[Recorded by Electronic Apparatus]

Wednesday, November 8, 1995

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[English]

The Chairman: I call this meeting to order.

Colleagues, we'll have to stick with our time today because we have a vote at 5:15 p.m.

We're considering Bill C-101, the Canada Transportation Act. From the Canadian Auto Workers we welcome Mr. Dennis Cross, president of Local 101, CP Rail, and the assistant to the president, Mr. Chernecki.

We would like your report to be 15 minutes or less so that we have time to ask some questions. Gentlemen, when you're comfortable, please begin.

Mr. Bob Chernecki (Assistant to the President, Canadian Auto Workers): Thank you, Mr. Chairman.

We brought with us eight recommendations that we hope will be appended to our main presentation. We thought it was important to articulate in point form exactly how we felt about this bill, and those recommendations seek to do that.

First of all, let me give a full introduction here. Kevin Collins is from the CAW research department. Bob Hanlan is the vice-president, Great Lakes region, Local 100, CN Rail. As Mr. Keyes just said, Dennis Cross is the president of Local 101, CP Rail. And I am Bob Chernecki, the assistant to the president. My responsibilities include the transportation sector of our union.

I assume committee members have read through the brief, so I won't read it verbatim, but I want to walk through this so that committee members understand how we feel about what's being contemplated here.

As you can see by the presentation, we now are the largest public and private union in the country in terms of this industry, including air, rail, truck and bus. In total we have around 40,000 workers, and we appreciate this opportunity to come before the committee. This is not our first time around on this kind of issue, and Bob Nault will tell you that. As I said, we appreciate the opportunity to walk through this with you. Hopefully, our voice will be heard in terms of how we feel about the whole issue of deregulation and privatization.

This bill is about the privatization and commercialization of CN. It seeks to do that, although there are other minor changes. It seeks to help CN privatize, and my union has been on record for many years on how we feel about privatization of crown corporations and what that's meant to workers and the country. We hope we're not blowing in the wind here. This is a serious approach by the federal government to fully deregulate this industry.

Our policy, which was adopted at our 1991 constitutional convention, deals with this matter pretty clearly. What we're about, what the country should be about, and what legislation should be about is providing productive jobs, unifying our nation, and facilitating regional economic development, which we don't think this bill does.

We also believe there ought to be a balanced approach to this. It should not just be about profit and the economic viability of corporations. It ought to be about communities and how they view and are affected by these changes.

When you look at what's happening and what's contemplated here, a whole host of communities will be without service. Like you, I've read the comments from the Mr. Telliers of the world and from the grain handlers. These are people who have a direct interest in this.

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Mr. Tellier seeks to tell you that this bill doesn't go far enough. He would like to see the whole Transportation Act dismantled completely, so that he'd have the right to do what he wanted to do when he wanted to do it and how he wanted to do it, and to hell with communities and the workers.

The grain handlers are arguing that this may very well cost them efficiency and may very well cost them more money to run their operations because of the lack of service. I'm not so sure our view is much different. At least on that point we certainly agree.

To continue, everyone knows the background of deregulation - where it really started and who started it. The airline industry today is fully experiencing it: we saw Air Canada a number of years ago move to deregulation, and today isn't doing much better than it was back then. Canadian Airlines, by any measure at all, certainly isn't doing well under deregulation. The combined revenue of the two carriers is almost $7 billion, with the regional carriers bringing in an additional $700 million or more. Air Canada is of course able to take advantage of that.

Moving through the years to what's currently happening today with the open skies, I submit to you that the jury is still out here. There's a two-year moratorium, as you know, on the open skies period, in which the Canadians have a right to move into the U.S. markets and then within two years you'll have the U.S. moving into our market. We're going to experience, we think, some major changes over that period: we're going to see further job loss and the erosion of a very important Canadian industry, the airline industry.

The issue for us has always been the jobs and what that means to our workers. We've experienced enormous job loss, both in the airline and rail industries, primarily due to the direction of the federal government in deregulation and privatization. An example is in the air treaties. Air Canada had a Montreal-Atlanta line and quickly got into that market, and quickly got out of it in the last number of months, because they didn't see any profit in it.

So while we see open skies as a positive thing at this point, and while the government may see it as positive, we think that after that two-year review we're going to see the true result of open skies and deregulation: further job loss. The economies of scale just won't let the Canadian airline industry survive. And as I said, Canadian Airlines are back at their employees again for concessions.

We are, as workers, really subsidizing that airline. Some would argue that if you don't have an airline you don't have jobs. Well, the bottom line is do you save the airline to bankrupt workers? If you talk to the workers, as I do when I go through those airports, they will tell you they've had enough of bankrupting themselves to save this airline.

So it is important to set the stage a little bit as to what deregulation has done, at least to the airline industry, and our presentation to you does that today.

In terms of the rail and the class one and CN and CP, their revenues are on record: over $6 billion of revenues, with combined net profits of over to $400 million. The issue still remaining is job cuts arising from their moves to become more competitive. The latest round of bargaining, which I think most will remember, was about a very important principle for workers, protection of their income, at the same time assuring that communities had these jobs so they could run their municipalities properly, effectively, financially and otherwise. What ended up happening was the labour movement came under attack, we think, by the Minister of Labour and the Minister of Transport on our collective agreements. That was an unfortunate experience for all of us. A strike occurred and people were ordered back to work.

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This is all about pressure, about job cuts, reductions and a change of focus from what used to be. We used to have a lot of respect for national structures such as our airlines, our rail systems. For some reason, over the years we have lost that. It has all been in the name of profit; it has all been in the name of people wanting to get into the global market, at which most times they fail.

It is with much concern that we say to you that this legislation needs to be reviewed, needs to be updated, needs to be more progressive.

As a union we've identified several concerns around what will lead to short-line operations. The question, of course, is the economic viability of these operations, safety concerns, and workers' rights.

The record in the U.S. is not very good with short-line railways. In our presentation, as you can see, many of the U.S. operations are now heading for bankruptcy. I mean, 15% to 25% of the short lines fold each year in the U.S. and the numbers are on record. Of 138 short lines created in 1986, over 20% failed. Of course, given that high value of equipment and assets, this was a significant failure.

What you're contemplating in this legislation, and what Bill 5 coming from the Conservative government in the provincial house deals with, is the creation of interprovincial lines, short lines as they're commonly called. The only measure you have, and the only measure we have as workers, is what we've seen. What we've seen is an erosion of our collective bargaining rights. We've seen lay-offs. We've seen bankruptcies. All of these things affect the communities and the well-being of those communities and the country as a whole.

I want to expand a bit on the rights of workers. Our brief was a little outdated at this point. On page 10 we talk about successor rights for unions, and we talk about B.C. and Saskatchewan. We can no longer say that in Ontario. As I mentioned earlier, Bill 7 took care of that and took out, along with a number of other things, the rights of workers in that province under the term of successor rights. That is when the line moves federally to provincial jurisdictions. If the short lines remain in federal, two issues could be resolved: a short line would maintain the federal safety standards and we would maintain our representation in our collective agreements.

So for us it's very important that those kinds of issues are addressed in this legislation. It's important that we're on record with you, again, telling you what the importance is, because we know what's going to happen. We can cite some examples coming at us today in terms of CN. If they're allowed to do what they want to here, they will create - or the economy will create - a whole host of short-line railways. They will then seek to dismantle our collective agreements and they will then seek either to bring us back to the bargaining table to seek concessions, or right out tell us that either we take this or our collective agreement is gone. In future we are going to see some major debates between labour and these class one railways on such issues.

The summary, if I could try to capture it, is really found in our recommendations. I want to go through them with you.

Number one is that the longer-run trend towards deregulation of the national transportation system has been extended in Bill C-101. This thing should be reversed. We should stop, have a look at what we're doing, and adopt as a country a national transportation policy, which the Liberal government promised when it was elected. We've not seen that at all.

We figure that attention should be paid to national transportation policy in the following principles, and they're outlined for you: on the national unity question, on public and worker safety standards, environmental protection, access for both freight and passenger service for all Canadians, and a balance into integration among the various modes of transportation.

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We think the ownership, obviously a priority, should remain public, and there should be a debate about who can make the most profit by deregulation. There should be a transportation policy that addresses the need for a national transportation system, publicly regulated and publicly owned.

The other issues deal of course with the pricing and, as I mentioned earlier, the policy, but VIA Rail too is certainly a major concern. Most of you I think know that VIA doesn't own the tracks here. You have CN, which is heading for privatization, and VIA runs on its track.

The next question, I guess, is that once that's privatized - once that's gone - how does VIA run coast to coast on a track the government doesn't own? There will be increased pressure, and I assume a new ownership at CN will force VIA to come to the pump on a higher rate for track usage. We see that as a further force to dismantle VIA, which we think is coming at us shortly. We think the government today has lost sight in terms of what this country really needs in national transportation services.

So when you analyse what is happening with CN Rail and with CP Rail and what has happened with CP Rail, we think VIA will be in dire straits here, because people will force it to pay more for the track usage. Where does that put our public transportation system and rail?

The last one, of course, and probably the most important to us, would be that the rights of workers should not be compromised by a trend towards short line and cheap labour approach, such as rail tax, of American operations, who are waiting in the wings, in particular, with workers' collective agreements rights.

Mr. Chairman, it certainly is a very short period of time for a very serious issue. I know the committee has a vote this afternoon, but I would beg some indulgence here. There are some examples here they should hear about from some of the participants, maybe Dennis Cross, about what this means to some of the communities and what it may mean to some of the communities. We'll be brief.

The Chairman: Unfortunately, we have 105 witnesses to hear from in the time span we were given. These decisions aren't taken lightly. We are now approaching twenty minutes for your presentation, which was probably about eight minutes longer than the average so far. So I will have to ask you to wrap up, Mr. Chernecki, in a minute so we can ask some questions of the CAW that are specific and germane to Bill C-101.

Mr. Chernecki: We have a couple of examples.

The Chairman: One minute, Mr. Chernecki, doesn't allow time for examples.

Mr. Chernecki: That's more than we got from Mr. Harris, so we appreciate it.

Mr. Dennis Cross (President, Local 101, CP Rail, Canadian Auto Workers): I think speaking for our union overall and our membership, the majority are the ones who service and inspect rolling stock like Canadian Pacific, Canadian National, and VIA Rail. We also have, with CN and VIA, the clerical staff and some support staff.

Our greatest concern is that when you allow the railways to announce which lines they'd like to divest themselves of and put a three-year period on it, there may not be a complete understanding by the government of what that may mean.

At Canadian Pacific next week, they're going to announce that they're going to spin off their lines from Windsor, Ontario, to Quebec City. What we expect as a union is that when they comply with the act and announce which lines are going to be divested in three years, that will include their main line through eastern Canada, except for their profitable intermodal terminals in the Toronto area. There is no way the provinces of Quebec and Ontario are going to be able to carry on that sort of infrastructure without investing well over $1 billion just in Canadian Pacific.

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This bill, as written, is going to have a lot of implications for the railways. Take for example the bay line in western Canada, on CN. How is a province such as Manitoba, the province I come from, going to maintain its line to Churchill? They won't be able to, and the bill as written is going to give absolutely no recourse to the federal government to look out for the interests of the communities along that line.

I'll close it there and we'll accept questions.

The Chairman: Thank you, Mr. Cross and Mr. Chernecki, for your submission to the committee.

We'll get into questions. Mr. Mercier, please.

[Translation]

Mr. Mercier (Blainville - Deux-Montagnes): I quite agree with Mr. Cross and Mr. Chernecki that this bill is more concerned about profitability than it is about the public interest or the interest of workers. Having said this, there is no denying that many branch lines are unprofitable. Under the legislation, when a branch line operates at a loss, the company may put it up for sale; the segment in question can either be purchased by a private interest or bought back by the government. Now then, given this bill's concern for profitability, what action should be taken when a branch line is unprofitable? This bill makes provision for the segment in question to be purchased by a short-line railway. However, you indicated, probably with good reason, that if you had to renegotiate your collective agreement with a short-line railway, you would likely not end up with the same working conditions that you now enjoy. At the same time, if the unprofitable line were abandoned, jobs would be eliminated.

Do you not think that under the circumstances, the short-line operation would be the lesser evil, preferable to the abandonment of the line? I am thinking here about the interests of the workers, because it would be preferable for the segment to be taken over by a short-line railway rather than be abandoned altogether. If not, what do you propose that we do when a segment operates at a loss? Should it be subsidized in the public interest? Should it be sold to a short-line railway, if possible, or should it be abandoned? What should be done?

[English]

Mr. Chernecki: That's a good question. No, we don't think it should be abandoned at all. The history of our country shows that we are about having a public national transportation system. If a community is going to be without service, I think there's an obligation on the country to subsidize that line. Where that's absolutely impossible, when there's a bankruptcy and there's no future for it, then irrespective of any legislation it will go bankrupt. Maybe somebody will pick it up.

In terms of the overall approach, we're moving to a situation in this country in which we are dismantling what was once termed the crown jewel of the country, and all in the name of what? All in the name of privatization, all in the name of profit. There is an obligation here on the country to subsidize.

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VIA Rail is a prime example. I hear members of the House standing up and criticizing because we're subsidizing VIA Rail. Well let me tell you, when the communities can't get service any more and they're losing that passenger service, then I challenge a member of the House to stand up and support why he or she agreed to take that service out. There is an absolute obligation here on the country.

An hon. member: [Inaudible - Editor]...the service.

The Chairman: Order, order, order. You'll get your day.

Mr. Chernecki: There is an an absolute obligation on the country and on the parliamentarians to make sure we have a national passenger service.

The quick answer to your question: there isn't one.

In terms of the trade union movement, the labour movement here, from our view I think we ought to have some secure...no holds in the legislation dealing with our collective agreements. Why should workers, because a railway changes hands, take less for the work they're doing? They shouldn't. Whatever a car man is doing after the short-line railway takes over is the same work he or she was performing under the class one, class two railway. Why should they take less? It's not their responsibility to subsidize the profit of a corporation, and that's where we're heading here.

So I appreciate the question, and if I can just ask Dennis -

Mr. Cross: I think we have to be careful. Traditionally we think of short-line railways as something like Goderich-Exeter in Ontario, Truro-Sydney in Nova Scotia, where it's a branch line. There are very few people working on those lines and that won't affect my membership very much on CP. I have 4,300 members across the country and very few of them work on those types of lines. But the way this proposed act is written, it will include lines like Quebec City to Windsor, that corridor. That is what Canadian Pacific is looking at.

They made an announcement after the federal government refused to sell them the CN east of Winnipeg. They said they were going to do either of two things. They were going to divest themselves of Quebec City to Windsor and the Windsor-Niagara Falls-Hamilton corridor, and you're going to have no competition out east unless one of the provincial governments picks it up. Or else you're going to have the line from Sudbury to Thunder Bay abandoned and nobody is going to pick that line up. All those communities are going to be without any rail service in northern Ontario. CP is going to do either of these two things in the next two years.

What CP plans to do is.... There won't be a big picture any more. There will be this little line and this little line and this little line, and they'll look at it in micro-economics instead of macro-economics. They say that they need at least 20% operating profit on any given line. Traditionally in the last 50 or 60 years they've never made more than 10%. It has always been under 10%. They've always been strong railways, both of them, until the rationalization after deregulation in 1987.

What they're doing is expecting through regulation to double their traditional profits. They're saying, well, the Americans are doing it. Yes, the Americans have been doing it the last five years, but with huge economies of scale compared to Canada. They will never achieve that unless it's a line like Crow's Nest to Vancouver, where you have 26 coal trains going a day. They will make that.

The Chairman: Mr. Gouk, please.

Mr. Gouk (Kootenay West - Revelstoke): Mr. Chairman, I'm going to try to stay on the short-line issue because there are a number of things. I have maybe just a passing comment with regards to VIA and your national passenger system.

There are two problems there. One is that when you talk of a national passenger system, there are still huge, massive areas of the country that have no passenger service. They go by car, they go by bus or they go by airplane. While I sympathize with people generally, anybody who is on a VIA line and wants to keep it just because it should be a line, I don't agree with that unless the line is capable of paying its own way. I'm looking separately at some areas like the Algonquin Central Railway, where there could be hardship; I treat that differently. But the general premise that we have to have rail because it has always been and therefore it always should be - I don't accept that.

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With regard to short lines, half a loaf was mentioned. I have an older friend who got up creaking from having coffee one morning when the cold weather was coming on and said ``God, old age can be a bugger, but on the other hand it's a hell of a lot better than the alternative''. That's the way we tend to look at short lines.

I've lost a rail line within my riding that we had viable people interested in, railroaders who were interested in taking that line over, a 60-mile run. They could not get the kinds of concessions because we have successor rights in British Columbia that provide the very thing you're telling us you would like to see.

When we start talking about the condition of change, we have nothing against the union going in there. That's entirely up to you and the people who work on that railway. The company can't stop you and there are laws to prevent them from trying to stop you from organizing those workers if those workers choose to be organized.

A short line has a problem not so much with salary but rather with the craft work rules. That's the place where the successor right really causes a problem for a lot of potential short-line operators. Even when companies like CN have looked at internal short lines, which the workers have agreed to - and frankly I was a little surprised at how favourably they embraced this - one of the changes was the craft rules.

Again, you've talked about economy of scale and so on. You have that with short-line operations. It's all well and good to say this person does this job and only that job if you have enough units of work for that person to do. When you're in a small-scale company, it just doesn't make sense to have that person specialized in that job only.

Am I understanding this right? Did you say the railroad should operate a line even if it's not profitable because the alternative, which is a short line, is not acceptable? Is that your contention?

Mr. Cross: My concern is that with this act the focus won't be on those small branch lines. It's going to be on large lines, main lines, the Dauphin-Churchill run in Manitoba, the Quebec City to Windsor corridor at CP. As far as the branch lines go, with respect to craft rules, do you want a clerk to be a machinist?

What's happening on those small branch lines, such as what was formerly car, Sherbrooke to Saint John, New Brunswick, is nobody does it any more. Nobody does the servicing of the locomotives. They go on to CP lines and into Montreal to be serviced. They don't have that expertise there.

Mr. Gouk: One thing I wanted to touch on. You're talking about this 20% profit margin because CP feels they're not making enough. They want to make 20% when 10% has always been plenty good.

If I were running a company, whether it be a railroad or anything else, and I can only handle so many units of my business and make 20% on that many units and less on others, then I'm going to get rid of the others. If I'm running a company I want to be as big as I can get it, sure I like the parts that make 20% a hell of a lot better than I like the parts that make 10%.

I'm not going to get rid of something that makes a 10% profit because it's still 10% profit. I'm going to get rid of the ones that don't make any profit or that cost me money or drain away money from that 20%. Where do you see a problem with that?

Mr. Cross: I don't; Canadian Pacific does.

Mr. Gouk: Do you see them selling off lines from which they get a 10% return on their money? Is that what you're suggesting they're likely to do under this deregulation?

Mr. Chernecki: Yes, that's what we think will happen.

Mr. Gouk: Why would they sell off a line on which they're making a 10% return on their money?

Mr. Chernecki: It goes back to what I said earlier. It's about more profit, and to hell with the community and to hell with the service.

Mr. Gouk: If you've got something you make 10% off and you sell it, you've got no profit.

Mr. Cross: If you were to read yesterday's Montreal Gazette, CP's spokesman said their shareholders have directed their board of directors to increase their operating profit to 20%. The only way they can do that is to divest themselves from eastern Canada and make themselves a western-based railway. It's the only way they can do it.

Mr. Gouk: It will be interesting to hear CP's comments on that.

Mr. Cross: They said it yesterday.

Mr. Chernecki: That was their statement.

Mr. Gouk: I'll follow that up.

Mr. Chernecki: There'll be a further statement by CP probably some time Monday on the whole eastern situation.

Mr. Fontana (London East): Gentlemen, obviously you've got a difference of philosophies here. It would seem to me though that when you go out of the house in the morning and look up in the sky and see a whole bunch of clouds, either you can be very pessimistic and say it's going to be a rainy day and it's going to be just terrible, or in fact you can come out of that house and say you see some sunshine and there's going to be some hope.

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I'm rather curious as to why you haven't seen the positives in this bill. The positives are about protecting jobs, protecting communities, and creating new opportunities for your members.

I'd like to know, because the railroad unions themselves have recognized reality. They are in fact supportive - maybe not enthusiastically - about short-line opportunities that exist.

I'm having a hard time understanding a union that says that unless the government and the taxpayer subsidizes everything...then obviously that should be the panacea for everything. I mean, why not work with the railroad companies?

Obviously this bill is about helping them out too, because they're not as viable as you think. In fact if they become much more viable and we become much more competitive in the shipment of our goods across this world, then there are more jobs for everyone.

So I'm really having a hard time understanding where you're coming from. You're not talking about protecting jobs and protecting communities because the whole bill is about protecting jobs, creating short lines, and in fact helping communities in the abandonment process.

Under the present status quo it's either abandonment or nothing. Now we're talking about sale, about transfer, about opportunities for provincial governments, municipalities and local interests to be involved in creating their own economic development.

So I don't know where you're getting this from the bill. Do you always wake up this negative in the morning?

Mr. Chernecki: No, most of the time I'm positive, except when I see proposed legislation that may have the result of attacking workers' collective agreements.

Fundamentally some of what you said may be true, in terms of the job aspect, but we know what happens; we've experienced it. Through many years of history our collective agreements have established certain principles.

We've set what we think in most cases is a below-average wage structure, but at least it's moving up. Then we get hit with a class one railway like CP or CN and all of a sudden because they want to make more profit they want to do it on our backs. They want to spin off this thing -

Mr. Fontana: What happens when they've lost money for the last -

Mr. Chernecki: Let me finish. I'm going to answer your question.

Mr. Fontana: Yes, please.

Mr. Chernecki: They spin this thing off and the next thing you know who's under attack? We're under attack as a labour movement in terms of our collective agreements.

When I wake up in the morning, look at those clouds and I see the sunshine, I think about a number of things. I don't look at things in isolation. The sun may be clouded over a little bit, but when the rays come through the clouds I'd like to have some of those rays myself and not have them go just to the corporations.

Mr. Fontana: Excuse me, but all you're talking about - and we're not talking about collective agreements in this bill and everything else.... All this -

Mr. Chernecki: Actually we want you to -

Mr. Fontana: The loss of jobs -

Mr. Chernecki: We want you to talk about collective agreements -

Mr. Fontana: No, no, but collective -

Mr. Chernecki: - and to protect people's wages.

Mr. Fontana: No, wait a minute. All you've talked about has occurred under the status quo. This Bill C-101 talks about creating a new environment for railroads, shippers, communities, railroad workers, and those people who want to create short lines.

So that's my point. I don't want to go back to yesterday.

If I'm not mistaken, most of everything that's in agreements between yourself and the railroads has been negotiated, with the exception of the arbitration rulings that have come down, but most of your unions accept it.

You talk about profits. Have you looked at the bottom line of railroads over the past five years - maybe not this past year? What happens when they lose tens of millions of dollars, and what happens when they go bankrupt, which is a possibility?

Mr. Chernecki: Why does that happen?

Mr. Fontana: Are you prepared to bail them out with union funds?

Mr. Chernecki: With respect, Mr. Fontana, there has been no vision by these two railways over the years. Do you know what they've done with their equipment over the past ten years? Nothing. You see them scrambling now to purchase locomotives to try to become more efficient. Where have they been?

Mr. Fontana: That's because they don't have the money.

Mr. Chernecki: That's not so, not so.

Over the years there were opportunities for them to make a strategic plan on how to run that railway. They ran the damned thing into the ground, and now they want to get rid of it. And they want to do it at the cost of the workers.

Mr. Fontana: Mr. Chairman, if -

Mr. Chernecki: Have a look. You probably do a lot of reading, like I do. Have a look at what's happening in Europe today.

Mr. Fontana: I don't know about reading.

Mr. Chernecki: Have a look at how they're approaching the rail industry in Germany, in Japan, and in every progressive country. Have a look at what they're doing. They're modernizing their track, they're modernizing their equipment -

Mr. Fontana: And private enterprise -

Mr. Chernecki: - and that's bringing jobs and profit to the railways.

Mr. Fontana: Private enterprise is going to do that.

Now, I want to talk -

Mr. Chernecki: We'll see about that.

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Mr. Fontana: I want to talk about short lines.

Mr. Chernecki: We'll see how much profit CN makes after they privatize.

An hon. member: You're over your time.

Mr. Chernecki: I'm enjoying the debate.

A voice: It's ten minutes.

A voice: I thought you're over.

The Chairman: No, it's ten minutes. Lead questions get ten minutes, and he shows -

A voice: The chair is over there.

The Chairman: - five left.

Mr. Fontana: Mr. Chairman, obviously these witnesses have attacked the process or at least the concept of short lines.

You've indicated that you allege a high failure rate in short lines in the United States, but according to the American short-line railroad and according to the short lines that have appeared before this committee, in fact they've all been successful in this country. None have gone down the tubes.

Your assertion that in the United States, where over hundreds and hundreds of them have in fact been created that have been successful and have protected and created jobs for their members.... I'm just wondering where you're getting your information with regard to the short-line industries.

Mr. Chernecki: If you read the brief, you'll see at the bottom where we got our stats, from the U.S....

Mr. Fontana: I might add something too while you're looking at that, and perhaps you might want to respond because it's the same thing.

Over half the short lines that were created in the United States, the ones that were created in Canada, including the ones between Exeter and Goderich and the ones in northern Quebec.... In fact unions have been formed in those railroad areas so that there are opportunities for unionized workers also to be included in the creation of short lines.

It's not an attempt, as someone might suggest, of union-busting and so on. In fact unionized members are being formed in those short lines to assist those short-line operators to become competitive and efficient to help shippers.

Mr. Chernecki: First, I apologize. I thought we identified the source of that information and it's not identified. I'll provide that to the committee.

Second, I understand where you're coming from in terms of the vision you have about what this means. Rest assured, we're trying to remain as positive as we can about this too, but we know and we live the experiences when these things happen. We've lived the experience of deregulation. We've lived the experiences of privatization. We know what short-line railways mean.

I don't know which unions you're talking about that are in love with this legislation, or hold the short-line agreements dear to their hearts. Most times they're forced into them, so I don't know what unions you're talking about. They have a right to do what they want to do, and we have a right as the CAW to make our position very clear.

We're not going to put workers and their income in jeopardy because somebody wants to make more profit. We're not going to do that. People have a right to make a good living, which boosts the economy of any community. They have a right to maintain the level of wage they had before the main railway spun them off.

The Chairman: Mr. Comuzzi, please. These are five-minute rounds now.

Mr. Comuzzi (Thunder Bay - Nipigon): Mr. Cross, you made a statement that I'd like clarified with respect to closing of the CP line between Thunder Bay and Sudbury. You're obviously aware that's the only link CP has with the east and the west. If they don't use that line, they go the southern route.

Mr. Cross: They go Moose Jaw, North Portal, Minneapolis, Milwaukee, Chicago, Windsor, which they've poured a lot of money into in the last three years.

Mr. Comuzzi: But they also have a commitment to containers. That utilizes that line from Thunder Bay to.... Unless you have some facts I don't have.... That's my question. You had stated unequivocally that they're going to close the Thunder Bay -

Mr. Cross: I believe they are going to do one of two things, and that's from my day-to-day dealings with them. These are the indications they've given to me: get rid of northern Ontario or just pull right out of eastern Canada, period - Windsor to Quebec City - leaving their intermodal terminals with the rest of the country. That will be announced on Monday.

Mr. Comuzzi: They're going to announce closure of Thunder Bay to Sudbury?

Mr. Cross: They're going to set themselves up to do either of those two things in the next three years, and that will be announced on Monday.

Mr. Comuzzi: When you refer to ``they'', who are the ``they'' you're talking about? Who is it specifically in CP you refer to? You said ``they have told me''.

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Mr. Cross: Industrial relations -

Mr. Comuzzi: I'm not trying to be argumentative here.

Mr. Cross: No, no. It's just the people I deal with at my level. And it did not go public until The Financial Post and The Globe and Mail picked it up on Monday. We've been told this for the last six weeks.

Mr. Comuzzi: I don't want to get into a confrontational approach with Mr. Chernecki with respect to the railways, their profitability, and the unions. I think you folks in the CAW spend a lot of time working together with the industry.

We have heard in this committee that the bulk commodities we ship in Canada.... I'm referring particularly to coal, grain, and lumber products, pulp. In order to compete in a global market, the costs of transportation sometimes go as high as 55% to 60% of the cost of the product we're shipping. In essence this means that the person who's mining the coal, producing the coal, growing the wheat, or producing the lumber comes up on the short end. Lumber is not as bad as the others, but they come up on the short end of the stick insofar as the division of that dollar is concerned.

I'd like you to comment on that. Tell us what your thoughts are with respect to how we should cope with that. To me that is a very serious issue.

Mr. Cross: A lot of those basic commodities - potash, coal and grain - were farther to beachhead than any other country in the world. With the big exporting countries like the United States - their coal is in Montana and Idaho - and Australia, they're 60 to 70 miles away. You're not going to do that through labour.

CP and CN have attempted to do that, and to some extent they have. You can compare the gross unit payroll of our members with the equivalent in the States. It's 60% more in the States than it is in Canada. It's $23 Canadian here and something like $45 in the States. That is -

Mr. Comuzzi: That wasn't my question. My question was about the Canadian production, and I'd like to really stay in Canada. Could you comment on the alarming rise in transportation costs with respect to the cost of the product we are finally able to sell in a global economy. I'm sure you folks are concerned about that.

Mr. Cross: I'm not sure whether it's rising or not, or always has been that.

Mr. Comuzzi: No.

The Chairman: Okay, Joe?

Mr. Comuzzi: Yes.

The Chairman: Are there any other questions, colleagues?

Gentlemen, I want to rip off some question here to you too. Listening to the discussions, the questions and the answers that are coming, I wonder if you could answer a few for me, Mr. Chernecki.

How many of your members work in the rail industry?

Mr. Chernecki: About 20,000.

The Chairman: How many of them work on the main line?

Mr. Chernecki: For CP and CN?

The Chairman: Yes.

Mr. Chernecki: You mean the class ones?

The Chairman: There are only two left in Canada.

Mr. Chernecki: It's 85% to 90% of that.

The Chairman: You don't have a number though?

Mr. Chernecki: No.

The Chairman: No number. How many of them work on the branch-line system?

Mr. Chernecki: What do you mean, the branch-line system?

The Chairman: Smaller railways -

Mr. Cross: Probably less than 10%.

Mr. Chernecki: Are you talking about O&R and BCR, those lines?

The Chairman: No.

Mr. Cross: They're concentrated in the major centres.

The Chairman: So you say 85% of your 20,000 employees work on main lines, CN or CP?

Mr. Cross: At least.

The Chairman: And the remainder work on smaller lines?

Mr. Cross: Yes.

The Chairman: Of these smaller lines, how many do you think will be abandoned or sold?

Mr. Chernecki: You have to ask Mr. Tellier and Mr. Scott. I have no idea.

Mr. Cross: That depends on -

The Chairman: That's fine. No, that's right. You don't know, eh?

Mr. Cross: Your question says branch lines. Our greatest concern is that it is not branch lines that are used through the act.

The Chairman: Smaller lines.

Mr. Cross: It's that main lines are used. I keep bringing up Saskatoon to Edmonton on CP, like that line in Quebec and southern Ontario.

The Chairman: All right, then let's get to that part of the question. In your opinion, how many of those lines you're speaking of will be sold?

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Mr. Cross: In my opinion, on Canadian Pacific there will be more than 30%.

The Chairman: More than 30% of them will be sold? And how many of that 30% will be bought up by provincial, municipal, or private sector interests?

Mr. Cross: I have no idea.

The Chairman: You don't know.

What's the average salary of a railway worker?

Mr. Cross: The average salary of a railway worker is about $45,000 to $50,000 a year.

The Chairman: That's just a step up from -

Mr. Cross: For almost all trades people it's $39,500.

The Chairman: How do you think that compares with the salary of other workers in the transportation industry?

Mr. Chernecki: It's low.

The Chairman: A salary of $45,000 to $50,000 a year is low?

Mr. Cross: In the railway industry.

Mr. Chernecki: For trades people.

Mr. Cross: Our bargaining unit is for trades people. An electrician at CP will make $40,000 a year. Outside they'll make $60,000.

The Chairman: This is my last question. How many of those employees who might lose a job completely if the line were let go would be happy to work for let's say a reduced rate of pay from a privately owned or municipally owned railway line?

Mr. Chernecki: I don't know how you answer that question. I guess you take a vote. I don't know. Would you agree to work for less?

The Chairman: It's better than not working at all.

Mr. Cross: As an example, in Saint John, New Brunswick, my bargaining unit had 19 workers. One remained, the rest moved to Montreal to stay with Canadian Pacific. One remained with the Irving group that bought CP.

The Chairman: Thank you to the Canadian Auto Workers for their presentation to our committee and for answering our questions.

Mr. Chernecki: Thank you.

The Chairman: We invite representatives of the Wabush Mines to the table, please. We welcome the acting general manager, Damien Lebel; and the counsel, Mr. Howard and Mr. Schabas.

Welcome, gentlemen, to our committee. If you could give us your presentation in 15 minutes or less, it would leave time for us to ask some questions. Thank you.

Mr. Damien Lebel (Acting General Manager, Wabush Mines): Thank you, Mr. Chairman and members of the committee, for the opportunity to appear before you today on behalf of Wabush Mines to comment on Bill C-101, the Canada Transportation Act.

We previously furnished this committee with a detailed submission on Bill C-101, and today we would like to take a few minutes to summarize our position for you before answering any questions you may have.

First, let me tell you a little bit about who we are. Wabush is an iron ore mine and processing plant, with an annual capacity of 5.5 million to 6 million tonnes of product. Our principal owners are Stelco and Dofasco of Hamilton, Ontario, both integrated steelmakers with a combined ownership of 62%.

Our open-pit mine, the Scully Mine is located at Wabush Lake, Newfoundland, which is approximately 175 rail miles from our processing plant at Pointe Noire, Quebec, near Sept-Iles.

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Wabush employs 750 people combined at the mine at Wabush-Lake and the processing plant at Pointe Noire. The town of Wabush Lake, Newfoundland, is home to about 2,430 residents who endure long, cold winters where we can expect about 366 centimetres of snowfall each year.

In terms of goods and services alone, Wabush contributes $20 million to the local economies of Wabush Lake and Pointe-Noire. In addition, Wabush contributes about $50 million in salaries and wages, and its freight bills are $34 million.

The steel industry, our only customer, is cyclical and we are currently benefiting from an upside in our business cycle. While most mines and steel plants are at present operating at near capacity, we must prepare for the next downturn that is certain to come. Many industrial analysts are forecasting additional rationalization of high-cost iron ore operations. We are making every effort to control and reduce our costs to ensure that Wabush is a survivor.

Next to labour, our highest cost input is transportation, which is about 20% of our total cost. Also our production is less than that of our eastern Canadian competitors. Accordingly we must spread fixed costs over a smaller base of production. For example, IOC produces 16 million tonnes per year compared with 5.5 million to 6 million tonnes at Wabush.

We ship our product, iron ore concentrate, in our own cars on the QNS&L railway, which is wholly owned by our market competitor, the Iron Ore Company of Canada, also known as IOC.

Wabush is an example of a truly captive shipper. There is no alternative effective at equal or competitive means for transporting our product. There is no rail connection between the QNS&L and CP, CN, or any other railways for that matter.

Wabush is isolated from the Canadian and U.S. rail systems, and there is no other economic railway alternative. Therefore the competitive access provisions of Bill C-101, of competitive line rates and interswitching, have no application to our situation.

Trucking is not an alternative. There is no direct highway link between Pointe Noire and Wabush Lake. One must drive west from Pointe Noire to Baie Comeau, about 200 kilometres, to pick up the road north, which is largely unpaved, narrow, winding, sometimes impassable in winter and flooded out in spring.

Just think of the difficulties we would face trying to ship 5.5 million tonnes 765 kilometres or 478 miles and 275,000 truckloads or one truckload every two minutes, 24 hours a day, 365 days a year.

We believe that the dispute resolution provisions in sections 48 to 57 inclusive of the current National Transportation Act are an effective and essential protection to truly captive shippers such as Wabush. We vigorously urge that these provisions be retained without change or precondition in Bill C-101.

Specifically we ask that subclause 27(2) be clarified to ensure that it has no application and is not a precondition to final offer arbitration. Please do not permit unnecessary hurdles to be built into Bill C-101 to prohibit access to to final offer arbitration for truly captive shippers such as ourselves.

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This concludes my oral remarks. We thank you very much for this opportunity. We would be glad to respond to any questions or comments you have at this time. Thank you.

The Chairman: Thank you very much, Mr. Lebel, for your presentation to the committee. I've been to Wabush. Despite the winding roads, isolation, and 366 inches of snow every year, it's a beautiful place to visit, a beautiful community. We appreciate the time you took to be with us at our committee, to give us your input.

We'll go right to questions. Mr. Gouk.

Mr. Gouk: I gather one of your main concerns on subclause 27(2) is the possibility that it may inhibit you from getting to final offer arbitration.

Mr. J.F. Howard (Counsel, Wabush Mines): Yes. The qualification in subclause 27(2), which seems to say that the agency can only grant an application where they find significant prejudice, could apply in final offer arbitration even though that section says they shall submit it in certain circumstances.

On page 8 of the brief we filed we suggest that if that's what the meaning is, all you have to do is put ``notwithstanding subclause 27(2)'' at the beginning of subclause 162(1), and that will clarify it.

Mr. Gouk: I happen to agree with your interpretation that it could end up being interpreted that way.

All parties involved in this, including the government representatives who will come themselves, have said that is not their intention. Because they have said that, I have met with the other side and we've discussed putting it in there. Basically I've said if that's your intention and you have no other intention, then why not clarify it in there? I'm very hopeful that you will see that go into the bill.

Mr. Howard: Let me say this: I've spent my life in court rooms and I've sometimes been surprised at what judges decide. If there's any doubt at all in my submission, it's clear if that's what the meaning is, put in the ``notwithstanding'', and then there can be no doubt.

Mr. Gouk: We're looking to ensure at minimum that that's in there and that they also clarify that subclause 27(2) was meant to be a remedy rather than a gateway block. Those are two of the things that would certainly -

Mr. Howard: That would certainly satisfy our main concern.

I don't know whether the committee has been told this, but we had no remedy until the 1987 act. I'm told that there had been only seven submissions to arbitration. Only two have ever gone to arbitration, one of which is ours this year.

This is what happened: because it was there, we could negotiate right after the act came in. When we couldn't make a deal this time, we went and got a very good result at final offer arbitration. It's a very effective means for captive shippers, as we are.

Mr. Gouk: I think you can take some comfort that it will probably be there. I'll wait to see if there are any comments from my colleagues opposite to substantiate that.

Mr. Howard: Thanks.

The Chairman: I'm not so sure I want to see this bill contain a notwithstanding clause.

Mr. Howard: I didn't mean that kind of notwithstanding.

Mr. Gouk: There are other ways to do it, as long as the result is the same.

The Chairman: Maybe there's a way around it.

Mr. Fontana: Obviously the government is always looking for some good ideas, no matter where they come from, so -

Mr. Gouk: I don't know if I feel good or hurt at that, Joe.

Mr. Fontana: I think you touched on the same question that I may have had with respect to the final offer arbitration system.

As you know, within the bill, the final arbitration set-up is essentially not a double-blind. If you're a card player, I suppose you would recognize that term. Obviously Mr. Gouk recognizes that term. Do you feel that's an advantage or disadvantage to the shippers or the railroads?

Mr. Howard: No, sir, it isn't double-blind. I'll tell you how it works.

First, prior negotiation is required. The railway says this is the rate we want to charge you. The shipper says this is the rate we want to pay. So the parties know their respective positions before they go in. If he's dissatisfied, the shipper files and says this is what he's prepared to pay.

Now the railway can change or not change, but if they change I gather that in most cases further negotiations occur after the submission, and a deal is made. There are only two cases in which they don't. It's not double-blind in that sense. The parties know where they are.

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Mr. Fontana: Okay, but my point is that we've set it up - obviously this is subject to debate - to give the railroad an opportunity to look at that final offer and either get back to the negotiating table or put forward their last position. Is that a better situation than not giving a railroad an opportunity to look at your last position?

Mr. Howard: It's always better to give the other side a chance to meet and make another offer, and I think the proof is in the pudding. Since 1987 that's meant that deals have been made. Although I make my living in court, I think it's much better to make sensible business solutions.

Mr. Fontana: Then you're a smart poker player. Thank you.

Mr. Howard: It doesn't always work.

Mr. Nault (Kenora - Rainy River): I want to jump off from what Mr. Fontana was asking Mr. Howard about.

The bill of 1987 had a mediation process built into it, but my understanding is that it was never used. There was a formal mediation process that could have been used under the final offer arbitration mechanism, but nobody used it. Nobody seemed to know it existed and every time I asked about it they all looked at me like Mr. Howard is looking now. They decided to take it out of this bill because nobody seems to want it.

Mediation is effective for a number of reasons. One is that it brings in a third party who is much more willing to stick to the facts and keep the emotions out of it, because sometimes both sides harden as they negotiate. Do you find it appropriate that they are taking the mediation process out completely? Will that cause you any concern?

Mr. Howard: You've surprised me, because I didn't know it was there either - if it was there.

In the circumstances I've looked at, in the labour situation, mediation is useful. By and large shippers and railways aren't confrontational. They're businessmen trying to arrive at a sensible result, and I think it's an unnecessary step. Final offer arbitration brings great realism to people's positions because you can't afford to go in with a stupid number. You'd lose for sure.

Mr. Nault: Thank you.

The Chairman: Gentlemen, thank you for coming to our committee. We appreciate the time you've spent with us and your valuable input to the committee.

Could we have the representatives from Cargill Limited to the table? We're sort of against the clock here, but we still have lots of time. Barbara Isman is the assistant VP of corporate affairs.

Welcome to our committee. Please introduce your colleagues and give us your presentation in 15 minutes or less so that we can ask some questions before we trot off to vote.

Ms Barbara Isman (Assistant Vice-President, Corporate Affairs, Cargill Limited): Thank you. I appreciate that it's the end of the day and the end of your process, so we plan to be brief. We appreciate the opportunity to appear before the committee as you study this important piece of legislation.

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You asked me to introduce Tom Cascica, who is seated next to me. Tom is the senior manager of transportation for our corporation. He is responsible for all transport operations on land. I brought him because he's the guy who actually does the work and has over 20 years of experience dealing with the Crow rate legislation, the WGTA, most recently Bill C-76, the NTA, and soon it will be the Canada Transportation Act. So I would encourage you, after Tom has finished remarking on the specifics of what we see as positive in the bill and those concerns where we would like to see changes, to ask Tom questions about what it's like to deal under legislation on a day-to-day basis.

If you'll permit me, I'm not sure how many of you folks are familiar with Cargill, so I'll just spend half a minute telling you that our company is the Canadian subsidiary of Cargill Incorporated. It's a global agricultural trading company and processing company. We operate in 70 countries around the world and we handle more than 40 major commodities. In Canada we're involved in grains processing, handling, marketing and transportation - specifically oilseed crushing, meat processing, fertilizer manufacture, farm supply distribution, feed manufacture and seed production.

Our expertise in this business is essentially connecting farmers with the world marketplace. Approximately 70% of what we sell annually goes into the export marketplace, so transportation is of critical importance to our business. Several of the product lines I mentioned do have intermodal competition available to them; however, our grain business does not, in our opinion. Therefore, this legislation stands to have the most impact on that business, and that's what Tom will concentrate upon.

I would like to make one comment about our philosophy in approaching this legislation. In general we believe that the role of government should be limited, inasmuch as we believe that the marketplace should exert discipline rather than government regulation. That's not to say, however, that when there is an absence of competition or competitive forces, whether they're domestic or international, the government does not have a role to play. We happen to believe that's the case specifically with grain transportation today.

Because we have traditionally been - and I use the word advisedly - captive to the railways and the configuration of our grain-handling system, we sought, through organizations such as the Western Grain Elevator Association, protections in the form of a maximum rate under NTA, 1987. However, in looking at this piece of legislation we did attempt to weigh the appropriate balance between our needs as an industry and the railways' economic needs. Basically we asked ourselves what minimum level of protection would be required in order to protect us given the existence of a duopoly in rail transport, and on the other hand, where that proposed legislation succeeds or falls short in balancing railway needs and shipper needs.

I'll turn to Tom to comment on the specifics in the legislation.

Mr. Tom Cascica (Senior Manager, Land Transportation, Cargill Limited): Having looked at some of the other shippers' positions put forward, I realize the committee will have heard our concerns many times before. I certainly sympathize with your position of having to listen to the same concerns time and time again. However, Cargill does feel strongly enough on some of these issues that we felt compelled to appear before this committee.

In addition, I would ask the committee's indulgence and understanding as to our lack of knowledge and experience working with the NTA of 1987 and the proposed new CTA. As grain shippers we have seen the rules and regulations governing our western grain shipment go from the Western Grain Transportation Act to NTA, 1987, and then to the proposed new CTA within the past few months.

Starting on the positive side, Cargill acknowledges the government's efforts to reduce the costly regulatory burden of having to regulate transportation. Certainly the budgetary pressures as well as the desire to have competitive transportation react more to commercial mechanisms point us in the right direction.

Cargill also recognizes the improved abandonment procedures that allow the railways to sell or abandon lines with little or no government intervention. The fact that with no purchaser willing to take over an unprofitable line allows the railways to rid themselves of a substantial cost.... This should allow the railways to substantially downsize their plant and increase their overall productivity. Certainly railroads have indicated to us that perhaps as much as 50% of their lines move a lot less than 7% of their business.

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Clauses of Bill C-101 that allow railways to increase their profitability by decreasing costs, not increasing rates, are the keystones to a cost-effective transportation system. Sections dealing with the transportation of grain and acknowledge the limited competition between carriers and mandate a maximum rate are at this time acceptable regulations.

Taking into account that less than 3% of grain shipped from western Canada has moved on a yearly basis under the NTA - in other words, we have not had a lot of experience on that and it is somewhat limited - we would like to express some concerns, which, knowing Cargill's presentation is towards the close, this committee has heard many times before.

With respect to subclause 27(2), which calls for the agency to decide whether the applicant would suffer significant prejudice if the release sought were not otherwise available before the agency reviews the application, is it the intent that a decision be made on significant prejudice before the issue can even go to a dispute mechanism? It would seem to be a ``prove a point to me twice'' situation for the shipper, first to prove significant prejudice and then have your dispute ruled in your favour.

The second item of concern is subclause 34(1), which would allow the agency to award -

Mr. Comuzzi: Excuse me, sir. Could you move back over that last point you made on subclause 27(2), in which you said it's a two step -

The Chairman: Joe, you can expand on this stuff if you want to ask him questions afterward.

Mr. Comuzzi: I didn't understand what he said, Mr. Chairman, in his submission.

The Chairman: Well, maybe you're -

Mr. Cascica: What is the desire?

The Chairman: Get a pointed question together, Joe, and we'll come to you in a second.

Go ahead, Mr. Cascica.

Mr. Cascica: Subclause 34(1), which would allow the agency to award damages against a shipper if it finds the application to be frivolous or vexatious, may deter some shippers with valid complaints to seek relief from the NTA. Cargill accepts the fact that the new action might allow for a preponderance of petty issues to take up the time of NTA officials and railway staff. This clause, however, does not, in Cargill's opinion, add anything to the act.

Clause 113, which states that rates or condition of service established by the NTA must be commercially fair and reasonable, adds an ambiguous layer of regulation. The definition of fair and reasonable might be different depending on whether you are the shipper or in fact the carrier. This clause, to my understanding, was not in NTA 1987, and Cargill questions its necessity.

We thank you for your time, and we'd be most pleased to answer any questions.

The Chairman: Thank you very much, Ms Isman and Mr. Cascica, for your input to the committee.

Could I have a response to a suggestion? Let's call it a safety valve provision. I've heard what you and others have said about subclause 27(2), for example, and to allay any of your concerns about what the impact might be on shippers of subclauses 27(2), 34(1), or clause 113, might a provision be included in the bill something to the effect that the transport committee of the House of Commons review, two years after the date of proclamation, the impact of Bill C-101 on the industry? Would that -

Mr. Cascica: As it stands today, you mean?

The Chairman: If that were to be considered as an added provision to this bill, to allay your concerns on subclause 27(2) and the impact it might have on the industry or even the question of a rail line in the situation of abandoned lines, etc., we would conduct a complete review in two years.

Mr. Cascica: I certainly appreciate that suggestion. We are inexperienced with this type of legislation, but it would seem to me that the proper way to do it would be to do it properly right off the bat and not have to worry too much about the review. I don't feel that suggesting we leave some things in the bill that we don't agree with at the present time because it's going to be reviewed in two years is an acceptable solution.

The Chairman: I heard your brief, and I understand that, but what everyone's trying to achieve in this bill is a balance, and we're hearing the shippers' point of view, we're hearing the railways' point of view, and we're hearing everyone's point of view.

Mr. Cascica: Exactly.

The Chairman: In order to achieve the balance, something must be done. But if this provision were brought forward as a safety valve that in two years' time this committee of the House of Commons would review, and if it found it was problematic with this particular issue or that particular clause, it would be addressed....

Mr. Cascica: I gave you my previous answer, sir. I could repeat the answer. I think earlier, just in the presentation before us, the gentleman expressed some concern. I thought it was the intent of this committee to perhaps go in and make sure there were no doubts as to what the intent, for example, of subclause 27(2) is - to clarify it so there would be no problem. I would suggest that the proper way to approach it would be to do that for the other sections in which the shippers are concerned.

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The Chairman: Unfortunately, we have to get legal advice, and you know what happens then.

[Translation]

Mr. Mercier: Mr. Cascica, are you suggesting that clause 27(2) be removed or that it be amended for the sake of greater clarity?

[English]

Mr. Cascica: Unless something better is proposed, I think removal of it would probably be sufficient.

[Translation]

Mr. Mercier: Thank you. That's clear.

[English]

Mr. Gouk: Mr. Chairman, our favourite three clauses, 27(2), 34, and.... By the way, I would like to point out that on the last and second last pages.... Aside from your numbered 1, 2, 3 provisions you refer to clause 112, which is interchanges, rather than clause 113. You might want to talk to somebody about that.

Mr. Cascica: It should be clause 113.

Mr. Gouk: Yes, I assumed that.

The main concern you mentioned with regard to subclause 27(2) was final offer arbitration, that it may block it. We've heard responses from transport and other people here suggesting that they don't read it that way, and, in any case, that wasn't their intent. I've suggested and hope the committee will put in a simple provision stating that subclause 27(2) does not apply to final offer arbitration, period. We're already saying that's what they mean. So if we put it in there, that should satisfy that specific concern. Would you accept that?

Mr. Cascica: Yes.

Mr. Gouk: Likewise, to stop the NTA - or CTA, as it will be known - from even looking at your application until they weigh that, if we make it clear by the wording in subclause 27(2) that it is not a blockade, that it is only a remedy after the case has been heard, would that satisfy that aspect?

Mr. Cascica: Yes.

Mr. Gouk: Moving on to subclause 34(1) I've looked at some examples and it seems to me that may be as much if not more. In the cases I've found, it was more to the advantage of the shippers than of the railway. For shippers ``frivolous and vexatious'' would more likely apply going in on the application, but once in there it would also apply to the railroads for all the blockades they would put up to run up legal bills to have you back out and make some kind of settlement as opposed to simply having the thing settled. I pointed this out to a number of shippers and stated that they might want to consider whether they really want that taken out, and a number of them have backed off somewhat. I would put it to you to consider the same thing.

Mr. Cascica: I think we would certainly be willing to do that. We firmly understand that there is no way.... As grain shippers, we have a regulated rate. In theory we could come in with what might be classified as a lot of frivolous FOAs, because it can only go one way. It can only go in our favour; it can't go any higher than the rates. I think these are the types of things that legislation should try to prevent. The wording of that and the way it's worded in the act - it concerns us because there might be some legitimate complaints that people will be leery of lodging because of damage awards and this type of thing.

Mr. Gouk: Thank you.

Mr. Comuzzi: I have two questions. Mr. Cascica, please expand this: ``We're gravely concerned that at best this clause forces shippers to jump a duplicate hurdle before ultimately achieving a settlement''. Go through the process as you visualize it.

Mr. Cascica: I ask for your indulgence, because this is not something we've been involved in and we're still trying to understand it.

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It seems to me if you have to put a case forward before an agency to prove significant prejudice, are you presenting your whole case at that time or are they just going to want certain amounts of information? If they're going to want the whole case before they decide whether there's significant prejudice, it seems to me they're examining the whole issue. If they're just going to need partial information before they make the decision, then you don't necessarily want them making the decision with only part of the information. Do they in fact try it once to find out whether there's significant prejudice and then when you get into your dispute mechanism try it again?

Mr. Comuzzi: I asked that question several times in the process, and I always thought this was a two-step process. I had some agreement and some disagreement. If you make the case for significant prejudice...if once they establish that there is, then you start to prove the substance of your case.

Mr. Cascica: Fair enough. That's my understanding, yes.

Mr. Comuzzi: Both Ritchie and the other guy from CN agree with that. But I'm not so sure the committee agrees with this. We'll leave it there. That answers my question.

I know Cargill's a big player in this movement of grain. Is there anything in this bill that would prevent you from using Canadian facilities rather than all of the options you have available in Minneapolis and Cleveland? Do you like this process of what we're trying to accomplish here?

Mr. Cascica: Yes, very much so. I think the government is definitely trying to get a balance between protecting the rights of the carriers and the rights of the shippers. Depending on whether you talk to a shipper or a carrier, they'll tell you that this balance is either shifting one way or the other.

Frankly, I think we as shippers have more protection afforded us on the Canadian side than perhaps our U.S. counterparts have when it comes to dealing with carriers. I think most shippers would acknowledge this fact.

Mrs. Cowling (Dauphin - Swan River): I sat on a subcommittee of transportation where we took a look at curbing the impact after the WGTA was removed and the dismantling of the Crow. One of the things we heard in that committee was there should be at some point a watchdog to watch this as it unfolds. I'm reading that in the press from many of the shippers and from many of the organizations.

As a follow-up to our chair's question, I'm wondering what you would think of a transparent supervisory body that would be made up of industry people and the people who are affected by some of the changes we're making in deregulation, to watch the system as it unfolds. Would you agree with that type of thing?

Mr. Cascica: I think that's a good idea. Ideally, if you want this to make sure the system is working correctly.... But you also tend to be leery, because we have to make investments as to how we think the system is going. The sooner it's a known fact for a longer period of time, the sooner we can make financial decisions as to where we're going to invest our money, and this type of thing.

When you put something in place, and you say you're not sure it's going to work, you're going to review it in two years or you're going to watch it, this doesn't create the best atmosphere possible for investment. As I said earlier, if you can get it done right the first time, everyone has confidence in it and you can make longer-term decisions. I think that's better. But knowing that's a wish more than a reality, I would think with all the changes we're making it would be very wise to have the ability to review what we've done to make sure we are in fact pointed in the right direction.

Mr. Nault: As a multinational corporation that plays in the North American marketplace, you would probably be best positioned to answer two questions. One is the question of whether you would agree or disagree that the railway industry in Canada is probably the most regulated transportation mode in North America. That takes into account rail, truck, and ships on both sides of the border. Would you agree that in your everyday business this particular sector is the most regulated and still maintains that number one status in Bill C-101?

Mr. Cascica: The answer to that question would be yes.

The only thing I would caution you about when you do comparisons between the regulations of perhaps the railroads as it relates to the Canadian and U.S. railroads or Canadian railroads and other industries is the competitive nature of the business.

Mr. Nault: My next question relates to this particular interest in the shippers on the Canadian side. You suggest that the reason we have this regulatory regime is that there is a lack of competition because there's a duopoly, but that does not exist in the United States. Having done a lot of business in South Dakota, North Dakota, and Montana, I am under the impression you are as captive there in most cases as we are here in Canada. Is that factually correct? Based on my opinion that you're doing quite well, thank you, in the United States under the Staggers Act, what seems to be the reluctance by most to think a duopoly is not good enough or is too severely restrictive? What would you think would be the number of railways we need to classify ourselves as competitive around here?

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Mr. Cascica: If you pull up an economics book, in reality it takes two people if they are in fact willing to compete. That's what basically makes a marketplace. If the two people involved in the marketplace are not competing, then you don't have competition.

I'll try to answer some of your questions. In North Dakota it's slightly different because there are actually some trucking modes that compete with rail. For example, the truck rates and some of the things that happen, we actually truck grain from North Dakota down to Duluth. We currently don't truck grain from say the Manitoba area to Thunder Bay.

Mr. Nault: How many kilometres is that?

Mr. Cascica: The distance from the growing area in North Dakota and from the growing area in Manitoba would be roughly about the same. For example, from Winnipeg to Thunder Bay - I could be corrected here by the member - I believe it's somewhere around 450 miles. The distance down to Minneapolis to get on the barge system, or the distance to Duluth, is just about the same. That would be both truck and rail.

Mr. Nault: Is it factually correct then that you could argue there are captive shippers in the United States just as there are in Canada in that? You're saying though that may not be the same because the circumstances are different because in Canada they think they can't go 450 miles by truck but in the U.S. they do.

Mr. Cascica: That would be in North Dakota, that's correct.

Mr. Nault: For the sake of argument we have a definition of captive that a lot of shippers in the U.S., like in North Dakota, Montana, or wherever, would fit.

Mr. Cascica: They would to some degree, but I know competition is a very contentious issue. If a trucker takes a load out of North Dakota and runs on a federal highway, and he can do those types of things, that's fine. I'm not sure whether our trucking industry in Canada - and I know I'm trying to discuss rail and not trucks - would have the same economics to run trucks on the road system. It's somewhat different.

With regard to the competitive nature of the business - and I hate to keep coming back to the duopoly - you asked about captive shippers in Montana and North Dakota. Basically, if you're captive and the railways can service you and you can make money - we, as Cargill - but the farmer in either Montana or in western Canada is paying an extremely high rate because he's captive, is it the intention to say yes, we want to make the railroads profitable so we'll let you extract more than a normal or acceptable type of rent on your assets in order to do that? That's what it comes down to.

Mr. Nault: I want to ask a final question, which is an important one. It seems to me at least to be somewhat of a contradiction by all the shippers who have come to the committee. On the one hand they're all in favour of the railways rationalizing their plant. In western Canada that obviously means many elevators and many short lines or branch lines will be shut down. That's what that means in layman's terms, to me at least. From a shipper nature, everyone has come to the committee saying they're all in favour of that. On the other hand, they're saying they want protection from the CTA for service provision. What kind of service provision are you going to get when the line cannot be sold and is abandoned? There's no service provision because there's no track. How can someone square that for me, that the shippers are all in favour of abandonment and/or rationalization but opposed to having more deregulation and open competitiveness?

Mr. Cascica: I'm sorry, I thought the position was consistent as to what you're saying. Maybe there was a misunderstanding. Our company's position is that we're in favour of rail line abandonment.

Mr. Nault: Yes, but how can that at the same time meet your needs if you happen to have a producer who wants to ship with you and go to a country elevator if in fact that line gets abandoned?

Mr. Cascica: Are you referring to the competitive aspect of our grain-handling business between the companies in western Canada?

Mr. Nault: Exactly. That's part of this bill if it goes through. There's going to be a rationalization of the track in western Canada.

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Mr. Cascia: If I might answer that, again it's your definition of competition. Cargill competes in western Canada with seven grain-handling companies, not with one other competitor like the railways do. In addition to our competition with the other seven grain-handling companies, a producer has every right to order a railcar, load that railcar himself, avoid our elevation - whatever we're charging - and he can do that himself.

Cargill as a captive shipper cannot get a railcar and run it on a U.S. or a Canadian rail line, but a farmer can go around. That's where competition comes in. A producer is perfectly entitled to completely go around our facilities. He actually gets special priority in getting the car given to him because there is protection under the Canadian Grain Commission Act.

That is an excellent safeguard. When we publish our tariffs, the option to the producer is he either accepts our price or he can actually completely avoid our costs and do it himself. That is something we can't do. We can't ship a railcar from the middle of Saskatchewan to an export port.

The Chairman: Barbara Isman, thank you.

My apologies if I have been mispronouncing your name, Senor Cascica. Gracia.

Thank you, colleagues. Tomorrow morning we will hear from our last three witnesses and will pass some house-cleaning motions. We are through for today and will see you tomorrow morning at 9:30 sharp.