Proceedings of the Standing Senate Committee on
Transport and Communications
Issue No. 32 - Evidence - March 21, 2018
OTTAWA, Wednesday, March 21, 2018
The Standing Senate Committee on Transport and Communications, to wich was referred Bill C-49, An Act to amend the Canada Transportation Act and other Acts respecting transportation and to make related and consequential amendments to other Acts, met this day at 6:51 p.m. to give consideration to the bill; and in camera, for the consideration of a draft agenda (future business).
Senator David Tkachuk (Chair) in the chair.
[English]
The Chair: Honourable senators, we will be examining Bill C-49, An Act to amend the Canada Transportation Act and other Acts respecting transportation and to make related and consequential amendments to other Acts.
Today, we have two panels of witnesses. For the first panel, I’d like to welcome Rob Ashton, President, International Longshore and Warehouse Union; Karen Kancens, Vice President, Shipping Federation of Canada; Bruce Burrows, President of the Chamber of Marine Commerce; Martin Fournier, Executive Director, St. Lawrence Shipoperators appearing by video conference from Quebec; and Sarah Clark, Chief Executive Officer, Fraser River Pile and Dredge appearing by video conference from British Columbia.
I invite Ms. Kancens to start her presentation. Please proceed.
Karen Kancens, Vice President, Shipping Federation of Canada: The Shipping Federation of Canada is the voice of the owners, operators and agents of foreign flagships that carry Canada’s imports and exports to and from world markets. These ships play an essential role in the Canadian economy by facilitating the movement of Canada’s international trade. They do so efficiently, securely and safely day in and day out.
Although I am here as part of a maritime panel with my colleagues, I would like to take this opportunity to note that ocean carriers also have a keen interest in the rail provisions of Bill C-49. Indeed, our members strongly believe that the creation of a more efficient and transparent rail freight system will benefit all the elements of the logistics network, from carriers in the rail, trucking and marine modes, to ports and marine terminals, to inland warehouses and beyond.
That being said, my main purpose this evening is to highlight the importance of the maritime provisions of Bill C-49 and clause 70 in particular which amends the Coasting Trade Act to allow all foreign flagships, regardless of flag or ownership, to reposition their empty containers between Canadian ports on a non-revenue basis. That’s an activity that has previously been closed to them under Canada’s cabotage legislation.
It is worth noting that this is something that our container carrier members have been requesting and that our association has been advocating for over the last decade or so. Discussions on this subject had actually advanced to such a degree that in 2011 Transport Canada was on the verge of proposing an amendment to the Coasting Trade Act that would have exempted the repositioning of empty containers from the act’s prohibitions.
However, those discussions were placed on hold when empty container repositioning became a negotiating item in CETA, the trade agreement between Canada and the European Union. Now that those negotiations are over and the CETA provisions have come into effect, Bill C-49 seeks to complete the discussions that were put on hold in 2011, when there was general agreement that empty container repositioning should be open to ships of all flags and all ownership.
The amendment proposed under clause 70 is important because a significant aspect of the container shipping industry involves moving empty containers from locations where they are not needed, so where a carrier has a surplus, to locations where they are needed, where, for example, a carrier has a Canadian customer who needs the empty containers for export cargo.
Because the Coasting Trade Act has until now prohibited foreign flag carriers from using their own ships to carry out this activity, they have had no choice but to employ alternative solutions, such as moving the empty containers by rail or actually importing them from overseas.
However, none of those solutions represent the most productive use of the carrier’s transportation assets. All of them come at a cost, not only for the carrier but also for the Canadian exporter in the form of higher transportation costs and fewer options for getting goods to market as well as for the logistics chain in the form of reduced fluidity and overall efficiency.
Clause 70 of Bill C-49 would address those issues. It would give carriers the flexibility to use their transportation assets, that is their ships and their empty containers, in the most productive and logical manner possible, and that for the ultimate benefit of everyone who relies on the availability of an efficient and well functioning Canadian supply chain.
That’s why we support clause 70 so strongly, and we thought it important to bring to this committee’s attention. Thank you.
Rob Ashton, President, International Longshore and Warehouse Union: Hidden in Bill C-49 is a story of unintended consequences. Ottawa’s goal and investment in jobs for the middle class is admirable. To that end, the new federal infrastructure bank has been established to attract private sector investment in infrastructure our economy needs to create good jobs; but Ottawa’s intervention here could have exactly the opposite effect in B.C.’s maritime industry.
The aspect of Bill C-49 I want to discuss this evening has rarely been addressed during your proceedings. Only David Emerson has directly tackled the issue we are bringing forward. For your information, I have quoted him at the top of my speaking notes.
Bill C-49 proposes to permit port authorities to receive loans and loan guarantees from the federal infrastructure bank. We submit opening infrastructure bank funds to port authorities is wholly inappropriate.
It is our view that Bill C-49 will put a chill on private sector investment in British Columbia marine facilities that is already committed and/or planned. The infrastructure bank is intended to spark private investment where little or none exists. Such is not the case in B.C. Our marine sector is booming, fuelled largely by private sector cash. An infusion of infrastructure bank tax dollars could actually threaten that.
Let me give you a specific example. The Vancouver Fraser Port Authority has plans to build a giant new marine terminal at Roberts Bank, known as T2. It will cost at least $2 billion, maybe even more. It will involve the construction of an island in an environmentally sensitive area that has come under fire from both community and environmental organizations, such as APE and BC Nature.
It is also right beside the existing delta port terminals operated by Global Container Terminals. GCT is in the middle of a $300 million expansion and is prepared to sink $800 million more to expand the facility’s capacity.
We are concerned that funnelling tax dollars through the infrastructure bank into the Vancouver Fraser Port Authority would be like throwing a cold wet blanket on this private sector activity.
Many people believe that GCT expansion is a better, more prudent plan that will make Canada’s Pacific Gateway more competitive. Yet, this project could go up in smoke unless Bill C-49 is changed.
Overall, the private sector is eyeing further investments in B.C. marine ports worth in excess of $1.5 billion, enough to meet Canada’s forecasted needs through the year 2050. These plans could be upended if the Vancouver Fraser Port Authority is permitted to unfairly compete funded by the taxpayer.
Stimulating jobs is a big part of the infrastructure bank’s mandate as well, but the port authority plan for Roberts Bank is to build a highly automated operation. If Ottawa invests in this project through the bank, it would in effect be investing tax dollars to destroy jobs, not create them. Fewer good jobs for middle class British Columbians means reduced tax revenue for Ottawa and the communities in which we live. Automation is a fact of life. We should be smart about managing its negative effects on people and communities while harnessing the benefits of it.
Just last week, Minister Garneau announced a major review to modernize port authorities, the first time this has been done in 20 years. Like Mr. Emerson, we recommend the committee amend Bill C-49 by deleting clauses 73 and 74 until such time as Minister Garneau’s review has been complete.
Thank you for your time. I am happy to answer any questions you may have.
[Translation]
Bruce Brurrows, President, Chamber of Maritime Commerce: Good evening, Senator Tkachuk and Senator Bovey, as well as the other members of the committee.
[English]
Thank you for inviting me to speak with you tonight on behalf of the new Chamber of Marine Commerce.
[Translation]
I apologize, as I will be speaking English exclusively this evening.
[English]
My name is Bruce Burrows. I have been President of the chamber or CMC, as we call it, since December 2016.
The CMC is a product of a recent merger. We are now an association that represents more than 130 marine transportation industry stakeholders in both Canada and the U.S. Our members operate in the Great Lakes, in the St. Lawrence River Basin, and in the coastal waters of Canada, the U.S. and the Arctic. We represent a diverse membership that includes shipowners, Canadian and U.S. port authorities, the St. Lawrence Seaway Management Corporation and large industrial companies that ship commodities like grain, iron ore, steel, cement and sugar.
The Great Lakes-St. Lawrence system writ large is a low cost, binational, marine super highway that supports the global competitiveness of North America’s industrial heartland, creating 227,000 jobs. Within that system, ships are the most fuel efficient and carbon friendly way to move goods. Increasing inland and coastal shipping is part of the solution for climate change.
With respect to our seven Canadian domestic shipowners, they provide cabotage services in Canada’s Great Lakes and St. Lawrence River. Together, they operate a fleet of over 85 Canadian ships that handle about 60 million tonnes of Canadian goods every year, including bulk commodities, general cargo, and cargo for Canadian energy and infrastructure projects, a hot area at the moment.
I am proud to say their ships are crewed by Canadian seafarers who are among the most highly trained and qualified in the world. The new ecoships in particular, for which we have spent over $2 billion in recent years, are specially optimized for safe, efficient and sustainable navigation in Canada’s freshwater lakes and rivers.
Our shipowners are a vital domestic service industry and a major source of employment for Canadians. They create many high paying, middle class jobs, both aboard their ships and onshore.
We have one concern regarding Bill C-49 proposed amendments to the Coasting Trade Act. Before I address that concern, let me provide some relevant background.
Concessions were granted in the Canada-EU trade agreement that opened up Canada’s market for cabotage to foreign vessels operated by EU companies. These concessions were made without first consulting Canadian service providers and without obtaining reciprocal concessions from the EU. The concessions that concern us the most are those for feeder transport services between the ports of Halifax and Montreal.
Shipowners understand that CETA is a done deal now, so there really is no choice but to accept these concessions.
Bill C-49 proposes to make further changes to the Coasting Trade Act. The amendments under clauses 70 to 72 will completely liberalize the concession that allows a foreign operator to use any foreign vessel to reposition its empty containers between Canadian ports.
To be clear, our shipowners do not object to this concession, provided that this activity is limited to empty containers only and never done on a commercial basis. However, we have one important concern: How will Canadian authorities monitor this activity to ensure that only empty containers are being carried without consideration?
It is our understanding that the Canada Border Services Agency monitors the containers that enter and leave Canada. Without a robust and effective monitoring enforcement regime, there is nothing to prevent the repositioning of empty containers from being commingled with the domestic cabotage of goods and containers.
Turning to our broader membership for a moment, we agree with the provision of Bill C-49, in fact, concerning its intent to increase financing options for ports by securing loans or loan guarantees through the new Canada Infrastructure Bank.
I should add that we would not want such loans to be offset by reductions in loan liability or borrowing power limits that ports face under Transport Canada rules.
Again, on behalf of the Canadian shipowners of the CMC and other members, I thank the committee for this opportunity to speak with you. I welcome any questions you might have.
Sarah Clark, Chief Executive Officer, Fraser River Pile and Dredge: Fraser River Pile and Dredge, located in Vancouver, British Columbia, conducts dredging operations in B.C. and other locations across the country. I am here to speak to you today on behalf of an informal coalition of dredging companies that operate from coast to coast.
We thank the committee for the opportunity to present our views and the consequences of amending the Coasting Trade Act, as outlined in Bill C-49. This is a fresh opportunity to address the impacts of the Canada-EU Comprehensive Economic and Trade Agreement, known as CETA.
To be clear, we are eager to compete in a vibrant global market. We support CETA. However, CETA did not provide any reciprocity for us in the European market but streamlined access for Europeans in Canada. We have been simply asking for a level playing field to compete in.
Opening routes to Canada and international shipping vessels brings consumer goods to Canadian markets and takes our export products around the world. Without dredging, ports in major cities across the country would be inaccessible to global trade and transportation. Industrial operations would not be able to function.
The companies that comprise our coalition actively compete and comply with rigorous government regulations concerning labour, environmental protection, safety and operating standards, while regularly submitting to routine major inspections that are among the most rigorous in the world. Canadian dredging companies also provide well paid, middle class salaries which, in turn, fuel local economies across the country.
If a level playing field is not created and maintained, the Canadian dredging companies will face structural disadvantages when bidding on contracts, as we pay market rates and benefits that reflect the skills of our crew members in Canada.
For example, foreign crews are typically compensated at about a third or less of the rates we pay. In 2015, the average monthly salary for a chief engineer on a Canadian vessel was $15,000 U.S. The same position on a Dutch crew was about $7,000 U.S.
As salaries represent about one-third of the vessel’s operating costs, foreign companies will operate at a significant advantage over Canadian companies, leaving Canadian seafarers out of work. The playing field is inherently uneven, to the detriment of Canadian companies.
Prior to Bill C-30, foreign flagged vessels were required by the Coasting Trade Act to obtain a coasting trade licence. This process was structured to ensure that foreign flagged vessels adhered to the same laws and regulations as Canadian ships, but even that structure faced monitoring and enforcement challenges.
Under CETA, European dredgers will have greater access to our waters and greater opportunity for non-compliance in areas such as human resources, environmental compliance and safety.
Turning to what we recommend as reasonable solutions, our key ask of this committee is that it recommend to the government the establishment of an operational enforcement protocol, binding the deputy ministers of all relevant departments and agencies.
We are not seeking the establishment of a new enforcement arm of the government. We are simply recommending that the government take note of the number and seriousness of the enforcement issues at play where foreign crews on foreign flagged vessels are concerned: labour, safety, environmental and tax issues.
Right now, the interdepartmental coordination is under resourced and leaves it to the industry and our workers to police our waters. This seems unacceptable for Canada as a modern maritime and trading nation.
Let’s address the level playing field issue for Canadian dredgers. While we are at it, let’s also be much more proactive when it comes negotiating future trade agreements. Canada needs to be the champion of full reciprocity on the water for our industry, our workers and our national interest.
[Translation]
Martin Fournier, Executive Director, St. Lawrence Shipoperators: Good evening, honourable senators. Thank you for giving us the opportunity to share our comments and concerns regarding Bill C-49, especially regarding proposed amendments to the Coasting Trade Act.
The mission of our association, St. Lawrence Shipoperators, is to represent and promote the interests of domestic ship operators, to support their growth and to ensure the development of marine transport on the St. Lawrence. There are 15 Canadian shipowners in our group that operate a fleet of over 130 ships employing Canadian seafarers. Our members’ fleets sail on the St. Lawrence River and the Great Lakes and serve the Atlantic provinces and the Arctic.
The activities of this fleet on the St. Lawrence River and the Great Lakes create over 44,000 jobs directly, generate close to $2 billion in tax revenue for the provinces and the federal government, and create economic spinoff benefits of close to $3.2 billion.
The marine industry consequently plays an essential role in Canada’s competitiveness and prosperity, and in that of all of North America. It is important to mention that marine transport activities between two ports in Canada are carried out under the Coasting Trade Act, the purpose of which is to support national marine interests by reserving Canadian coastal shipping to ships that are registered in Canada and have Canadian crews on board.
In the United States, since 1920, the Merchant Marine Act, better known as the Jones Act, protects the American domestic shipping industry by ensuring that cabotage is done by ships built in the United States that fly American flags, are held by American interests, and have American crews on board. Many other countries in the world, including the European countries, have similar acts that also protect their market.
One fact to be noted is that during the negotiations that led to the Comprehensive Economic and Trade Agreement, CETA, with Europe, the countries of the European Union did not open their markets to Canadian ship operators. Canada is the only country that agreed to yield part of its market without reciprocity —
[English]
The Chair: Mr. Fournier, Mr. Fournier.
[Translation]
Mr. Fournier: — to protect its marine industry, upon which depend the vitality and sustainability of domestic marine transportation —
[English]
The Chair: I am wondering if you could slow down a little bit.
[Translation]
Mr. Fournier: — it’s important to mention that foreign ship operators do not operate under the same rules and do not have to meet the same requirements as Canadian ship operators who operate Canadian flag ships.
As an example, the study carried out in 2015 by Ernst & Young and by the Innovation Maritime centre on the cost of crews on board European ships, which are authorized to operate in Canadian waters under CETA, showed that they sometimes represent as little as 30 per cent of the cost of a Canadian crew. Under Bill C-49, the gaps in remuneration with crews from other countries will be even greater. In barely more than a year, this is the second time that amendments to the Coasting Trade Act are being proposed.
St. Lawrence Shipoperators considers that, generally speaking, free trade agreements are beneficial to the Canadian economy, and we support Canada in its efforts to increase trade and the competitiveness of our economy. We are, however, concerned about the impact of the breaches to the Coasting Trade Act, and the concessions involving the domestic marine sector granted in the course of negotiating trade agreements.
Moreover, St. Lawrence Shipoperators and its members, as well as several representatives of the industry who took part in the government-industry joint working group on the implementation of CETA with Europe, have on many occasions expressed their worry as to the effectiveness of the system and of the measures that are currently in place to monitor and efficiently oversee the cabotage activities of foreign ships.
Many requests have been made to put a monitoring system in place. That request was also submitted to the Standing Senate Committee on Foreign Affairs and International Trade, which was tasked with studying Bill C-30, and even made this a recommendation. It is essential that that surveillance system be put in place and that it include all of the government departments and agencies concerned, including Transport Canada, the Canada Border Services Agency, the Canadian Transportation Agency, Immigration, Refugees and Citizenship Canada, and Employment and Social Development Canada.
St. Lawrence Shipoperators has always opposed any opening of the Coasting Trade Act that would allow foreign ships to provide cargo transport between two Canadian ports. That market is reserved to Canadian ships, which, in compliance with Canadian regulatory requirements and standards, are designed, adapted and optimized to take into account the many navigation challenges in the waters and navigable seaways of Canada.
By respecting these standards, which are amongst the strictest and most stringent in the world, Canadian ships contribute to navigation safety and the protection of the environment.
[English]
The Chair: Mr. Fournier, we have a problem in that you were speaking so quickly and I wasn’t able to get to you because you couldn’t hear me. The interpreters had a tough time trying to figure out what you were saying. A number of us, who don’t understand French, had some difficulty with that.
I don’t know how members want to handle this. Do you want the second half, or are we okay with what we have?
Senator Plett: Have Senator Cormier and Senator Boisvenu ask him questions.
The Chair: I want to know if any other members missed the back half. We got the first half of it, but it was the back half that was missing.
Senator Bovey: Is there anything written?
The Chair: They will be able to listen to the tape, I think, and translate that. We will have that.
We’re going to proceed and ask questions. Mr. Fournier, in your answers, if you could be slower, that will help our translation a lot.
Senator Plett: I am going to ask one question, basically, of the whole group.
First of all, we’re into an area that I don’t understand a lot about. Clearly, we have been dealing with the rails and the airlines. We’ve been dealing with the western grain farmers. Those are areas that I understand.
Much of what was discussed here today isn’t my bailiwick. Over the period of all the meetings we have had, we have primarily had two witnesses who were entirely supportive of Bill C-49. All other witnesses have had some concerns over it. I now find we possibly have a third witness who is fairly supportive of Bill C-49.
My question to all of you is the same. Obviously, we will hear from Senator Mitchell at some point, maybe not tonight. Certainly, it is important to pass this bill through here, come hell or high water, to ramrod it through because the country will stall and our economy will go haywire if we don’t get Bill C-49 done in the next couple of weeks.
Do all of you believe, and very briefly because my preamble was too long, that there is reason to slow down Bill C-49 to get what you think we should put in to Bill C-49 to make it, in your opinion, the right piece of legislation?
Basically I got from Ms. Kancens, that she is happy with the bill but from everybody else there was at least something. Very quickly, in 20 seconds or less, tell us whether we should slow this bill down.
Mr. Ashton: As brief as I can, clauses 73 and 74 don’t just affect the West Coast ports. It actually affects ports across Canada.
In B.C. right now, we have approximately $1 billion in private money to be invested in our marine facilities. In Nova Scotia, we’re looking at possibly two more terminals being discussed by DP World and Western Stevedoring container terminals.
There’s more money out there, but if we put the cart before the horse, if we open up the infrastructure bank not just to the Port of Vancouver but to all ports across the country, what ends up happening is we scare away all private money.
We don’t need public money put into our ports. The corporations that want to move the containers through our country, they’ll do that for us. We’ve proven it in B.C., and we will prove it on the East Coast as well.
I have to agree with Mr. Emerson, and I don’t do that a lot.
Senator Plett: I do quite often.
Mr. Ashton: We quoted him as saying, “Don’t change anything.” It’s on the front page:
On the port authorities, my own feeling is that until there is a thorough review of the governance arrangements that deal with port authorities . . ., I get very nervous about opening up more spigots, if you like, for these authorities to get hold of more money, because I’m concerned with the governance framework . . .
I can go on with the rest, but it’s right there.
Senator Plett: Please slow down.
Mr. Ashton: I am.
Ms. Kancens: On the maritime provisions of Bill C-49, certainly we are very, very pleased with the repositioning. We have been advocating for that for a long time.
I want to take the opportunity to say that on the rail side we support provisions to strengthen shipper protections under the act to drive greater accountability from the railways, but I think there’s a general consensus there would still be no mechanism in Bill C-49 to address the kind of rail efficiency issues we’ve seen over the last few months.
We have seen a proposal from some shipper groups for an amendment to allow the Canadian Transportation Agency to initiate investigations on its own without having to wait for a shipper to file a complaint.
In the context of having seen what has been going on for the last few months, that might be something worth looking at.
Mr. Burrows: I’ll only address the marine component and give you a brief answer on behalf of the marine sector, and the answer would be no.
Ms. Clark: We are not here to ask to slow down the bill. We are asking for the government to consider strong mechanisms of reinforcement around legislation that is in place and will be put in place.
The Chair: You would like the recommendation in your presentation. Maybe we could include that as part of an observation or recommendation in our report. Would that be helpful?
Ms. Clark: Yes, that is exactly our request.
[Translation]
Mr. Fournier: In fact, I would say largely the same thing. We are asking that a system be put in place to control and monitor the cabotage activities that are going to be done by foreign ships.
[English]
The Chair: I don’t know if it is ironic or not, but it’s kind of interesting.
Just so I am clear from your testimony, Mr. Ashton, as part of the International Longshore and Warehouse Union, is saying no more government money; we want private sector. Mr. Burrows, President of the Chamber of Marine Commerce, is saying to let the government money flow.
What is going on with the chamber here?
Mr. Burrows: What is going on with the union?
The Chair: The union, don’t forget, are the longshore guys. They’re kind of in this for the right reason, but, Mr. Burrows, what’s happening there?
Mr. Burrows: I would be happy to answer. First of all, I would support our colleague’s observation or recommendation for an observation, that from an implementation and monitoring perspective we make that notation.
It is very simple. I spoke on behalf of the port members when I mentioned that because I think this will give them better access to financing. They feel quite strongly about that. We would support that from a port perspective.
We’re not advocating access for any of the private shipholders here. Let me be clear that’s from a port perspective.
The Chair: You don’t agree with Mr. Ashton that it may affect a private investment in the ports.
Mr. Burrows: No.
The Chair: Mr. Ashton, could we have a little discussion here?
Mr. Ashton: This is kind of strange. We have right now two container companies in the Port of Vancouver. They pay rent, for lack of a better term, to the Port of Vancouver. The Port of Vancouver then uses that money to fund a new container terminal that can hold up to three million 20-foot equivalent unit containers, which is currently what we do right now in the province of B.C.
Now what the Port of Vancouver is saying is, “We’re going to utilize your money to work against you and, by the way, you can’t have any ability to run the terminal, so we’re going to send it out to another corporation,” another company, an investment bank or whatever it is.
Then what happens is they create a fully automated terminal or mostly automated terminal, which then drives the current tenants either out of business or forces them to automate their terminals, which then drives workers out of jobs.
This bank, the way I understand it, is built to create jobs for Canadians, for the working class. That’s what we’re trying to do with this bank. We’re not trying to destroy it by giving port authorities the ability to build fully automated super container terminals which will force their current tenants out of business or force them to change their game plan.
Our current tenants, our current customers and our current employers should be the people the ports are dealing with right now. They shouldn’t be in the business of building something that will put them out of business.
Senator Mitchell: Thank you to each of you. I am kind of with Senator Plett. I am not fully conversant with these issues, so I will ask a really basic question. Could you, Ms. Kancens, give an idea of how this recapture of containers actually works?
A ship shows up in the Port of Vancouver and unloads containers. The containers have whatever they have, and they are transported to Regina. It’s not a CETA flagged ship or a Canadian ship.
What happens to that container from a ship that’s flagged in Japan and is sitting now in Regina? How does that get back? Does it have to come back empty? Does it have to come back on a train?
Senator Plett: If the ship is sitting in Regina we have problems.
Senator Mitchell: Climate change is going to be a problem. It could well happen; it could well happen.
Ms. Kancens: Maybe I could reset it with another example, if that works for you, just to explain it in simpler terms.
Let’s say you have a container shipping line. They run a regular service between the North American East Coast and Europe. That service includes regular calls between Montreal and Halifax before they go to Europe.
That container shipping line has a customer in Halifax. That customer needs 400 empty containers because he wants to load them for an export cargo, say frozen seafood. That same container shipping line has a surplus of empty containers in Montreal, which actually happens quite often.
Right now, before Bill C-49 and before CETA provisions which only apply to ships owned by EU entities, that ship owner could not deliver those containers from Montreal to Halifax on board his own ship even though he was doing a run from Montreal to Halifax as part of that bigger string, because it was prohibited under the Coasting Trade Act.
His options would be to either get the containers from Montreal to Halifax by putting them on rail, or he would have to import them from overseas directly to Halifax.
If you’re using rail, you’re subjecting those containers to additional moves because now the containers have to go from the marine terminal to the rail terminal. They have to be loaded on to the train and make their way to Halifax, and then the whole thing has to be reversed.
You’re adding costs to the process. You’re adding inefficiencies in terms of logistical delays. You’re doing the whole process on timing that works for the railway rather than for the carrier or the customer.
By the way, railways prefer not to carry empty containers because they don’t earn revenue on them, so they will deprioritize the movement of those containers.
It should be a simple process to go from point A to point B, instead of putting a whole lot of trade chain impediments in the way that flow down not only to the carrier but to the exporter who is waiting for those containers, and that impacts the efficiency of the chain overall.
That is what you couldn’t do without this amendment. Now there can be some movement if the ship owner is an EU entity, but it makes a lot more sense if it’s applicable to all foreign flagged ship owners, regardless of their ownership.
Mr. Burrows: If I may add to the point, a number of us here are making the observation that we want to make sure the empty containers remain empty and don’t become a stealth way of moving goods from port to port.
Ms. Kancens: I don’t understand how it would happen, but absolutely. We support monitoring by Transport Canada.
Senator Mitchell: Your concern is noted.
The upshot of all of that is in a world that is increasingly driven, apart from the United States, by trade, the desire for free trade and the desire for broad-based international trade, we’re essentially limiting the appeal of any number of ship lines being used to transport goods to Canada because it’s awkward and inconvenient for them to recover their containers in a competitive way.
Ms. Kancens: It’s an impediment. I can tell you since the CETA provisions came into effect following the passage of Bill C-30, those of our members who are EU entities are certainly repositioning their empty containers because it is helpful and it helps the trade chain.
Really, right now, it’s focused on the Montreal to Halifax segment. We see some opportunities, probably Montreal to Saint John and ultimately Vancouver-Prince Rupert as well.
It is a very, very useful provision for us because our members are carriers, but it’s useful for exporters as well.
Senator MacDonald: I want to go back to the feeder concerns in the ports of Halifax and Montreal.
Ms. Kancens, in your presentation you seem to be in support of the changes that were made in regard to the EU. Am I correct?
Ms. Kancens: Just to be clear, there’s nothing in Bill C-49 that has to do with feedering.
Senator MacDonald: I understand that.
Ms. Kancens: We think the feedering in Bill C-30 represents some interesting opportunities. To be fair, we weren’t involved in the CETA negotiating process, so that came to us as a kind of surprise, but certainly it’s interesting.
Senator MacDonald: Mr. Burrows, I want to ask you a question. In your presentation you said the concessions that concern you the most are those for feeder transportation services between the ports of Halifax and Montreal.
Could you elaborate on that?
Mr. Burrows: In the same way, the focus here is on the movement of empty containers. Our broader position would be that we wouldn’t want that to become the beginning of a slippery slope toward movement of cargo. That’s really what that position is all about.
Senator MacDonald: You mentioned your concern that we didn’t obtain reciprocal concessions from the EU.
Could you define reciprocal?
Mr. Burrows: Again, I guess it’s going back to the original CETA concessions implemented by the initial change to the Coasting Trade Act. That added in the new exceptions to the general rule that a foreign vessel cannot provide commercial services in Canada without a licence.
My understanding is that was not reciprocated for Canadians in Europe.
Senator MacDonald: Would there be a particular reason why it wouldn’t be reciprocated? Would there be another sort of concession in another area? Do you know?
Mr. Burrows: I really don’t know. That was before my time in the sector, so I don’t have a lot of history on that issue. Maybe Ms. Kancens does.
Ms. Kancens: I believe it was another concession in another area, but I couldn’t tell you what it was. We were not privy to any of those discussions, so we sort of tried to piece it together after the fact as well.
Senator Bovey: I would like to ask a question, please, of Ms. Clark.
You recommended as a solution to the committee that the government establish an operational enforcement protocol binding on the deputy ministers of all relevant departments and agencies. One of the common themes and questions we’ve been asking through all the hearings is what’s critical in the legislative aspect of this and what’s critical in the regulatory aspect.
In our recommendation to the government, would you be recommending a regulation rather than building it into the law itself?
Ms. Clark: We would be looking for whatever was most effective. Right now, in order to enforce the requirements on foreign flagged dredges, a number of different departments are involved. We spend a lot of time with those different departments. We see that there is not a binding protocol across them. There’s informal cooperation.
In the past this has not worked. Now that there’s no coasting trade licence required for the foreign flagged vessels, it will be even more difficult to know when they’re in Canada and what kind of crew they’re operating with. It would be very hard for CBSA agents, for example, to understand who needed a visa, did they go through the LMIA process, or is it okay to have all foreign crew or should they have been Canadian.
We’re looking for an effective mechanism of cooperation across those departments.
Senator Bovey: You’re really looking at a means of enforcement regulation so that it’s consistent across all aspects of the sector.
Ms. Clark: Yes. We’ve been told we’re part of the enforcement. We don’t even have notification of when these vessels come.
How can we help enforce as the private company? We can do our best, but we’ve been given an email to report things.
[Translation]
Senator Cormier: My question is for Mr. Fournier. I want to give you an opportunity to summarize your thoughts. You spoke about issues related to CETA, the Comprehensive Economic and Trade Agreement; you spoke about issues having to do with foreign ships. In your opinion, what are these issues having to do with the presence of foreign ships in our waters? What requirements must they respect, and how does Bill C-49 meet these requirements or fail to meet them?
Mr. Fournier: The main request we have with regard to the bill before you concerns the implementation of a system of surveillance and monitoring of coasting activities. With CETA, and now with Bill C-49, we are seeing breaches in and concessions to the Coasting Trade Act that affect the activities of our members and ship operators. Since the economic agreement with Europe is a done deal, we want to make sure that the cabotage activities that will take place here will be adequately monitored and that information will be provided to Customs and Excise, Employment and Immigration Canada, Transport Canada, and so on and so forth.
A question was put earlier about the absence of reciprocity between Canada and Europe in the agreement. The chief negotiator told us that the concession was made at the last minute to satisfy European requirements, and that he thought it was not a good idea at the time to ask for reciprocity. This means that we have members now who sail to the Arctic and pass by Greenland, but cannot make transport stops between two ports in Greenland, even though they are sailing close by. This absence of reciprocity is harmful to our industry. An agreement should be equitable, and favour reciprocity between two economic actors in the context of these agreements.
Senator Cormier: To what extent does this bill meet or not meet those expectations?
Mr. Fournier: It does not meet them with regard to the monitoring and oversight of coastal trade. At this time, there is no structure that would permit that follow up. From our discussions with Transport Canada, we know that the standing request is: “advise us if you witness something.” I do not think that that is an efficient system. As an industry, we have the duty to inform Transport Canada of any irregularities.
Senator Cormier: Thank you, sir.
[English]
Senator Duffy: Thank you to the witnesses.
Mr. Ashton, I was intrigued by and frankly delighted to see your quotation of an old friend of everyone on this committee, the Honourable David Emerson.
Those of us on the East Coast are concerned about the infrastructure required to have efficient and good working ports. You mentioned two more possibilities of terminals in Nova Scotia. Are those based in the Halifax area, or are you looking at Sydney?
Mr. Ashton: It would be Sydney and Melford.
Senator Duffy: And Melford is on the Strait of Canso.
I understand from my colleague Senator MacDonald, who is the senator for Cape Breton, that they have problems there with the rail lines; in other words, the infrastructure.
While you wouldn’t want federal infrastructure money put into the terminals at these ports, proposed new ports, how would you feel about federal funds to upgrade the rail line interconnection to make these ports feasible?
Mr. Ashton: I am actually really happy that you asked me that question.
In my opinion, port authorities is infrastructure. Build it. I’ll give you examples from the Port of Vancouver. That’s where I am from and that’s what I know.
On the north side of the shore in Vancouver at Neptune Terminals there was a rail line that always got in the way of workers going back and forth. We were late getting there and late leaving, so the port authority built an overpass which moved us quicker. That never stopped us and that means the railway could move freer.
On the south side of the shore it was the same thing. We were having issues with the railways, cars going by and emergency vehicles getting to traumatic events. The port authority built overpasses for the freer movement of trucks, the freer movement of vehicles.
The over at Deltaport on the causeway the same thing happened. We were having issues with rail and with congestion, so the port authority built overpasses. They improved the infrastructure. They didn’t build terminals that would be competing with their current customers and possibly putting them out of business. In my humble opinion, the port authorities’ responsibilities are infrastructures to get our cargo moving from port to inland.
I went to Antwerp and saw how they move containers. It’s through the waterways. We have one of the greatest waterways on the West Coast, the Fraser River. We’re not utilizing it to its potential.
If we could get the port authority to invest money into that to move containers up and down the Fraser River, it would get more trucks off the roads and move them out to where they can move more freely.
The port authorities’ jobs aren’t to build terminals. The port authorities’ jobs are to give terminals private investment and easier ways to move their cargo.
Senator Duffy: Like governments building highways as opposed to building the shopping centre.
Mr. Ashton: Correct.
Senator Mitchell: Mr. Ashton, you’re not entirely opposed to this money being available to port authorities. You’re simply opposed to it being available at least for this particular use.
Opening it up isn’t entirely wrong by any means, but you’re just making the point that some kind of discretion should be used in how it might be used to compete with private sector investment, which would already be inevitable or to some extent.
It seems to me, if market forces were such that the latter point is the case and there is a need, as you admit, for something to facilitate movement up the Fraser, why is it that there will be so much demand or likelihood of demand by VFPA for money to build a terminal?
I am not really disagreeing with you. I am shaving your point a bit because I think you’ve shaved it.
Mr. Ashton: No, I don’t think I did. There is another point to our argument. When you have a port authority that is allowed to regulate itself, to look at its own environment amd to fund its own project through this infrastructure bank if it goes through, that is a big problem because there’s no oversight.
Why not set the port authority’s ability to access infrastructure bank money? Right now they get money. There was no infrastructure bank when they got the money to build the overpasses. There was no infrastructure bank when they did all the improvements to the inner harbour. They got that money because it was a need of the country. It wasn’t because that bank was there.
We have to do what Minister Garneau says. We have to review this 20-year-old policy. The Honourable David Emerson is correct. Don’t open up the floodgates until it does get reviewed because more questions could be raised.
Let’s review it. If those changes are necessary after the review, we can adjust them then. In my opinion and in Mr. Emerson’s opinion, if we open up the floodgates, we’re putting the cart before the horse.
Senator Mitchell: So, a program designed to create more jobs would be implemented in a way that would reduce jobs. I am just saying you’re assuming the worst. It is certainly counterintuitive to necessarily assume the worst.
This program is designed to create jobs. Mr. Burrows, you’re saying that it might offer some advantage.
Mr. Burrows: I am sort of summing up here. I think the concern at the table is more about automation in general, quite frankly. That perhaps is another debate.
Senator Mitchell: If automation is so appealing or is not sufficiently appealing for the private sector to fund, it just seems to me that GCT must be very efficient and will likely survive that kind of market force.
Or, why isn’t GCT going to that, if it’s so obvious that automation will be so competitive that it would wipe it out?
Mr. Ashton: With GCT at Deltaport there has been some automation there. That automation has happened through discussions and negotiations with the labour unions represented there.
Maybe it got lost, but we’re saying that the port authorities shouldn’t be in the business of building terminals to put their current tenants out of business. If they build a fully automated terminal, they don’t have to pay wages to any workers. Their labour costs get cut drastically.
They don’t have to worry about pensions; they don’t have to worry about workers getting hurt; and they’re going to sell all of that.
What happens to the next generation if they have no jobs? The jobs on the waterfront, the jobs in the maritime industry, are very well paying jobs. They support families. They support communities. If they automate the container terminal in Prince Rupert, 800 people would be out of work in a community that already lost hundreds of jobs when all the mills and fisheries shut down.
For the Government of Canada to create a fully automated terminal with the infrastructure bank that produces no jobs and has an inability to wipe out hundreds more is counterintuitive. It doesn’t make sense, especially when it’s being funded by a bank that is there to create jobs.
Senator Mitchell: But we don’t know that it is.
Mr. Ashton: But it will. Look around in Australia. Australia built automated terminals and it was a snowball effect.
The Chair: We have another witness. He’s a single witness and we are trying to give him 40 minutes or so.
I want to add that we’re having a short meeting after the meeting is over that’s in camera. People who are replacing senators can stay if they wish, but you have no obligation to stay. It’s entirely up to you.
To continue our study on Bill C-49, we have with us Konrad von Finckenstein, Commissioner of the Competition Bureau from 1997 to 2003, and Justice of the Federal Court from 2003 to 2007.
Thank you for attending our meeting today. I invite you to start your presentation, and afterward I am sure senators will have questions.
The floor is yours, sir.
Konrad von Finckenstein, Former Commissioner of Competition, as an individual: As you know, I was asked by Transat to comment on sections 53.7 to 53.8 of Bill C-49 which deal with the arrangement of two or more transportation undertakings providing air services. I will refer to them as the joint venture provisions.
I was Commissioner of Competition when Air Canada and Canadian Airlines merged. As you all know, it was a very contentious merger and brought to the fore the very issue addressed in the joint venture provisions, namely, the conflict between public interest and competition principles.
The conflict is nothing new. The objective of competition law and policy is to create an efficient economy where competition produces maximum choice of producers or services at best prices for consumers.
Public interest encompasses a much wider view of the well-being of society as a whole than competition principles. It takes into account other things, such as the impact on communities, employment and environment.
There is a natural tension between the objectives of competition policy and some aspects of public interest. It is the job of legislatures and elected officials to resolve such conflicts and strike a reasonable and acceptable balance.
This was done in 1996. To avoid another contention between the Minister of Transport and the Commissioner of Competition, the Transportation Act was amended in sections 53.1 and 53.2 under the title “Review of Mergers and Acquisitions.” I will refer to these as the merger provisions.
The key features of the merger provisions are a report by the National Transportation Agency regarding the public interest concerns, a report by the Commissioner of Competition regarding the competition issue, publication of the report of the commissioner upon receipt by the minister, opportunity for consultation and input by all parties affected, and the decision by the Governor-in-Council as to which terms and conditions are divided between those that relate to public interest and those that relate to competition.
The issue before you concerns potential joint ventures of airlines. The proposed authorization by the minister of an airline joint venture would immunize the joint venture from the application of the Competition Act. The sweep of such an authorization is very wide. Let me quote the proposed arrangement to coordinate any aspect of the operation or marketing of air service to, from and within Canada:
. . . including prices, routes, schedules, capacity or ancillary services and to share costs or revenues or other resources or benefits of such service.
Once the joint venture is authorized by the minister, the regulated conduct defence applies. That means the conduct authorized by a government body or legislation is not subject to the Competition Act.
Consequently, the current criminal provisions and civil remedial powers with respect to potential anti-competitive behaviour resulting from a joint venture would be unavailable to the Commissioner of Competition.
Given the experience with airline mergers, one would have expected the treatment of joint ventures would adapt as far as practicable the scheme that’s already there for mergers. Surprisingly, this is not the case. Instead, the joint venture provisions provide a downgraded version.
There is less transparency. The report of the Commissioner of Competition is no longer required to be made public after receipt by the minister, as in the case of mergers. Rather, the commissioner shall only publish a summary of his conclusions.
The decision is more singular. The final decision to approve is made by the minister, not the Governor-in-Council, so input from other affected departments is limited.
The final decision is less precise. It may but does not have to specify conditions imposed relating to public interest and conditions relating to competition, rather than having to identify the difference of these obligations as in the case of mergers.
Mergers are, of course, inherently different from joint ventures. They are permanent and once approved they cannot be undone. As the saying goes, you can’t unscramble an omelette.
Joint ventures, however, are only temporary collaboration agreements and should be regularly reviewed to determine if the joint venture parties abide by the terms and whether they fulfill the purpose for which the original authorization was granted.
While the joint venture provisions before you provide for review and revocation, all of this is left at the discretion of the minister. He merely has to consult the Commissioner of Competition, which I know from my experience means a phone call. However, any concerns regarding competition are not made public and do not have to be addressed in the decision of the minister.
Finally, both the merger provisions and the joint venture provisions require the minister to issue guidelines specifying the criteria the minister will employ when considering applications. Draft guidelines were published for mergers but were never finalized. It is an elementary due process that applicants and opponents for joint venture provisions should know the criteria by which applications will be judged.
Consequently, a provision should be added to the bill providing that no arrangement may be considered or approved prior to application in the Canada Gazette of the guidelines referred to in section 53.1.
In conclusion, I would suggest that you amend the joint venture provisions so that they follow, as close as practicable, the scheme of the merger provisions; provide for mandatory public reviews every three years; and add the requirement for publication of the criteria for public interest determination.
Thank you very much. I will gladly answer your questions.
[Translation]
Senator Boisvenu: Welcome, Mr. von Finckenstein. You were in this post for some time. When you read the bill, what do you think about the changes to your role as regards the whole notion of competition assessment, or that of those who want to ignore the Competition Act?
Mr. von Finckenstein: I don’t think the act has changed the role of the competition commissioner. He is the advocate for competition. He makes the representations, he provides advice to the departments in order to allow them to facilitate the best possible competition in the country. The department can change its opinion or review something, but it must be aware of the most effective options as regards competition.
Senator Boisvenu: Under the current law, do you have the last word on the evaluation dossier, or does the minister’s office have the last word? I mean currently.
Mr. von Finckenstein: Together with Mr. Collenette, I negotiated the provisions on mergers that are currently operative, after the merger of Air Canada and Canadair. We did not want this type of confrontation to occur again. It was very difficult for both of us. We established these provisions: people have to seek the opinion of the Commissioner of Competition; if they do not accept the opinion, they have to publicly explain why not. In certain cases, people decide to do something else than what the commissioner recommends.
Senator Boisvenu: Why are there many co-ventures in the air industry? I’m thinking of Air Canada and Lufthansa, which I fly with on a regular basis. Why do we hear from the competitors of that enterprise that the commissioner is going to lose power, that the decision will make his role more political, and that there should be arbitration that is not political in this dossier? That is what people tell us.
Mr. von Finckenstein: The provisions before you are going to immunize the co-ventures. There are many of these now. Air Canada is a member of Sky Airlines; there is no problem. WestJet is a member of Delta; there is no problem. But here we are talking about:
[English]
The proposed arrangement is to coordinate any aspect of the operation or marketing of air service to, from and within Canada, including prices, routes and schedules.
Effectively, you allow them to price fix.
[Translation]
And why? If the minister believes that something needs to be done, he must at least explain why he or she made that decision.
Senator Boisvenu: Very well, thank you.
[English]
The Chair: Just so I am clear, because we have had short presentations by Air Canada and WestJet talking about these merger provisions, and Transat had some difficulty with them, I will use an example used by one of the airlines.
Air Canada tried to explain to me, if we have Air Canada and Air China getting together on a route from Beijing to Toronto that were both leaving Toronto at six o’clock in competition with each other, that perhaps it would be helpful to the consumer if we had one plane leaving in the morning and one leaving in the evening. Therefore, they would get together and organize, as you say, prices and everything else.
To me, this sounds like collusion. It’s all done in secret, is it not? None of this is public when it goes up to the minister. Does anyone know what’s going on before it hits the minister’s desk?
Mr. von Finckenstein: That’s the problem with the provisions before you. There is no demand that the Commissioner of Competition looks at and gives the report and that the report is made public.
Take your example of collaboration with Air Canada and Air China. It may be perfectly innocent and efficient, but it may actually amount to collusion. That depends on the circumstances of the investigation by specialists.
Under these provisions, the minister gets the summary and, in his wisdom, decides yes or no.
The Chair: Once decided, it can’t be changed.
Mr. von Finckenstein: Only he can change it, but there is not a mandatory review.
Let’s say the minister says yes. It seems fair. It makes sense. It will provide better service. The consumers will benefit, and he attaches certain conditions.
Let’s have a review after two or three years. Is the situation actually still the same? Have these conditions the minister has attached done the trick? Have they produced a more efficient market and avoided collusion, or have we actually gotten it wrong and created a cartel? In that case, then, let’s lift it.
The Chair: In your reading of the act, in the way it works now it would go to the Competition Bureau. What would be the reason for the government not following the same procedure for the particular joint venture to go to the Competition Bureau?
That seems like a process that is automatic and professional, instead of going to the minister’s desk. It’s already there. It has been worked on. People know the process.
Mr. von Finckenstein: They have to go; it is a joint venture. If two airline companies want to create a joint venture and apply for it, they have to go to the Commissioner of Competition. He will make a report, but his report won’t be made public. Only a summary will be. The minister will then absorb the report of the commissioner, the submissions of the joint venture and presumably of the opponents who are against it, and then make a decision.
The law, as it is right now, does not even specify on what basis or what criteria he will use to judge public interest. Nor does it provide that he distinguishes why he did certain things for the public interest as opposed to competition, and it doesn’t provide for review.
Senator Mitchell: I don’t know that you meant to say this, but you did just say that there is not a prescribed review. In fact, there is a prescribed review after two years. At least Air Canada would prefer that it be after three years because it takes time to create these joint ventures.
Were you incorrect in saying that there isn’t one when there is?
Mr. von Finckenstein: I am just looking. Yes, there can be a review, but I understand it is discussionary; it’s not a mandatory one.
Senator Mitchell: It’s certainly available to be done.
Mr. von Finckenstein: It says:
The Minister may, at any time after the second anniversary of the day on which an arrangement is authorized, notify the parties.
He may review up to two years. He doesn’t have to.
My point is these are extraordinary remedies. If we allow these people to collaborate on prices, on routes, on structure and on service, on the whole operation, and if we did it in the public interest, then let’s have a mandatory review after two years to see if we actually achieved what we wanted to do, or maybe it had some unintended side effect that nobody wanted.
Senator Mitchell: The commissioner isn’t prohibited from doing a review after two years, either. The commissioner can certainly insert himself or herself into or create a review process to look at that.
People with public concerns like Air Transat or another airline could approach the minister and make the case for having a review.
Mr. von Finckenstein: Anybody can make a petition for review. I don’t think the commissioner will make a review on his own when the joint venture has been immunized by the authorization from the minister.
What for? Why do a review?
Senator Mitchell: It demands of him or her a review before the process even starts. I am not convinced it’s just a summary, but I’ll accept your point. It certainly is public and the commissioner is not excluded from subsequent review and in fact has a prescribed role in that process.
All this is saying is that it is a competitive world out there. A commissioner who is limited, whether he or she wants to be, to only competition cannot consider the need to allow airlines that can’t be bought or merge to be competitive in an international market.
Mr. von Finckenstein: Don’t misunderstand me. I am not against joint ventures. I am not against public interest overriding competition interest. The scheme is there. That’s how we did it in the merger provision.
I lived through it in the Air Canada merger when we hadn’t spelled it out. Both the Minister of Transport and I took great pains not to wind up in a collision between us. I have no problem with the minister or the Governor-in-Council saying public interest is paramount and overriding competition. Fine, but do it publicly, explain why you’re doing it, revisit it after a certain time to make sure you got it right and didn’t get unintended consequences, and specify what you mean by public interest.
Senator Omidvar: That was exactly my question. In the case of mergers when the Canadian Transportation Agency has to report out on public interest, where is public interest defined?
I note with some interest how you have defined it, but I don’t know if it’s defined in the agency.
How does the minister respond to this criterion of public interest?
Mr. von Finckenstein: Both these provisions and the one for mergers provide that the minister, in consultation with the Competition Bureau, can determine guidelines and publish them. He hasn’t done it in mergers and there’s no provision here that he has to either. I say, “Fine, by all means, do that, but before you make a decision the guidelines have to be there.”
The provision right now that he can make a decision without guidelines being there doesn’t make sense to me.
The Chair: All right. If there are no further questions, thank you very much, Mr. von Finckenstein. Your comments were much appreciated.
(The committee continued in camera.)