Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce

Issue No. 10 - Evidence - November 24, 2016

OTTAWA, Thursday, November 24, 2016

The Standing Senate Committee on Banking, Trade and Commerce met this day at 10:35 a.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.


The Chair: Good morning and welcome. My name is David Tkachuk and I'm the chair of the committee.

Today is our eighth 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.

I'm pleased to welcome, from the Canadian Federation of Agriculture, Mr. Ron Bonnett, President; and from the Canadian Cattlemen's Association, John Masswohl, Director of Government and International Relations. Thank you for being with us today.

Mr. Bonnett, please proceed with your opening remarks. Mr. Masswohl will follow and then we'll open the floor to questions and answers.

Ron Bonnett, President, Canadian Federation of Agriculture: Thank you for the invitation to attend. I appreciate the opportunity to talk about enhancing and facilitating commerce and internal trade within the context of national infrastructure and transportation corridors.

At your October 27 meeting, you talked about new corridors, jurisdictional authorities and challenges facing Canada with getting some of our natural resources to market. I would, on the other hand, like to talk more about improving and maintaining the corridors already in existence.

Canada exports $56 billion a year in agriculture and agri-food products. Over 50 per cent of our beef cattle, 70 per cent of our soybeans, 70 per cent of our pork, 75 per cent of our wheat and 90 per cent of our canola are exported. Canada's agriculture and agri-food economy stands at 8 per cent of GDP. We're the fifth largest agriculture exporter in wheat, pork and beef. This simply means that we have a lot of exports going to a number of countries, and we need the transportation and infrastructure systems in place to get them there.

Our industry is looking at the new CETA agreement with opportunity — again, that's another source of sales — and we're still hoping that the survival of TPP might be in the works.

It is clear that the health of the agriculture economy and the Canadian economy as a whole is contingent on export markets. That makes our transportation corridors more important than ever, both the maintenance of existing corridors and creation of new facilities and systems. That makes the government's release of a national policy framework for strategic gateways and trade corridors in July 2007 very important. The Asia-Pacific Gateway, the Ontario-Quebec Continental Gateway, and Canada's Atlantic Gateway and trade corridor are all important in ensuring that we get access to markets.

We have the NAFTA agreement and we have the CETA agreement. Japan, India, China and a number of other markets are filled because of the fact that we have transportation corridors operating.

Between 35 and 40 million tonnes of grain in Western Canada annually need to be moved to port position. This is approximately 1,000 kilometres farther than most of our competitor countries, which creates a bit of a competitive disadvantage to Canada. So we need to make sure that those rail systems operate properly. The Emerson report states that, "Transportation costs, for example, often represent a more significant hurdle to expanded trade than cost associated with international tariffs or related barriers.''

The year 2013 served as a prime example of how important transportation corridors and systems are when Western Canada had a bumper crop. There was an unusually harsh winter and our transportation system failed to get the product to port in time so that grain movement could go ahead. The port terminals did not receive the export grain that had already been marketed. Vessels had to anchor and wait at port. Grain plugged the system in the Prairies, and Canada was in danger of losing high-volume, premium markets as a result of non-delivery. The failure of the transportation further cost the industry millions of dollars in market disruptions.

Containerization of course has exploded. As stated by Transport Canada, since 1995, world container trade has more than tripled, exceeding 500 million equivalent units in 2009. In the same period, Canada's trade with the rest of the world grew by 65 per cent. Canada's major ports now handle almost 33 per cent more international trade volumes and 65 per cent more containers than a decade ago. This trade increase has also affected Canada's airports, railways, roadways and internal waterways.

Cross-border trade into the United States and Mexico is just as important. Just-in-time delivery of horticultural trade from Canada to the U.S. means that arteries have to be open and clear of bureaucratic, regulatory and physical obstacles. All across Canada, there is a high volume of export traffic every day, which makes upgrading, maintaining and improving our infrastructure critical. Cross-border services, including the work of the Canadian Food Inspection Agency, need to reach optimum levels of efficiency.

I've said a lot about trade, export, transportation and facilitation, but our own internal trade across Canada is important. As provincial and federal governments continue talk on internal trade, our cross-Canada infrastructure becomes more important as well.

We all realized how vulnerable we could be when a bridge on the Trans-Canada Highway failed and it backed up traffic both ways. One of the things you could look at is how we build redundancy into the system. That includes making sure there are multiple routes, as well as possibly looking at agreements with municipalities, where there could be parallel routes where you could take product to market.

Our agricultural production continues to expand and diversify. Quality continues to improve in the eyes of the international market, and the need to be evermore competitive is growing. Already, agriculture accounts for over 12 per cent of the employment in Canada, and agriculture and agri-food makes up, as I said earlier, 8 per cent of Canada's GDP. That and the fact that close to 75 per cent of our agricultural economic success is contingent on a robust export market simply emphasizes the critical importance of ensuring our transportation systems, corridors and resources keep up to the growing need.

This is more than just about planes, trains and automobiles. This is about the entire infrastructure system: people, regulation, legislation, inspection and investments. All of these components together form the basis, the platform, upon which Canadian agriculture can be even more competitive.

I would like to add that one thing that's arising as a piece of infrastructure that is also important to link all of these together is very viable Internet and broadband service to make sure we can get efficient delivery.

Success in all international markets is contingent in getting it to market on time and ensuring that markets are not lost as a result of delays, disruption and extraneous costs. The CFA calls on government to continue on an aggressive path of investment in all of the components of the transportation system to make it robust and success.

Thank you.

John Masswohl, Director of Government and International Relations, Canadian Cattlemen's Association: Thank you, Mr. Chairman, for the invitation to appear before the committee this morning to talk about trade, competitiveness and how infrastructure supports these in the Canadian beef sector. It's also good to be here with Ron. I'm relieved. Even though we didn't coordinate, our messages are very complementary to each other.

As Ron outlined, the ability to get products to market is a fundamental necessity of any goods-producing business, agriculture or otherwise.

In the Canadian cattle business, transportation can be particularly challenging due to the remote locations and long distances that cattle need to travel. Canadian beef cattle operations are typically located on what we call marginal lands. That means back when Canadian agriculture was taking shape, land that could support a crop was plowed and planted, while beef herds were relegated to land where you could grow grass, but you couldn't do much else with the land.

Over decades now, with advancements in farm equipment, biotechnology and crop yield improvements, what used to be marginal land can now often support crops. Furthermore, as cities grow and suburban development spreads over former farmland, agriculture is generally getting more and more remote, but beef production, in particular, gets squeezed out.

Consequently, beef producers are increasingly looking to the north. In the example of Ontario, where the beef cow herd has dwindled from 421,000 in 2005 to 268,000 this past summer, the Beef Farmers of Ontario are working on strategy to develop farms in northern Ontario. Up in northern Ontario, there are about 16 million underutilized acres in an area known as the Great Clay Belt — not far from the Ring of Fire area — that could support beef cow production.

To put that in perspective, all land currently being farmed in Ontario is just under 13 million acres. One of the issues is infrastructure, including roads, to make the land more accessible. In terms of numbers, my colleagues at Beef Farmers of Ontario are estimating that if they can add 30 new farms a year for the next 20 years, it would put extra 100,000 beef cows on the ground in Ontario and contribute more than $6 billion in incremental GDP to Ontario in that 20-year period, and probably at least another half of that in construction and associated work to get the farms started.

Furthermore, stabilizing the current decline in the Ontario beef herd and, in fact, turning it around to grow the herd will support thousands of jobs in cattle feeding and beef processing in southern Ontario.

In the West as well, we frequently hear of farmers looking farther north. It's not uncommon for producers to own pasture land in both the southern and northern Prairies and for them to move the cattle north in the summer to graze and bring them back south in the fall to overwinter.

I understand the committee is specifically reviewing the northern corridor proposal and seeking input on that. I have to admit that prior to being contacted by the committee, I really had not heard about that proposal. We have not discussed it within our organization, but if I can take the piece you are looking at and the piece we know about, our understanding is that, at this point, that is an aspirational concept. The committee is trying to determine if it merits further support, to flesh it out further.

Looking at the proposal, it's a bit vague about where the corridor would physically exist, so that makes it difficult for us to comment on how useful it would be to our plans for northern agriculture development.

I do tend to have a bias toward thinking that infrastructure development in the North could be beneficial for agriculture and beef production specifically, with the caveat the devil is always in the details as to what that might look like.

I'm sorry I don't have a more definitive view on the northern corridor specifically, but I would re-emphasize that the ability for us to move cattle and ultimately move beef to markets is a top priority for us.

As Ron was talking about, we've seen devastating effects over the years of not being able to move product through political barriers to overseas markets. We've also seen the physical barriers and the inability, in the example Ron gave, of moving cattle from Western Canada to Eastern Canada when the single bridge over the Nipigon River, which connects the east to the west, broke and everyone was left scrambling.

Critical infrastructure needs to exist. It needs to be properly maintained. We need to develop alternative routes before existing corridors reach overcapacity. Yes, there is very much a place to consider new ideas that could be transformational. Perhaps this northern corridor is just such an idea, but there may be other ideas as well.

One of the things we would ask government officials to do is investigate the feasibility of livestock trucks having the option to transit through the United States in order to avoid the longer Canada-only route such as the one north of the Great Lakes.

To wrap up, as this is the International Trade Committee of the Senate, if anyone wants an update on any of the many hot-topic international trade issues, I can go into that when we come to questions as well.

Thank you.

The Chair: Thank you very much.

Mr. Bonnett, you mentioned growth in the use of containers. Are there more inland ports now than there were a number of years ago to service the use of containers, say in Edmonton or elsewhere?

Mr. Bonnett: Some expansion is taking place. However, I think what we are seeing a huge growth in the use of containers. If you look at crops like pulses and specialty grains, those are smaller orders, and they are getting packaged in a container. It's becoming more and more of an issue to make sure that the capacity is there to meet that. It's something that needs expansion.

The Chair: You might have an inland container port in Edmonton, and that would be used by pulse growers. Then, of course, all those containers have to be shipped somewhere. It is the more efficient way of shipping it, I would think. I don't know how else you'd get it to port all the way to the West Coast.

Mr. Bonnett: It's not even so much an issue of whether you can get it there. You can get a truck and take it to port, but by the time you pay the trucking fees, your margins have slipped. Moving it by rail is still the most efficient way, whether it is in a bulk grain car or on a containerized ship.

There has been a dramatic shift from bulk cars. They are mainly used for wheat. Specialized markets are developing, particularly in Western Canada for grains that are going into the containerized routes because they are designed for very high-end customers which might be a smaller load than a full boat load.

Senator Ringuette: I fully understand what you are saying in the last decade with the Pacific Gateway and the Atlantic Gateway in regards to hopefully increasing port capacity. If I look at the increase you just indicated in your statement, are you saying that maybe the Asia-Pacific Gateway and the Atlantic Gateway are lagging in regard to the capacity they can provide for you?

Mr. Bonnett: The biggest capacity deficit would be in the rail system. That's where the bottleneck seems to be. The ports are making steps to move forward and expand their facilities. It's particularly grain we are talking about from Western provinces out to the B.C. coast or in to Thunder Bay. That's where you run into the bottlenecks. We have to pay attention to making sure the proper investment is there in that rail corridor because once you start with trucks, the cost goes up very high.

Now, the cattle side is mostly moved by truck, not by rail. There is a whole series of issues around that.

Senator Ringuette: Is the bottleneck due to not enough trains exercising the right-of-way to bring your products to port? Or is it still an issue where the quantity of rail cars is creating this bottleneck?

Mr. Bonnett: I think the big issue is having enforceable service standards with the rail companies. As it stands right now, the grain is there to haul whenever they get a chance to haul it. There is not a penalty system in place with the railroads if they don't deliver that product on time. In my presentation, I mentioned how important just-in-time delivery was for that product.

The Emerson report on rail transportation in Canada looked at a number of those issues. Actually we made some presentations to the Minister of Transport. Service agreements that really spell out the responsibilities of the railroads are critical.

We've heard stories where farmers have ordered a set of rail cars to come in so they can be loaded, and they may wait four or five days for the cars to come in. Then when they get loaded, it might be four or five days before they move out, which creates bottlenecks. That's in some instances. They still move a lot of grain, but if you are trying to deliver grain on time to a specific market, that really creates a bottleneck.

What we saw happen in 2013 is things slowed down so much with grain movement that boats sitting out in the harbour would be coming in to load and couldn't get the grade of grain they wanted all in one load, so they had to go back and sit around and bob in the harbour for a period of time. All of a sudden charges were given to the shippers for that cost.

It's about building efficiency into the system.

Senator Ringuette: Into the railway transportation system?

Mr. Bonnett: We have been suggesting that there has to be overall strategy on how we get that grain to market. It includes the railroads and the elevator system at the farm gate and the ports to ensure coordination.

I mentioned the Internet service connecting a lot of these things with broadband and having tracking systems in place, all of the logistics, and that includes the inspection service.

We're positioning ourselves as a country to be one the world's biggest suppliers and exporters of food. If you look ahead to 2050, that's likely going to be the case, but if we are going to meet that opportunity, we have to make sure we have those transportation systems working at maximum efficiency.

Senator Ringuette: We are looking at the possibility of a northern corridor or right-of-way. Would an additional commercial rail line in that corridor bring benefits to the grain farmer in Western Canada, or would that be too much of a distance going north to reach the port for you?

Mr. Bonnett: I'd have to look at the maps. I'm not claiming to be an engineer. My observation would be it might be wiser to try to twin some of the rail lines where you need to increase capacity and put spur lines up. Heading north with spur lines would make more sense than having another complete line across because the cost of that would likely be fairly extravagant. That would be my gut feeling.

Senator Ringuette: Mr. Masswohl, for many years we've been hearing that a very large percentage of beef production in Western Canada was being transformed in your neighbouring U.S. state. Is that still the case?

Mr. Masswohl: Yes, we export live cattle to the U.S. for processing, as well as exporting beef. You want the economic conditions to favour us processing them here in Canada, but you also want the option of an open border in terms of the arbitrage that that creates. It's the same reason the energy companies want a secondary pipeline, so they have more than one buyer. Yes, it's definitely a significant factor.

Senator Ringuette: When you stated earlier that a northern corridor might help increase the supply of beef production from Ontario, because of current commitment from the western beef being slaughtered and processed in the U.S., you would technically see the additional capacity in northern Ontario for beef production that could be destined for other markets, and therefore diversify export opportunities for the Canadian beef industry?

Mr. Masswohl: Yes. I think one the things we've got right now if you look at the market the way it exists is we have slaughter overcapacity. We do not have enough cattle to justify the slaughter capacity we have right now. This is one the big fears in Ontario in particular where you have the Cargill facility at Guelph, Ontario, that can process 2,000 head per day. There are a couple other smaller facilities in the Toronto area, and that's really it for all of Eastern Canada. So there are cattle coming from Quebec, from the Atlantic Provinces and from Ontario. You also have a very a successful Ontario corn-fed beef program, but there are not enough cattle to put through it. The concern is if we don't increase the beef cow numbers — the mother cows to have the calves — then you worry about a company like Cargill saying, "Why do we continue to have that facility in Guelph?''

Senator Ringuette: I understand; thank you.

Senator Tannas: The idea of the corridor, I think, is for transportation of all things, including energy, so pipeline, telecommunications, electricity, highway and railway. I know that we're having a good discussion about transportation of goods with you folks, and that's your primary interest. I appreciate you being here.

We had Transport Canada people here regaling us with success they're having in putting more efficiencies into the existing corridor. Our job and the reason we took this little study on is to look well into the future, because when people say this is a great idea, it will be 50 years from now, and we have set the table for some kind of response if we're all doing our jobs as leaders and people charged to look to the future.

I was interested in your information about the North and the opening up of the North in Ontario. Is there any kind of correlation in Western Canada that you see or hear about as global warming moves its way north? Are there big large patches of land that will be freed up for grain or cattle production?

Mr. Masswohl: I think there is a similar analogy to be made in Western Canada, and there are producers that are looking to the North. As I mentioned, a lot of producers now try to have pasture land in one or the other. You never know when a drought year is coming, and you want to have an alternate. If you don't have the grass growing in the South, maybe you've got summer pasture land that you can use in the North to alleviate things.

I think one of the biggest things in farming is the cost of the farmland. In southern Alberta, land prices have been going up. We have started to see a shift not even just from southern Alberta to northern Alberta but into Saskatchewan, people changing political jurisdictions as well sometimes. So there is movement.

As I was coming here today with my comments, I was trying to think not necessarily what we need today but what we may need 30, 50 or 100 years from now. We hear about climate change and what the environment might look like in the future. We think that if the predictions are true about that, then Canada is probably very well positioned in terms of its northern land base to be a food supplier to the world.

Senator Tannas: That really leads to the question that we also asked the folks from Transport, and they weren't really able to answer. What if we doubled production of all the things that we do? We're talking about doubling our population. Presumably we're going to double production of lots of things. Would it be possible or conceivable to see a doubling of cattle production and a doubling of grain production through a combination of better efficiencies and better equipment? We have seen so much in the last little while on yields from better seed technology and so on.

Would it be conceivable by 2050 that we could double agriculture production? Are we still then convinced that the southern corridor that runs through cities, mountains, et cetera, is capable of handling a doubling?

Mr. Masswohl: I don't know what the factor would be, whether it's double or whatever, but there's huge growth potential; there is no doubt about that. We're going to have more population in Canada. We are opening up trade routes. The growth potential in the Chinese market in particular is mindboggling. China could consume every pound of beef that we produce in Canada. Those opportunities are there.

We think Canada is probably one of a handful of countries that is poised to be an agriculture superpower in the world as long as we have the right policies, the right infrastructure and the right competitive environment. A lot of that is going to be on research because we probably do have to adapt probably to a different climate moving north, in terms of different crop varieties.

We know what happened in the past decades with biotechnology improving crop yields. Land that used to be marginal is prime land now, and that can happen in places we're underutilizing right now.

Mr. Bonnett: Just so you know, I am one of the cow-calf producers in northern Ontario, from the Sault Ste. Marie area, and I was involved with some of the discussions about opening up that Cochrane clay belt area. It's huge. We flew over it in a small plane. It's hard to grasp how massive that area is through northern Ontario and northern Quebec. Both provinces have a huge potential. Some of that land was cleared years ago when they were logging and were feeding hay to horses; that's what the land was used for.

You mentioned the shifts that are going to take place in the foreseeable future. Two things: I think there is a huge potential for cattle expansion, especially in the North. I think you can pencil it out once we get the prices up a little bit more.

The other thing you're seeing is a real shift in the types of crops being grown. If I look at a province like Manitoba, corn and soybeans are quite normal there. As you see some of the warming trends, you will see those crops expand north.

You mentioned the yield potential. When I was growing up in southwestern Ontario, if we were getting 100 bushels of corn, we were doing good. There are guys there now pushing 300 bushels of corn. That shows you the kind of yield increases.

Now, for the transportation infrastructure, I think one of the things for the long term — you're talking 40, 50 years — is we have to keep our eyes on Hudson Bay as an outlet. If there is an opening up of that transportation route, and there is some transportation taking place there now, it's a lot closer to areas like that clay belt or a lot of Western Canada than some other areas. I think it's one of the things, if you're really taking that long-term view, and it looks like the shipping channels might be open, economically it will likely be a lot more efficient to tie into that than to try to run a whole new line east-west in the northern corridor. I think those are the types of things you should be looking at.

Senator Wallin: I'm going to try something different, because we have been at this issue for quite some time. Given your expertise, I'm asking you to respond, as people who are involved in the industry, people who know the geography, about the idea of this right-of-way. We've got to take out the actual projects, whether there's going to be a pipeline in there or a rail line in there or highway in there, fibre optics, whatever it might be, and get your sense of whether you are two more groups that would be on the list of people that would need to be consulted concerning whether this proceeds.

Do you embrace the idea? I know it's relatively new and that you were just looking at it. What would be your specific concerns if something were to be approved on this front, with access to pasture lands or how infrastructure dollars are spent? You're talking about improving what we've got as opposed to something new. If this were to proceed, what problematic issues do you see?

Mr. Masswohl: Well, as I said, my bias would be towards thinking that it is an idea that has merit, that should be further evaluated and maybe put some details on it. A big thing we would be interested to know is exactly where. Would it be located somewhere that would actually be useful in terms us accessing it, or would it be 300 miles too far north to be of any use to us? That would be a big concern.

I can tell you, if you have the chance at some point and you're looking at Google maps on the satellite view, and you look at that northern clay belt area, so around Lake Abitibi, northern Ontario, south of James Bay, and you look where the Ontario-Quebec border is, on the Quebec side, it is all farmland. On the Ontario side, it's all forest. One of the big differences is roads. There is a grid system of roads on the Quebec side. Government subsidies may be a factor as well, but it's having roads.

It's not just, as we mentioned, the ability to get the product out, but as you mentioned in terms what goes in the corridor, the ability to get inputs in, to get people in and people out. People want to have lives and they want to move back and forth.

Another factor we looked at in the North is there is a lot of Crown land up there. Could Crown land be made available to farmers? If Crown land will be made available along the right-of-way to build, it puts me in mind of when the railroad was established; you build the railroad but you have farms all along it. A similar thing could happen.

Mr. Bonnett: On the concept of putting a new corridor route right through the North, I think before I would go completely down that road, I'd look at how you could improve some of the east-west corridor that's there now. Part of the reason I say that is when I was talking about some of the export markets that need to go to port, we can't forget that a lot of our export markets are straight south, so we need the north-south corridor as well. About 70 per cent of our trade is with the United States.

I participated in Canada-Mexico partnership meetings this week, and there's a lot of expanded trade into Mexico as well.

Canada is unique. We're sending product out in a number of different directions. I would want to make sure that, when we have that 70 per cent of the product moving south, that is looked at as a corridor as well. You can really get hung up on border crossing points and things like that, especially with fresh produce. People may not realize it, but Canadian greenhouse growers put a lot of product into the United States, and any kind of delay in crossing that border can take a perishable product and turn it into mush.

I think looking at the whole system of transportation has to be a priority. It's not just one thing. It's not just the rails. It's a combination of rail, road, and inspection points, all of those border crossing points and reducing wait times, particularly for trucks going across.

Senator Wallin: It's a funny thing, because of course the whole Canadian construct is east-west. We built the big rail line to connect it all, but our activity and even our affinity is often more north-south. If you live in Saskatchewan or Alberta, we used to go across the line, as we called it, to shop. We lived that way. The thought that you would actually come to Toronto was bizarre. So we're kind of fighting geography and almost natural instinct to be talking about this in some respects.

Mr. Bonnett: You mention about product going south, and I think John would agree. There are a lot of cattle processed in Western Canada. That meat is processed in the United States and then comes back into Eastern Canada.

I know you're not talking about it, but that's why it's important that particularly an agreement like the North American Free Trade Agreement is kept up front as real a success story, not just for Canada but for all three countries participating in it. We've developed those chains where it was the most efficient way to produce, transport and go to retail markets. I think that's important.

Senator Enverga: Thank you for being here today. Many of my questions have been answered, but I heard there's some sort of increase and perhaps some potential in northern Ontario and northern Quebec and perhaps somewhere in the western parts of Canada.

I understand that sometimes the country-wide network, the whole northern part might not be viable at this time. In the near future, what do you think is the most critical part of Canada to be part of this northern gateway? Is it part of northern Quebec and northern Ontario or maybe some parts of Alberta? If there is a part of the country that you would really like to have this northern corridor, where is it?

Mr. Bonnett: There is one observation I would make, and possibly it's because of living in northern Ontario. We have the Ring of Fire possibility, development there, and in Alberta you have all of the potential for energy benefit.

Taking a look at resource sectors, you have energy, mining, forestry and agriculture. I think it would be interesting if somebody could do some mapping to see where those are concentrated. That might give you some indication of where the investments may be made.

If that Ring of Fire develops, it's going to demand infrastructure to service it, but at the same time, that's very close to the area you were talking about in northern Quebec and northern Ontario.

Similarly, if there's more development on the energy field in northern Saskatchewan and northern Alberta, that ties in with some of the expansion that could take place with different crops and grains.

I know I'm not giving you a direct answer, but those are two regions where I think it would be interesting to do some overlay mapping on the different types of resources that could be coming out. That might give you an indication of where the potential for growth is.

Mr. Masswohl: I think there are different needs in different parts of the country. If I think about Alberta or Western Canada, those northern ones are going to look for places to get the calves to feeding capacity, which there is a lot of in southern Alberta. Maybe there's kind of a north-south need there, but it may very much be a need to get calves to feed lots in Ontario.

The thing right now is that Ontario is the number four province in terms of beef cows, mother cows, but it is number three in terms of cattle feeding and number two in terms of beef production. Because the land is so expensive in Ontario, it lends itself more to the higher value-added part, where more labour is needed because there are more people in Ontario. So right now there is a need to bring those calves from the west into Ontario. That's part of why they're trying to produce more beef cows in Ontario. I can see an east-west need coming out of the northern west.

In terms of Ontario, the need is probably going to be to open up those northern areas and have the infrastructure to get from northern Ontario down into southern Ontario.

Senator Day: You painted an image of one side of the Quebec-Ontario border being forest and the other farming. You explained the difference being the road network that had been built on the Quebec side. It's a nice image for us to keep in mind, especially when we start talking about global warming. The forest industry is not what it used to be, and neither is the fur industry what it used to be 200 or 300 years ago. Industries change. Global warming is going to change a lot.

I'm thinking of the forest industry moving farther north for those that want to stay in that industry and a lot more agriculture land being opened up in the North.

This is all part of a long-term strategy that's going to have to be thought out, but can we rely on just a north-south corridor at each place? There's going to have to be some east-west up there to some of these feeder lines as well.

I think, Mr. Bonnett, you were talking about coordination of the rail owners and the grain elevator owners. Then you talked about inspection, and they are all different entities doing their own thing. Who brings them together? Do you see it as government's primary role to do that coordination and strategic planning?

Mr. Bonnett: There it gets broken up again. I think government might have a role in helping to coordinate and bring the players together to get them talking to each other. I think there is an opportunity to really look at a long-term vision of how the transportation system is going to work. It is likely going to be, at the end of the day, a combination of partnerships being put together and possibly some regulation on the government side. But I think clearly getting a number of people around the table that understand the industry to drive it is important. I know there are a number of farm organizations, particularly on the grain side, that would be interested in being part of that discussion as well.

It's almost stepping back. I think you mentioned looking at how we deal with these issues 50 years out.

Going back to your initial comment about the east-west and north-south corridors, there may not have to be a line starting at Newfoundland and going right through to the B.C. coast. There may be areas where the line is trying to go through populated areas.

If you take the rail lines in southern Ontario, they're not really efficient for moving things because they just go through too many communities. However, if you take the northern line that goes up to Hearst and Kapuskasing, it's likely northern enough that the corridor could be utilized as a main line corridor. You may have to look at specific areas. Looking at the specifics of where the weaknesses are in the system would make more sense than possibly looking at the whole system.

I've also heard stories of sometimes delays getting through the Rockies. You might have an ability to move grain fairly quickly, but then you have a bit of a funnel going through the Rockies. That's where you could concentrate your efforts, taking a look, particularly at rail, at where the system has bottlenecks and figuring out ways to bypass them.

It almost ties in with John's comments about the highway system when that bridge went down at Nipigon. There's basically no way by there. If you take a look at what the losses could be for a major event, it might make sense to have an alternate route around there in the road system to make sure that the bottleneck doesn't come up again. Talking to some of the cattlemen, it was a quite headache. Will you reroute those trucks through the United States? You can't just immediately take a truck and run it down through the States without a lot of approvals in place. That's what you have to look at long term if we're going to be using that corridor: how to make sure one set of bad bolts doesn't shut the whole system down.

Senator Day: Mr. Masswohl, you were talking about the east-west trucking of cattle. You made a comment that I thought was interesting, crossing the border of the U.S. and coming east on U.S. routes and then back into Canada. What complications and expenses are involved in doing that?

Mr. Masswohl: It definitely is a shorter route to bring cattle through the U.S. and bypass going north around the Great Lakes. As Ron said, all kinds of approvals are required both for cattle in the back of the truck and maybe the credentials of the driver who is driving it. Some drivers only drive in Canada because they can't drive in the United States.

Senator Day: In spite of North American free trade.

Mr. Masswohl: I don't want to get into people's personal histories.

But there may be issues with drivers who are driving only domestically. There's a scenario where you say we have a nice road from Eastern Canada to Western Canada, and vice versa, but if the bridge breaks, which it did, there was no plan B. There was no other way to get from Western Canada to Eastern Canada, other than through the U.S. Unless you've planned for it in advance, you cannot take cattle on that route.

It would be beneficial, not only as a plan B but in terms of animal care conditions, to have cattle on a truck for a shorter period. It would be good to have less fuel, less time, less expense. It would also be good to have made-in- Canada solutions as well.

Senator Day: Are there road tolls for trucks that would be greater if you had to use the U.S. route than the Canadian route?

Mr. Masswohl: There may be. I haven't looked at every aspect of it, but I have to think that has to be offset in some circumstances. If that's your only option for a plan B, that would be a minor inconvenience, I think.

Senator Day: I'm thinking in terms of plans and strategic planning for the long term. We need somebody to take the lead on this, and there is a need for funding. It's going to cost money to do the planning. Is that the kind of thing that your federation and association could be a part of? If there is a group of researchers talking about alternate routes and plans working out of the University of Calgary and they need some money, are you part of the consortium that would fund them to do some of the long-term planning that has to be done?

Mr. Masswohl: I doubt we would be a funder of things like that, but we might put our voice behind someone else funding it.

Senator Day: Like the government. This is a thing the government should be doing.

Mr. Masswohl: Like the government, yes. Something that's aspirational for the Canadian economy.

Senator Day: But isn't it aspirational for your federation, too?

Mr. Masswohl: We have no money. That's the only right answer.

Mr. Bonnett: John, I was just waiting to see what your answer was going to be because I was looking at my check- off.

We talked about the Nipigon bridge, but we may want to think about partnerships with municipalities along major routes. Our farm is right near Highway 17, a major thoroughfare across northern Ontario, and there have been times when there's been a major accident or a blockage and they've rerouted trucks through municipal roads. The only problem is some of the municipal roads used were not built to the standards to take these large vehicles. However, it might make sense in the long-term planning, if you had an alternate bypass route, to make sure when there is rebuilding taking place on those routes that the road base is built to a standard that can take that bypass traffic.

That's why I made the comment about getting enough people engaged in the discussion and looking at it as a system. You may have that Highway 11 or Highway 17 corridor, or No. 1, I guess it is, going out west. Are there municipalities that could provide that bypass capacity if it was necessary? If there need to be investments to help the municipalities meet a higher standard of construction, then that would actually help alleviate some of the stress when something goes wrong.

Senator Ringuette: Have you made that recommendation? The current government is looking at a major infrastructure program. Municipalities would be involved, and some might be enrolled in roadwork. Perhaps they could request the standard that you're looking for.

Mr. Bonnett: Have we made that request? I'm like John. I and our organization didn't think much about this issue until we got the invitation.

Part of my background is that I was a municipal councillor at one time and a mayor, and that's why it got worked into it.

Senator Ringuette: It makes a lot of sense.

Mr. Bonnett: It's just simple.

Senator Ringuette: Will you make that recommendation?

Mr. Bonnett: Yes, we'll follow up.

The Chair: We had transportation hearings with the Transport Committee a number of years ago, and Vancouver was becoming a little problematic in the sense that a lot of people were saying, "Not in my backyard.'' They didn't want certain shipments of product moving through their backyard.

In 20, 30 years from now there will be a heck of a lot more people there. There will be not necessarily environmental but certainly social objection to a product moving through their neighbourhoods. Is that something you discuss as a federation or association, or has that not been thought of yet?

Mr. Bonnett: We have not discussed it at our organization. But going back to some of my municipal history, I think that becomes an issue of land use planning for municipalities. I sat at council meetings where a developer came in and convinced everybody that we don't need that set-aside line.

I think some of these corridors should be identified as priority protected areas from a trade and economic benefit, because if you start to get encroachment, you get all kinds of problems.

We saw what happened in Quebec with the oil cars. I think that's the case of when the rail lines went in, that was the easiest place to start building communities, right around the rail lines. Now we're at the state where those very communities are actually acting as a barrier for the rail line going by.

The Chair: People like transportation going near their place.

Mr. Bonnett: Then you get into provincial and municipal authority. If it's established that these corridor routes have to be a priority for getting product to market and it's in the economic interest of a country, then that has to be driven down through provincial and municipal planning processes.

The Chair: I may be wrong, but in the States if you had an earthquake in California, which happens from time to time, they have Seattle, Portland, and a number of different ports to go to. If we have an earthquake in southern British Columbia on the coast, which a lot of people say could happen, what alternatives would we have?

Mr. Bonnett: Thunder Bay would be getting used a lot, but that wouldn't work well in the wintertime.

Senator Day: Is the earthquake hitting Prince Rupert as well?

The Chair: Not necessarily, no. It's far enough away. That would have to be the alternative route.

Senator Massicotte: A couple of years ago we had a big debate when there was the mad cow problem with cattle in Western Canada. Then there was a long debate, nearly a nationalist debate, about having slaughterhouses in Western Canada. Refresh my memory; what slaughterhouses exist in Western Canada?

I also remember being told that from birth, a calf goes through the border several times before it's finally slaughtered or maybe until it's consumed. Where does that stand and why don't we hear about that debate anymore?

Mr. Masswohl: One of the big problems when we had the BSE problem in 2003 is that we did not have enough slaughter capacity in Canada to process the number of cattle every week that needed to be marketed. We depended on a certain percentage going into the United States. All of a sudden, when you can't ship them to the United States any more, you have too many cattle needing to go into too few spaces, and of course the price of the cattle plummets.

There was a period in 2004-05 where we actually built slaughter capacity. Prior to BSE we could do about 72,000 head per week and we needed to do about 105,000 head per week, and we got to that capacity. Then when the border reopened, some of the policy changes made it more expensive to process cattle in Canada. All of a sudden cattle went into the U.S. again, and we had overcapacity in Canada and some of those slaughter facilities closed down.

Right now the two largest facilities in Canada are both in southern Alberta. There is Cargill at High River; there is JBS at Brooks, Alberta. They can each do about 5,000 head per day. The next largest one is Cargill at Guelph that does about 2,000 head per day, and then there are two in the Toronto area, one out in Prince Edward Island, and that's pretty much it for federally inspected slaughter. There might be a new one coming in north of Calgary that may be more geared towards Europe, but we're at an overcapacity situation right now.

Senator Massicotte: For several years I was involved in going to Washington to talk about COOL, country-of-origin labelling, which has been resolved thankfully. But what was the issue about going back and forth across the borders?

Mr. Masswohl: We want cattle to move where it's most economical to feed and process them. We don't want artificial political barriers, and the issue is largely weather in any given year. In some years we have better grass growing on one side of the border, better grain availability on one side of the border or another. If you are a cow-calf producer, meaning you have the mother cows and the bulls, your product is a 500-pound calf. You sell that calf probably either to a backgrounder or a feed lot. If you're in southern Alberta, maybe the best place for you to sell that animal is to someone else in Alberta or maybe someone in Washington State or Nebraska or whoever will pay you the most. So you want that border to be open.

Sometimes American cow-calf guys might sell their calves up to a Canadian feedlot. You want that economic flow to be able to happen no matter where it makes best sense. And of course when they're finished in the feedlot and then go to a packer to the slaughtered, again that would be either side of the border. Yes, they could move back and forth.

Senator Massicotte: That's potentially twice and then does it get shipped to the Canadian consumer?

Mr. Masswohl: Yes, I would say more than twice for the same animal would be exceptional.

Senator Massicotte: You said Canadian slaughterhouses are non-competitive given new regulations compared to the American ones. What does that mean?

Mr. Masswohl: There was an example back in 2007 when we enhanced our feed ban in Canada to control BSE, and then about a year later the Americans enhanced their feed ban. What we did in Canada was much more onerous. The cost per culled cow, so an over-30-month animal, was somewhere over $30 per head with the additional incremental cost in Canada, whereas in the United States it was a few dollars a head. If you're selling these over-30-month cattle and an American facility can pay for more because they have fewer costs, then that's where the cows will go.

Senator Massicotte: What is that cost? You made reference to it, so describe it to us if you don't mind.

Mr. Masswohl: The purpose of the enhanced feed ban was to take the parts of the animal where we know the BSE infected agent called the prion exists. It exists in the brain, the spinal cord and some of the nerve endings. One of the things that was different in Canada was that the regulation said it's in the brain, so not only must we dispose of the entire brain and the optic nerve endings, but they said, "Well, there might be some residue left in the skull therefore we have to dispose of the whole skull.'' In the United States they said that just vacuuming out the brain was good enough. Whereas we had several pounds of material per animal to dispose of, in the United States it was a few ounces. There was also the cost of disposal of that so there was a big cost difference.

The Chair: Thank you, gentlemen. This has been very interesting. Thank you for coming and giving us your thoughts on a northern corridor. We really appreciate the discussion.

Senators, yesterday we talked about asking for a delay on the report and we said June. I'd like to make it the end of May only because Senator Cordy will get up and we'll be talking about communications. I want to avoid all that. I think we'll be done by the end of May, so let's make it the end of May.

One more thing is that unless we're compelled by the Senate to meet for some reason, we'll be done on the fifteenth. If we're back here on the week of the nineteenth there will be no meetings unless the Senate has some kind of a motion that says we have to do a particular bill or something. Then, of course, we will meet, but other than that there will be no meetings that week, so you can plan your calendars accordingly.

(The committee adjourned.)