SMAR Committee Meeting

37th PARLIAMENT, 2nd SESSION

Subcommittee on Marine Transportation of the Standing Committee on Transport

EVIDENCE

CONTENTS

Tuesday, June 3, 2003

º

1630

The Chair (Mr. Roger Gallaway (Sarnia—Lambton, Lib.))

Mr. Jim Campbell (Vice-President, Chamber of Maritime Commerce)

The Chair

Mr. Raymond Johnston (President, Chamber of Maritime Commerce)

The Chair

º

1635

Mr. Roger Gaudet (Berthier—Montcalm, BQ)

º

1640

The Chair

º

1645

Mr. Marc Gagnon (Executive Director, St. Lawrence Economic Development Council)

º

1650

º

1655

»

1700

The Chair

Mr. Andy Burton (Skeena, Canadian Alliance)

Mr. Raymond Johnston

»

1705

Mr. Andy Burton

Mr. Raymond Johnston

Mr. Andy Burton

»

1710

Mr. Raymond Johnston

Mr. Andy Burton

Mr. Marc Gagnon

»

1715

The Chair

Mr. Roger Gaudet

Mr. Raymond Johnston

Mr. Roger Gaudet

Mr. Raymond Johnston

Mr. Roger Gaudet

Mr. Raymond Johnston

Mr. Roger Gaudet

Mr. Marc Gagnon

»

1720

Mr. Roger Gaudet

Mr. Raymond Johnston

The Chair

Mr. John Cannis (Scarborough Centre, Lib.)

»

1725

Mr. Raymond Johnston

Mr. John Cannis

Mr. Raymond Johnston

Mr. John Cannis

»

1730

Mr. Marc Gagnon

Mr. John Cannis

Mr. Marc Gagnon

Mr. John Cannis

Mr. Marc Gagnon

Mr. Raymond Johnston

Mr. John Cannis

The Chair

Mr. John Cannis

Mr. Raymond Johnston

Mr. John Cannis

Mr. Raymond Johnston

Mr. John Cannis

»

1735

The Chair

Mr. Roger Gaudet

Mr. Raymond Johnston

Mr. Roger Gaudet

Mr. Raymond Johnston

Mr. Roger Gaudet

Mr. Raymond Johnston

The Chair

»

1740

Mr. Raymond Johnston

The Chair

Mr. Roger Gaudet

The Chair

Mr. Roger Gaudet

The Chair

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CANADA

Subcommittee on Marine Transportation of the Standing Committee on Transport

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NUMBER 006

l

2nd SESSION

l

37th PARLIAMENT

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EVIDENCE

Tuesday, June 3, 2003

[Recorded by Electronic Apparatus]

º  (1630)  

[English]

    The Chair (Mr. Roger Gallaway (Sarnia—Lambton, Lib.)): We'll start.

    We welcome today, from the Chamber of Maritime Commerce, Mr. Ray Johnston and Mr. Jim Campbell; and from the St. Lawrence Economic Development Council, Mr. Marc Gagnon. Welcome to our meeting.

    We hope that others will arrive. It's that time of year when people disappear—though no poetic licence is intended.

    We thank you for that very good film. It will be distributed to members.

    As I understand it, Mr. Johnston, you will start off and Mr. Gagnon will follow.

    Mr. Campbell, if you wish to say something at any time, please feel free to do so.

    Mr. Jim Campbell (Vice-President, Chamber of Maritime Commerce): Thank you, Mr. Chair.

    The Chair: Mr. Johnston.

    Mr. Raymond Johnston (President, Chamber of Maritime Commerce): Thank you, Mr. Chairman, and thank you to the committee for giving us the opportunity to appear before you today.

    I have prepared a report summarizing my comments. Has that been distributed?

[Translation]

    The Chair: His speech is in English only.

º  (1635)  

    Mr. Roger Gaudet (Berthier—Montcalm, BQ): Next time, Mr. Chairman...

º  (1640)  

    The Chair: There's always a next time. Thank you, Mr. Gaudet.

    Thank you, Mr. Johnston.

    Monsieur Gagnon.

º  (1645)  

    Mr. Marc Gagnon (Executive Director, St. Lawrence Economic Development Council): Thank you, Mr. Chairman, committee members, for inviting me here to present my comments to your subcommittee. I do not have a written submission with me, but you will receive one in the next several days.

    Today, I will be speaking to you specifically about the St. Lawrence, as this is what the Council represents. We represent a group of businesses, ports, shipowners, dock workers, professionals and towns along the St. Lawrence. Today, I'd like to talk to you about the formidable challenges facing our maritime community. My comments are similar in many respects to those that my colleague Ray has just shared with you, but my focus will be on the St. Lawrence in particular.

    Shipping is one area that tends to be overlooked. Since your subcommittee first began its hearings, you've likely heard from every witness that shipping is critically important to Canada. There's no denying that fact. Shipping is essential to the St. Lawrence—Great Lakes system. However, one tends to forget that shipping is but one component of the Canadian economy and of our industries. Without a cargo, there's nothing to ship, and without shipping, cargo cannot be moved. For instance, in Quebec, there would be no aluminum smelters, iron ore mines or paper mills if there was no St. Lawrence.

    Shipping drives industry and drives the economy. It's important to bear that in mind, because the marine industry has a significant impact on the economy. It accounts for 26,000 jobs in Quebec, and $3.1 billion in spinoffs. That's nothing to sneeze at. The industry also brings in $350 million in tax revenues every year for governments, an equally impressive figure. However, the industry exists to serve the economy in that we are a critical component linking the production of goods to their consumption.

    I will spare you the endless statistics that will be detailed in my written submission. Instead, I'd like to focus on the concerns of our maritime community as well as the challenges we face. I'd like to highlight four areas in particular which pose certain challenges. The first area is ports. I'm not talking about so-called national ports, or Canadian port authorities. As you know, the committee in charge of reviewing the Canada Shipping Act is slated to table its report very shortly and legislative amendments are no doubt in the offing. Rather, I will be focusing on regional ports.

    Goods are shipped through a total of about ten regional ports located along the St. Lawrence. These ports are without any identity, so to speak, because under Transport Canada's port divestiture program, their status has yet to be determined.

    The port divestiture program was introduced eight years ago and was recently extended for three years by the minister. That's indeed good news because a solution to this problem is needed. The vast majority of St. Lawrence ports have yet to be divested and it's important that their fate be decided. We have been making the appropriate representations to the minister and have presented him with options: either the department turns the ports over to the province, which would be an interesting solution as far as industry is concerned, or Transport Canada maintains ownership and starts reinvesting in the port infrastructure.

    The St. Lawrence shipping industry believes that regional ports should be publicly owned. It is concerned that divestiture to the highest bidder would only lead to an erosion of Canada's port network, especially along the St. Lawrence.

º  (1650)  

    Our objective is to maintain a strategic, public port system. We hope that the discussions currently under way between Transport Canada and the Government of Quebec will bear fruit. If not, the government could always hold on to the ports, provided it decides what their status should be and begins to reinvest in port infrastructure.

    The second challenge is the environment. Ray addressed this issue earlier on. Canada faces a number of significant environmental challenges. This country is a signatory to the Kyoto Protocol. We sincerely believe that steps could be taken and regulations introduced to promote the expanded use of marine transportation.

    Earlier, mention was made of short sea shipping. Other initiatives have been introduced, in particular by a number of European nations, to promote shipping. The Canadian government would be wise to take a more proactive approach to resolving some of these problems which we genuinely believe can be resolved.

    This issue has been debated and continues to be debated at length. The time has come for concrete action to promote the use of this transportation mode.

    The third challenge which was also addressed by my colleague is the matter of fees charged by the government. As you know, the federal government in Canada charges shipping fees in the neighbourhood of $500 million per year. Some of these fees are inevitable, while others are not.

    The St. Lawrence marine community is especially affected by Canadian Coast Guard fees. We assume nearly half of all fees charged, or nearly one fifth of the Coast Guard's budget. We're dealing with a difficult situation, compounded in part by geography and climate, but equally by the provisions of a cost recovery program which meets neither the expectations of the community nor the simplest rules of equity.

    This is a situation that we are endeavouring to resolve in cooperation with the Coast Guard. Ray mentioned the National Marine and Industrial Coalition. This movement is important to our community, as it represents all regions of the country. We are very hopeful that this issue will be settled shortly. We submitted our proposals to the Minister of Fisheries and Oceans almost a year ago and we are still awaiting his response.

    Let me recall the coalition's three objectives: predictability, stability and lower costs. The goal is simple enough. We are not asking for too much. All we want is for this issue to be settled as quickly as possible.

    The process entails considerable risks, namely higher fees imposed for navigational aids without a corresponding increase in the level of service provided. Ice-breaking fees could also double. Lastly, traffic volume could decline and our competitiveness, particularly with respect to US shippers, could suffer.

    I will refrain from commenting at length about dredging. We were advised of the latest decision Friday night. Despite the fact that the federal government is responsible for channel maintenance, pursuant to the Fisheries and Oceans Act, users of the St. Lawrence are being told to ante up, otherwise dredging operations will cease. This is indeed unfortunate.

º  (1655)  

    The whole situation is rather untenable, but what choice do we have. We have to pay, because the channel has to be dredged. It's as simple as that.

    The last challenge that I'd like to discuss is more general in nature, but no less worrisome, namely the stagnating state of the shipping industry in the St. Lawrence. Quickly, let me review some of the figures. Over the past two decades, the total volume of goods shipped on the St. Lawrence has declined from 120 million to 105 million tonnes. Over the same time span, shipping on the Mississippi has increased from 450 million to 700 million tonnes. Obviously, we are doing something wrong. Neither government nor industry is to blame for this state of affairs. The culprit here is a combination of factors. The fact remains that this disturbing trend must be reversed. Therefore, to halt the decline, and perhaps even to spur some growth, increased cooperation among all stakeholders is required.

    Since the release by Transport Canada of Straight Ahead - A Vision for Transportation in Canada, and the report on the review of the Canada Shipping Act, the marine community expects two things of the government.

    We found the paper Straight Ahead to be an interesting, almost comprehensive document that clearly sets out a vision for the next 10 years. We are rather optimistic about this vision. A cautious approach is taken toward shipping, but as we understand it, the drafters were awaiting the release of the report of the committee reviewing the Shipping Act to flesh out the shipping question.

    Several interesting issues are broached in Straight Ahead, in particular the question of the environment. For the first time ever, the issue of calculating overall shipping costs is addressed. This has been a long-standing request of ours. We're pleased that Transport Canada is acknowledging the existence of costs other than accounting costs, to wit, social and environmental costs.

    Straight Ahead contains some interesting facts. Among other things, it notes that the study on the benefits of shipping carried out jointly by the industry and by Transport Canada acknowledges the importance of marine transportation. Other extremely positive elements are commercialization options and recognizing a network of remote ports.

    I will admit, however, that some of the issues of concern to us were not addressed in the report. Of note is the lack of a clear vision of marine transportation. There's also the fact that considerable emphasis was placed on innovation in surface transportation, specifically road and rail transportation, whereas innovation in shipping and in the matter of fees charged, as mentioned earlier, was largely ignored.

    Regarding the review of the Shipping Act, of course we too are anxiously waiting for the committee to report back to the minister and for the report to be released. I can't comment on the report, as no one has yet laid eyes on it, but our expectations are high that the problems affecting the larger ports, including the five Canadian Port Authorities we operate in the St. Lawrence, will be resolved. We also expect that the report will suggest ways of addressing the challenges we face.

    In conclusion, it's clear that the St. Lawrence shipping industry as well as the Canadian shipping industry must work together and in partnership with the federal government.

»  (1700)  

    Talks are under way with several departments and will continue over the course of the summer, with a view to establishing either a committee, a council or a forum. This will give the marine industry, which is rather compartmentalized in Canada, the federal government and its various departments an opportunity to sit down at the same table to hold their talks.

    When a foreign vessel enters the St. Lawrence, it must report to over 20 different authorities. We do business with Transport Canada, with Industry Canada, with foreign trade officers, with Agriculture and Agri-food Canada, with the Canada Customs and Revenue Agency, to name only a few.

    Industry stakeholders have forged a coalition. The Subcommittee on Marine Transportation is another positive initiative. It's now time for departments to engage in a dialogue with us, while acting within the framework of the same forum.

    We will continue to work closely on this matter.

    Thank you for your attention.

[English]

    The Chair: Merci.

    Mr. Burton.

    Mr. Andy Burton (Skeena, Canadian Alliance): Both presentations were very informative. They're not totally new. I think we're hearing a lot of the same thing, which is good. This gives us some good solid direction.

    I must say the report from Mr. Gagnon is quite lengthy. I would have appreciated a chance to read it earlier. I think there's some really good information in there and I haven't had a chance to absorb it. It is an excellent document, from what I've seen.

    As I said, we're hearing a lot of similar issues, whether we're in Chicago or Sarnia, or Ottawa for that matter. We're hearing about the regulations, the regulatory burden, pilotage, dredging, the year-round operation of the seaway, fees, obviously, and on and on. I'm not really too sure where to start, other than to possibly ask Mr. Johnston a couple of quick questions.

    On the fee structure, I think it was on page 11 of your report that you say you've put this proposal to the National Marine and Industrial Coalition and you've had no response. What kind of timeframe are we looking at? When did you put it in? Maybe you could elaborate on what the proposal was and when you expect some response.

    Mr. Raymond Johnston: The history goes back seven years, and I won't drag you that far back in time. This is an issue that has not been addressed properly since the introduction of fees during the program review days.

    I will back up a little bit to say that this is actually the second proposal the coalition has put forward to DFO and to the coast guard, the first being in February 2001, which also did not receive a reply from the department. We got together and actually enlarged our coalition and brought in literally every industry and every company that uses marine transportation in Canada. Close to a thousand companies are represented in that coalition, large and small.

    In August 2002 we put together the document that is before you. We met with the minister and explained our position to the minister. The minister undertook to consider the industry's point of view and to respond to us. The coast guard, as you are no doubt aware, has been in a difficult position vis-à-vis budget cuts and service reductions, concerns about capital, replacement of assets. This is unfortunately one of those issues they said they don't have money for, so go back to the central agencies, which we have done. The minister encouraged us to meet with his cabinet colleagues. We have been doing that since September last year. We've met with some of you as well.

    We would certainly hope, in terms of receiving a response, that this is worthy. The marine community is putting forward a very serious position, and we think a very viable proposition, to sit down with the government and work out a long-term agreement. It's perplexing and very disappointing that we have not even received an indication of a willingness to do so. I'm at a loss for an answer as to when we might expect one. We continue to request that the minister address this issue.

»  (1705)  

    Mr. Andy Burton: Thank you for that answer.

    I think that really points out, Mr. Chairman, the need for what we're trying to do as a committee. I think these people deserve answers, whether they're the answers they want to hear or not. You don't always get what you want. Certainly it behoves the government to respond to these types of issues.

    I come from the west coast. Certainly it is not the St. Lawrence Seaway system or anything like that, but I am familiar with shipping and how we handle products, bulk products and so on, on the west coast. Without shipping there wouldn't be very many mines operating in British Columbia. I know that for a fact. We don't handle our copper or our lead and zinc and things like that so much in British Columbia as overseas. A lot of our products go overseas, and we have to have ships to handle those products and those concentrates.

    Certainly from my perspective this industry deserves more attention, Mr. Chairman. Hopefully we can do that through the studies of this committee.

    You talk about the elimination of all fees. That obviously would be very nice. I'm also on the fisheries committee, and when we travel and listen to witnesses from the coast guard operations, we constantly hear of their lack of funding for whatever they're trying to do. How do we respond to that? They're not getting the funding they require through the ministry, yet they have a mandate to provide certain services, so they're coming to the industry. How do we rationalize all that? Industry should pay something, but government also has a responsibility here. Our highway system is highly subsidized through government. How can we relate that somehow and make that point?

    Mr. Raymond Johnston: To be clear, the proposal and the call for the elimination of fees is with respect to certain services, fees levied by the Canadian Coast Guard. In other cases, such as pilotage, industry is essentially paying the full cost of pilotage. That's commonplace in just about any shipping jurisdiction in which you might operate, within the United States or countries in Europe.

    The St. Lawrence Seaway is actually a different situation. There's a fee for transiting Canadian locks and there isn't in the United States. It's much the same with coast guard services. This puts Canadian shipping companies at a disadvantage with their American counterparts who do not charge for these particular services.

    I guess the only answer we have is that it's a level playing field issue with one of Canada's biggest trading partners. It is providing this service; it is contributing to commerce by providing these services at no cost to users. Canada has adopted a different point of view. It comes down to making some fundamental decisions about supporting commerce if Canada is to retain its status as a major trading partner and a competitive nation.

    This is one small thing, which is not helping the shipping industry per se; it's helping a very broad base of industry within Canada. It helps west coast shippers. It helps the mining industry. It helps the grain shippers. It helps make all of our products more competitive. Those are the people who are claiming the competitive impact here. So this isn't about helping a shipping company.

    Mr. Andy Burton: What I'm trying to do is to get this sort of thing on the record. It may sound a bit repetitive at times, but we'd like to get these things on the record so when it's dissected for the final report there's some sort of cohesive approach.

    On the pilotage, you didn't get into that too much. We have heard quite a bit in the past. It's obviously a huge issue in terms of cost, and at times, I think, necessity. Did you want to expand on that a little bit? We heard from the pilots' association recently and they made their case. What's your approach to the overall necessity, given certain parameters of the pilotage?

»  (1710)  

    Mr. Raymond Johnston: Pilotage is an important service at the appropriate time. Our position is that it's a system that over time has built up with regulations and a cost structure that we see as being somewhat out of control. You only have to go back the last three or four years and see the types of tariff increases that have outstripped consumer price indexes. They have outstripped any rate increases that shipping companies may have received. They have certainly outstripped any increases in base commodity prices that are ultimately paying for this.

    It comes down to looking at how we provide this service in the most efficient and cost-competitive fashion. The case we're putting forward and what we are attempting to do is to review all aspects of pilotage, the regulations, what's really required for safe navigation.

    Let me assure you that there are a number of responsible shipping companies who are more interested in the safety of their ships than anybody else is. When you're driving a $60 million asset through a channel, you want to make sure you get out the other end safely.

    Shipowners have demonstrated their commitment to safe navigation in many, many ways, through investing in technology. There are no mandatory carriage requirements in Canada for electronic navigation systems. There is no international safety management code requirement in Canada. This is all done on a voluntary basis. Nobody has to take bridge resource management training. Shipping companies have proactively done this to ensure the safety of their vessels and their people.

    That goes hand in hand with modernizing pilotage services, looking at how we administer the pilotage regime better. Do we need different entities overseeing different sections of pilotage territories in the Great Lakes and St. Lawrence? Perhaps not. Are there opportunities for more efficient administration? Is there a place for a more commercialized management model such as that under which the St. Lawrence Seaway has met with great success? Those are the fundamental questions we're putting forward. We are calling for some serious detailed economic review of what is the cost structure and what's the best cost structure we could come up with.

    We've had countless reviews. You're aware of how many reviews of pilotage there have been, and we simply have not moved forward. There has been good evidence and a demonstration on the part of shipowners that they are concerned about safety. Somehow we have to work this through, not to eliminate every pilot in the system. There is still a requirement for pilotage; there's no question about that. But where it's not required and an advantage, a cost efficiency can be achieved, that's really what we're calling for.

    Mr. Andy Burton: Thank you.

    Mr. Gagnon, unfortunately, I haven't had a chance to read your report, but I look forward to reading it in depth.

    You talked about regional ports and whether they're going to be offloaded in some way but kept as a public asset. Do you have any idea of what sorts of dollars are needed for improvements, what we have to invest? And is this perhaps one of the reasons the federal government is looking to get out of it and let somebody else pay that bill? Is that where we're heading?

    Mr. Marc Gagnon: That's an interesting question. I wouldn't say why the government decided eight years ago to download their ports. Certainly some of them are not viable, that's for sure. We need to streamline. I'm talking about the St. Lawrence only. There are other areas in Canada. We have to see if we need a port every 200 kilometres. We think not, but there are commercial ports in the St. Lawrence that are viable and right now are in limbo. Of course, there is no question that Transport Canada is maintaining safety and security there, but there is no investment in those ports right now because the decision was made to transfer those ports to the region, the province, the local ownership. I don't know how many dollars are needed to upgrade those ports, but before long we will need some serious money. We need a decision now.

»  (1715)  

    The Chair: Thank you.

    Mr. Gaudet.

[Translation]

    Mr. Roger Gaudet: Thank you, Mr. Chairman.

    In you opinion, Mr. Johnston, which portion of the Seaway should retain piloting services?

[English]

    Mr. Raymond Johnston: Which part of the seaway should retain pilotage services?

[Translation]

    Mr. Roger Gaudet: You stated earlier that piloting services were not required everywhere. I'd like to know where exactly you feel such services are unnecessary.

[English]

    Mr. Raymond Johnston: I don't see it as being a decision or I don't have a recommendation as to whether it should be in one city or another. I think the notion or the concept initially is to look at the system as an integrated waterway. Ships can't get into the Great Lakes and the seaway without coming through the St. Lawrence, and vice versa.

    The seaway corporation has infrastructure, if it should.... And I don't have a foregone conclusion or recommendation that pilotage should be rolled into the St. Lawrence Seaway. If that were to be the case, the seaway has infrastructure in Montreal and Cornwall, which happens to be where the two pilotage entities currently reside.

    The view we're taking or the concept really is to look at how we integrate the administrative services. Do we need two boards of directors, do we need two vice-presidents of finance, and do we need two vice-presidents of this, that, and the other thing? Can there not be either an integration with an existing body to take advantage of capacity, maybe in another institution, or can we put those two together in a separate jurisdiction and/or location? I don't think location is terribly important today for a corporation.

[Translation]

    Mr. Roger Gaudet: I have a second question for you.

    Do you think it would help the shipping industry if dredging and Coast Guard fees were eliminated, while piloting services were maintained?

[English]

    Mr. Raymond Johnston: Yes. The percentages are of course going to vary, depending on what trade route you're talking about. The nature of those fees right now would range anywhere from 10¢ to 50¢ per tonne of cargo, depending on what time of year and what ports the ships are going in and out of.

    The question, I guess, is whether 50¢ a tonne is important. Well, I can assure you, having many years of experience in this business, that many contracts are won and lost for a few cents. So any contribution is certainly going to help the competitive position of a vast number of industries.

[Translation]

    Mr. Roger Gaudet: I have a question for Mr. Gagnon. You stated earlier that your industry was faced with four challenges. Regarding the environmental issue—and I'm thinking here about the Kyoto Protocol—and Coast Guard fees, in your opinion, what would happen if piloting services were eliminated? What would happen in the event of an ecological disaster?

    Mr. Marc Gagnon: There's no question that piloting services are indispensable in the case of a seaway such as the St. Lawrence. Unless I'm mistaken, I don't think any group appearing before the committee called for the complete elimination of piloting services.

    Unquestionably, pilots contribute indirectly from an environmental standpoint because they minimize the risk of an accident occurring. The same can be said of many other things, such as the new electronic navigation systems or government monitoring services.

    The Canadian government, a signatory to the Kyoto Protocol, is being asked to take action to cut greenhouse gas emissions. Shipping produces less greenhouse gases per tonne of goods shipped than either rail or truck transportation.

    Shipping is not an option everywhere, but wherever possible, such as in the St. Lawrence, in the Great Lakes or along the coast, it's an option not to be dismissed. Shipping is more environmentally friendly, it's better for the economy because it's a less costly alternative and it increases our overall competitiveness. Industry is thus better served by the various modes of transportation and everyone comes out ahead.

    In many instances, shipping would resolve some congestion problems, not only in Toronto where congestion is a long-standing problem, but in many other locations such as the North Shore. Trucks servicing the industries in the area clog the narrow highway.

»  (1720)  

    Mr. Roger Gaudet: I have another question for you. Do you believe that today's ships are sturdy enough to withstand navigation on the Great Lakes 12 months of the year, with the help of ice-breakers? I've been told that many ships would likely not be able to operate during the winter months. The Great Lakes and the St. Lawrence could also be threatened if a vessel were to run into some kind of trouble.

[English]

    Mr. Raymond Johnston: No, that's right. Many of the vessels are not ice class, and there would still be ice conditions throughout the winter.

    I don't think at the present time, without some modifications to the infrastructure, it would be feasible to simply employ icebreakers year-round or through the winter period to break ice through the seaway.

    One of the physical problems is there are some power plants that require some ice cover. Also, there is no place to physically put the ice. It's fine to break the ice, but it's got to go somewhere.

    I think it's a matter that has been under consideration. It's a complex engineering study. We hope this joint U.S.-Canada study will consider the requirements and what is technically feasible.

    I can't answer you today that it is feasible. My belief is that there are difficulties at the present time without some infrastructure changes.

    The Chair: Thank you.

    Mr. Cannis.

    Mr. John Cannis (Scarborough Centre, Lib.): Thank you, Mr. Chair.

    Thank you for your presentations.

    I'll start off by saying that I'm not as up to speed on marine transport as my other astute colleagues are, but I certainly have an interest and want to learn more. As we do this review from various other industries that have come before us, air, rail, and yourselves, I seem to be hitting similar common denominators, or conclusions, or recommendations.

    Before I get into that, you referred to the document called Straight Ahead that was brought forward by the minister. If you haven't got to that part, I encourage you to look at the area where he talks about long-term stable funding. We too, as a committee and its representatives, were encouraged. Maybe what you're really saying to us is that we should look at it more in detail and see exactly what the minister is referring to. So rest assured, I think we're going to look into that area.

    Mr. Gagnon and Mr. Johnston, you both talked in your presentations about the need to be competitive. In your conclusions you talked about, and my colleague Mr. Burton referred to it, the elimination of fees. There's not been one presenter or one witness who has come before the committee who has made the same request. We know these are difficult times, given various circumstances. There was only one organization, an airport in Canada that I will not name, that talked about increasing certain service charges, which is beyond us, because we're trying to find means to eliminate that somehow.

    The problem we have.... Mr. Johnston, you referred to program review. Thank you for referring to that, by saying that you're well aware that there were tough decisions that needed to be made. Otherwise, today we definitely would have not been in a position to even come close to reinvesting, as Mr. Gagnon has requested. And I agree with you.

    I have several questions. First, Mr. Johnston, you talked about contracts being lost or won by a few cents. Now, when cargo is moved from country A to country B, or internally, who's kidding who? Those cars, as an example, have to go from location A to location B. Are you telling me that this manufacturer will refuse to take these cars to Canada or to the U.S. because of a certain fee? Not that I'm saying we shouldn't address the fee. I'm just asking, is he going to say that, no, he's not going to sell cars or whatever goods he's selling to North America or to Canada because this fee is being charged?

    The other question I have concerns the elimination and reduction of airport taxes, airport improvement fees, and the fees you both referred to. Canadians have demanded and deserve investment in health care. Mr. Gagnon, you mentioned a road system and rail, air, etc. My question has been, and still is today, will government today, or any government in the future, be able to secure revenue to meet its obligations to Canadians?

    These hundreds of companies you referred to, Mr. Johnston, that use marine transportation, they're telling you and you're telling us directly that by reducing these fees they'll become more competitive and their goods will be cheaper. Are you telling me then that if these fees are going to be eliminated, reduced, or what have you, then their goods or these savings will be passed on to the consumer? In other words, I'll be able to buy a Ski-Doo, car, boat, or whatever cheaper because of these reductions? Are we going to see a passing on to the consumer?

»  (1725)  

    Mr. Raymond Johnston: You touched on a lot of areas.

    First of all, without trying to sound flippant, I will state that certainly adding costs to the transportation system does not make anybody more competitive. That's in fact what the coast guard did. It added $40 million of cost to the marine transportation network in Canada.

    Mr. John Cannis: How did it justify those costs?

    Mr. Raymond Johnston: It didn't. It was an arbitrary decision to collect revenue of $40 million for some services from some users, from one user group in fact. So that's the history of program review, and that in itself is worthy of a long discussion.

    However, having said that, no cost increase is going to help competitiveness. The converse to me is somewhat logical: that any reduction in cost is ultimately going to make products cheaper and our industry more competitive.

    The decisions you refer to about shipping a car here or a car there in some cases there are short-term decisions that the decision may be as simple as “I'm not going to make money. I'm going to lose $300 on this car if I ship it to Halifax by water instead of by rail.” So yes, in fact, I'm sure that type of scenario can happen.

    I think what you also tend to see is long-run impact. One has to only look at the tonnage decline in the Great Lakes and St. Lawrence waterway system and map that against the increase in cost over a similar period of time. I would suggest that there's a pretty high correlation of....

    Mr. John Cannis: Somebody referred to the Mississippi and said that there was an increase in tonnage. Have we done a comparison as to what it was they undertook that allowed them to generate more revenue or an increase in tonnage? Why did they become more competitive, Mr. Gagnon, compared to what Mr. Johnston was saying?

»  (1730)  

    Mr. Marc Gagnon: As I said, there are a variety of factors why we are losing some ground in the St. Lawrence and the Great Lakes, and fees are part of that. I can't say that it's the main part. Grain is going through the west coast more now than through the east coast. This is one factor. There were some problems with iron ore. There were different factors like that. But when you're losing cargo because of market changes or things like that--

    Mr. John Cannis: But they increased their tonnage because of something. Something happened to increase their tonnage.

    Mr. Marc Gagnon: In the Mississippi?

    Mr. John Cannis: In the Mississippi.

    Mr. Marc Gagnon: Well, for various reasons, one of which is the fact that there's no fee for some of the services that we charge here. There's a--how can I say that--glut of barges in the Mississippi, which makes it very cheap for them to move more cargo.

    Mr. Raymond Johnston: May I also just mention, in support of Marc's point, the dredging money that is invested by the U.S. Army Corps of Engineers in the Mississippi: it's hundreds of millions of dollars every year to keep the system, without charge to the users. The investments that have gone into modernizing and enlarging the lock system--again, countless hundreds of millions of dollars that the U.S. has chosen to invest in its marine infrastructure.

    Mr. John Cannis: Could I have one second, Mr. Chair, just to comment?

    The Chair: Please.

    Mr. John Cannis: I hear what you're saying, Mr. Johnston, and I don't disagree with you. I know my colleagues are working very closely with the U.S. on the Canada-U.S. parliamentary association to continue that wonderful relationship we've had in years past and hopefully can continue in the future. But I find it often unfair to compare us in Canada to the U.S., and I say that constructively.

    For example, growing up in the greater Toronto area, I remember a toll we had that was taken away when we were going to Niagara Falls by Hamilton, and that was eventually eliminated. Now we have the 407 as a new entity, whereas, as you all know, in the U.S. there is a continuous flow to go from one state to the other, and we're talking 260 million to 270 million population, as opposed to 31 million population. It is unfair sometimes to compare us, because maybe they could turn around and put an investment into their infrastructure of billions of dollars in comparison to us. Our general revenue is in terms of.... I need not get into those figures.

    So it's unfair at times. That's why I asked Mr. Gagnon if he could be--and maybe you could look into that, Mr. Gagnon--more specific on whether it was something more than just the actual fees. The dredging and the investment I understand, but is it more than just fees? I think fees are something, as Mr. Burton indicated quite clearly, we are looking at as a committee to make those recommendations, not just with your industry but with other industries as well.

    I think you're trying to make good comparison, but my closing statement is that I think it's unfair to compare with the U.S. Often it's in terms of numbers, dollars and cents.

    Mr. Raymond Johnston: May I comment on that?

    Mr. John Cannis: Yes, please.

    Mr. Raymond Johnston: In general, you may be right. I think in this particular case, when we're looking at the Great Lakes and the St Lawrence Seaway, this is about Canada and the U.S., and there are commodities that can either come from Quebec, such as iron ore, or they can come from Minnesota. American grain can either come through the Great Lakes and seaway system and be transshipped in Quebec, Port Cartier or Baie Comeau, or it can go down the Mississippi. Coal can come from Canadian sources or from Montana. So this is very much about the relative cost structures of both countries, and shippers, believe me, in the grain business in particular, are acutely aware of the cost differences of shipping through the Great Lakes system versus going down the Mississippi.

    Mr. John Cannis: There's also some legislation I think we have to compete with when we compare with the U.S. I know my colleagues will remember. We did the review on shipbuilding. Of course, with the Jones Act, we have difficulty in terms of how we're trying to deal with it domestically here with our cousins to the south, and internationally how things have changed. So we are dealing with that side with the U.S. as well.

    I do thank you, because certainly this has been a very good education for me. Thank you for the answers.

    Thank you, Mr. Chair.

»  (1735)  

    The Chair: Mr. Gaudet.

[Translation]

    Mr. Roger Gaudet: In your opinion, what kind of charges are imposed each year on ships leaving Halifax and transiting through the St. Lawrence Seaway and the Great Lakes?

[English]

    Mr. Raymond Johnston: The global amount of fees. As Mr. Gagnon said, the total fees--

[Translation]

    Mr. Roger Gaudet: Are we talking about $500 million, $1 billion or $300 million?

[English]

    Mr. Raymond Johnston: It's almost $500 million per year that the federal government assesses on marine cargo and ships in Canada. That includes ports, pilotage, seaway, coast guard, and a range of some smaller Transport Canada fees that ships would pay.

[Translation]

    Mr. Roger Gaudet: Therefore, Canada could always pay the $500 million and recover the cost some other way, through all of the services. That remains a possibility.

    If you cannot answer the question, I will put it to the Chair. We're talking about $500 million out of a total budget of several billion dollars.

[English]

    Mr. Raymond Johnston: Well, it is a lot of money. And the point we're making is that we're not asking for the elimination of all those fees. The fees we pay for our port services are paid in other countries, in the U.S. and around the world. Similarly with pilotage, as I mentioned before. The coast guard happens to be one exception.

    As a further comment on the coast guard, I think it's important to note also that since the initiation of the fees, industry has scrutinized the services and the money the coast guard spends on navigation services. In fact, during the last five-year period those costs have actually declined by almost $50 million on an annual basis. So the cost to the coast guard is $50 million less, and in fact it's $90 million better off than it was before. So we've more than saved the amount of revenue that it is collecting from the fees.

    Industry continues to maintain that there are still opportunities to squeeze more out of the coast guard: to run its fleet more efficiently and to provide a number of those services more efficiently. We're not walking away from the table. We need the coast guard. It provides valuable services, don't get me wrong. But perhaps as another way of tackling this thing, instead of charging fees, let's focus on how we can save the government $40 million in costs. That really is the essence of our proposal.

    It's a win-win opportunity. Industry reduces its costs and becomes more competitive. We can save the government. We've demonstrated our commitment to work with the government. We have demonstrated that success by lowering its costs by $50 million already, and that's just one year, that's the last year. So add that up. The government's costs have gone down by about $200 million because we've taken buoys out of the system.

    With the new technology that I mentioned, we don't need all the buoys we had before. In the Great Lakes there are 50% fewer buoys than there were before. In the St. Lawrence, there are probably 20% to 25% fewer buoys. This is the impact of technology; it is lowering costs. We're not getting a payback on that technology. We're making the investment. We're saving the government money. That's not a good business proposition.

    I think that the case we've put forward is a constructive position, recognizing the challenges that government has from a budgetary and fiscal point of view. We're prepared to continue to address that by giving the government the benefit of our expertise, our knowledge, and our experience to help it reduce its costs even further, and it can be done.

    Going back to Mr. Burton's question, we're at a loss as to why that sort of discussion wouldn't be jumped upon, the opportunity.

    The Chair: I thank you very much.

    I have just one final question. A couple of months ago some officials from Transport Canada were present. When asked about the decline in volume on the lakes and the seaway, they attributed that to one factor. And I may be simplifying it somewhat, but they attributed the decline of some 25%, in nice round numbers, over a three- or four-year period, to the economy. Would you like to comment on that?

»  (1740)  

    Mr. Raymond Johnston: Sure.

    I would have thought one of the biggest contributors would have been the shift in grain from an eastern route to a western route and western markets. That certainly took somewhere in the order of eight million to nine million tonnes out of the annual grain shipment right off the bat, and it really never recovered. That's been compounded by successive poor crop years.

    There certainly has been little growth in the steel industry. The system went through a period of growth through the 1960s and 1970s, when we were building steel mills and power stations. There was a lot of new construction and aggregates were moving, etc. I would say that we've probably held our own in terms of those kinds of volumes. The steel mills, the Dofascos, the Stelcos, the Algomas, continue to ship volumes very similar to what they were shipping 10 to 15 years ago.

    Grains certainly would be one of the big ones, and I think steel shipments, depending on where you're measuring and what sector you're measuring in, tend to be up and down, depending on world trade conditions for the steel industry.

    I think markets and the economy certainly have an impact and have had a bearing on a declining tonnage situation. It's very difficult to sort of empirically demonstrate the impact of cost structures, but the system is not getting more expensive.

    Commodity prices have not gone up in ten years. The price of grain is the same as it was ten years ago. The price of iron ore today is less than it was ten years ago. You can go through every single commodity and see that prices have gone down. That's the price we pay for a global economy. We're competing with Australia and Brazil, and their prices are driving the price for Canadian products. So here we have this cost curve going up on the shipping side and everything else is going down.

    In our focus, all we can do at this point is try to make a business case for running whatever is a controllable cost to try to get that under control, and certainly, if we can, to reduce the cost and slow down the rate of increase. That's a business-like approach we're proposing to the governance and the management of the St. Lawrence Seaway and the Great Lakes system.

    The Chair: Thank you very much.

    Once again, every time this committee meets it's very helpful. We appreciate your presence here. We apologize for our tardiness, but it was out of our control in terms of a vote.

    Monsieur Gaudet.

[Translation]

    Mr. Roger Gaudet: I have a short question, Mr. Chairman.

    This afternoon, the Minister spoke of new piloting techniques employed in the field of marine transportation. Could we possibly meet with some pilots? I could supply a list of persons with whom we could possibly meet.

    The Chair: I believe representatives of the Laurentian Pilotage Authority are slated to appear on June 17.

    Mr. Roger Gaudet: I'll give you my list. I'd like to meet with several of the groups or people listed, if at all possible.

[English]

    The Chair: Thank you, everyone.

    We stand adjourned.