Proceedings of the Standing Senate Committee on
Foreign Affairs and International Trade
Issue 8 - Evidence - Meeting of March 26, 2014
OTTAWA, Wednesday, March 26, 2014
The Standing Senate Committee on Foreign Affairs and International Trade met this day, at 4:19 p.m., to study security conditions and economic developments in the Asia-Pacific region, the implications for Canadian policy and interests in the region, and other related matters.
Senator A. Raynell Andreychuk (Chair) in the chair.
[English]
The Chair: Honourable senators, we continue with our hearing on the study of security conditions and economic developments in the Asia-Pacific region, the implications for Canadian policy and interests in the region, and other related matters.
We have before us, by video conference, two excellent experts in their individual capacity: Mr. Bruce Matthews, Professor Emeritus, Comparative Religion, Acadia University; and Mr. Lex Rieffel, Non-resident Senior Fellow, Brookings Institute.
Gentlemen, we're ready to proceed with your opening statements, and then we will proceed to questions from the senators. I am just going to take you in the order that you are on the agenda, so I will start with Professor Matthews, please.
Bruce Matthews, Professor Emeritus, Comparative Religion, Acadia University, as an individual: Good afternoon. I am very pleased to be with you this afternoon. I wasn't too sure of the exact agenda, Madam Chairwoman, but still, if you would like some observations from me at this point on Myanmar, or Burma, I would be glad to proceed. Is that what you had in mind?
The Chair: Please start with whatever comments you would like to make on what you think might be of interest to us as we study the Asia-Pacific region.
Mr. Matthews: I'm going to refer to Myanmar by the name Burma, perhaps because I'm more historically comfortable with it over many years of travel and work there, but I'm also recognizing, of course, that the official name of this country is Myanmar.
I take this time just to remind our listeners that this is geographically the largest country in Southeast Asia, with an approximate population of 55 million, made up of a Burmese or Bamar majority, but with 25 per cent minorities of various kinds that surround geographically this majority in a sort of horseshoe over the hill country of central Burma right up to the north. These ethnic complexities are really behind many of the trials and, shall I say, the opportunities of this country as it comes to grips with ending many years of isolation and bringing itself into the international community.
Despite the fact we have seen progress in this matter, there are still, of course, many problems attendant to the development of Burma in our time. A lot of these are consistent with a failure to bring forward a political system that is sufficiently democratic and that is not able at this time to completely isolate itself from a military background that continues to dominate this quasi-civilian democracy, and this spills over into a lot of ethnic disorders.
It is an interesting time in Myanmar, Madam Chairwoman and members of the committee, an interesting time politically, an interesting time economically, and an interesting time from a point of view of communalism or religious nationalism.
Perhaps I can leave it at that for the moment and let Lex get on with his observations, and we will see where we go from there.
The Chair: Thank you. We will turn to our next speaker.
Lex Rieffel, Non-resident Senior Fellow, Brookings Institute, as an individual: At the outset, I would wish to thank the committee for this opportunity to testify on the situation in Myanmar, still called Burma by many people, then, an important caveat: I do not consider myself to be an expert on Myanmar, because I do not speak the language and have not lived there for more than three months. However, my first visit to Myanmar was in 1967, and it has been the main focus of my policy research at the Brookings institution since 2007. By contrast, I know much more about Indonesia because I speak the language and lived there for two years. I also lived in Vietnam for a year while serving in the U.S. Navy and in India for two years while serving in the U.S. Peace Corps.
Economic development was my major in college in the early 1960s, and it has been my life-long preoccupation. My recent work on Myanmar has focused on its economy, trying to draw lessons from experience in the rest of the world that could contribute to a successful transition from conflict to peace and from authoritarian rule to democratic rule.
I will just make four points in my opening statement.
Point one: The success of Myanmar's transition depends, above all, on ending the internal conflicts that have plagued the country nonstop since independence in 1948. These are conflicts between the ethnic Bamar people, who are believed to represent at least 60 per cent of Myanmar's total population of perhaps 55 to 60 million people, and a score of different major ethnic communities and many more minor ones.
Achieving peace is clearly the top priority of the Thein Sein government, and some recent reports on the status of negotiations are encouraging. However, as politicians, you know that the last mile is often the hardest. While the outside world seems to believe that a peace deal can be concluded before the national election due to be held at the end of next year, my best guess is that it won't happen that quickly.
Two implications: First, it is important to have realistic expectations. Pressure from the outside to conclude a deal quickly could be counterproductive. Second, the biggest contribution that outsiders can make to the peace process might be to back off. We have seen, for example, that some efforts to promote economic development in ethnic minority areas, with the best of intentions, have been seen as threatening by the minorities being helped.
Point two: In the process of building a democratic political system, Myanmar has adopted a constitution that creates three branches of government with many classic checks and balances. When the Thein Sein government took office three years ago, almost everyone expected the legislature to simply rubber stamp the laws presented by the government. Instead, dominated by the personalities of lower chamber Speaker U Shwe Mann and opposition leader Aung San Suu Kyi, the legislature has become increasingly powerful, directly challenging the executive and overriding it in some key instances.
From the perspective of good governance and economic development, this pattern worries me. I have seen a similar pattern develop in Indonesia since its transition to democratic rule began in 1998. Some of my Indonesian friends tell me that the legislature is the biggest obstacle to economic progress in their country. I see many of the same cultural and political forces developing in Myanmar.
One implication: The natural instinct in countries like the United States and Canada to promote the strengthening of the legislative branch in Myanmar relative to the executive branch may actually result in a longer and bumpier route to a just and prosperous society.
Point three: Like Canada, Myanmar is a country blessed with an abundance of natural resources. Since independence, however, these resources have been more of a curse than a blessing. They have been a key factor in the conflict between the Bamar majority and the ethnic minorities, for example.
Over the past 65 years, as Myanmar has been exploiting its natural resources it has been neglecting its human resources, which were among the most impressive in Asia at the end of World War II. In my view, the success of Myanmar's transition will hinge critically on its ability in the coming years to build up its human resources and reduce the extraction of its natural resources to sustainable levels with better methods.
Three implications: First, anything Canada can do to encourage the development of Myanmar's human resources is worth doing. Second, anything Canada can do to discourage unsustainable extraction of natural resources by foreign investors is worth doing. Third, anything Canada can do to support the Government of Myanmar's goal of becoming a full participant in the extractive industries' transparency initiative is worth doing.
Point four: A year ago, I co-authored the first study of foreign aid to the Thein Sein government. The title was, Too Much, Too Soon? Our short answer was, yes. We have seen other cases where aid donors rushed into a country in transition and ``smothered it in love.'' This unhealthy pattern is visible in Myanmar today, and it would be a great tragedy if foreign aid becomes one of the factors driving Myanmar's transition off the rails.
The basic problem is that there may be fewer than 20 officials in the Myanmar government who have the authority to implement policy decisions. This small group of officials is being overwhelmed by foreign visitors. They are not spending enough time on policy analysis and even less time on policy implementation; and it is getting worse for three reasons: chairing ASEAN this year, the elections next year, and the burden of aid project implementation that will start hitting in the next year or two. One implication: Anything Canada can do to reduce the burden of foreign aid, such as more donor coordination and more multi-donor trust funds, would be helpful.
Thank you again, and I look forward to answering your questions.
The Chair: Professor, I want a clarification. You said that the legislature could be the impediment to progress. That often is the case because it is a transition to a democratic system. How one functions within a government setting and how one functions in a legislative setting is new to them. Are you making the comment that development and democratization are slow processes and we should be conscious of that? Is there something inherent in the situation in Burma that we should be paying attention to?
Mr. Rieffel: I have to confess, it is difficult to give you a short answer, but let me try.
Part of the context here is that the donor agencies for years have not been giving any assistance to the government for very good policy reasons. That has continued since the new government took office three years ago. By and large, there is little donor assistance going to the government, to the executive branch. From my experience, it is difficult to drive a successful transition without having a strong and effective executive branch of the government.
Please don't read into my statement any negative views toward the legislature. The legislature has a very important role to play in this process, but it is a question of balance. I would say that if the balance at this stage of the transition is not in favour of the executive branch — I'm not talking about 99/1 because 60/40 is okay — if there's not a bias in favour of the executive branch, Myanmar may end up where Indonesia is now, where the legislature is more of an obstacle to progress than an engine of progress.
The Chair: Is the aid not going to the executive because the aid community is still questioning the executive, having come from a military base. Are they still somewhat hesitant to deal with them or is it a question of the corruption, or is it all of those factors?
Mr. Rieffel: All of those factors. Please, don't read too much into my statement. It is not that zero aid is going to the government. Every day a little more capacity-building assistance is going to the government, but compared to what we see going to the legislature, it seems to be unbalanced.
The Chair: When you say ``executive,'' you mean institution-building as well as the actual executive branch, which would be around the officials. Is it the lack of a proper judiciary, a finance department, et cetera?
Mr. Rieffel: When I say ``executive branch,'' I'm focusing on the president and the cabinet. I'm not talking about the judicial branch or about the legislative branch. The assistance that is needed is primarily for capacity-building. You know that aid is delivered through projects and programs. In the past, aid projects were delivered through projects and programs with nongovernment actors — with civil society, NGOs and so forth. The shift from that orientation to working directly with government agencies has been quite slow up to this time.
Senator Demers: Thank you for your presentation, which was very well said and presented.
In 2015, Burma will hold a parliamentary election. What role will certain ethnic minority groups, such as Karin and Rakhine, employ in the upcoming parliamentary election?
What role are social movement labour groups, civil society organizations and activists likely to play in the upcoming elections?
Mr. Matthews: The election in 2015 is a national election. It will depend largely on a majority vote by the Bamar people to keep one or the other of the big parties in absolute power: the National League for Democracy, which is Aung San Suu Kyi's party, or the Union Solidarity and Development Party, which is the government party of the present government of Thein Sein. On the edge of this rather large economy are many regional parties.
You are right, senator, in indicating, for instance, the Karin, the Kachin or the Shan or any number of other smaller ethnic regional parties. These are already represented in the Amyotha Hluttaw, or upper house, and in the lower house as well. They already have a presence in the current Parliament. For sure, they will be a significant ingredient in the formulation of the next Parliament, not as much as the Bamar majority but they will certainly have a place.
That was one of the questions you asked.
Senator Demers: Yes, sir.
Mr. Matthews: The second one was?
Senator Demers: What role are social movement labour groups, civil society organizations and activists likely to play in the upcoming election?
Mr. Matthews: Well, I don't think anything too aggressive. There are civil society organizations like the 88 Generation and other smaller civil society organizations that deal with things like Buddhist funerals and helping people at one level or another, but in my understanding of Myanmar's society today there isn't a lot of civil society activism or organization yet. That might yet come but at this point in time compared to, for example, Thailand or Sri Lanka, it's a relatively undeveloped aspect of society.
Senator Demers: Thank you very much professor, for such a well-thought-out answer.
The Chair: Professor Rieffel, do you wish to add anything to that?
Mr. Rieffel: If I may, a couple of points: First, on the ethnic minorities, it's important to know that there are 14 regional assemblies, regional legislatures, in Myanmar, and these are divided between seven estates that have more ethnic people than Bamar and seven so-called regions, and all of the major ethnic groups have created ethnic parties that are represented more in the regional legislatures than in the national legislature. In fact, in one state, Rakhine state, the Rakhine party holds more seats than the government party, the USDP. That is one point.
There's a serious election process issue over proportional representation or first past the post. At the moment, it is a first-past-the-post system, which is believed to favour very much the NLD, Aung San Suu Kyi's party, and the ethnic minority parties have been arguing in favour of changing it to a proportional representation process.
On the role of civil society, I have to beg to differ. I think you would be surprised to see the activity of civil society in Myanmar today. One simple example: You may know that six months after taking office, President Thein Sein suspended construction on the Myitsone Dam, this very large dam at the headwaters of the Irrawaddy River. That remarkable action was taken in response to a very strong civil society movement.
Senator Demers: Thank you very much.
Mr. Matthews: Would it be a civil society movement, Lex, as much as just a general program in the population? I don't recall a particular civil society organization coming forward to struggle against Myitsone. I just remember a lot of public discord.
Mr. Rieffel: There were, I would say, at least six major organizations, NGOs, Myanmar NGOs leading that protest, and probably a score of other lesser ones that made it possible to have the public reaction. Without them, it would never have happened.
[Translation]
Senator Fortin-Duplessis: First, I want to thank you both for your presentations. My first question is for Mr. Rieffel.
Mr. Rieffel, in March 2013, you co-authored a report on foreign aid in Myanmar. You pointed out the inherent risks of providing too much aid too quickly. You also mentioned that some principles of the Paris Declaration and Busan Partnership were not respected by all donors. Does your opinion remain the same one year later, or have you noticed greater respect for the principles of the Paris Declaration and Busan Partnership in terms of foreign aid in Myanmar?
[English]
Mr. Rieffel: First, I have not gone back and resurveyed the issue, so I can't give you a really robust answer to your question. However, from my last visit in August of last year and the work I do every day to keep abreast of developments there and conversations I have with people who pass through Washington, my opinion is basically unchanged. There are two sides to the opinion. The positive is that the aid representatives in-country are trying very hard to do a better job in this country than the aid community has done anywhere else in the world. At the same time, they are all subjected to pressures from capitals to do things that otherwise they wouldn't do. This is what can be described as supply-driven aid as opposed to demand-driven aid. I consider it one of the unfortunate features of the aid process in Myanmar today.
[Translation]
Senator Fortin-Duplessis: I have another question for Mr. Rieffel. You just listed eight challenges that the Myanmar government is facing. You spoke about the peace process, political reform, microfinance policies, inflow of private capital, resource extraction, land grabbing, agricultural development and education.
Do you think Canada could help Myanmar with these challenges?
[English]
Mr. Rieffel: Absolutely yes, senator. I would put education at the top of the list. As I said in my prepared statement, I just think any education, long-term education especially, that is provided to the Myanmar people will be richly rewarded in the future.
After that, the area that I would single out is resource development, resource extraction. Canada has learned many lessons about the benefits and the risks of resource extraction and therefore I think is a more credible advocate for sensible policies on resource extraction.
[Translation]
Senator Fortin-Duplessis: Thank you very much. Madam Chair, if there is a second round, I would like to put my name down for it.
[English]
Senator Ataullahjan: My question is regarding Indonesia. It's one of the best performing markets to date, up 23 per cent in U.S. dollar terms according to Forbes. This is nine months after it was called one of the fragile five global economies. Many seem keen on the country, given its large population and thriving democracy. Do you foresee Indonesia losing momentum in the future, or should it be a target country for Canada? What about the effect on Indonesia of a possible domestic downturn in China? Either one of you can answer.
Mr. Matthews: I'd better let Lex do that. I'm not an expert on Indonesia.
Mr. Rieffel: Yes, I would say there is a risk that Indonesia will lose momentum. One very basic reason for optimism is that we have an election coming up soon. There is a candidate for the presidency who is overwhelmingly supported in the polls. This is the current Governor of Jakarta, known locally as Jokowi.
One of the most important factors in successful development we have seen is political stability. If he is elected president, as many people expect, it will be a source of stability that will help the Indonesian economy. The other thing that will help Indonesia in the long run is a tradition of sound macroeconomic management. I don't think that will be lost in the near term regardless of how the election turns out.
Do I think Indonesia should be a target country for Canadian investment and so forth? I would say yes, even if it does lose momentum. This is the fourth most populous country in the world. It's a very interesting place to be engaged in business.
The impact of a Chinese slowdown could be very serious because Indonesia, unfortunately, has become too dependent on raw material exports, many of which are going to China. If there is a greater slowdown in Chinese economic growth than people expect in the next year or two, it certainly will have repercussions in Indonesia.
Senator Ataullahjan: My second question is on the status of the Rohingya Muslims, who are described by the UN as one of the most persecuted minorities in the world. We have seen the horrific images of them being burnt alive and their places of worship destroyed. What has caused this situation to escalate? Has it been gradual over time or has it suddenly taken a turn for the worse? What is the government doing and what can the government do?
Mr. Rieffel: Actually, senator, I was at a point in my prepared remarks when I left out a portion for reasons of time.
People outside following events in Myanmar are understandably concerned about the mistreatment of the Rohingya community in the past couple of years and several attacks on Muslim communities in Myanmar's heartland. In my extensive experience with different cultures, I have never encountered such deeply racist attitudes as I have found among a number of ethnic Bama acquaintances toward the Rohingya. It will take a miracle to have the Rohingya accepted as fellow citizens among the Buddhist majority in the near term. It may well take more than one generation. Certainly, one development that would help is strong economic growth and job creation for the Buddhist majority. This problem is extremely complex and has deep roots. I cannot think of a more intractable problem that I have encountered as a development economist.
The government is trying to make the problem go away, but I'm not convinced that it knows how to or will be able to.
Senator Ataullahjan: What about the other religious minorities, Hindus and Christians?
Mr. Rieffel: The treatment of the Muslims is obviously a concern to them. They can say, ``After the Rohingya, after the Muslims, is it us?'' There is concern among all non-Buddhist religions and all non-Bama ethnic minorities about the treatment of the Rohingya.
Mr. Matthews: Can I get in on this one?
The Chair: Please.
Mr. Matthews: Let me go back to the Rohingya. This has been a historic challenge in Myanmar. As you all know, only recently has it become an exacerbating feature to the ongoing stability of the reforms that Myanmar has experienced in the last four or five years. Yet its roots go way back to the 1820s and the fact that the Rohingya Muslim population is originally of Bengali extraction. They are in the far western border region of the Arakan. They have a long and distinguished history in this country, and I'm not suggesting they don't. In the Second World War they visibly and aggressively backed the British Army and supported the initiatives of the allies, which the Bamar people did not do. When the time came to ``settle the score,'' shall we say in the modern polity, perhaps it was held against them to some degree by Bamar people.
There has always been a concern that the Buddhist religion is somehow under the gun in that it will be swamped by an aggressive Islamic presence in the country in time; and that Muslim families are much bigger, have polygamy and other features that may eventually swamp the Buddhist majority. Of course, these are largely fictitious concerns, but they are part of the historical drama and feed into the paranoia that the majority Buddhists sometimes experience.
We are reminded that about 4 per cent of Myanmar's population is Muslim. The Kaman are non-Rohingya Muslims, many of whom are of Indian extraction as their families came here in the colonial era. They have also been attacked in places like Meiktila and Insein. The anti-Muslim activism amongst the Rohingya population has flowed over, unfortunately, into the mainline Kaman communities. The families of these Muslims have been there for at least 100 or more years.
I certainly agree with Professor Rieffel that this is an obdurate problem. It is not going go away easily, or certainly tomorrow. It will affect the election coming up next year.
It is also a sentiment amongst some observers of Burma that the whole conflict with the Rohingya is being fuelled by an internal power struggle amongst the officers of state, including parliamentary figures, but especially senior officers in the Tatmadaw, or Armed Forces, who may have policy differences with Aung San Suu Kyi certainly and probably with Thein Sein. This is their way of destabilizing a situation. That could be a possible feature of this.
Senator Downe: I wonder if the witnesses could explain in more detail, and Professor Matthews alluded to it, what the actual role of the military in Burma is today. How much influence do they have directly and indirectly in decisions made in that country?
Mr. Matthews: I'll make a quick start on this, although I'm sure Professor Rieffel knows even more than I do. My take is that the Tatmadaw, the Armed Forces, is still a very powerful institution and that in certain areas of the country it acts outside any political curtailment of Parliament or the president, especially in the more remote areas where there are still ethnic struggles or difficulties of one kind or another. It has an autonomy more or less all of its own, which is obviously quite dangerous.
There are likely to be important cliques within the government, however defined, that have allegiance in one way or another to another political agenda than the one that we currently see is the fairly progressive one of the Thein Sein present government. In other words, there are people within the Armed Forces who have their own political opportunists in the system, and they would like to perhaps revert to the old order, or certainly not give in to as many changes as might be possible, for instance, if Aung San Suu Kyi came into power.
Finally many of these Tatmadaw figures, senior officers in particular, likely have financial gains to be made by their political activities, and they don't necessarily want to be curtailed by any central government.
Mr. Rieffel: I agree with everything that Professor Matthews said. I also had the benefit of studying the military in Indonesia during the transition that began in 1998, and even looking at military business back in the 1970s.
The military, the Tatmadaw, in Myanmar today is basically a black box. We really don't know what's happening inside the military. We can guess. The guesses that Professor Matthews made are as good as any guesses I have seen anywhere else.
Senator Downe: The military controlled the country for many years. You both have been to Burma, as I had the opportunity to be there, and you know they had their own medical facilities. They lived the best life possible in Burma. Change is always difficult. It is difficult everywhere. It's difficult in our country. It must be very difficult for them to give up the control.
You alluded to the disproportionate influence they have the farther away you get from the capital, but even in the capital there must be a second force at work somewhere trying to get the preferred candidates into either the executive branch or the legislature. Do you know any examples of former military people who suddenly became civilians and are now prominent in the government or Parliament?
Mr. Matthews: As you all know, 25 per cent of the seats in both houses of Parliament are reserved for military personnel. That means 75 per cent are not necessarily military personnel, but many of them are retired military personnel or resigned military personnel who have taken on a civilian capacity. Their world view and maybe even their political allegiance are to the old Armed Forces notion of what Burma should be like.
The short answer is that there is still a great deal of influence from what I would call that general military attitude in the polity. It would be easy to isolate all sorts of names of former generals and brigadiers that now have a place in Parliament. There are lots of them, including Thein Sein himself, the president. He's the best example.
Mr. Rieffel: I was going to say, start with President Thein Sein who just yesterday delivered a kind of state of the union address on the third anniversary of taking office. He has delivered a series of these statements. There is a lot of evidence that he really believes what he says when he makes these statements.
Also, the speaker of the lower house in the legislature, Shwe Mann, is a former general. The two key ministers in the president's office, one of whom is leading the peace process, are former generals. One of the special things about this country is that you are witnessing a military-led transition. We don't know how it's going to end up but, if it is successful, there will be some military officers who get the credit for a successful transition.
Mr. Matthews: We are reminded that there is a national security commission, a separate body from Parliament, and it has, in a sense, ultimate authority in political decisions. Its chair is Min Aung Hlaing, a so-called senior general who has taken on that position. He is a very powerful figure. He's not behind the scenes; he's right in front of the scenes. He's not an elected official. He, technically speaking, has all sorts of powers to intervene if he feels the country is in peril. He couldn't do that, I don't think, easily without the permission of the president and a body of politicians. Still, this guy is extremely powerful.
I thought I would alert you to his name, Min Aung Hlaing, a senior general. I would consider him not to be particularly in favour of Aung San Suu Kyi or of any sort of overthrow of the present constitution, which as you all know is fixed so that the military will always have a role in that government.
Burma will not be able to make much progress unless that constitution is changed. Democratically, it will not make any progress at all. It will be a sad day if Myanmar can't do something with this constitution to allow Aung San Suu Kyi to run as a presidential hopeful next year.
Senator Oh: Burma has a population of 55 million and is probably one of the last countries in the ASEAN or Southeast Asia to open up. I was talking with a senior government officer from an ASEAN country last week. The view from him was the ASEAN countries would prefer Burma to open up slowly. Otherwise, if it's too much interference from the West, the military junta still holds the power in the country, and if chaos is created, it could set Burma back again to the old days. Can you comment on that?
Mr. Matthews: I think Professor Rieffel is the one to do this.
Mr. Rieffel: Senator Oh, I have some sympathy for that point of view, reflected in the study that I did a year ago. Yes, I see some danger in moving too fast.
ASEAN is famous for moving slowly, and Americans tend to regard that as a flaw, a criticism of the organization. I don't have that opinion. I am a great admirer and fan of ASEAN and the ASEAN way. To me, stability is important and, if the transition moves too fast, it could become unstable, and that would be tragic.
[Translation]
Senator Fortin-Duplessis: This time, my question is for Professor Matthews. As you know, the Myanmar government is getting ready to conduct its first census of the population since 1983. A number of associations in the Myanmar diaspora and experts on identity issues have requested a census report for many reasons, including the inclusion of questions on ethnicity and the fact that some ethnic groups and religious minorities are not included in the census.
In your opinion, although a census of the Myanmar population is necessary, do you see it as a risky exercise that may aggravate ethno-religious tensions?
[English]
Mr. Matthews: I absolutely agree with you in every way. This census is being assisted, I believe, by at least two bodies of the United Nations, but it is flawed. One way in which it is flawed is that the analysis of the ethnic group is done partly by geography rather than by language base. That's just one aspect of a possible deficiency in what might occur.
Technically speaking, Myanmar argues there are 135 different linguistic bodies. Therefore, I suppose you could say, from a point of view of a census, that there are 135 different groups. There are probably more than that. One unfortunate community that isn't even included is the Rohingya, a community of about 1.5 million Muslims in the Arakan whom the Myanmar government refers to as Bengalis. They won't even give them the name ``Rohingya.'' If a cohort society of that size is left out of a census, then it seems to me that the census isn't going to be of much use.
You, or whatever analysis you have read, are perfectly correct. In my opinion, an improperly conducted census or one that may skew the way in which the numbers can be read could be very dangerous. For example, if it overelaborates the presence of minorities, that might exacerbate tensions amongst the Bamar majority. Which of those communities might be overrepresented depends on how the census is recorded from a geographical point of view.
The Chair: I would like to thank both presenters. You have certainly given us new information about Burma. Your experiences and perceptions are extremely helpful to us as we continue our study. You did a good job from a distance, including the interplay, which was very helpful. We will continue to study Burma, Indonesia and possibly Singapore and the Philippines as part of our study of the Asia-Pacific region.
We have before us now Mr. Michael Murphy, Vice-President, Government Affairs, Canadian Pacific Railway. We were to have had Mr. Michael Bourque, but proposed legislation is being introduced that involves the railways, so he could not be with us.
Mr. Murphy, we appreciate that you have given priority to us today. You have been before many committees before and we welcome you. Please make your opening statement after which we will go to questions.
Michael Murphy, Vice-President, Government Affairs, Canadian Pacific Railway: Good afternoon, honourable senators. I appreciate the opportunity to be here.
As the chair just mentioned, my colleague Mr. Bourque from the Railway Association of Canada couldn't be here. The government tabled a bill a couple of hours ago that is of considerable interest to us in the rail industry. We're rather preoccupied today, as we have been for the last little while. I will see how I handle things today.
I'll just start by way of background and talk about Canadian Pacific and how we're providing rail and intermodal transportation services to more than 10,000 customers over a network of 23,000 kilometres serving the principal business centres of Canada from Montreal to Vancouver, and the U.S. Northeast and Midwest regions. We transport bulk commodities, merchandise freight and intermodal traffic. Like the economy, the success of our business is very much tied to trade. In fact, two thirds of our traffic is trade-related, either moving between Canada and the U.S. or to and from a port, namely the ports of metro Vancouver and Montreal.
In a continual effort to improve our service and safety performance, we are investing approximately $1.2 billion in infrastructure this year. Collectively, the industry ensures that Canadian businesses remain competitive in global supply chains. We offer the lowest freight rates in the world by moving a ton of freight one mile for just 4.1 cents.
CP is a strong supporter of Canada's Asia-Pacific Gateway and Corridor and Initiative. The government has shown considerable leadership in facilitating partnerships between governments and supply chain participants to increase the movement of all goods, including providing direct funding for public infrastructure, such as roads, bridges and road- rail grade separations. Overall, a process of involving multiple partners in gateway projects, on a corridor or area approach — for example, the Roberts Bank Rail Corridor Project — has resulted in a more effective delivery model. This is accomplished by taking a comprehensive approach to address the needs of all participants with the goal of improving capacity and fluidity in the gateway while meeting the needs of local communities.
Specific projects involving Canadian Pacific in the Lower Mainland of B.C. that are within the scope of the Asia- Pacific gateway include the Roberts Bank Rail Corridor, which consists of up to nine grade separation projects that improve access to the Roberts Bank terminals.
Specifically, the 41B Street overpass allows for additional tracks to be constructed to improve the flow of coal and intermodal containers to Roberts Bank. The Clearbrook Road realignment allowed the extension of the Mud Bay siding to almost 12,000 feet, and the 232nd Street overpass provides a footprint for additional track on CP to connect to the existing CN Rawlison siding and allows the siding to be extended to 12,000 feet. The additional grade separations along Roberts Bank allow for additional track to be constructed as well.
In the South Shore Trade Area of Burrard Inlet, the Stewart Street elevated structure spans 10 industrial customer tracks, and the realignment of Commissioner Street allows for two future tracks to be constructed. The Victoria Drive pedestrian overpass will eliminate the need for CP to break trains at that crossing, and the Powell Street overpass provides a footprint for future track.
The North Shore Trade Area involved a series of projects to improve access to terminals located on the north shore. Specifically, the Brooksbank Avenue underpass widening allowed for the expansion of track at Neptune Terminal, provided for the expansion of the Lynnterm Westgate track, and provided space for additional CN tracks in the area. The low-level road Neptune Cargill overpass allows CN to construct additional tracks in the area and reduces road rail interface on the route off the Second Narrows rail bridge in the area.
Other projects in the Lower Mainland that have provided real benefits include the Port Mann Bridge and the widening of Highway 1. This will improve capacity to port terminals for rail and truck. In addition, the King Edward Street overpass was constructed as part of the Port Mann / Highway 1 Improvement Project and allowed CP to construct rail extensions at Sapperton in the Westminster subdivision, which allows us to have longer trains destined to the north shore terminals and longer CN interchanges that increase rail capacity.
It is important to remember that the Pacific gateway extends beyond the west coast of B.C. as it is also about the entire corridor. In that regard, a number of investments have been made in, for example, the global transportation hub. This involved moving our terminal outside the city of Regina to a new facility, which has allowed us to expand our intermodal facility, allowed for the establishment of Loblaws new Western Canadian distribution centre and improved truck access to the terminal. Another important investment was a grade separation at 52nd Street in Calgary, which improved access to our intermodal yard there. These projects have resulted in increased capacity and the fluidity of the gateway to the benefit of the Canadian economy as a whole.
CP is doing its part to facilitate trade and improve the service offering through the gateway. We have instituted supply chain best practices with our supply chain partners. Elements of these agreements include the development of performance indicators, communication protocols, business development and dispute resolution.
Our efforts are bearing fruit. According to Transport Canada's fluidity database, the movement of imported intermodal containers from major ports in Asia through B.C. ports and via rail to Chicago is competitive in terms of transit time to that of U.S. ports and rail to Chicago. Average transit time for all intermodal cargo from unload at the B.C. ports to Chicago is approximately eight days.
In 2013, we at CP surpassed our 2007 record for rail cars processed through Vancouver, moving 1.1 million cars. We have also significantly reduced our dwell time, which is the average time a car spends within our yard being processed in both our Vancouver and Coquitlam yards. Our average dwell in Vancouver was 4.4 hours in 2013 versus 12.5 hours in 2007, which represents a 65 per cent reduction. Our average dwell in Coquitlam has gone from 23.1 hours to 2007 to 14.9 hours in 2013, which is a 35 per cent reduction.
Further, in July 2013 we launched an improved service for our intermodal customers connecting the Pacific gateway to terminals in Chicago or Toronto in four days, which is a full day improvement over our previous service offering. Overall, we have made significant strides in improving the efficiency and capacity of the gateway through collaboration with our supply chain partners.
However, with continued increased trade with China, the implementation of the Canada-South Korea Free Trade Agreement and the possibility of a trade agreement through the Trans-Pacific Partnership, it is expected that export and import volumes will increase through the gateway. One important challenge we are currently facing in the gateway, in particular in the Lower Mainland of B.C., relates to what we call ``proximity issues'' between our operations and those who live in proximity to our property.
As communities have expanded, there has been increasing concern with safety and issues such as noise, vibration and emissions. We have been very proactive in addressing proximity issues. We have a dedicated staff that work with local communities to resolve expressed concerns related to our operations. As well, through the Railway Association of Canada and the Federation of Canadian Municipalities, we have developed planning guidelines to assist municipal governments and railways in determining general planning policies for conversion of lands in proximity to rail operation. These proximity guidelines address issues such as noise, vibration, emissions, safety and development design.
To date, the current proactive and voluntary measures to resolve proximity issues have had mixed success. A more effective measure to prevent future proximity issues from arising is to require municipalities to notify and consult with railways prior to any land development in close proximity to railway activity. This will allow railways and municipalities to put in place mitigation measures prior to new developments taking place.
Another opportunity to increase the capacity, service and security of the gateway is to advance the programs under the Canada-U.S. Beyond the Border Initiative. In particular, we support the pilot project at the Port of Prince Rupert under the Integrated Cargo Security Strategy, where offshore cargo destined to the United States is screened at Prince Rupert before the cargo moves by rail across the shared land border. CP supports the ``screened once cleared twice'' principle. Upon completion of the Prince Rupert pilot, we would like to see the program rolled out to other ports, including Port Metro Vancouver.
This concludes my comments, Madam Chair. I'm happy to answer any questions that honourable senators might have.
The Chair: You have pointed out that the free trade agreement with South Korea will increase the need for your services and port facilities. Have you done a strategic look at Burma, now coming into an international environment; at Indonesia, taking on a different role; and at the more South Asia area? Do you do projections? We do them politically and know that these countries are coming to the fore and that there will be increased trade and movement. Have you factored that in? Is there a plan to look at it? Does that mean you will hit limits? You are hitting the proximity issue now, but you will hit limits of capability.
In my province there wasn't sufficient capacity, so certain industries have moved into U.S. ports. That was of some concern to Canadian ports, and we have had to work that out. We're now looking at Prince Rupert. Are you part of this strategic look at the capacity to service the Asia-Pacific region?
Mr. Murphy: The short answer to that is, yes. One of the positive things that came out of the Pacific gateway initiative was the kind of leadership that we saw from governments here. This really is a partnership in the strong sense of the word with not only governments at various levels, including the federal government, provincial governments in Western Canada, and local governments directly engaged, but also all of the other stakeholders like terminals at the ports, the rail business and others who came together to initially deal with what we saw coming, which was a much larger increase in demand in terms of the requirements on the West Coast coming from Asia. Part of that was the result of increased manufacturing in a variety of Asian countries that export back into North America.
From our standpoint, one of the things that came out of this was not only the initial understanding and requirement that had to take place in terms of upgrading infrastructure to cope with that increase in demand but also some of the governance, if I can put it that way, that's been put in place. There's the Greater Vancouver Gateway Council, for example, that we and all the other entities are part of that meets regularly and helps to coordinate not only the work that we're doing today but also to think about the future in terms of what are we'll need as we go forward. All the entities are under one umbrella, which was a positive step.
I don't mean to go on, but the idea that we have a pretty good handle on how to stay on top of what is happening with demand is important. I'm pleased with the way this has developed and we hope to continue that work.
[Translation]
Senator Fortin-Duplessis: Mr. Murphy, could you tell us about the co-operation between the Government of Canada and your company, Canadian Pacific?
[English]
Mr. Murphy: In terms of the Pacific gateway, there's been a high level of coordination between our company, other railways, other stakeholders in the gateway and the federal government. I've had a lot of opportunity to get out and talk about this. I will be frank with you: We have used the Pacific gateway initiative as a shining example of how to do this right.
It wasn't just a question of the money that got put into it, and there was significant funding from a variety of levels of government here, including the federal government. There was also leadership on bringing the parties together. That continues today. We continue to work very closely with the federal government and with other levels of government on this very important component of our business in terms of the Asia-Pacific region.
It's also a business, and I think the chair was getting at this very nicely, that is competitive. We compete very vigorously with other ports on the West Coast. Shipping lines have options. They can choose to go to different ports on the West Coast, and some of those are much larger than the ports we have here in Canada. That kind of cooperation in terms of maximizing our efficiency and the fluidity of the gateway is all very important.
[Translation]
Senator Fortin-Duplessis: I have another question, Mr. Murphy. I was replacing a colleague at one point on the transport committee. We were talking to the wheat producers. They were desperate because they were not able to get the services they needed from CN or CP to have the wheat transported and exported.
Are you aware of that? What is your relationship with the producers? I asked you some questions about the Government of Canada, but what is your reaction with respect to the producers who need you?
[English]
Mr. Murphy: It probably won't come as a surprise to any of you that we've been spending a lot of time on grain issues in the last little while. Let me start at an obvious framework for us at CP.
We move more grain than we move anything else. Grain is the single largest commodity that we move. It's over 20 per cent of our business. For us, it's an extremely important commodity. In terms of our customer relations in dealing with the grain companies in Western Canada who are our customers, I think we have excellent relationships with those companies. The people in my company that manage those relationships are extremely professional and understand the marketplace very well. I'll just start with that framework.
In terms of the current crop year, there are two significant factors we need to talk about. First, the crop that grew last year that ships during this current crop year that runs August 1 to July 31, so started August 1, 2013, is a record, with close to 80 million metric tonnes. We have never had a crop that size before. We combine that with the coldest winter we've ever had, and we have had some challenges. The crop year started in August. We didn't get any demand to move grain in August, which was unfortunate because it's a great month to move grain. In September, October and November, we moved more grain than we have ever done in our history.
You might read some reports that we haven't moved any grain at all this year. We've moved more grain than we ever have. I can go on in terms of getting into the detail, but I don't know if that's sufficient to address your question.
The Chair: Thank you.
Senator D. Smith: I know the country pretty well, but I'm a Toronto guy. I have never farmed, but I do follow the media. I heard what a great bumper crop it was and all that, but a lot of farmers and people are very, very unhappy. Do you think this was really an aberration? If greater agricultural uses of whatever it is they're doing that created this bumper crop become a norm, is it going to have to be addressed, or was this just a fluky year? Do you follow me?
Mr. Murphy: Yes. In terms of an aberration, there are a couple aberrations here, and I have referred to both of them, but I'll just talk about each one. One is the size of the crop. We've never had one this big, 80 million metric tonnes. We have never been near that.
Senator D. Smith: What do you attribute that to?
Mr. Murphy: The last growing season was the absolute perfect growing conditions for grain. Everything I hear in terms of talking to people who know a lot more about this than I do say it couldn't have worked out better. It's often discussed, is it too cold or too warm or too wet or too dry? Everything worked out just perfectly. The crop got in a little late, but the growing conditions were perfect, so we ended up with this extraordinary crop.
I don't want to do a lot of statistics, but I'll give you one. Normally, in a typical year we move 33 million to 34 million metric tonnes of grain for export. This crop is going to require us to add another 22 million metric tonnes on top of that 33 to 34, so another two thirds or 67 per cent growth in that. That's to give you some size.
There is no supply chain that's going to be built that will ever be able to handle that without any notice. We weren't even told about the size of the crop even well into the crop year this year. There's no way you're going to be able to gear up for that. I'll give you a good example. We were sitting there in August. From June through August, we had railcars, hopper cars that move grain, parked. In August, you start to move. Normally, we get a significant amount of demand in August to start moving grain. We just didn't get it this year. People have a right to decide when they want to move the grain, if they do not want to move it and they want to wait because maybe they think prices will be higher, or whatever the rationale. Now everybody wanted to move it. Between September and November, we had never moved more grain in our history in that time.
Then the winter hit. That's the second aberration. We're having the coldest winter, and I keep saying ``we're having'' because it seems like we're still having it, but in Western Canada they're having the coldest winter in 60 years. That is a problem for us. You get to minus 25 and rail operations are significantly affected. We had weeks of that in the Prairies. It's affected for safety reasons. We have to break up our longer trains because we can't get air into the train for brakes, so it's a safety issue, and velocities have to be reduced. It affected the supply chain in a very significant way. We're now coming out of that, pretty significantly. Even in February, we moved 15 per cent more grain than we did last year, and we're really starting to roll.
As you know, the government has asked us to file numbers every week in terms of how much grain we're moving. We just filed on Monday our first numbers, and I'm happy to say we're starting to come right back. We've been predicting that as soon as we get a break in the weather, we'd get right back to the performance we had before.
Yes, there are aberrations.
To finish the answer, the issue going forward will be this: Is the 80 million metric tonnes which we have never seen before an aberration or a new normal? We've heard some people call it the new normal. Even Agriculture Canada is predicting that next year's crop will be 15 per cent smaller. It becomes a very important issue in terms of sizing to meet the demand. How much visibility can we get in terms of the crop size? We do pretty well. The more visibility we get on it, we do a lot better.
I don't know the answer to whether this is the new normal or not, but we have never had a crop this big. We'll have to see going forward.
Senator Downe: I would like to follow up on the question asked by Senator Smith. There are all kinds of complaints about the lack of grain movement. You outlined the problems your company had. What's the role of the government? They've heard these complaints. They move the onus onto you to absorb the cost to ramp up. As you indicated in your answer, next year it may be half the volume of this year. Are they going to reimburse you for the cost on a go-forward basis? You're a private company.
I read the comments of your president to the government's announcement. I think he made them in New York or Montreal. I'm wondering what the position of your company is on what the government did.
You're not Canada Post; you're not a Crown corporation. It would seem to me that if this is a priority for the government, they would buy a railway and run it. What's the intervention in the private sector?
Mr. Murphy: I feel like I'm back at the Transport Committee.
You're absolutely right. In terms of the company, not only are we a private company, but we build and pay for our own infrastructure completely. To give you've an example, revenue wise, we were a little over $6 billion in 2013 and we spent about $1.2 billion in capital. We're pushing 20 per cent of revenue. There are very few, if any, companies that spend 20 per cent of revenue on capital. We do that every year. This year, we've said we will spend between $1.2 billion and $1.4 billion, so we're going to ramp up.
One of the reasons we do that is obviously maintenance. We have to spend to maintain our network or it will break down. So the bulk of it is on maintenance, but the rest of it is on growth. Part of it is, where do we anticipate having to do better in terms of more sidings, longer sidings? I talked about these 12,000-foot sidings. They are really important so we don't have to break up trains that we want to move, whether it's grain, coal or potash. I'm just using bulk examples out of the Prairies to the West Coast. So we spend that money.
We work very diligently with a variety of customers to move those products, so we weren't very happy when we were told, ``Now have you to meet certain quotas or targets.'' That was sort of stage one, which we saw three weeks ago; it will be three weeks on Friday. Today, we've got more legislation to intervene more directly in terms of the grain market. That's really where the focus has been, on grain.
In our view, we should be targeting a much more commercialized system. As I think most of you are aware, other than regulated grain, which is a big chunk of what we've been talking about here, we're regulated in terms of a maximum revenue entitlement for moving grain. That is the latest iteration of a whole series of interventions the government has had in the grain transportation system for many decades. This one has been around for a while now. That's the only part of our business that is dealt with that way.
We see it in the United States as an example, to pick one, where in times of peak or higher demand, people who want railcars have an opportunity to get into the marketplace and get them. That won't work in this environment with the cap system that we have.
The government made one decision with respect to more commercial efforts in grain. We think there's an opportunity to do more with the maximum revenue entitlement and think about eliminating it so that we can get into a fully commercialized environment. We think it would work well.
That is kind of where we are.
Senator Downe: There are these restrictions they put on you on one hand, and on the other hand they set these targets for you. The costs you are incurring from this new reporting mechanism, is the government reimbursing your company for any of that?
Mr. Murphy: Not that I'm aware of. We filed the first of the reports, and we'll continue to meet the demands of the order-in-council over the next several months, which is when it's in play.
Senator Downe: That reminds me of an old joke the Republicans and Democrats in the U.S.A. used to say all the time: ``Hi, we're from the government; we're here to help you.'' I'm sure your company feels that way.
Mr. Murphy: Thank you.
The Chair: I've heard that from many people in Canada.
[Translation]
Senator Robichaud: You said that grain transport is regulated. There is a maximum rate that you can charge to transport grain. Is that correct?
[English]
Mr. Murphy: That's correct. It is unique to grain. Part of our franchise is regulated grain. It's essentially the grain from the Prairies that is going to be moved and distributed to an export position. It could be moved anywhere in Canada. It could be moved to the United States. We have a number of corridors that we move the grain in, but that is a system where we are entitled to a certain level of revenue each year for the movement of grain. There's a maximum revenue entitlement; that's the correct name. There are other names used. It's a targeted number that's built based on a number of factors, and we don't need to get into the detail of that. It's a number we're held to each year, and if we exceed that number, we have to pay that money into a research organization in Western Canada, plus a penalty. Of course, if we're under the revenue entitlement, then there's no application there. That's the constraint you're under as a result of that regime.
The Chair: Can I get a clarification as to when that came in? Was that after the Crow rate?
Mr. Murphy: Long after, yes. There have been a number of iterations of government interaction in terms of the transportation of grain, but this is where we are today with this particular system.
[Translation]
Senator Robichaud: We heard that you devoted more of your efforts this fall to transporting non-regulated materials instead of grain. Is there any basis to that rumour?
[English]
Mr. Murphy: The short answer is no, and I'll try to explain that. We were often accused of favouring other commodities in some way, not so much in the fall, just to be a little more precise, because as I mentioned earlier, in September, October and November, we had never moved more grain, and you never heard anything from anybody; this performance was terrific.
The winter hit very hard in December, so the issue was really about December and January in particular, those two months, but also February because we still had some issues there. A number of people tried to paint it as a picture of somehow we were favouring the movement of crude oil.
Let me try to put that in perspective. I mentioned in terms of grain being the largest single commodity that Canadian Pacific moves, which is about 20 per cent of our business, about 500,000 carloads. We move 2.7 million carloads a year. In 2013, we moved 2.7 million cars. In terms of crude oil, that represented about 3 to 3.5 per cent of our cars. We moved 90,000 cars in 2013. You're talking about something where we're moving 20 per cent of our business versus a much smaller commodity.
I could go on here for a while. You're also looking at a completely different set of cars. You're talking about tank cars versus hopper cars; you're talking about different lanes where these products would move. There really is no issue there. For people to suggest that, quite simply, they're wrong.
Senator Robichaud: Have you convinced those people that they're wrong?
Mr. Murphy: I'm not sure I would ever be able to convince some of them. All we can do is state the facts, and the numbers that I just gave you are the facts.
Senator Johnson: What are the trends with respect to exports destined for Asia that make their way to Canadian ports by rail?
Mr. Murphy: Sorry, trends?
Senator Johnson: What are the trends you're seeing with respect to exports?
Mr. Murphy: I can get some numbers more specifically, if you like.
Obviously, if we start with grain, which is a big one, I'll break it into the three major areas of product line that we move. Bulk is the first one, so grain is in there and it's the biggest part of that. Obviously, with the numbers we've been talking about here, it's going to be a very significant year for the movement and export of grain off the West Coast and elsewhere.
Potash is another of the big areas for us. There's some softening in that area.
Coal is another huge part of our business. For CP and the different types of coal, our big export movement is in metallurgical coal used in steel production in Asia. That continues to be pretty robust in countries like China and Japan and elsewhere that manufacture steel. We're able to take coal produced and mined in southeastern British Columbia, bring it to Vancouver and sell it into the Asian market. It's pretty remarkable. I'm always impressed with that. That's an area that we look to continue to grow in.
The auto sector has also been reasonably robust.
I already talked about crude. That's a business that has us moving crude — some from Canada, some from the northern U.S. — to different markets in the United States, east, south and west. That's growing significantly, but it starts from a much smaller base, as I was describing earlier.
There are other products. It's more of the domestic market.
The only other big component I did not touch on was the container business, which is the intermodal part of our business. We have two businesses there, one domestic and one international. The international business is something that we have de-emphasized a little bit in the last while and we're more focused on intermodal movements within Canada. We're not seeing significant growth in that area for the moment.
Senator Johnson: That's interesting. You said there is some softening in the potash. Where is that trending?
Mr. Murphy: That's really a question of what's going to happen. It's always about the price of the product in terms of what the big buyers in Asia, for example, want to pay. Product prices move, and I don't have the latest numbers in terms of where we are on that, but that's all readily available. That really drives those demand numbers.
Going forward, though, there has been a lot of activity in Saskatchewan. In particular, I'm thinking about new mine development, and that's all predicated on thinking about demand continuing to grow. Ultimately, what you're talking about when you're moving potash is feeding people. That's something that Canada is pretty good at helping make happen. We've got the product. Again, it's a product that we have here in the middle of our country that we can export in competition with other countries, and we've done very, very well with it. These tend to be cyclical kinds of products in terms of where prices are moving.
Senator Johnson: You're very positive going forward with what you have to offer?
Mr. Murphy: Absolutely. To the extent that we have natural resources that other countries want and we have the supply chain as well functioning as we do in this country, that positions us very well in terms of being able to continue to be vigorous players in what is, quite frankly, a heavily competitive global environment.
Senator Johnson: It is very competitive.
Finally, what opportunities and challenges do you think exist for enhancing Canada's trade to the Asia-Pacific region from the perspective of Canadian railway companies?
Mr. Murphy: When I look at this business and how capital intensive it is, I always start answering a question like that by talking about ensuring that we have the ability to continue to spend at the level that's going to be required to meet demand. It's not just about that maintenance component I talked about; it's about meeting growth.
That quickly gets you back to the kind of regulatory environment you're dealing with. Companies like stability, obviously. They like to know what kind of environment they're investing in.
It's a challenge not just for railways but for the rest of the supply chain as well. The Port of Vancouver, obviously the largest port in the country, has its challenges too. Burrard Inlet is a very congested area, so the opportunity to grow out of Deltaport at Roberts Bank is hugely important. There are going to have to be additional investments as time goes on to meet the increased demands that will be there.
Senator Johnson: How long do we have before that has to be done?
Mr. Murphy: That's a very good question. I don't think I have a top-line answer. Certainly over the next several years we're going to have to see increased investments. It's just part of the reality based on our understanding of the opportunities for growth. It's a little tough to pin it down to a particular year, but certainly out over the next several years we're going to want to have to do that.
Senator Johnson: Your wish list would say two years, three years?
Mr. Murphy: It probably won't be that quick. When you're talking about adding another terminal, for example, out at Roberts Bank, Deltaport, that's a major undertaking and it will take several years to do that. A few years ago, they added a third berth to the existing terminal, and that increased capacity tremendously, but the ships are getting bigger all the time in terms of how many containers they'll take. Vancouver has the capacity to deal with that, but what else is coming at us? I would say it is several years down the road.
The Chair: There is one area that we have not touched on yet. You're moving our natural resources commodities and our agriculture. What is coming back from Asia-Pacific that is new?
Mr. Murphy: Everything that you can think of. I'll use the intermodal business.
The Chair: Is it coming through you?
Mr. Murphy: Absolutely. Let's look at all manufactured products. If we're focused on the Asia-Pacific, pick any country or series of countries that you would want to talk about. As you know, there is a lot of manufacturing in many of those countries destined for markets in North America. Containers are put on ships, and they move and come to the West Coast of North America. They can go where they like. They can go to Long Beach or Los Angeles, or they can go the Pacific Northwest of the U.S., or they can come to Vancouver or Prince Rupert. There are a lot of port choices.
You're looking at the Canadian market and you've got manufactured goods, whether it's electronics from Japan or Korea, automobiles, you name it, whatever is being manufactured. You can just go to a Canadian Tire store and look on the shelf and see where these products are manufactured. Canadian Tire is one of our customers, and there is a very high probability that those goods were on one of our trains from wherever they landed, probably at the Port of Vancouver if it was Asian manufactured. We get it to our intermodal facilities in Montreal and Toronto for distribution in local markets, and we do the same thing in Western Canada as well.
The Chair: Have you moved into using the Canadian ports to send goods to the United States? I understand there has been an increase; is that correct?
Mr. Murphy: Most of the goods that land in Vancouver — the biggest port — in a container from Asia, just to stick with that example, stay in Canada. Some of them move to the United States. That would be the Chicago corridor I was talking about earlier. Somewhere between 5 to 10 per cent of the containers coming into the Port of Vancouver would move through to the United States. The rest would stay in Canada. There is movement that way. There is no question.
The Chair: One other area we touched on before was food security, items come into Canada and ensuring that the containers are not in any way tampered with and new security services. Are you involved in that?
Mr. Murphy: Yes, we are. We have a group of people who are directly involved in working with both CBSA, our own customs and border folks, as well as the CBP in the United States through Homeland Security. We have a team of people working with them very extensively. I made a quick reference in my remarks to the Beyond the Border Initiative, which we were very supportive of when it was announced by the Prime Minister and the President of the United States some years ago.
I wouldn't mislead anybody. We have a number of trains every day moving across the border from Canada to the United States, and the reverse, of course. It's not today a showstopper problem for us that our trains aren't getting through. It's just that we can do better. We can improve the fluidity of the supply chain by cleaning up some of the issues. One of them is increasing the security and clearance at the port and then continuing on with the journey as opposed to stopping it at the border. We think that would be a big improvement. They have been piloting that kind of a thing now for over a year. We're still waiting for the results. I mentioned Prince Rupert was the rail pilot.
There was other pilot work done at other ports using trucks. We still haven't got word yet about how we will get that work consolidated so that it can be spread out to all of the other ports. I know CBSA wants to be able to do that but, like a lot of things, when you're working between two countries, it's never as simple as you think it might be, even though we would like to move ahead quickly with it.
Senator Mockler: There is no doubt, Mr. Murphy, that you're very informative.
Mr. Murphy: Thank you.
Senator Mockler: I look at this bumper crop of 80 million metric tonnes. Being the Chair of the Agriculture Committee in the Senate, I have to talk about the farmers. I say it's because we have good farmers, good policies, good weather and good infrastructure.
Mr. Murphy: I agree.
Senator Mockler: That said, my question to you — and feel free to answer it or not — has to do with the new legislation being reported by the Government of B.C.
Mr. Murphy: Are you talking about what is happening on the West Coast today with the labour situation?
Senator Mockler: Yes.
Mr. Murphy: The back-to-work legislation is coming from the B.C. government, that's right.
Senator Mockler: That said, you quoted that 20 per cent of your assets go back into infrastructure. That's commendable. Will this new legislation help the movement of grain for our farmers?
Mr. Murphy: Just so I'm clear, are you talking about the legislation the B.C. government is proposing to pass, or what the federal government in Ottawa put today in front of the house?
Senator Mockler: Both.
Mr. Murphy: Both. Okay, good.
On the first one, labour, we had a serious problem in this country in terms of reputation, particularly the reputation in Asia. For those of you who have a chance to get around and talk to people who are doing business with us, for years we were struggling with the notion that our supply chain was seen as unreliable because you never knew what was going to happen on the West Coast, particularly with labour concerns. A lot of work had been done there to come to some agreements, and we were very happy about that.
But this current issue with respect to truckers, it is affecting our business significantly, and not just us, but other supply-chain partners. I think it will be important to try and get that back as quickly as possible, because that is the largest gateway we have for trade in Canada in terms of the export market to Asia. So it is very important.
In terms of what is happening with the legislation tabled this afternoon — and I just read it before I walked over here — this is another step, picking up from the order that came out almost three weeks ago, where the government is intervening much more directly in the grain marketplace. You won't be shocked or surprised to hear from somebody in the business community, whether it is me or anybody else, that that's never our preferred approach. We believe in the marketplace and think that commercializing the grain market and allowing all the members of the supply chain to continue to cooperate with each other is the best way to go.
I will leave it at that. I'm happy to discuss it further, but that's where we are today. We will have a little bit more to talk about as we understand the specific implications of what happened today.
The Chair: Mr. Murphy, you can see you generated a lot of discussion in many areas. Some of them are very interesting and will help us in the parliamentary sphere. Some of them will be directly helpful to us in our report. Thank you for coming here and making this a priority today. We appreciate it, Mr. Murphy.
(The committee adjourned.)