Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce
Issue No. 15 - Evidence - March 1, 2017
OTTAWA, Wednesday, March 1, 2017
The Standing Senate Committee on Banking, Trade and Commerce met this day at 4:20 p.m. to study and report on the development of a national corridor in Canada as a means of enhancing and facilitating commerce and internal trade.
Senator David Tkachuk (Chair) in the chair.
[English]
The Chair: Good afternoon and welcome, colleagues and members of the general public who are following today's proceedings of the Standing Senate Committee on Banking, Trade and Commerce, either here in the room or listening via the Web.
My name is David Tkachuk and I am the chair of this committee.
Today is our 11th meeting on the subject of our study on the development of a national corridor in Canada as a means of enhancing and facilitating commerce and internal trade.
During the first part of our meeting today, I am pleased to welcome, from Infrastructure Canada, Marc Fortin, Assistant Deputy Minister, Program Operations; and Mr. Glenn Campbell, Executive Director, Canada Infrastructure Bank Transition Office.
Gentlemen, thank you for being with us today. Please proceed with your opening remarks, after which we will go to a question and answer session. We will then suspend briefly to change our witnesses for the second panel.
Marc Fortin, Assistant Deputy Minister, Program Operations, Infrastructure Canada: Thank you very much for the invitation. I have been asked to appear today to speak about how Infrastructure Canada's work supports Canadian trade and commerce. As you mentioned, I am joined today by my colleague Mr. Glenn Campbell, Executive Director, Canada Infrastructure Bank Transition Office.
Infrastructure is the backbone of Canadian communities big and small. It connects citizens with each other and it connects our communities to each other, facilitating the flow of people and goods both domestically and internationally.
[Translation]
It provides opportunities for businesses to innovate, grow, access new markets, and compete globally.
Infrastructure Canada has a long-established relationship with the provinces, territories and municipalities. For more than a decade, the department has worked collaboratively with these partners to address the unique needs of each region — such as investing in disaster mitigation projects to reduce the likelihood of impacts from extreme weather events.
[English]
This also includes significant investments in infrastructure that promotes trade with our global partners and between our provinces and territories. Our investments in ports, highways and other corridor infrastructure aim to reduce barriers and support businesses.
[Translation]
The Government of Canada's goals are to create growth and jobs for the middle class, help them meet environmental targets, build a low carbon economy, and build communities where everyone has access to opportunities.
[English]
Working together with our provincial, territorial and municipal partners, Infrastructure Canada wants to build strong foundations that connect all Canadians to opportunities.
The Government of Canada's long-term infrastructure plan will invest more than $180 billion over 12 years to support five key areas: public transit, trade and transportation, green infrastructure, social infrastructure, and rural and northern communities.
The plan is already moving forward with phase 1 programming helping ensure that Canadians' most basic local infrastructure needs are met while also supporting transformative projects.
[Translation]
These investments will help shape Canadian communities and build the foundation for the country's economic future.
[English]
Statistics Canada notes that the average Canadian commuter spends 32 working days every year traveling to and from work. The C. D. Howe Institute has reported that the annual cost of productivity lost to traffic congestion is $10 billion.
Under the long-term plan the Government of Canada will invest $25.3 billion toward public transit projects that will build the new urban transit network and will transform the way that Canadians live, move and work.
[Translation]
The Government of Canada will also invest more than $10.1 billion towards trade and transportation infrastructure. Further details will be shared in the coming weeks and months, but it will focus on projects that keep people and goods moving as efficiently and as safely as possible — at gateways, along corridors and across the wide expanse of our country.
These investments are crucial because Canada's expanding trade relationships are placing even greater pressures on our existing transportation networks.
[English]
Canada needs robust and reliable trade corridors that allow Canadian entrepreneurs and businesses to compete in key global markets and trade more efficiently with our essential partners, including the United States.
Closely tied to this long-term plan are two major projects that Infrastructure Canada is overseeing: the construction of the new Champlain Bridge and the Gordie Howe International Bridge. Both projects are good examples of strategic investments that get people and goods moving within the region in facilitating trade.
[Translation]
The new Champlain Bridge Corridor Project in Montreal is one of the largest projects currently underway in North America. The new span across the St. Lawrence will include an integrated two-lane corridor for public transit.
With an estimated 40 to 50 million vehicles, 11 million transit users and $20 billion in trade flowing over the existing Champlain Bridge every year, the new bridge and corridor will help ensure the continued safety of commuters, and facilitate the flow of goods across this key transportation corridor.
[English]
The Gordie Howe International Bridge will create the first highway-to-highway connection in the area between Windsor and Detroit, diverting a significant amount of commercial traffic out of the province of Ontario via Windsor's downtown core and increasing overall border traffic capacity. The project is moving forward with procurement and site preparation both in Canada and the United States.
The Windsor-Detroit trade corridor is the busiest commercial land border crossing along the Canada-U.S. border and one of the busiest in North America. More than one-quarter of all trade between our countries relies on the Windsor-Detroit corridor. When complete, the bridge will help ensure the efficient movement of goods and people with our most important trading partner, the United States.
Infrastructure Canada recognizes the importance of both these projects to their respective regions as well as to Canada.
[Translation]
While Infrastructure Canada officials continue to work with provincial and municipal partners to make these strategic investments, the Government of Canada also recently announced a new tool that will help make transformational investments across Canada: the Canada Infrastructure Bank.
The bank is a new tool that will find new ways to fund infrastructure and mobilize private capital. It will create more options and opportunities for provinces, territories and municipalities to undertake large transformative infrastructure projects.
The bank will invest $35 billion in new projects across Canada — projects like major public transit in Canada's largest cities, bridges, complex corridor projects, and more.
[English]
Canada has a very mature market when it comes to infrastructure projects and partnerships between public and private sectors. Many key pieces of infrastructure like the Edmonton Light Rail Transit system and the Iqaluit International Airport Improvement Project were financed in part by the private sector.
The Government of Canada believes there is an opportunity for the federal government to crowd in private sector investment in infrastructure through loans, loan guarantees and equity participation.
We live in a world that is smaller and more connected than ever before. More and more Canadian cities are carving out their own place as leaders on the world stage. At the same time, regional needs are taken into account.
[Translation]
Moving forward, Infrastructure Canada will continue to work closely with its provincial, territorial and municipal partners to create the programs that help meet the pressing needs of our communities, our provinces and our country.
Once again, thank you for inviting my colleague and me to testify before your committee.
[English]
We are both happy to be here and will answer your questions to the best of our knowledge.
The Chair: Do you have any additional comments, Mr. Campbell?
Glenn Campbell, Executive Director, Canada Infrastructure Bank Transition Office, Infrastructure Canada: No, I don't.
Senator Tannas: Thank you for that stirring speech. I appreciate your being here and specifically talking about Infrastructure Canada.
I apologize for being late. I tried to catch up with you as quickly as I could.
We are here to study the idea of a national corridor, and specifically a new corridor that would not replace the old one but would enhance it and potentially be of use 50 years from now.
Does your department study future needs for highways and corridors of this nature 50 years out? If not, is it because it's not in your mandate? Would you happen to know whose it would be?
Mr. Fortin: Our department is looking at research and study in terms of trying to project ourselves into the future and the needs of infrastructure. Your questions in terms of the corridor will probably be better answered by our colleagues at Transport Canada itself.
Senator Tannas: Maybe sometimes looking backward tells us things about looking forward. In your own experience do you see anything that would cause you to believe that there might be a need for a brand new corridor that will not be encumbered by cities and all of the things that have grown up around our existing corridors, which are obviously bottlenecked in many cases?
Mr. Fortin: Do you have a specific example, senator? As you know, in many of the projects with which we are involved our corridors are those that exist and were crafted, designed and proposed by our partners, the provinces and municipalities. The way our programs are designed is that the provinces and the territories first prioritize their needs in that regard. That is where we establish our partnership with them.
Senator Tannas: That is interesting. Transportation would be specific to roads. They would be the ones that would have to be looking at extraprovincial. Otherwise all we would get are roads that begin at one border and end at the other, and none of them would be connected.
Mr. Fortin: Yes, we have been funding Highway 1 starting in B.C. Those are big provincial and national types. I mentioned the two key corridors for us, the Gordie Howe International Bridge and the Champlain Bridge that are key elements in terms of pieces of infrastructure, commercially speaking.
Corridors and boards that go to the borders are others that would have been funded. We also participate as a partnership in funding of some of the big Canadian ports, such as Montreal and Saint John, New Brunswick. From a trade perspective those are also key commercial entities that we have been partnering with.
Senator Tannas: Are you involved in planning or anything that touches the North where you're involved in the planning of a highway that doesn't exist or anything of that nature?
Mr. Fortin: Yes, we participate. You are talking about planning again. That is done after the prioritization with the provinces and territories is done. We are partners in the Tuk highway that is taking shape.
Senator Wetston: Thank you for your presentation.
I want to ask you a couple of questions about the rationale here. Can you tell me the relationship between the ministry and the infrastructure bank? I noticed you said $35 billion. I am assuming that the amount you referred to here is included in that $35 billion.
Mr. Fortin: Yes.
Senator Wetston: Part two of the question is this: Is the strategy around infrastructure about job creation, or is it about something else? If it is about something else, what is it linked to? Can you help me with that?
Mr. Campbell: Thank you for your question, senator. I'm the executive director of the new transition office in charge of setting up the proposed infrastructure bank that was announced in the fall economic update. The government signalled it would be coming forward to Parliament soon with a legislative proposal that would detail the governance, the nature of the arm's-length entity, how it would operate and its responsibility.
In the interim Infrastructure Canada is an appropriate place, given all that is happening, to coordinate the effort to establish this new entity. I used to be at Finance Canada for many years, where I was responsible for banking and financial institutions, so it's appropriate perhaps that I take the helm.
In terms of the $35 billion, the government had signalled that $15 billion of that would potentially be fiscally expensed and therefore in the fiscal framework that is reflected in the $187 billion in that national 11-year plan. It's the small part; it's the minority share over that period of time.
We get to $35 billion because the government realizes this commercial enterprise would need an additional balance sheet to participate in various structures. There is an additional $20 billion on a cash basis that we assume would be doing liability asset matching. That is the responsibility at this stage.
When the government comes forward it will determine more of the governance and how this relates to the broader plan. I can say that it is one more tool in the tool kit. It's meant to be one instrument to achieve a new way of financing. Once the planning is done and once there is prioritization, this is an option for proponents, particularly in provinces and municipalities who own the majority of infrastructure in Canada. For those federally, it is one extra instrument to help get some transformative projects off the ground and improve planning.
Perhaps Mr. Fortin can handle the second part of the question.
Mr. Fortin: We are looking at infrastructure projects to create jobs themselves and getting the right Canadian expertise involved. The way our programs are designed we are looking through different lenses. I mentioned phase 1, which was announced at the last budget, but in phase 2 there will be a longer term infrastructure program where we are looking through different lenses at social, at green in terms of the environment, and at transit itself. These are the kinds of lenses around which we design the program itself.
Senator Wetston: There is always a lot of discussion in Canada about the strength of our pension funds. They are world-class pension funds, for obvious reasons, and they invest a lot. They have been investing a lot in private equity globally and that have been investing in a lot of regulated projects globally.
I may be incorrect in this, and I'm sure they'd all have my head for saying it this way, but I don't see them investing a lot in Canada. Maybe they are, and you know of whom I speak.
What is it you will be able to do to attract the investment of pension funds in Canada?
I recognize the challenges that they might have like restrictions on investment, the importance of returns and the stability of returns, which I think in part is why regulated assets are desirable in many cases. Can you comment on that?
Mr. Campbell: I would be delighted. In past months I have personally been consulting with many of these forms of institutional investors, not only the big pension funds but a lot of other asset managers and private equity.
The Chair: Does that include CPP, the Canada Pension Plan?
Mr. Campbell: Yes, it does. It would include everyone. Any institutional investor would be available to potentially interface with the bank in concept.
The key issue for them is that they are looking for opportunities to diversify and to invest in Canada. They are investing a lot in global infrastructure elsewhere and they are looking for opportunities in Canada.
What has been identified is that there is no lack of financing in Canada from a debt finance point of view. Many of the pension funds and asset managers are lenders into many of these projects but over time, even in a low-for-long environment that stresses public balance sheets. Municipal, federal and provincial are all borrowing and they are lending money at low rates, but effectively that means all the risk is borne by the taxpayer. We have to look for an additional way.
Many institutional investors including pension funds are managing long-term portfolios when they need to match their assets to long-term liabilities. They are willing to invest in projects and take on more risk through equity participation or something more so that they would potentially get a higher return than just lending.
On the flip side, they would bring a private sector discipline and expertise, potentially, to a project and also lifecycle management. Maybe they'd be there for the longer haul.
P3s in this country have been very successful and will continue to be so. This is really the next generation where we could potentially do a construct that would involve some equity or other forms of participation. That would bring in investors that would want to be there for the long haul and ensure that they're involved with a proponent, let's say a municipality or province, over the long haul. They would be there to absorb risks and in turn that would provide some fiscal room for the proponent or the taxpayer to free up scarce resources to do something else. That's kind of the construct.
The Chair: Would the infrastructure bank be an equity partner in projects, or are they a lending institution or a granting institution in partnership?
Mr. Campbell: That's a very good question, senator. I would portray the intent of an infrastructure bank to be more of a merchant bank in the sense that it has the capacity to put together a deal construct where the principal equity partner or financier and the proponent are coming in and using a mix of federal tools and instruments. It could be equity. It could be lending. It could be other forms of subordinated debt or equity or a combination thereof to manage some of the risk transfer between the proponent and the private investor.
In concept, the government is looking at flexibility. There is a range of tools. There will be certain parameters. At the end of the day, it's trying to make that construct work where there is sufficient risk transfer from the proponent to the private sector to match the economics of a project and to make it viable.
The Chair: Where are you going to get your money from? Are you going to get cash from the federal government in a cheque, or are you going to borrow money that the Government of Canada will back up?
Mr. Campbell: It's not intended that the infrastructure bank itself would issue debt or borrow money. The federal consolidated borrowing program will raise the funds, and then it will be issued through the infrastructure bank. There will be no new borrowing beyond the Government of Canada borrowing program. Then as that entity makes commitments, funds will be released to that entity to finance deals of some variety.
The Chair: Will that show up in the consolidated fund? Will that show up as part of the deficit, or will that be off in some other place? Let's say that you borrow half a billion dollars, $500 million. Where does that show up as an expenditure? Does it show up on a consolidated balance sheet, or does it show up in borrowing? How do we know where the money is being spent?
Mr. Campbell: That's a very good question, senator. I'm happy to return when the government comes forward. I can clearly say the intent of this would be consolidated on the Government of Canada's books. They already announced in the fall that $15 billion of the fiscal profile over 11 years will be expensed and then recorded.
In any given year, to the extent the bank enters into transactions, an accounting determination of whatever the federal support is, net of the asset liability, would be charged against that $15 billion. Therefore, it would be charged against the deficit surplus of the Government of Canada and would be reflected in the books. This is not off-balance sheet. It is an on-balance sheet financial transaction.
Senator Day: Mr. Chair, they were all good questions you were asking. I was enjoying the answers. They covered a number of the points I wanted to ask.
Gentlemen, we've met on a number of occasions. Senator Smith and I have had the opportunity to talk with you when you appeared before Finance. You know the frustration expressed by the Finance Committee was with the delays between the government announcing all of this money for infrastructure and things actually happening on the ground.
That was always a question of an arrangement between the federal government and the provinces. Have you done anything to mitigate those delays so that you can get on with doing what was announced, investing in infrastructure in Canada?
Mr. Fortin: That's a comment that comes to us on many occasions. I appreciate your point, senator, when you mentioned the gap between announcement and making the money available and the work starting. As I mentioned in the past, the work is starting sometimes without the bulldozer being on the ground. Planning and the RFP processes are taking place.
To come back to your question on whether we are doing anything to streamline that process, in the short term we tried in phase one after the last budget to put in place a bit more transparency in terms of the projects that have been approved and making public allocations by the provinces. The bilateral agreements that we sign with provinces and territories are now public, so you can follow the progress of the provinces in terms of the projects.
We are looking at more innovative ideas for the longer term because phase one was two years. Now we are to get involved in something a bit longer term. We will be engaging the provinces and territories to see how we can address that particular challenge.
Senator Day: I'm interested in your comment, Mr. Fortin, when you were talking about Infrastructure Canada and the announced funding. You said that this also includes significant investment in infrastructure that promotes trade between our provinces and territories. We've done some work in relation to interprovincial trade.
Who is providing the vision for interprovincial trade and a corridor? For example, let's think in terms of a pipeline from Alberta to Saint John, New Brunswick. A lot of work will be going on in terms of getting rights-of-way and environmental studies. Who is doing that thinking for that infrastructure project interprovincially?
Mr. Fortin: Right now our agreements and partnerships with the various provinces, municipalities and territories are done on a project basis. They arrive with the projects. We look through the lenses of eligibility at those projects themselves.
What you're talking about is probably more of a broader policy type issue, but from an infrastructure point of view programs are designed to address various agendas and topics. I refer to challenges on transit and big communities and how we can put more accessibility in place.
Those are the lenses through which we are looking at it. The provinces and territories are bringing forward the projects. Our work with them is to make sure that the program designs are eligible and meet our terms and conditions.
Senator Day: It may be that the investment in some of this preliminary work won't show a lot of employment right away. We're trying to envisage a corridor — how wide we don't know — all the way across Canada from West to East and East to West that could accommodate transmission lines, fibre optics and a lot of different things.
There will have to be some environmental studies done. There will have to be some rights-of-way obtained. It may not be for a project that's going to go in there tomorrow. It may be 10 or 20 years from now, but the corridor will be there and established.
You will not get certain provinces to come forward with that when they want to build something immediately for their area, but is there any vision? If there is a vision at the federal level to bring this together, where is that? Is that within infrastructure or is that somewhere else in the Prime Minister's Office?
Mr. Fortin: It's in many places, I would say. As a department our work is really to implement the prioritization done by our various partners. They come forward with their proposals. We try to make sure they are complying with our program design.
There may be other programs in other departments that are more particularly designed to address broader types of things or that kind of issue that you raise.
Senator Day: You're not involved in that.
Mr. Fortin: We go with the prioritization that is done with our partners.
Senator Day: Short term and limited to what each province wants that will get them the most bang for the quick investment.
Mr. Fortin: We will get into a longer term type of thing in the future.
Senator Day: I hope so.
Mr. Fortin: We'll see the kinds of projects that are proposed to us. I referred earlier to two big assets like the ports of Montreal and New Brunswick and bridges between Detroit and Windsor. Those are addressing visionary types of challenges that Canada needs to address at the same time.
[Translation]
Senator Moncion: Regarding the federal government's infrastructure projects, certain points that were raised concerned the increase in productivity and revenue generated by the various projects. Like the Champlain Bridge, Windsor Bridge and various corridor projects, the Highway 407 project in Toronto will generate revenue, which makes it a very interesting project for investors.
What criteria do you use to make the Champlain Bridge, for instance, generate revenue and productivity? This same question applies to the Windsor Bridge, Montreal's light rail transit system and the light rail project on the Champlain Bridge. What type of planning do you do to foster productivity and revenue generation?
Mr. Fortin: As for the Champlain Bridge example, I think that your question is regarding the net value of these projects and the revenue they will generate. Perhaps my colleague could answer you regarding the objectives of the bank.
As to your question about the Champlain Bridge, the plan in the initial concept was to dedicate one corridor to public transit. We are currently holding talks with the Caisse de dépôt et placement and the Province of Quebec to see how we will meet that requirement.
Senator Moncion: This will generate revenue.
Mr. Fortin: Yes.
Senator Moncion: For all of those who will be using it, is it the bridge as such that will generate revenue? We know that the Champlain Bridge was once a toll bridge, but that now it is not.
I think that the incentive to make the Champlain Bridge pay is to encourage people to use the light rail system, which will create a double incentive, because people will think: "If I have to pay to cross the bridge, I am going to take the train.'' So they would be ready to pay for their spot on the train, but they won't pay on the bridge. There is this whole issue of generating revenue, and later it becomes an asset that has a monetary value that can become very interesting for retirement funds.
Are projects examined with that in mind?
[English]
Mr. Campbell: Thank you for the question, senator. I don't want to comment on any specific project, but I can illustrate, going into the future, that we are setting up an instrument. As projects are thought up in the pipeline through whatever planning process at the municipal, provincial or federal level depending on the asset, we would now have an additional tool to help the planning of the particular project.
In some cases, many proponents are already thinking about revenue generating models of different assets to defray costs, to recover costs or for demand management and other incentives.
Without placing a value judgment on any of those options, if they were contemplating or if they might contemplate revenue it would be the key indicator for attracting any private sector investment because you would effectively be securitizing that revenue.
If you used user pricing of some variety to attract private investment, you would get productivity enhancements from the demand management, from the private sector discipline potentially and the lifecycle planning. Perhaps into the future, if you're bringing in those partners that want a long-term vision, you would even think about integrated planning: What is going on around the particular asset, whatever it tends to be.
You may derive positive externalities from that whole process. It's not the panacea; it is merely one option to think about when creating an asset. The premise is how we do more or something transformative that would not have otherwise been done.
We're creating another instrument. If you can crowd-in some private capital to do it, it is a win-win for all and there is more revenue available to build more public infrastructure.
Senator Moncion: I want to add: What if the government doesn't have any criteria? I'm sure the government does, but if the criteria are not built into the projects that are being presented you have some revenue generation but not for a long time. It's more of a cost. The cost is associated with building the bridges.
I understand that trade will be enhanced, but there has to be more revenue generation and criteria around these infrastructure projects so that they remain interesting forever.
Highway 407 was the best example. When Mr. Sabia was here a couple of weeks ago, he wanted to invest in it. He would like to buy a piece of Highway 407. When Highway 407 was built they said that no one would use it. What happened?
Mr. Campbell: Thank you for that clarification, senator. In terms of any future project in which the bank would be involved, by definition it would not be just financing the construction. It would be financing the lifecycle and the asset in the long term. Institutional investors, be they pension funds or others, want long-term assets that derive revenue over the long term. There is a match there of public interest.
All governments are learning from past experiences. Whether you view them positively or negatively, they are all instructive, going forward. The premise is to give more options to planners, to investors, and to those who are stewards of the asset to say in certain circumstances: "Maybe we could do it differently.''
In one circumstance maybe a traditional P3 design, build, operate, finance, and maintain is appropriate. In another one perhaps you could attract some revenue generating that would allow for a long-term arrangement with the private sector and the public proponent. Again hat's a win-win.
The objective is to try to create an instrument, perhaps a niche instrument at the start, and walk before it runs to see if we can have more of these projects in Canada built.
Senator Wallin: Thank you to both of you. The $35 billion is a lot of money but in the context of these projects it may not be enough.
Please correct me, but my sense is that in your transit focus or your bridge focus, Champlain and Gordie Howe, you're looking at important but smaller projects that seem to be more centred in the 100 miles north of the U.S. border where most people live. First, is that the case? Then we will go on to the second point, which is something farther north than the 100-mile population concentration base.
Mr. Fortin: Are you talking about for the bank?
Senator Wallin: Yes.
Mr. Campbell: You mentioned the $35 billion at the beginning and the $15 billion. This is in the context of the $187 billion over 11 years, so there is a lot of public funding.
With the intent, the spirit and the premise of the bank of course the government will come forward. This could be a potential vehicle for a project anywhere in Canada. It really depends on the nature of the project that it would support, whether it's a municipal, provincial or federal. Is it in the North? What type is it?
Priority determinations are already reflected in the government's plan for projects that would be on the pipeline. We hope there's good planning and good prioritization of what is in the pipeline for projects the bank would potentially partner with.
Over the long run you would have a vehicle that would be looking at major projects of scale, and also those that are small and potentially investable. In the future we could look at potentially bundling smaller projects. That takes some work, but clearly this is about thinking innovative and transformative. It could be anywhere in Canada.
Senator Wallin: I realize the book has been written, but given your understanding would this kind of corridor project that we've looked at — and I say northern because it's out of the population base — be something on the books, or would you be tending to look at it in the smaller projects?
Would you do something that would cover one chunk of a pipeline and maybe some communications equipment and then bundle after the fact rather than saying yes, let's take on this big huge new national project? There doesn't seem to be an appetite for that kind of approach. It is, rather, do the bits and join them up after.
Mr. Campbell: I would say, at least in the initial concept of the bank as an instrument, we don't want to overwhelm it with excessive expectations. We will let the proponents decide because it's an option for them, particularly provinces and municipalities. We will let the market determine in the sense that the investors will determine.
Like any major infrastructure project, whether national or part of a big municipality, they are all integrated with something. Both the planners and the private sector will look at how we can congregate a big enough piece to make it manageable and investable to do the due diligence and determine the economics around a specific part of the project.
Whether that's one of many or on its own, there has to be a degree of practicality to what you're attaching contracts and investing in.
[Translation]
Senator Ringuette: Mr. Fortin, you spoke about your provincial partners, and the territorial and municipal ones. However, in your presentation you did not mention any partnerships with the aboriginal communities. How do project requests for infrastructure for aboriginal communities work?
Mr. Fortin: In those cases, the territorial and provincial jurisdictions must hold consultations and engage those communities. When the projects are submitted to us, we attest that the consultations took place.
Also, if I may, our agreements are signed with the territories and the provinces, as I mentioned earlier. Those entities must conduct their consultation process to establish the order of priority of the projects.
Senator Ringuette: Even if, legally, the territory is administered by the federal government and the communities are its responsibility in large measure, when it comes to economic development under the auspices of the department, the provinces must conduct those consultations, and not the department.
Mr. Fortin: We ensure that the conditions are respected. The same laws and jurisdictions apply at that point. We follow a process to make sure of this.
Senator Ringuette: Who ensures that the necessary funding is in place for the infrastructure requests? Suppose we follow the ordinary process. You ask the provinces to prepare a list, to consult the entities and municipalities on their territory, and then the aboriginal communities. You ask them to prepare a list of priority infrastructure projects. At the provincial and municipal levels, that priority infrastructure project list has a financial component. A financial obligation has to be set out.
So who has the financial responsibility regarding the participation of the aboriginal communities in the infrastructure projects?
Mr. Fortin: Could you be more specific? You are talking about the financial aspect?
Senator Ringuette: My question is very simple. In an infrastructure program, the federal government contributes financially, as does the provincial government, and most of the time the municipal government does as well, if we are talking about municipal infrastructure.
Mr. Fortin: It depends on the program. You are talking about financial responsibility being split one third, one third and one third. It could be the Small Communities Fund. However, there can be other programs where the proportion is not one third, one third and one third, and that are the responsibility of the provincial and federal governments.
Senator Ringuette: I understand that you have some 30 infrastructure programs, and that you can probably make everything as foggy as possible.
Mr. Fortin: I don't know all of them by heart, Senator.
Senator Ringuette: Once the consultation process is complete among the partners — according to what you say the provinces are responsible for consulting the aboriginal communities — who is responsible for the funding of an infrastructure project in an aboriginal community?
Mr. Fortin: For a project on aboriginal territory?
Senator Ringuette: Yes.
Mr. Fortin: At that point, a consultation is conducted with the community. Then we verify to see whether the financial structure from the province is adequate.
Senator Ringuette: So, you are saying that the federal government has no financial involvement in the requests for infrastructure projects to be carried out in aboriginal communities.
Mr. Fortin: Yes, but in this case we may be talking about other programs that are not Infrastructure Canada programs. We may be talking about other departments. These may be the programs you are referring to. We go by the priorities established by the provinces and territories in those territories and provinces.
Senator Ringuette: We can understand why the aboriginal communities speak to us about their infrastructure needs, be it for economic development in the northern corridor or elsewhere. In fact, there is a sort of devolution of responsibility with regard to the infrastructure needs to underpin economic development in those aboriginal communities. I am trying to get an answer, and you talk to me about your 30-odd programs. The program doesn't matter. You say you have federal-provincial-municipal partnerships. That type of partnership, in the 30 different programs, should also include a partnership with the aboriginal communities, wherever they are on the Canadian territory.
Mr. Fortin: I understand, Senator. However, programs cannot overlap. The needs of those communities can be handled through other programs that do not belong to Infrastructure Canada. Our role is to ensure that we respond to those needs thanks to other programs that may exist within other departments. When projects are submitted to us by the provinces and the territories as priorities, there is a consultation process that ensues. As regards the funding, these are projects that will be carried out in the provinces, municipalities or the territories in the Canadian North.
Senator Ringuette: Do you work in partnership with the Department of Indigenous and Northern Affairs Canada?
Mr. Fortin: We consult other departments, including that one, yes.
[English]
Senator Enverga: Thank you for your presentation. I received a lot of answers from you already, but are there projects right now that you have been building or planning that you consider to be part of the national corridor? Is there anything like that right now: Just put another line from point A to point B there and that will complete the whole works?
Mr. Fortin: I will need more detail in terms of the corridor itself. Are you talking about the Canada-U.S. trade corridor? What are you talking about?
Senator Enverga: I am talking about the northern corridor that we are studying.
Mr. Fortin: There are so many projects taking place that I will have to see if those match the corridor you mention.
Senator Enverga: You have no definite idea about that.
What about the infrastructure bank? You mentioned that you were doing this and that people will be taking risks. We are asking private entities to join in that. What kind of risk do private investors have? Can they lose their whole investment because a project was unsuccessful? Is that possible?
Mr. Campbell: Senator, every infrastructure project which has an economic business model is all about managing risk, whether or not it is done purely on the public side or through a P3 or potentially through some other arrangement.
The objective would be to build robust covenants and legal arrangements to ensure the viability of a project in the sense that it would move forward, be completed and would continue to operate.
There are instances of default that happen in many kinds of transactions. All kinds of legal agreements will be put in place to ensure that asset continues to move forward. It's more like a hierarchy of how assets are valued and exchanged.
The party who is buying risk may have to absorb that risk. Usually that will come at some financial cost if a private sector is willing to invest so much in a project. The deal terms suggest whatever happens under certain conditions. If it doesn't meet certain expectations they will have to absorb those losses. That is what will happen. The losses will be transferred commensurate with the level of risk being apportioned in the contracting.
Senator Smith: Mr. Campbell, Michael Sabia from Caisse de dépôt came before us. They talked to the Province of Quebec about the concept of the 67-kilometre train system to replace the existing problems and congestion with collective transportation. He was very clear about what the province said: "Yes, that is great, but we will not pay for it.''
He said, "Okay, I will pay for it, but I will take full control of the planning, execution, engineering, delivery and running it over the life of the program. We are in this to make a return for the pensioners of Quebec, who are our shareholders.''
With the infrastructure bank will this mean the major pension funds that want to be involved will only do it on one basis, that they can make a return? If they work on projects with the federal government where they can make a return through the infrastructure bank, what does that mean for the federal government's infrastructure funds and departments, the other part of the $186 billion?
What does that mean for those social housing projects that don't return the same amount of return as the electric train system will in Montreal? Will that mean that the government will basically use debt with very low returns and have a difficult time justifying the returns of infrastructure money invested from that section, and the people from the pension funds will not be cherry-picking but will be in a substantially more powerful position to influence and control the bank?
Mr. Campbell: That is a very sophisticated question for me to answer.
I don't want to comment on any specific projects, including the REM project in Montreal currently before the government and multiple governments in play, but I can talk in illustrations.
In the first instance, if a pension fund or another private player went to a proponent and said they were willing to absorb all the risk and there would be no need for any government money, then there would be no need for the bank. That's what our normal financial institutions do.
In certain cases there would be a public priority determination that whatever it is someone's proposing it likely would have been funded in part or in whole through other bilateral agreements or programs or by a province.
If you structure this opportunity in the right way and there is an appropriate risk transfer — and "risk'' means the institutional investor may not get the return it wants or it may not happen depending on how it flows — it would free up scarce resources of the province, municipality or federal government to allocate money elsewhere.
Whatever the public infrastructure project is, the premise would be that it would still require some public support to make it viable. The role of the bank would be: How do you leverage federal support as minimally as possible to make that deal economically viable for the two parties, without underpricing or subsidizing that project any more than you would have to do to make it work?
It's a complicated question; I apologize for the complicated response.
You were referring to other government priorities. The objective here is that the government is doubling its funding of infrastructure. Many of the provinces are doing the same. This is one tool in the tool kit to do a certain type of transformative project. The premise is that the more we can crowd-in private investment in certain types of infrastructure, the more it will free up resources that will go into other social and economic infrastructure.
Senator Smith: What is getting at me is when you look back at the first railway that was built, who was behind the first railway? It was the federal government, if I understand correctly, with major Canadian players like the Ogilvie family with the Ogilvie Flour Mills and other people throughout Canada. It was a national program.
The highways connecting to the St. Lawrence Seaway created the southern corridor, which is with our biggest trade partner, the U.S. Again that was a visionary program that the government got involved in.
When you hear Senator Tannas, Senator Wetston and Senator Day ask the questions of Mr. Fortin, it's not a criticism, but Mr. Fortin specifically says, "The provinces come to us and speak to us about projects.''
We are talking about a transformative project and trying to study the concept of corridor across the northern part of our country. Who will take the leadership in that? The provinces will only come in once somebody steps up to the plate and says, "We need you all with us.''
I am not seeing that in the answer. If that is not part of your mandate, there is no problem, Mr. Fortin. It's not a criticism, but should it be an opportunity for the federal government if we are doing a transformative project, a big one? The Port of Vancouver was great and Prince Rupert was great. We had our largest crop of wheat in 2014 with 77 million metric tons, but we couldn't get it to port because we didn't have enough railcars and we didn't have enough track. We were blocked.
There has to be conceptual understanding of the role that the federal government will take. It's a question I put out to you to take back to the people in your areas of responsibility. Who do we speak to in order to make the message clear that if there is to be a transformative project the feds will have to step up?
Mr. Fortin: May I add to the question, Senator Smith, which you asked us? We will put some thought around that wisdom.
[Translation]
We often hear about transformative projects, but we also hear about the needs of smaller communities. The entities that can meet the needs of these communities are the municipalities, the provinces and territories. That is the beauty of Canada. We try to produce a series of programs so that we can examine the more strategic, global and international needs to make Canada more competitive. Our communities have needs, and we try to meet those at the same time.
Senator Smith: We agree with that. What we are trying to say is that you are spokespeople who can convey the message to other orders of government that they must examine other aspects. Your vision is perfect; however, we are talking about another vision for the next step in the development of the Canadian economy.
[English]
Mr. Campbell: To supplement, senator, pertaining to the bank, it will specifically be intended to promote transformative projects.
To be clear, what Mr. Fortin was talking about was a lot of our bilateral agreements where partnerships with our provinces are really cornerstone. The bank is meant to be an instrument on the side that could be used for provinces, territories, indigenous communities and federal departments involved in visioning exercises. Indian Affairs, Natural Resources or Environment could come forward and say, "We may have a project. We may have something that comes outside of a vision. Do we think this is bankable?'' We would hope the bank would become the interface to help them to become a reality.
In that respect we would envision the bank, at least in that instrument, being the agent to consult and advise whether or not there could be some private financing along with public financing for some of these ideas, whether it's indigenous.
Senator Campbell: I am following up on Senator Ringuette's question. I note that you have a long established relationship with provinces, territories and municipalities. Given the focus that this government has on relationships with First Nations, I have to tell you that I am shocked that they aren't included here.
My first question is: Why aren't they included here?
Mr. Fortin: The idea I spoke to earlier was not about excluding those communities. The design of the programs does not duplicate programs that exist in Indigenous and Northern Affairs Canada and in other departments. That's my reference on it.
Senator Campbell: Infrastructure Canada is like an umbrella that sits over all of this. We know that First Nations have a right to be consulted. The Supreme Court of Canada has told us that. If you do not have some sort of scope or idea or a long-standing relationship every time you build a project you will run into difficulty. It makes sense to have an established relationship with First Nations.
Mr. Fortin: I understand your comments. I appreciate that. My comments were more on the design of the programs. That doesn't mean we are excluding a relationship. It means we go with what is eligible in those programs, the way the design is, and who the proponents are that are bringing forward those projects to us.
Senator Campbell: We are talking about a corridor across Canada that runs through God knows how many First Nations. We are talking about pipelines and wireless. We are talking about the whole gambit.
We have been told here again and again that we have to be visionary. We have to look way out there to figure out where we are going. How can you look way out there when in the middle of this you have a sizeable population of Canadians who are not included? Every project that you envision at some point will have to be seen through the lens of First Nations. I don't get the sense that anyone finds that particularly amazing.
[Translation]
Mr. Fortin: I understand your point, Senator. It's just that at the same time, we deliver specific programs according to the priorities established by the territories and provinces. We ensure that they have consulted their communities, and we apply the criteria for those programs. I don't want to ignore the fact that there are programs aside from those of Infrastructure Canada that take the needs of those communities into consideration. That is why I spoke of innovative projects in my opening remarks. For instance, I referred to the Tuktoyaktuk highway.
[English]
Senator Campbell: Maybe I could suggest that the people you should be consulting with are the communities and the municipalities that know a hell of a lot more about what is going on than any province or federal government.
That is one of the issues and difficulties we have with infrastructure. It is pushed down to the bottom level, to the cities, and they are expected to pick up all of the pieces and put it all together.
I love this idea from Mr. Sabia. I wish more companies would come forward and say we will build the whole thing. Governments should be helping and not standing in the way. I'm sorry but I don't see a flow in what we are doing here.
The Chair: There are about five minutes left and I have two senators left.
Senator Ringuette: I have a comment for Mr. Fortin. If the programs are designed that way, change the design.
I have a question for Mr. Campbell. I haven't seen you since I was at the Finance Committee. Congratulations on your challenge.
The native communities from Northern Canada that were in front of us are a very dynamic group. They saw all kinds of economic opportunity in their areas and the need for infrastructure. Their request was that they wanted at least a loan guarantee, not even risk-based equity and all this jazz with a super duper pension plan. They wanted a loan guarantee to move forward with their infrastructure needs so that they can have economic development.
Mr. Campbell, will this infrastructure bank provide them with the loan guarantee from the federal government that they need to move forward? It's a simple yes or no answer.
The Chair: No, it never is that.
Mr. Campbell: As a point of clarification, the objective of the bank is to finance a project wherever the project may be. In indigenous or rural communities, small or large, let the project decide. Everyone is eligible. The bank will have an advisory function as well. The stewards of that asset in indigenous communities and small municipalities will be the ones interfacing with the bank. Whether it is a loan guarantee or a loan, everything has to be priced and reflected in the books of one level of government, one way or the other. These are different tools that will depend on the financial construct.
Senator Ringuette: Is your answer yes?
Mr. Campbell: Everything's possible. It's about the project, though. Just to socialize, this is not a tool to interfere in fiscal federalism or order of governments. It's about financing a project. It's not about lending to another order of government. Everyone can borrow. The issue of indigenous communities is a separate one. The idea is this is a tool to finance projects.
Senator Tannas: This follows on Senator Ringuette's question. What is infrastructure? It is obviously roads, bridges and so on. Would power plants be infrastructure? Would pipelines be infrastructure, even commercial pipelines? Do you have things that fall outside of the scope?
We had First Nations here who said, "Look, we have an opportunity to participate. We know it will grow our tax base. It is the chicken and egg. We have a private partner here but we don't have the money. We will not have the money until the project is done.'' It was for a gas transmission pipeline. Would that fall into place?
Mr. Campbell: That's a good question. That's a policy determination that I think the government will be making when we come forward.
Senator Tannas: Okay, it hasn't been made yet.
Mr. Campbell: It hasn't been made yet. However I have been the one leading this consulting. We are operating on the premise that this is about public infrastructure. Even though there may be private financing it is still public infrastructure. It's about renewing and about adding more. There will likely have to be some determination between what is a commercial versus a public proponent.
I would say the bank and the entity should be open-minded about what constitutes infrastructure because I think it's changing from physical roads and bridges to broadband and energy. We should be open-minded, but it will be a government determination.
The Chair: We are continuing our study on the development of a national corridor in Canada as a means of enhancing and facilitating commerce and internal trade.
It gives me great pleasure to welcome from the Canadian Chamber of Commerce, Ryan Greer, Director, Transportation and Infrastructure Policy; and from the Association of Canadian Port Authorities, Wendy Zatylny, President, and Mike Ircha, Senior Advisor.
Wendy Zatylny, President, Association of Canadian Port Authorities: Good afternoon or should I say good evening, honourable senators. On behalf of the Association of Canadian Port Authorities or ACPA, I thank you for the opportunity to be here to talk about how Canada's 18 port authorities are an integral part of Canada's trade and supply chain and our vision of the future of ports within Canada's trade enabling infrastructure.
As you've noted, sir, I have with me Dr. Mike Ircha, our senior policy adviser. He is also a long-standing expert on marine transportation policy and the author of a chapter on trade corridors and gateways in an evolving national transportation plan, which appeared in a book on integrating seaports and trade corridors. We made a copy of that chapter available for you. If there is anything in there, the man to my right is the one to be grilling on those questions.
The Association of Canadian Port Authorities represents the 18 Canada port authorities that make up the national ports system. We operate across Canada on the east and west coasts as well as along the St. Lawrence Seaway and in the Great Lakes. Together we handle over $400 billion in cargo every year. We're trading partners in over 160 countries around the globe. We contribute significantly to Canada's economic growth. We create tens of thousands of direct and indirect and induce jobs that pay higher than average wages in Canada.
We're also committed environmental stewards and good community citizens, having contributed over $22 million back into our communities, cities and towns over the past five years through community investment programs that help provide breakfasts in schools. We support local arts and culture, provide recreational facilities and protect the environment.
Lastly, I underline, especially in the context of the conversation that took place earlier, that we have a dual mandate. Under our enabling legislation we have the mandate of being financially self-sufficient and rooted within our communities. This is one mandate that port authorities have spent the past nearly 30 years refining how they bring that to fruition and make that concrete.
In addition, it's important to note we're also innovators. The story of ports has evolved over the years. Just a few years ago, ports were considered as physical places where ships arrived and cargo was loaded and unloaded. This is still true, but over time Canada port authorities have evolved into much more than mere cargo handlers. From their position at the heart of Canadian supply chains, CPAs have become intellectual catalysts linking trade, industrial innovation and development and marine environmental protection. The emergence of the Port of Montreal's Cargo M integrated logistics cluster is a good example of the innovative synergies that are created by today's ports.
This evolution was recognized by the World Bank in its global performance index. Every two years they rate the logistical efficiency of the world's economies. In the latest analysis that came out in 2014, Canada was ranked 12th in terms of our trade efficiency. This is up slightly from 14th place in the previous year.
This might sound pretty good except as the World Bank notes itself it's not the absolute ranking that is important. It is the 10 per cent grouping that you are located within. As a major trading nation Canada ought to be among the top 10. By this measure we are in fact punching below our weight.
We do have the capacity and expertise to build on. Canada's ports, as I said, have evolved to become logistics and efficiency experts, data managers and active participants in the knowledge economy. This is pertinent to our discussion of trade corridors today because much as the committee has been deliberating and focusing on the creation of a physical corridor. We believe there is also much to be gained by looking at this from a virtual perspective as well.
What if instead of building a physical corridor we build an idea? The idea is that we work together and bring together supply chain partners and infrastructure funding to vault Canada into the top 10 of the World Bank's Logistics Performance Index.
Let me illustrate what I mean. Getting goods to market globally is premised on efficient and effective domestic and international supply chains. As I said, these supply chains are expressed physically through ships, wharves, terminals, roads and rail connections, as well as virtually through data transfer, key performance indicators and intellectual capital that help ensure cargo fluidity.
Over the past several decades, economic globalization led to Canada's major ports to enable trade by serving as key gateways connecting trade corridors to global markets. This role has been reinforced by the development of several gateway and corridor initiatives, namely, the Asia-Pacific Gateway and Corridor Initiative, the Atlantic Gateway and the Continental Gateway. These strategies focused on multimodal transportation and served as the basis for international marketing and promotion of logistics performance and geographic advantages, and they worked. The Asia-Pacific Gateway stands out as the main success story, but all of those have been pointed to as success stories.
Indeed, our gateways and corridors approach is seen by many outside of Canada as a best practice in focusing financial, political and intellectual resources to smooth out the speed bumps in the transportation supply chain. The resulting efficiencies now see supply chains extending from Canadian ports into the American heartland as well as into distribution centres across the Prairies and in Central Canada.
Now I will apply this notion to the current question. Optimizing Canada's trade network requires integrated national transportation and trade policies and programs. It requires a clear mandate for Canada's port authorities to act as trade catalysts, as well as a framework to unite policy, regulation and stakeholders in a single vision; in short, a virtual trade corridor.
Within this context ACPA supports a comprehensive national transportation strategy that prioritizes key infrastructure and service improvements to ensure the efficient domestic and international movement of Canadian goods. This was recommended in both the report of the Canadian Transportation Act review panel and Minister Garneau's Vision 2030 for transportation. Both cast a focus on the role of transportation for enabling trade and economic growth. The panel likewise called for a unifying national strategy featuring strong public/private partnerships.
In addition, all policy frameworks benefit from a bit of seed funding. To realize their part within a national transportation strategy that facilitates trade, CPAs must also invest today to develop required berths and cargo-handling infrastructure to process tomorrow's trade.
Canada's port authorities currently have a $1.9-billion requirement to replace legacy infrastructure needs. This is against the backdrop of a minimum of $5.8 billion in overall infrastructure requirements. The $5.8 billion breaks down into two-thirds developmental and one-third rehabilitative.
This was pre-CETA signing so those numbers have increased since then. Certainly there have been catalogues put forward by the port authorities to Transport Canada as to the level of funding that's required. Again, in terms of order of magnitude, we're looking at about $5.8 billion.
This is not an "ask'' of government per se. It is simply identifying the required package of funding that will be put together through what for port authorities amount virtually to P6s, not P3s. The funding that comes together for a port program is typically a combination of federal, provincial, municipal, private sector and port funding.
However, federal funding is extremely important there. Federal financial support should include granting access for Canada's port authorities to the proposed Canada infrastructure bank to provide one-time grants for legacy infrastructure projects, as well as for developmental needs.
It was interesting when we were listening to the previous witnesses speak about the plans for the Canada infrastructure bank. We noted with a bit of chagrin that marine was not mentioned too often, other than for the two big development projects in Montreal and Saint John. The reality is that all 18 Canada port authorities have an integral role to play and they all have development projects on the go.
In addition, ports can continue to be powerful trade enablers for Canada, but to do so we also have to be flexible and able to adapt to changing market forces. Measures such as the removal of federal barriers to financial flexibilities would empower the port authorities to pursue trade-related opportunities and reduce current restrictions that may serve as obstacles to obtaining the necessary project funding for growth.
We recommend and we have been calling for the federal government to remove restrictions on CPA borrowing limits and allow commercial financial institutions to determine each port's borrowing capacity.
Before closing, I would like to mention a physical corridor that already exists within Canada which does hold tremendous potential. We have a unique binational internal marine trade corridor that penetrates more than 3,800 kilometres into the continental heartland, so five Great Lakes, their connecting channels and the St. Lawrence River. This marine corridor provides shipping access to two provinces and eight U.S. states, connecting North America's commercial heartland to the globe. Each year, the seaway carries more than 160 million tonnes of raw materials, agricultural commodities and manufactured goods. The corridor itself is the foundation of a $5 trillion regional binational economy that the entire continent depends on.
Despite its significance, the Great Lakes-St. Lawrence Seaway corridor is underutilized and undervalued, but its potential for future growth is starting to be acted upon. The economic importance of the corridor led the Council of Great Lakes Governors and premiers to adopt a strategy for the Great Lakes-St. Lawrence Seaway. Certainly the Province of Quebec has adopted a maritime strategy that is seeking to grow the maritime economy, create jobs and protect the integrity of the province's rivers and marine systems.
Realizing the full use of this potential marine corridor in the industrial heartland of the continent requires a thorough review of the steps needed to curb costs and enhance trade. We recommend that the federal government in partnership with other governments undertake a full review of the costs and administrative burdens for shipping on the Great Lakes-St. Lawrence River system with a view to improving trade to benefit our committee.
This review could identify ways in which this corridor could be more effectively integrated into domestic and international supply chains, as well as look at what enhancements would be done to maximize utilization of the seaway, including extending the shipping season.
In conclusion, I hope I have offered you a bit of a vision for how ports can and already help Canadians trade, both domestically and internationally. Support for an efficient, data-driven national transportation system that can leverage green and adaptable ports as intermodal hubs is a major way of achieving this vision.
Thank you. I look forward to answering your questions.
Ryan Greer, Director, Transportation and Infrastructure Policy, Canadian Chamber of Commerce: Chair and committee members, thank you for inviting the Canadian Chamber of Commerce to take part in your study on the development of a national corridor.
I've read some of the transcripts from previous witnesses with great interest. The national corridor concept is one borne out of a real economic challenge in Canada, and that's the challenge of building linear infrastructure. We're always pleased to participate in discussions like this one because the issue of getting goods and services to customers is important to our members. It directly affects their competitiveness and the overall wealth of Canadians.
By some measures Canada has reasonably strong supply chains. By other measures, as Wendy said, we're not necessarily punching above our weight versus some of our competitors. Most importantly, it's a dynamic and shifting landscape, so where we were more competitive yesterday does not mean we're as competitive today or tomorrow as others make investments in these areas.
The federal role in helping Canadian companies get their goods and services to market is an important one. International trade is a national issue with a clear national mandate for Ottawa. It's especially relevant today. As global supply chains increasingly dominate international trade, the movement of goods and service through some jurisdictions in Canada is becoming more and more impacted by political interests that do not prioritize national economic development.
The idea of a new coast to coast right-of-way for road, rail, pipelines and other linear infrastructure is intriguing.
The Chamber position that has been established by our members is that the federal government should take a leadership role in working with other levels of government to help set up a radiating network of transportation and utility corridors to better integrate all urban centres and regions in Canada.
The specific idea of a single, more northern national corridor is not one that has yet been put to our membership. There are some advantages to focusing on a network approach rather than on a single national corridor. I will go through those very quickly.
Focusing on existing corridors will add capacity where it is needed most. As Wendy alluded to with the Asia-Pacific Gateway and Corridor Initiative, a great deal of federal and provincial policy and funding weight went behind what has been recognized as a Canadian best practice to try to move goods and services where shippers and receivers are already moving goods and services.
A network approach could obviously include those corridors and could add additional capacity as part of the national northern corridor that you have been looking at but would not necessarily be restricted to it.
In addition, for a single national corridor getting any kind of consensus from all the provincial governments that would be required would be incredibly challenging. As this committee has seen from its work on internal trade barriers, consensus on lesser issues is infrequent and fleeting. It has taken decades and we still don't have alignment on trucking regulations among provinces, so imagine the challenge we would have in trying to align any number of linear infrastructure projects on a single corridor. A grand bargain on these issues would certainly be welcome but I wouldn't hold my breath.
Working on rights-of-way in existing corridors is likely to yield greater results. Not needing broad consensus would enable the federal government to focus on the most willing provincial and municipal partners. As we all know, sometimes the willingness of other provincial and municipal partners changes as their leadership does. It allows the federal government to work with those who are most interested. This approach isn't as ambitious as a single national northern corridor but probably more practical.
Certainly, the need for more transportation and utility corridors is consistent with the findings of the Canada Transportation Act review chaired by David Emerson. Its report recommended the creation of a national corridor production program for the purpose of protecting trade and transport corridors and protecting critical industrial land parcels for gateway faculty expansion which is sorely needed for our ports.
I would briefly add that the chamber has also made a series of recommendations to the federal government about how they should act to enhance Canada's existing corridors and gateways. We released a report last June called The Infrastructure that Matters Most, which made the case for greater focus on trade and transportation as part of the government's long-term infrastructure program. It recommended, first, that a larger share of federal infrastructure funding be devoted to trade and transportation; second, that those investments be merit based rather than on a fair share basis; third, the renewal of federal gateway and corridor programs such as the Asia-Pacific Gateway and Corridor Initiative; fourth, improvements to the complex and opaque regulatory frameworks that are stifling private sector investment projects along these corridors; and fifth, that the federal government should lead a public/private effort to do more strategic long-term national infrastructure planning.
We also shared these recommendations with the National Finance Committee and were pleased to see some of them reflected in the report released by the committee on Tuesday.
I think that last recommendation is particularly relevant to the work you're doing on this committee. As we heard from the previous witnesses from Infrastructure Canada, the federal government currently does not facilitate any long-term needs assessments in Canada. It largely leaves this work up to the provinces, which then submit through projects for federal approval, but they don't at this time do any long-term strategic planning. T
The Emerson report also recognized this by highlighting that other countries certainly do a much better job, Australia being a good comparator to Canada, of planning for their long-term infrastructure needs.
Through this study I think the committee could encourage the federal government to lead a public\private long-term planning exercise to follow through on some of the recommendations in the Emerson report. Then that work could be built on thorough analysis of existing transportation and utility corridors, the need for additional transportation and utility corridor, and projecting short, medium and longer terms to see if there is a need to start setting aside larger parcels of land in greenfield parts of the country.
I will wrap up with this: Connectivity is a key driver of Canadian competitiveness and the federal government has a key role in helping overcome Canada's natural and political geography. While it's difficult at this point to offer too many views on the concept of a northern corridor because it is just that, a concept, the chamber very strongly agrees with the problems that the idea is seeking to address.
Thank you. I look forward to questions.
Senator Wetston: Thank you for your presentations. There is a lot involved in both of your presentations. It's not just about corridors from my perspective, although that may be what we're focused on.
I want to ask you a question about the relative ratings of our ports. You talked about the World Bank. They do a lot of measurement. It is a tremendous amount of work that they do in many areas. I think you said we're 12th. Let's say that we were No. 1; it's nice to aspire to No. 1. What would that mean for your ports? What would that mean for Canada? What would that mean for the economy of the country?
Ms. Zatylny: I'm enjoying the vision. Give me a second here. In terms of job creation and economic development we would certainly see quite a spurt. One thing that strikes me out of the work of the port authorities is that they are tremendous generators.
When investing in a port one benefits from a double bounce, from a multiplier effect, in the work that is accorded to the port. The port grows in infrastructure. There is the work that is generated to do the actual design and construction, but then it also increases the flow-through economic activity.
A few years ago the OECD did a great study on the competitiveness of port cities. One thing they found, to put numbers to my point, is that for every million tonnes of additional through-put in a port, an extra 300 jobs are generated within the port hinterland. It's not just within the port or the port community, but those benefits spill out into the broader hinterland.
At the same time they found that for every additional tonne of through-put there is an additional $100 U.S. generated of increased economic activity. Those are powerful multipliers.
Port cities are interesting because they are innovators. The study cites that the greatest number of patents around transportation and in other areas as well come from port cities. To your question, economic growth and job creation multiplying beyond the actual activity of the port, plus innovativeness in approach, would be some of the benefits we would see in Canada.
Senator Wetston: Senator Campbell got into this and I didn't with the previous witnesses. I actually believe cities are pretty important. There is a lot of discussion about the federal government, a lot of discussion about the provinces, and it all ends up in cities or towns or communities. They're left without the constitutional authority or capacity to do a lot of the things that the province and the federal government can do.
You just focused on a very important issue: What can cities do to advance and enhance their capacity with respect to ports and other infrastructure to ensure that basically the economic benefits achieved are achieved at that level? That's where it happens. It is not in the policy shops in Ottawa or in the policy shops of the provinces, but at the level of the citizens who live in this country, whether they are in the North or whether they are 100 miles from the U.S. border. Can you help me with that?
I would be happy if Mr. Greer would take on that question, and I have another question for him.
Ms. Zatylny: I love that question. Thank you.
In answering it, you focused on the question of cities, but we look at it from the perspective of port hinterlands, keeping in mind an example such as the Port of Thunder Bay which carries grain from Saskatchewan. The reach of a port actually extends far beyond the municipal boundaries it is located within.
In terms of cities, the biggest thing they can do is to recognize the value that the ports bring and then partner with their ports to maximize the benefits. Montreal has done a great job of that. The city itself has been welcoming and open to working with the port. There are interfaces where this occurs, in municipal regulations, social acceptability, community involvement, and partnering to identify projects up to various funding programs.
To be able to work together with the port to allow the port to grow, respectfully of the citizens within that community, is probably the biggest thing that a city and the surrounding community can do to help its port.
Mr. Greer: I would add to what Wendy said. You are right that lower levels of government are obviously better in tune with what their economic needs are and what the needs of their citizens are. That's why the federal infrastructure programs, as they have been set up, largely reflect that. Provinces collect lists from cities that then do their political horse trading with their cities. Then they do the same trading up with the federal government and everyone looks at the common lists to see where they match up. Then, lo and behold, we end up with funding agreements.
The challenge for cities and for the federal government is how to link up some of the more national projects, or projects that have national economic benefits, with the needs and interests of the cities where maybe they don't see it as much right now.
I can think of municipalities in the lower mainland that don't want to see more rail running through their communities. Nor do a lot of people living there. However manufacturers and commodity exporters from all across Western Canada depend on getting more rail through there to competitively get their goods to market. How we can link these national projects — and pipelines would obviously fall under that — to the needs of these cities is a key issue that we still need to crack.
Senator Wetston: You mentioned Australia. Canada cannot help itself but to compare itself to Australia in many ways. Australia is a federation; we are a federation. Some would say Australia works better in some areas, while we might work better in other areas. It's a wonderful country and a great federation, but there are obstacles to achieving certain national goals.
You talk about a national transportation strategy. There are other national strategies we probably could benefit from. Maybe the infrastructure bank is an example of a national strategy.
What is it that you think in Canada, from the perspective of the Canadian Chamber of Commerce, is inhibiting our capacity and ability to develop these national programs in the economic interest of the country?
Mr. Greer: That's a really good question. It starts with how our federation and the jurisdiction of the provinces are expanded and strengthened. There is obvious resistance to federal intrusion on infrastructure issues and on issues like internal trade. There is the federal trade and commerce power that no government of any political stripe has been willing to use to advance the national economic interest. I don't know if we will see that any time soon, and I think it would take a crisis of some kind to provoke that.
Senator Wetston: I can help you with that. They tried to create a national securities commission in the Supreme Court of Canada and it didn't work.
Mr. Greer: This is exactly it.
Australia, as you said, is a helpful jurisdiction for us to compare ourselves to, and we do. Personally I think sometimes Canada gets carried away with too many national strategies. There are clear areas of federal jurisdiction, including the national economic interest, where those efforts would be better directed than national strategies that tie together areas of social issues that fall under provincial jurisdiction.
If the federal government were to stick more to its knitting and focus on the national economic interest, there would be an opportunity to perhaps make bigger things happen.
Senator Enverga: Thank you for your presentation.
Mr. Greer, I understand that you highlighted the Asia-Pacific Gateway and Corridor Initiative. Would the approach taken by the federal government in relation to the Asia-Pacific Gateway and Corridor Initiative and the gateway and border crossings be suitable for the development and possible future expansion of a national corridor? Is that possible? What do you think about that?
Mr. Greer: It's certainly possible. Asia-Pacific Gateway funding has largely been spent so there is a gap right now. The Gateways and Border Crossing Fund, as well as Asia-Pacific Initiative, were created in the mid-2000s.
When the previous government renewed its infrastructure funding programs a few years ago, it shifted the funding from the Asia-Pacific program to nationally significant projects. The current government has now identified $10 billion of its $180 billion fund for trade and transportation issues. We are waiting to see how they will spend that and what the criteria will be.
Will it reflect specific trade criteria, like the Asia-Pacific program? Will it use what we learned from those programs, or will it be another "fair share'' program where everyone sticks their hand in the pot? We don't know that yet.
Once those details are unveiled, it is certainly possible it could be used for corridor expansion-type projects in addition to improvements along existing corridors. I would suggest that $10 billion of a $180 billion infrastructure fund for trade and transportation issues is not enough funding to expand beyond existing gateways and corridors. However, we are hopeful that some new version of the trade and gateway corridor programming is resurrected as part of the government's infrastructure plan.
Senator Enverga: I should discuss this with your chamber of commerce.
When do you see the need? How far apart are we? Are we going fast enough or are were going too slowly with our infrastructure that we cannot catch up with the trend of expansion for our businesses? How far are we? Do we really need this infrastructure at this time?
Mr. Greer: In our gateways and corridors it is all relative. The speed and reliability of our gateways and corridors isn't just objectively seen as how it stands. It is measured against competitor countries and businesses shipping through their gateways and corridors that are perhaps not grappling with the same geography we are in Canada.
Our members in the Lower Mainland who rely on the gateway and corridor tell us that the previous program used certain public investments that helped unlock private investment, and that there are some public investments that haven't proceeded and private developments are waiting to learn if there will be a certain rail or bridge link built. That investment is being held off, waiting for the public investment that may follow.
The federal government can play an important role convening lower levels of government and the private sector. While investment had been running along at a pretty good clip, some of it has now slowed. There is a lot of interest from those in the corridor. Even as volumes have dipped with the recent economic slowdown all the projections for the next 15, 20 and 30 years through all of our ports and corridors tell us there a significant increase that will require lots of new capacity, if we can get the goods there.
Senator Enverga: How about the port authorities? Do you have any comment on that?
Mike Ircha, Senior Advisor, Association of Canadian Port Authorities: On the question you raised about the issue of transportation corridors as part of a national strategy, the chapter you received really talks about that, but it talks about it eight years ago when we were looking at this. At that time I felt this was the beginning of a national transportation strategy. It was coming from the bottom up.
It is much like we heard with the infrastructure folks talking about it being built up from the bottom. The gateway and corridor strategy was a really good combination of all sorts of stakeholders coming together to identify the key bottlenecks that should be addressed and then finding funding, which was partly federal, private and provincial, to address those bottlenecks to smooth the system.
My thought at that point was that you could build on this into a national strategy because you are focusing it on corridors. It is not the whole world. It is just looking at what is most important in Canada for the movement of our goods and people and how we improve that efficiency. It seemed to me that the trade and corridor strategy was a way to a national transportation strategy.
The Chair: Ms. Zatylny, can you tell me: Does the association include inland ports?
Ms. Zatylny: We are the port authority so we have the inland ports, the freshwater ports on the Great Lakes, but not what are considered purely inland ports like Winnipeg.
The Chair: Not for the ones in Edmonton or Winnipeg.
Ms. Zatylny: No.
The Chair: Are there any other questions? There are no other questions. Thank you very much for your presentation today.
Colleagues, I would like to go in camera for about five minutes, so we will say goodbye to our witnesses, clear the room and proceed.
(The committee continued in camera.)