transport Canada told this committee that the department has been in collaboration with the provinces, port authorities and railways in terms of future investments, regulation and future planning. To what extent have you had discussions with Transport Canada on the three Rs — regulations, restrictions and roadblocks? You have touched on future planning and security.
Mr. MacIsaac: Most of my discussions with Transport Canada have centred around the need to recognize the case I was trying to make tonight, and that is, there is a huge opportunity out there for all of Canada, not only Atlantic Canada, and we need to be prepared to seize it.
Mr. Oxner: We have engaged with Transport Canada to explain the national significance of Nova Scotia and Atlantic Canada in terms of the total supply chain with regard to regulations, restrictions and roadblocks. We have not entered those types of discussions yet because we are still at the Coles Notes version, or in some cases it may be "Gateways for Dummies.'' We are trying to engage the stakeholders in understanding the role that Halifax plays.
In fairness to Transport Canada, the department has had to deal with many congestion issues on the West Coast, issues around the Windsor trade corridor and such things. Therefore, it has taken them some time to understand that in Atlantic Canada, where we do not have a congestion issue at the Port of Halifax, we are trying to pursue an economic development opportunity, that we have room to expand. We have not yet had detailed discussions on the three Rs to which you alluded.
Mr. MacIsaac: When we speak of infrastructure, we want to ensure that we plan in such a way that we avoid the development of congestion as a result of growth.
That challenge is different than trying to relieve congestion. We must plan in terms of how to spend money for infrastructure so those problems are not created in the future.
Senator Zimmer: The chairman and Senator Phalen touched on the subject that Professor Brooks of Dalhousie University told this committee recently that more land infrastructure is needed for north/south containerized trade out of Nova Scotia and that better connection be made between Eastern Canada and the northeastern United States. That view somewhat implies using northeast United States ports.
Do you agree with this assessment? Do you have any plans for the province to address these transport deficiencies if they do occur? What role do you think the federal government should play? Do you agree with her assessment because it alludes to the fact that maybe we should use the ports in the United States where, in fact, in your presentation you said ships could go directly to Halifax and bypass those ports, which I believe is a good system.
Mr. MacIsaac: I am not certain that I fully appreciate the context in which your witness made the comments.
I will answer by providing my own version of how things should develop. We have an opportunity to handle the growth that will occur in the containerized shipping business in the future, primarily through the larger ships and the flow of business through the Suez Canal from the Indian subcontinent and China.
That traffic will come to North America. Our challenge is to make sure that Canada is the first port of call for these ships that come to North America. After that, traditionally containers have gone from Halifax to central Canada and the Midwest by rail. We have tremendous rail links to accomplish that.
Whether there would be some opportunity for off-loading to smaller container vessels that would flow down into New England is another question. I am not certain that I have seen conclusive evidence that there is real growth there, but I do not think we should dismiss that potential at this stage.
Senator Zimmer: My last question was a bit tongue-in-cheek at first, but I thought about it further. Concerning these daily auctions and lotteries at the Suez Canal, is it a canal or a casino? Are the delays legitimate that occur because of the narrowness of the canal or are they done on purpose so they can get additional revenue?
Mr. MacIsaac: I provided that information in my presentation as an example to show the level of congestion that exists at the canal. I do not feel that I am really qualified to comment on the operation of the canal itself and the decision makers that run that business.
[Translation]
Senator Champagne: I am one of the true believers in your project. I have the impression that Halifax is extremely well positioned. Considering the new waterways flowing from Suez and the potential widening of Panama Canal, I feel that we can really make it, especially if you can accommodate those enormous ships. The mother in me thinks that all of this is very nice, that all these containers will arrive, be unloaded, that you will have all the necessary land to grow, but these ships will not leave empty. Will you have exporting goods in Halifax, so that these ships will not return home empty? Are you concerned with this aspect of the business? And are you taking care of it?
[English]
Mr. MacIsaac: You raise an extremely valid question and it speaks to the challenges that face us, regardless of whether we are speaking about gateway or not. The flow of goods from China and from the Indian subcontinent to North America is a reality. It is a fact of life.
The challenge that flow provides is to maintain our level of trade in return. I am focusing my attention on bringing the traffic to Canada in terms of the containers themselves. I think the question you raise with respect to what is in the return container is a question, again, that is a challenge for the whole country: that is, our ability to specialize and to remain competitive as a trading partner for China and the subcontinent. Canada will need to face that reality regardless of what route the goods choose to come to our shores.
[Translation]
Senator Champagne: It is another reason why Halifax seems to me an interesting option. Considering the congestion in New York, the continuing problems of depth, I am wondering why in the world these ships would not come here where there is no congestion at all and also where, in a few years, let us hope, there will be all that is necessary to accommodate these enormous container ships?
Maybe I put the cart before the horse by speaking of containers returning empty. Let us say that containers come by road or by rail. Senator Zimmer was talking about short sea shipping. We were told that, from Halifax to the ports just south of Philadelphia, everything was going fine. But as soon as we talk about short sea shipping between Halifax and Hamilton, for example, towards Ontario and further to the Midwest, then it seems that shipping services cannot compete with rail companies.
We are experiencing major problems right now with the CN. It is true that our government is working actively on this issue. You were saying that in your province, there were not too many labour relations issues, strikes and everything.
How could we manage so that the Port of Halifax is not only used for short sea shipping towards the Great Lakes and the northeast of the United States, but also, once containers are unloaded, to make sure that they are loaded again with goods to send towards Asia or other countries?
[English]
Mr. MacIsaac: The short sea shipping potential can become competitive if people make appropriate business decisions to invest in vessels that can be competitive, that is, to take smaller loads from the Port of Halifax and ship those loads to other destinations within Canada or along the Atlantic seaboard.
Can that be done more efficiently than by rail? The business community, I expect, will make that decision. Whether we want to explore that through studies or research and whether we should urge people in that direction are good questions, because that capability provides an alternative that we do not have when we are hit with labour problems and we have only one alternative. To have more than alternative is always a more beneficial situation.
[Translation]
Senator Champagne: We need to do some marketing in order to lure these enormous ships, load them with goods and send them back where they come from. But that is still a problem. As I told you in the beginning, I am a believer in your project, and I wish you to have brilliant ideas, and very good luck. And if you are dealing with the East, I hope you will be positioned at the right angle with the Sun. I truly believe in this.
[English]
Mr. MacIsaac: I had several meetings earlier today and this evening about the exchange that has taken place. Today has been an educational day for me. The more we talk about it, especially with people who have taken the time to become informed on the issue, as you folks have, the more we learn about the challenges we face. We have picked up some good information here this evening.
The Chairman: We are still a chamber of sober second thought.
Mr. MacIsaac: I appreciate that.
Senator Munson: Dominic Taddeo of the Montreal Port Authority was here two weeks ago. He sounded like my 19- year-old son, Claude Mathieu. Whenever I complain about something, he says, "It is all good. Everything is good.'' Mr. Taddeo was a great booster for the Port of Montreal. He talked about how Montreal can survive even in the era of big ships because they cater to those European ships you talk about. We walked away from that hearing feeling good about the economic state of the Port of Montreal. I sense in your voice, when you are talking to us, almost a cry for help. It is a different, more sober approach, and a realistic approach to what is happening in Halifax. What specifically can the federal government do now? If they have given you zero for marketing, if they have not given you a cent, what can they do now to heed your cry for help?
Mr. MacIsaac: That is a good question. To be fair to all concerned, if the Government of Canada had given us a blank cheque a year ago, I am not certain that we would have made good decisions with respect to how we spent that money. I think today we are far better positioned in terms of how to spend that money because we have had the benefit of hiring consultants to undertake some work and provide us with answers. Now, we are in a much better position in terms of being able to say to the Government of Canada, "Here are real things we can do to ensure that we do not miss the boat with respect to these opportunities.'' I am still optimistic that we will receive a good hearing. Anything your committee can do to help us pass our case along would be appreciated.
One concern we are coming to understand is that some officials in government may have felt that we were looking only for infrastructure money for Atlantic Canada and Nova Scotia. We are always looking for infrastructure money, and it will be a long time before we ever stop looking for infrastructure money, but that is not the thrust of what Atlantic Gateway is about. Atlantic Gateway is about seizing an opportunity for Canada to take advantage of changing shipping patterns in the world and ensuring that Canada is a major player in those changing shipping patterns. If you can help us make that case, we would appreciate it.
Senator Munson: Briefly, you always hear the argument about the environment versus the economy, and something will be at stake. Your legislature is in Halifax, and I have lived in Halifax for a few years. The trucks must shake the legislature building at the capacity that the Port of Halifax operates now, which is not where it should be, from your estimation. If you strengthen what is happening in Halifax, what specifically will happen in the centre of the city? The port is in the south end, another port is in the north end, and you have the one rail line that heads through the Bedford area and a residential area. What do you plan to do about that traffic? I know you addressed the issue with Senator Merchant. Success may come at a price.
Mr. MacIsaac: Yes: Usually, economic growth presents challenges with respect to alternatives in terms of how we do things. Some things can be done to impact the flow of traffic within the central part of the city. One thing that needs to be done, regardless of Gateway, is to convince more residents not to travel within the city itself. If we did that, then the flow of trucks through the city would become less of a problem. In other words, if people were to think in terms of public transit and alternate forms of transportation, then that change is part of the solution to addressing the problem to which you refer. The operation of the port and its success is a fact of the geography and the infrastructure that feeds the port. Hollis Street runs in front of the legislature, which is the main route for many container trucks that go back and forth. If we reduce by 30 per cent the volume of cars that travel on Hollis Street, then the volume of trucks would not be as great a challenge. That is one way of looking at the problem. I think we need to do that regardless of the growth of the port. All of us need to find ways of convincing even ourselves to use public transportation more than we do currently.
The Chairman: Minister, some analysis of the gateway opportunity concluded that more economic activity is needed in the province of Nova Scotia to stimulate the critical mass of traffic.
Are other departments in your government focussing on the gateway opportunity? Is the industry department trying to create conditions that will stimulate the critical mass of trade?
Mr. MacIsaac: The Department of Economic Development is working closely with the Department of Transportation and Public Works in all our gateway initiatives, as is Nova Scotia Business Inc. We have taken the leadership role within government, and it is my responsibility to answer for gateway within government. We certainly have the support and active involvement of other government departments, as appropriate, but economic development is a key partner for us.
Mr. Oxner: If I can make a point in relation to Senator Champagne's comments, I attended the Asia Pacific Summit in Vancouver in October. Minister David Emerson spoke at that event about the fact that sometime between 2007 and 2008, China will replace Canada as the United States' number-one trading partner. I think it was bold for a federal minister to make that comment.
Returning to your comment about our need to have product, most of the ships that go back to Asia currently go back fairly empty. We need to work with Canadian businesses, both small and large, to look at opportunities in the Asian market. There is a need for goods. The internal economies of Asian countries are growing and they are purchasing a lot more of the goods that they are starting to produce. We need to work with Canadian businesses to make these businesses more export-ready.
Currently, Halifax ships out more containers than it receives. We ship out things such as tires, french fries, seafood, blueberries and paper. Bowater Mersey Paper Company, which has a plant in Liverpool, ships containers of paper, I believe newsprint, into the Indian market. Currently, we have an imbalance in that we ship more than we receive.
In terms of Senator Munson's question regarding the truck traffic in downtown Halifax, the Halifax Regional Municipality, in partnership with the Province of Nova Scotia, are looking at what is called an inland terminal to try to plan for the future, when the terminal capacity in Halifax has reached a maximum. They are looking at building an inland terminal where containers that currently travel via truck to the rail yard or to other areas would be taken off the peninsula of Halifax via high-speed commuter rail to an inland terminal. That is something that we are looking at now, in terms of feasibility, to plan for the future. It would reduce significantly the truck traffic in the downtown core and put it onto a rail siding. Every time I see a container in downtown Halifax, I see dollar signs.
The Chairman: You should not lose that. Thank you, again, Minister MacIsaac, and Mr. Oxner, for your presence here tonight. It was interesting to hear from you. We heard a lot about Montreal, if you do not mind, Senator Phalen. We are trying to help, and that is why we are here. We are studying this matter carefully. It is important to us. When we report, we want to make the proper recommendations to the government.
Senator Munson: For the record, Senator Mercer has been a strong advocate, the voice of Nova Scotia.
The Chairman: Yes: He is a member of our committee.
We will visit Halifax as soon as we can, and we will let you know when that happens.
Mr. MacIsaac: Thank you for this opportunity. We appreciate it very much. If we can do to anything to help accommodate your visit to Nova Scotia, please let us know.
The committee adjourned.