[Recorded by Electronic Apparatus]
Tuesday, December 10, 1996
.0901 
[English]
The Chairman: Let's get under way. Welcome, Mr. Minister. We very much appreciate your taking the time to come down and meet with us.
As we've discussed, we're looking at the full question of trade, transportation and tourism. As there's been so much change taking place in all modes of transportation, the committee felt it was important that we look at what this might mean for the system as a whole.
As we began that study, one of the issues that came to the fore is just a lot of concern about the national highway system. As you have responsibility for tourism, we very much appreciate your taking the time to be with us to talk a little about tourism and its relationship to an effective and efficient transportation system.
So please go ahead.
Hon. John Manley (Minister of Industry): Thank you, Mr. Chairman. I'm happy to be back in the transport committee after an absence of three years and some time.
[Translation]
I am pleased to meet with the committee to help in your study on the economic efficiency of and the relationship between transportation, trade and tourism.
I want to speak both as Industry Minister and as Minister responsible for the Canadian Tourism Commission.
The CTC, I would like to remind the committee, is a partnership between the private sector, provincial and territorial governments, and the Government of Canada.
It coordinates the efforts of various players in the tourism industry and has a mandate to develop a national program to market Canada and to provide information to the industry.
[English]
In 1995 the federal government established the CTC with a financial commitment of $50 million annually, an increase of $35 million per year over previous levels. In establishing the CTC, the Prime Minister challenged the tourism industry to match the federal funding within three years. The industry has met that challenge a year ahead of schedule and will contribute more than $50 million in 1996-97.
I will take this opportunity to leave with you copies of the CTC's annual report for 1995-96. The report outlines how the CTC partnership is working to help build this increasingly important sector of the Canadian economy.
Tourism is Canada's fourth largest export industry. Last year we ranked 11th in the world among the number of tourist arrivals, 12th in terms of tourism receipts.
Last year tourism spending in our country amounted to $41.8 billion, an increase of 7.1% over the previous year. Compare that to the GDP growth of about 4% last year, over 1994, and you can see the strength of this particular industry sector.
In fact, international tourists spent $11 billion in Canada last year, an increase of 14.7%. The number of people visiting Canada increased by 6% last year to 17 million person-trips. Americans account for three out of four of our international visitors. Canadians travelling at home spent another $30.8 billion, which was an increase of 4.6%. The increase in the amount of money both international and Canadian tourists have spent in this country has dramatically reduced our travel deficit.
.0905
When we were elected in 1993, we had a tourism account deficit of $7.9 billion; in 1995 this was reduced to just over $3 billion. And obviously the objective is to reduce that further, Mr. Chairman. We want to encourage more international visitors to come to Canada, and we want to encourage more Canadians to spend their vacations getting to know their own country better.
Before I leave the topic of tourism's importance to the economy, Mr. Chairman, I want to add that its value is not measured simply in terms of tourist dollars. Tourism-related industries often provide the first job experience for young Canadians. In fact, nearly a third of the tourism workforce is under the age of 21, compared to 17% for the Canadian workforce as a whole.
I'd also add that some 80,300 person-years of employment in the transportation sector are directly attributable to tourism. This represented about 21% of the total employment generated by the tourism industries as a whole.
[Translation]
What, then, are the factors that make a dynamic tourism industry? Attractions, accommodation, marketing, easy customs and immigration procedures and, of course, transportation - the issue under consideration here.
Unlike other industries, tourism must bring the customer to the product. Transportation is a critical component of the tourism infrastructure. If tourists have difficulty getting to and around Canada, they are less likely to come.
What we require is rapid, convenient, comfortable, and affordable transportation. The industry is well aware of this. Transportation was identified as one of the barriers to meeting tourism growth targets for Canada in the Tourism Issues Survey of 350 tourism businesses and organizations across Canada earlier this year.
As we build the kind of transportation infrastructure that will help attract more travellers to Canada, the transportation industry itself benefits from the revenues that tourism brings.
This is especially true for some of the modes where tourists constitute the majority of passengers. Tourism accounts for 92% of air transport passengers 84% of rail passengers; and 93% of ship passengers.
[English]
People who fly airlines on business between Toronto and Winnipeg, or who take the train for a business trip from Ottawa to Montreal, enjoy the benefits of a transportation system that relies upon tourism for its bread and butter. In fact, the tourism industry has an enormous impact on all passenger transportation modes.
When we add road travel into the equation, we find that leisure travel accounts for almost 84% of Canadian intercity trips. When you look at the figures for tourism transportation overall, you see that in 1995 tourism demand for passenger transportation in Canada accounted for $17.4 billion, an increase of 7.5% over the previous year. That figure also represents half of the total amount tourists spend in Canada.
What modes carry the most travellers? The highway system bears the greatest weight in terms of numbers of tourists. Canadians made 76.4 million overnight trips in 1994, 93% of them by road, 6% by air. Americans made 13 million overnight trips to Canada, 72% by road, 21% by air. So American and Canadian tourism is largely what we call a rubber-tire market whose success depends on adequate access by road.
.0910
Although the highway system clearly plays a dominant role in the numbers of tourists in Canada, we cannot ignore the importance of the other modes in attracting the kind of tourists who, once they arrive in Canada, tend to spend more money.
Excluding air fares, Americans coming to Canada by air spend twice as much as Americans visiting us by car. Japanese air travellers who, of course, find it quite difficult to come by car, spend even more money per day than American air travellers.
For some of these tourists, unique transportation services, such as train trips through the Rockies or ferry trips up the inside passage of British Columbia, become not just a means of getting around but, in fact, are attractions themselves that draw tourists to Canada. In fact, the CTC has worked with many of Canada's transportation providers to promote tourism.
A recent advertising campaign with Ford of Canada promotes our Rediscover Canada brochure, Le Canada: un pays à redécouvrir. This encourages Canadians to take driving vacations of our country. I don't have quite enough of these to give to the entire committee, but we can send some over to you later.
Now, what else can the Government of Canada do to help the tourism industry benefit from the transportation sector? First and foremost, I believe, is to create the environment in which a competitive transportation sector can get on with the job of providing the services tourists need.
This, I would say, is the case of the Canada-U.S. Air Transport Agreement. Since the open skies agreement was signed in February 1995, 10 Canadian cities can now be reached non-stop from 60 new U.S. destinations. Of these new U.S. destinations, 39 are served by Canadian carriers.
Toronto, Montreal, Vancouver and Calgary receive 68% of the new transborder services. There have also been significant increases at other Canadian cities, such as Halifax and here in Ottawa, where we await the opening of a customs preclearance service, which will improve service in this city.
Open skies had an immediate positive effect on the transportation sector. Transborder passenger traffic increased by 15% in the second half of 1995. As a result of open skies, travellers have better schedules, more flexibility, more direct non-stop flights, and with increased competition, they will benefit from pressures to reduce fares.
Mr. Chairman, I'd now like to outline some of the work the CTC has undertaken to help improve the partnership between the tourism and transportation sectors. Transportation access was identified by the Canadian Tourism Commission's industry enhancement committee as a barrier to tourism growth in Canada.
The committee will continue looking at the transportation infrastructure from a tourism perspective. This includes an analysis of international access and capacity by various modes and the degree to which these modes are linked.
Last May commission officials and key representatives of the tourism industry and the transportation sector participated in a transport and tourism workshop sponsored by Transport Canada. During the workshop, the tourism industry emphasized that it wanted to be consulted on transportation policies and the initiatives that affect it. As a result of this workshop, Transport Canada has distributed for comments a draft paper on how to best involve the tourism industry in the development of transport policies.
Transport Canada and the CTC will also co-host a leaders' round table on transport and tourism later this winter, with the goal of setting a new direction in transport policy to better serve the tourism industry.
Last May's workshop also recommended a study to examine the effects on market expansion if the passenger transportation sector could improve the transfer between modes. The objective is seamless transportation, so that when travellers arrive by air, for example, they can access other modes efficiently.
The intermodal study is under way and is identifying best practices in intermodal passenger transport in Canada, the U.S. and Europe, and the effect these practices have on traffic and revenue.
.0915
Another area of Canada's infrastructure that holds great promise for the tourism sector is the information highway. Through the Internet thousands of Canadian attractions and sources of accommodation are being marketed around the world. As well, the Canadian Tourism Information Network, CTIN, provides information about CTC programs and services and access to a multitude of Canadian travel and tourism-related sites on the Internet. It was created to meet the needs of two main audiences: travellers seeking information on Canadian destinations, and Canadian tourism businesses seeking information to assist in decision-making.
So far I've discussed the CTC and the relationships between the tourism and the transportation systems. However, I would also like to take a brief moment to highlight how other parts of the industry portfolio contribute to the transportation network. Last December we announced funding, $9.9 million, under our Networks of Centres of Excellence program to launch the Intelligent Sensing for Innovative Structures Network, based at the University of Manitoba. The network brings together industry, university, and government partners to develop innovative design and construction technologies. This network will be a source of expertise, technology and skilled personnel as we respond to the challenge of renewing Canada's civil engineering infrastructure.
For example - and, Mr. Chairman, you may know about this - the Headingley Bridge near Winnipeg, touted as the smartest bridge in the world, is being built with the network's help. Half of the bridge will be made with conventional materials, the other half with fibre-reinforced plastic concrete, and embedded with fibre optic sensors to monitor the durability of the new construction technology. Another centre of excellence, Concrete Canada, is developing and supplying new expertise, technologies and materials to major construction projects around the world, including the P.E.I. fixed link.
[Translation]
To conclude, I want to reassure the committee that we understand the relationship between tourism and the transportation network. As you can see, the Industry Portfolio, including the CTC, is working to both increase tourism and ensure that Canada has a transportation infrastructure that is able to accommodate the growth of this important sector of the economy. I welcome your questions.
[English]
The Chairman: Thank you very much, Mr. Minister. We had ISIS Canada in before the committee earlier, and we of course are very proud of having the smartest bridge in the whole world, although the competition isn't very stiff at the present time.
[Translation]
Mr. Mercier.
Mr. Mercier (Blainville-Deux-Montagnes): Mr. Minister, I listened to your presentation with interest. I noted, when you talked about the means of transportation that American and Canadian tourists use, that they are divided between air and road travel, and that they practically never come by train, although the train itself could be an attraction.
I understand that people do not come from the United States by train because of the low quality of Amtrak services, but I remember that the former mayor of Montreal, Mr. Drapeau, was at one point promoting a high-speed train that would link New York and Montreal. Moreover, as you know there is a high-speed train project that would finally link Quebec and Windsor.
How do you a see possible development in the tourism industry using the two high-speed lines that I have just described, and secondly, do you foresee the possibility of developing the tourist capacity of the St. Lawrence, through cruises, for example?
Mr. Manley: The high-speed train issue has been studied several times by this committee, and during the former Parliament, a study was conducted and current researchers of your committee participated in it.
.0920
It has been under discussion for a long time. It is simply an economic issue. If there were a high-speed train between New York and Montreal, there would be an increase in tourist traffic. That is clear. The question is whether the increase would be sufficient to cover the substantial costs linked to the development of a high-speed train. There is not only equipment, but also the need for land which is set aside exclusively for the trains.
According to the studies that have been conducted, the project would be very costly. It is always an economic issue. I think that a high-speed train would compete with airlines and not with automobiles. The price of the tickets would be comparable with the price of airline tickets. There are some reasons for supporting a high-speed train. The studies we have conducted indicate that the corridor to be used must be densely populated in order to justify the costs.
Economists must determine whether a Montreal-New York line or a Montreal-Toronto line would be profitable. At present, I think large government subsidies would be necessary.
As for rivers, historically speaking, they are significant tourist attractions. The large rivers in Canada, the canals, the Montreal-Ottawa-Kingston navigable waterway via the Rideau Canal and the Trent-Severn Waterway, in Ontario, are important attractions for American tourists. We could try to do more to increase the number of tourists using the systems. There is an increase in the number of pleasure crafts. We attract a significant number of these tourists.
The Chairman: Mr. Crête.
Mr. Crête (Kamouraska - Rivière-du-Loup): I would like to know if you are convinced that the issue of reopening casinos on international cruise ships should not be settled as soon as possible. Would you be willing to make representations to the Minister of Justice to ensure that there is a response to this demand from all tourist operators on the St. Lawrence, boat owners, and people who are involved in tourism in Quebec, Montreal and along the St. Lawrence?
.0925
Would this not be a concrete way of attracting international tourists? Demands to that effect have been made for several years. Are you prepared to make representations to the Minister of Justice?
Mr. Manley: The Canadian Tourism Commission does not have any conclusive studies dealing with casinos on the St. Lawrence, on boats and in cities. We have impressive numbers for the Windsor casino, which is just opposite the United States and near a large city where there is no casino. But the studies are not conclusive.
Mr. Crête: The focus of my question was on international cruise ships that already have casinos aboard, but that are forced, when they enter the Gulf of St. Lawrence, and this was raised by people from the port of Quebec and international stakeholders... It is clear that we are losing cruises because of that. People decide not to go because of that. This issue has been on the agenda for several years, and if you need evidence, we can drum up lots of people who are knowledgeable and who say that the St. Lawrence, between Quebec and Montreal and towards the Great Lakes, is less attractive because of that.
Mr. Manley: I have not received representations from those groups.
Mr. Crête: I can provide you with some. If you are convinced, will you make representations to the Minister of Justice?
Mr. Manley: If I am convinced, yes.
[English]
The Chairman: Mr. Crête is quite correct, though, that we did have several representations on this question, which we no doubt will want to comment on.
I know Mr. Harris has come to represent Mr. Gouk, who is stuck in Castlegar. Mr. Harris, do you have any questions for the minister?
Mr. Harris (Prince George - Bulkley Valley): Yes, I do, Mr. Chairman.
Good morning, Mr. Minister. I would like to question you about a subject that's near and dear to all of the Canadian motoring public and the trucking industry, and it fits right into the tourist industry. That is the relationship between the amount of fuel taxes collected by the government on an annual basis and the amount of those taxes actually dedicated to the maintenance of the road infrastructure in Canada.
As you know, about $5 billion a year is collected in in fuel taxes, yet only about $300 million actually gets to the maintenance and upkeep of the national highway system. As a result, lots of complaints come in from various individuals and groups across the country. Indeed, in the triple-T committee I understand over 25 witnesses representing groups and businesses said if we want to improve tourism in this country, if we want to improve the cost of owning a vehicle or driving a truck in this country, we have to fix our highway systems. The way to do that is to dedicate more fuel tax money to the highway system.
So this is the question I would like to ask. Why has the government's position been to refuse to increase the dollars spent on the highways from the fuel taxes?
Mr. Manley: You're really asking an overall budgetary question. In any budgeting process there's a need to choose priorities. Yes, you could increase the amount of spending on highways, but you would have to reduce spending on other things, increase taxes, or borrow the money from Japan. There is no other way to square the circle. It's a very broad-based question on priorities.
By and large the maintenance of the roadways, with the exception of the contribution to the Trans-Canada Highway, is a provincial responsibility.
.0930
Mr. Harris: Well, then let's talk about the effectiveness of the famous infrastructure program. The infrastructure program says one would define...the terms would be water, sewer, highways - infrastructure things. I think the Canadian people were led to believe we would be dealing with the very basics of infrastructure in how the money would be spent. Yet quite a few million dollars actually were not spent on what we could call basic infrastructure, such as arenas...the list goes on. We talked about boxing courts and the canoe hall of fame and all the other less than basic infrastructure things we needed in the country. I would think under that infrastructure program the government would have seized the opportunity really to have a good look at our national highway system. Would that not have been an opportunity to tackle some of the serious problems we have on our highways?
Mr. Manley: The infrastructure program could have been directed to highways, it's true, but it was designed not as a federal-provincial program but as a federal-provincial-municipal program, and that did have the effect of allowing local governments to choose their priorities. I think to be fair you would have to look at the roughly $6 billion spent overall on the program from the three levels of government and say some of the examples you've cited are a fairly small percentage of the total amount. You and I may agree between us that they wouldn't look like the best priorities if we were picking them, but on the other hand they are the priorities chosen by the local levels of government.
It would be nice paternalistic politics for us to say, well, these local politicians don't know what they are doing, imagine choosing those priorities; but that's not how the program was designed. The program was designed to be two things, incremental and leveraged. In meeting those targets the municipalities picked the things that were, in their view, most important to them. In some cases it's very hard to argue that the construction, for example, of an arena, which is part of a community's social infrastructure - It's built with concrete and steel and bricks and mortar. It serves a lasting purpose. It's not spent and dissipated overnight. It's a long-term investment. Who are you and I to say Flin Flon or whoever else shouldn't choose to put their money to that purpose?
Mr. Harris: I understand what you're saying, Mr. Minister, but let's not forget one thing. First of all, this was a program that was initiated by the federal government. It said, let's do this and we need to bring the municipalities and provinces on board as partners in this. Well, that's fine, but because the federal government initiated this program, I would think it would reserve the right to set some guidelines on how the partnership would work and the type of projects that could be used.
With a program like that, I would think common sense would say, if we're going to do this program, let's spend this money on our needs; let's just forget about the wants for now, but there are some things we absolutely need in the country. Those things are the very basic infrastructure, such as highways, sewer systems, gas lines, water systems, which are deteriorating all across the country. These are the fundamental infrastructure needs we have in the country, and they are badly in need of repair. I think that would have been an excellent opportunity to address the concerns about those basic infrastructure needs.
.0935
Mr. Manley: You and I could probably agree on some others as well.
I happen to think that we need to upgrade our R and D infrastructure in this country. I think we have a lot of needs. I don't disagree with your thesis except to the extent of the old saying that he who pays the piper calls the tune, and in this case it was one-third, one-third and one-third. We did have limitations, but that still left the other levels of government with a fair bit of say in how the funds were going to be spent.
We achieved our key objective, which, after all, when you go back to the genesis of the infrastructure program, was to try to take the country out of a real economic funk, if you like, and create a little bit of a demand in the domestic economy. If you look at the numbers for 1994 and 1995, you will see that actually that broad economic purpose was achieved. By and large, the bulk of the $6 billion went into projects that have lasting value to the country, that will enhance productivity, and that will enhance the quality of life for the communities that chose them.
Sure, it could have been done differently, and maybe if we do another one it will be done differently, but I wouldn't put it quite so simply in the category of lost opportunities or misplaced priorities.
Mr. Harris: Okay. So I -
The Chairman: You have one more quick question.
Mr. Harris: I take it from your response, then, that despite the comments of the witnesses who testified before the triple-T committee, the government is simply not interested in dedicating a larger portion of fuel taxes to national highway maintenance. Is that your response?
Mr. Manley: My response is that we don't dedicate taxes for specific purposes. The excise tax on alcohol doesn't go into building distilleries or alcohol rehabilitation facilities. The excise tax on jewellery doesn't go into monitoring the quality of gold. We don't collect income taxes for targeted purposes. I think you get into a lot of trouble when you start to build - I used to do tax law. The system is complicated enough as it is. If we started to say that every tax had to be returned to the source of it, we'd create an impossible situation.
Should more money go into highways? I think you could probably make that case. If you ask me that with respect to my responsibility as Minister for Tourism, the answer is yes, I'd certainly like to see the highway system improved. Yes, it would improve the access to tourist destinations in the country. Yes, it probably would increase the amount of traffic from Canadian and foreign visitors. That's a statement of an absolute value, but in the whole mix of budgetary priorities, I would be hard-pressed to argue that I should take more money out of research and development in order to put it into highway construction.
What you're really asking is where the priorities are, and to make the argument that we ought to put more of the money into highways in the abstract without saying where that money comes from doesn't really lead us anywhere by way of conclusion.
The Chairman: Thank you, Mr. Minister. Thank you, Mr. Harris.
Mr. Cullen.
Mr. Cullen (Etobicoke North): Thank you, Mr. Chairman.
Thank you, Mr. Minister, for being with us today. I have two questions. Maybe I'll deal with them one at a time, starting with the first one, which picks up on your comments on tourism.
There has been some discussion that as a country we should perhaps be putting more emphasis and more of a focus on rural tourism opportunities. If you look at developments like farm holidays, ecotourism and eco-vacations, do you think that's the direction we should be moving in? If so, it seems to me that there may be implications for a national highway system. Would you comment on that?
Mr. Manley: With the improved numbers that I cited to you in my remarks, we are literally pressing the limits of our supply with the existing tourism system in the country. Therefore, we are in fact in need of developing new destinations, new activities and new attractions to support the continuing inflow of tourism interest that we're having. I've had Japanese tourism people tell me they can double the number; we just need somewhere to put them.
.0940
In a sense we're the victim of success. In my opinion the CTC has been an outstanding success. It meant focusing the federal government's efforts. We took a lot of stuff out of a lot of other things we were doing and said we were putting our emphasis on the demand side, increasing our money and leveraging it. It worked so well that we now have a problem on the supply side.
To come to your question, the development of rural destinations, the development of ecotourism, which by its own nature requires relatively small numbers but often quite a lot of spending, are key ways in which we can supplement the existing tourism infrastructure, which is overloaded in the big cities and resort communities such as Whistler and Tremblant, and satisfy the increasing demand from Canadians and foreign visitors to spend their money here. Yes, that will put increased pressure on some of the highway systems, and there is no doubt many of those destinations require access by road.
Mr. Cullen: Thank you.
My second question, Mr. Minister, deals with the whole question of financing the national highway system. I think most of us are reaching the conclusion that taxing and dedicating taxes will probably not be the total solution, if any part of the solution. But one of the things this committee is looking at is the possibility of using private-public partnerships as a way of realistically trying to finance highway renewal over the medium to long term. I'm wondering, as we do this, if you're aware of anything the private sector would look for, any sort of enticements they would be seeking, to get them excited about partnering with the federal and provincial governments in renewing our national highway system.
Mr. Manley: Profit - the need to design it in such a way that it is actually attractive to the private sector.
There are a number of approaches. Historically we've always talked of whether you dedicate tolls or some other method of privatizing a roadway. In fact, if I'm not mistaken, the CTC actually did some work on how that might work with Highway 407.
Other approaches, though, are being taken in other countries. A private-public partnership approach is being taken with certain roadways in the United Kingdom, for example, where the contract for construction includes an obligation on the part of the private-sector participant to maintain the road over a lengthy period and revenues are calculated on the basis of usage and paid by the state to the private-sector partner, so you essentially build into the equation an interest on the part of the private-sector contractor to build a road that is going to be well maintained and that will last, because if it's constantly being repaired the traffic volumes fall and the revenue falls. There are some cases of that kind of approach being taken in the U.K., I gather with some success.
I think we ought to be open to a variety of approaches. Increasingly we're looking to the users to pay for the cost of the systems they employ, and that kind of approach may be one way of ensuring we generate the construction we require.
At the same time, when you look at an issue such as the national highway system in Canada, you have to recognize that one of its purposes is to tie together some parts of the country that are rather low in density. It's likely the case that all or almost all of the costs will have to be borne by the public sector if we're going to be able to maintain connectivity to all of those areas.
.0945
There's no trouble privatizing roadways in your area, Mr. Cullen, but Mr. Byrne might find it a little more tricky.
Mr. Cullen: Nobody tells us.
Mr. Byrne (Humber - St. Barbe - Baie Verte): That's not what you're trying to tell me.
The Chairman: Mr. Byrne, that's an introduction for you.
Mr. Byrne: Mr. Minister, thank you very much for that seed of wisdom. It's a point that has not been lost on me, as well, and I appreciate your comments.
In terms of the areas with lower densities, one of the things that struck me, from an anecdotal point of view, is there are areas of our country that traditionally have not had a strong market presence in the tourism sector, remote areas where an outdoor product has not traditionally been used within the tourism sector.
Quebec City is a great city; it's one of the premier attractions in the country, as my colleague has pointed out. I would argue that Corner Brook, Newfoundland, is also a great city, but it doesn't share in quite the tourism market. However, recently with the change of demographics of North American society and with different interests within the tourism sector, remote areas of our country have now been adopted as a worthwhile, market-driven product for tourism.
Putting on your tourism hat again, can you comment on exactly what the trend is like for that particular aspect of the industry?
Mr. Manley: We've certainly seen a lot of growth in it, and what we're increasingly finding is that to develop tourism you need to package it and you need to market it properly. It's no longer a case that mom and dad put the kids in the station wagon and head north. It just doesn't happen that way. The tourism customer is becoming increasingly sophisticated about what they want and are interested in being able to have some assurance before they set off on a vacation that they'll get what they're expecting to get.
That has required us, and that's one of the things that the Canadian Tourism Commission is endeavouring to do through its various working committees, to build an approach that reflects standards for accommodation and restaurants, that enables the packaging of vacation opportunities so that if you can attract people to Corner Brook, for example, they know what they're going to get. They're going to want a tour, but they're going to want to know what the other attractions are in the region. They're going to want to be able to package that so that it's an expectation that can be fulfilled.
Various markets have different demands. It's very important, for example, in successfully marketing to the Japanese market, to be able to provide Japanese-language materials or personnel who can assist, and very high standards of accommodation. Those ingredients need some definition.
What we're really endeavouring to do with the commission - and by the way, the commission has representation from every province and territory on its board of directors and on its working committees and partnerships with local as well as national tourism operators - is we're trying to build a body of information that enables operators to know what's required of them and to be part of that kind of packaging of the experience so that we'll open up some new avenues for them.
Mr. Byrne: You mentioned the fact that it's rubber traffic; that is, there's a quintessential link between the auto and tourism in this country. Would you agree that it would be important to provide security of access, in terms of tourists being able, once a commitment is made, for example in the case of Newfoundland or places accessible only by ferry...wherever possible, provision should be made to ensure the product the clients, the tourists, feel they're getting is actually the product that can be delivered?
.0950
I say that from the perspective that in remote areas of the country we have to provide for that increasing tourist traffic in order to participate as partners, as participants, in that opportunity. Wherever possible we should be able to provide high-standard, consistent, secure access to transportation services.
Mr. Manley: Yes, I think it's fundamental that you have to be able to provide that reliability if you're going to attract the tourism customer. As I say, there's an increasing degree of sophistication, and the customer is demanding a level of reliability which perhaps is greater than it was in the past. The customer is prepared to pay money for it, but expects that the quality will be there.
Mr. Byrne: Thank you, Minister. I appreciate it.
The Chairman: Mr. Grose.
Mr. Grose (Oshawa): Thank you, Mr. Chairman.
I hate to rain on anyone's parade, but I think in all our enthusiasm about tourism we must remember it is a boom and bust business. When times are tough, mom and dad don't put the kids in the station wagon and go anywhere. As a matter of fact, I can remember not so long ago in Toronto when they were literally giving hotels away. The owners walked away from them because the vacancy rate was so bad. Now, of course, you can't get a room in a hotel in Toronto.
As long as we keep that in mind and realize the megaprojects to attract tourists often tend to be expensive and if times are bad they are not used.... We have to keep whatever facilities we provide reasonably priced, even in the worst of times.
As far as highways are concerned, yes, they are important to tourism; and I know a little about highways. I come from where they have the world's longest relatively narrow parking lot. But if you build a four-lane superhighway to a mountain and there's no ski lodge when they get to the mountain, it doesn't accomplish anything. It's the whole, overall picture. Highways are not the total answer, although they have to be addressed.
What's your thinking about getting overenthusiastic about tourism?
Mr. Manley: Our numbers indicate that tourism will be the fastest-growing industry in the world over the next fifty years. I don't have the numbers with me, but you can actually track the increase in tourism activity to the increase in prosperity.
So your point is well taken: when things are slow, tourism drops. But huge percentages of the world's population, particularly in Asia, are moving into income levels where they will become tourists. The projections for a boom in Asian tourism to all destinations - and we're intent on getting our share of that - would suggest there's a big, growing industry there. The domestic economy rises and falls, but overall the population of potential tourists in the world is increasing exponentially and will continue to do so. I think that's a key factor.
The other factor, Mr. Grose, is that when you compare Canada at our current exchange rates with virtually any country in the world, we are a tourism bargain. I can tell you, having been in a whole series of countries in the last couple of months, there isn't a country in the world whose good hotels are as reasonably priced as Canada's, whose restaurant food is as reasonably priced as Canada's. This is being discovered. For example, we're hosting increasing numbers of European skiers, both at Mont Tremblant and in the Rockies, who find that they can, with everything included, spend a cheaper week skiing in Canada than they can in Europe. And that includes air fare.
.0955
I don't consider our tourism industry to be entirely tied to our domestic economy. Our potential for taking up some of the slack in the troughs is there, based on our ability to attract a growing share of international tourism.
That said, I have to tell you that one of the motivations for creating the Canadian Tourism Commission was that we were observing our share of international tourism beginning to decline relative to other countries such as Australia. Australia took this approach of creating a partnership between the private sector and the public sector for tourism promotion several years before Canada did and their share began to increase. They have one key advantage: they are much closer in terms of time zones to that booming Asian market that I was talking about, and they do attract a very large share of inbound Asian tourism.
When I first looked at Tourism Canada as it then was, our budget for Japan was insufficient to buy one daily newspaper ad once in a year in Japan. We weren't there. We were not in that market.
So we have made a very determined approach to win market share in Asia, in Europe and in the United States for inbound tourism. Essentially it's part of trade; it's part of the current account. I think if we continue to pursue that approach the motels will have peaks and troughs, but our overall inbound tourism can continue to grow simply because that market is going to get bigger no matter what the world economy is doing.
The Chairman: Thank you very much, Mr. Minister.
I have three quick comments. First, I appreciate the information about the nature of the tourism market. Certainly it's one that's been raised with this committee continuously over the fall with reference to some of the capacity problems on the national highway system. Some concerns have been raised about the need to renew that system of transportation given the number of tourists that drive the highways.
Second, I want to note your use of the words Headingley, Charleswood, and Flin Flon. Your knowledge of Manitoba geography is good and we'll continue to educate you about that.
Third, one of the most precious commodities in Ottawa is ministerial time, and I really appreciate your taking the time to spend some of that with us. Your staff have been terrific in helping us get ready for this. We're hoping to come in with a report in early February. Our central focus of the first report will be on this renewal of the national highway system. Your time here will be very helpful to us.
Mr. Manley: Thank you.
The Chairman: I note two pieces of information for the benefit of members. You can hear the call to the House for the opening of the House. However, I am informed that there will be a vote that we will be called to some time around 10:30 a.m., so we'll have time to hear from Minister Massé before we have to leave to go to the House.
We'll recess until Minister Massé arrives.
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The Chairman: Let's come back to order. I'd like to welcome the President of the Treasury Board, Mr. Massé.
I appreciate, Mr. Minister, your willingness to come and meet with us. As we've discussed privately, the committee is looking at the broad question of trade, tourism, and transportation. But within that, one of the first issues that has raised rather forcefully with the committee is the question of the renewal of the national highway system.
As we've looked at the enormous costs involved in that and some of the possibilities for funding such a renewal, the issue of public-private partnerships has been raised with us from several sources. We thought it would be useful to ask you to meet with us on that topic, because eventually if we ever move in that direction, government is going to have to draw up some rules and some structures for thinking about those partnerships. It has been noted that the President of the Treasury Board is one of the rule makers, so we very much appreciate your taking the time to be here with us today.
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Hon. M. Massé (President of the Treasury Board and Minister responsible for Infrastructure): Thank you very much, Mr. Chairman, and thank you for inviting me today.
I understand that the Standing Committee on Transport is looking at linkages amongst transportation, trade and tourism, with a specific focus on the renewal of our national highway system. I also understand that the committee will be examining options for financing public infrastructure.
Therefore today, as President of the Treasury Board and Minister responsible for Infrastructure, I would like to talk about three things: first, financing transportation infrastructure; second, commercialization; and third, transportation policy and the role of government, including federal-provincial cooperation in government.
[Translation]
Before I get into these three issues, I would like to touch on alternative service delivery. Alternative service delivery
[English]
- this is alternative service delivery -
[Translation]
means finding new and better ways to deliver services that Canadians require. For example, it can mean partnership with the provinces on food inspection. Or it can mean the creation of a not-for-profit corporation in the private sector like NAV CANADA. Or, it can involve a number of other possibilities, including public-private partnerships and commercialization.
Transport Canada is at the forefront of change and its transition from a large operating department to a smaller, more policy focussed department is consistent of the objectives of Program Review.
[English]
In the 1800s, building a national infrastructure was critical to Canada's nationhood, so the federal government took the initiative with projects like the national railway. Now that our transportation infrastructure is at a mature stage; however, it is best managed at the local level.
In handling this major change, we have transferred airports to local authorities, commercialized the air navigation system by transferring it to a not-for-profit private cooperation, privatized railway operations, and we are in the process of turning over ports to local authorities. These are several examples of public-private partnerships in one form or another, each unique.
It is clear from that experience that federal involvement does not mean the government needs to deliver services directly or own the bricks and mortar. Here change allows us to maintain a federal role and achieve our policy and regulatory objectives.
Here, perhaps, Mr. Chairman, I'd like to get off my text for a few minutes and indicate that when we reviewed the Department of Transport under the program review, the question we asked ourselves was: what is the type of transport system we're going to need in the year 2000 and after, and what is the role of government in that transport system?
We came to the conclusion that in fact transport had changed its nature fundamentally. Originally when Canada decided to build the railway, there was obviously no one else who could build a railway across the nation who had the financing and the funds, who could deal with a total monopoly as it then was, and who had the resources the operate it and to make the deficits that came with it as a public service.
Now, of course, the reason we can privatize railways is that other modes of transport have developed, new technologies have come about that mean that transport is only one mode of transport amongst others and there is a lot of competition in various areas of transport, amongst the various modes. So it is not really a monopoly, although it keeps some aspects of it.
We came to the conclusion that because the needs of those who use the transport system change very quickly, more quickly than big organizations can deal with, be they government or monopolized public enterprises. We had to turn the system completely around. We had to give the authority to local groups who represented the users, to define the services they needed to change these types of services when technology or requirements changed, and who were motivated by the profit motive in becoming more and more efficient and in adopting new more efficient technologies as they came about.
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This is why we made the large change. The role of government changed. Technology has affected very considerably what the private sector can do better than the public sector. Things are changing much faster than before. As a result, the large, inflexible structures like government are not the way to do it any more.
That means we have a transport plan that will decrease the size of the transport department by 70% over seven years. We're already in the first three years of the program review and we're reducing the size of that department by 50%, which is an enormous change.
But it's not a change in which the decrease in person-years counts. It's a change in which we first had to change our understanding of the role of government in that sector, in that field. After that, we put together the changes that led to that new role.
In terms of public-private partnerships, this of course is a new era, in a way, although it has taken place before in governments. But it is a new era in which government and the private sector are experimenting with all types of relationships. There isn't one called public, another one called public-private and another one called private. There is along that continuum a whole series of arrangements that are better adapted to situations. So what we are beginning to see is the creation of a whole lot of different types of agencies adapted to specific problems.
In the case of NAVCAN, Navigation Canada, we are in fact transferring to the private sector, but to a non-profit corporation of between 5,000 and 6,000 employees. By the way, they get a guarantee of the same salary for three years, and the same advantages and so on. But basically, they have bought the system and they are selling it back to the users and making a profit doing it, or they're hoping they will make a profit doing it.
In the case of the railways, we've done a complete privatization. As I mentioned, the situation of monopoly is changed, and we believe that in this case private operators are not really using a monopoly. They are doing so in some cases, and we're still regulating these, but in most of the cases, they're people who have to also adapt to new technology and competition for other modes of transport.
The fact that governments and the private sector are still experimenting with a new tool is evident in the financial results of some of the measures.
The Chunnel in Europe is a good example of that. It was conceived as a plan whereby, through a public-private partnership, the responsibility for the financing and design of the project could be transferred to the private sector. But in fact, as we all saw, it could not really be done that way. This was a project of such newness that it was impossible to predict all the difficulties that would come up and the changes and inventions that would have to take place in order to make the Chunnel run on accepted principles of fiscal responsibility.
So there were a lot of debts. In fact, the States had to contribute a good share. Perhaps the type of public-private partnership that was used did not correspond to such a large venture in a field in which you were creating a once-in-a-lifetime experience in developing new technologies.
With our own fixed link between New Brunswick and P.E.I., we also had an experience with a private-public partnership. In this case, we tried to make sure that the financial responsibility was left to the operator, but also that if there were problems with costs, the operator could pay himself over a long period of time. Therefore this was already a more sophisticated sharing of the risks inherent in such a huge, one-of-a-kind project, and so far it seems to have worked very well.
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In terms of public-private partnerships, I remember when I was in Washington, D.C., that the Dulles Airport road was built like that. But it is nearly bankrupt because the authorities have put together a public-private partnership where you have tolls and so on, and just on the side you have another road that is and can be used by the same travellers but is split into small, more flexible sections and you pay less every time you come out.
The users have chosen not the big, wide road that was the public-private partnership with the higher tolls, but the small, more utilitarian roads that permit them to disassemble the services they want to get and to calculate the cost into the trips they make and to make a more rational choice about how much they really need that high-speed highway.
It's a problem, by the way, that we see also in Highway 407, where there may be extensions of Highway 407 in a kind of public-private partnership mode but where they're waiting for the experience to accumulate on the present segment in order to develop roads, about who will share future financial responsibility.
What we're seeing is really the creation of a new tool of public-private partnership, a tool that permits the private sector to take over the financial responsibility for designing, building and then in some cases recovering the costs, at the same time as the state may still, of course, regulate traffic, the types of cars that can go on the roads, in what state they are for the security of passengers and so on. But where something was considered essentially a public good, it is now seen as a good that can be produced by the private sector, and the consumption costs are costed in terms of how much you use it rather than spread across all the taxpayers of the nation.
Mr. Chairman, I don't think I will go through the rest of my speech, but essentially that is what we're seeing.
We have changed the structure and size of our transport department in order to fit that new view of the field of transport, and I must say that in that field we need your views, your help, your opinions, as much as we can give you the results of our experiences, because this is a field in total expansion.
The Chairman: Okay. For the information of members, the bell has started, as you are aware. I'm watching the time, and I'll make sure we get out of here. We have time for a full round of questions, if members will keep them relatively short.
Mr. Harris, we'll start with you.
Mr. Harris: Thank you, Mr. Chairman.
Mr. Minister, thank you for coming this morning. I'm glad you've really zeroed in on private-public sector partnerships for highways and other infrastructure.
I'm very curious, though, as to why 26 out of 39 witnesses who appeared before the triple-T committee very specifically talked about a larger share of the fuel taxes being dedicated to the maintenance of the national highways in our country. A very small number of witnesses actually talked about private sector partnerships, private-public partnerships, but it seems that in spite of the huge lobby, if you can call it that, or the huge interest in trying to ensure that the motorists of our national highway system get more for their money, because they are paying the bulk of the fuel taxes -
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How are they going to get more for the dollars they're spending on fuel taxes? It just seems that they're not getting their money's worth. Representatives from all sectors of the motoring public in Canada keep asking the same thing: why is the government only spending 5% or less of the total fuel tax revenue on our national highway system? We're not getting a good deal on this.
Mr. Massé: The basic answer, and the one the Minister of Finance will not get, is that government gets its taxes wherever it can. But apart from that answer, which is historically accurate, we now have two problems. The first one is the problem of a dedicated tax, and the second is whether we should treat fuel taxes as user-pay.
The problem with a dedicated tax is that every time you tax something and then try to reapportion the revenue so that it goes back to the people who paid it, you defeat some of the basic purposes of the state. One of the purposes of the state is to provide public services that nobody wants to pay for but are of use to everybody. Security in airports is one thing. If you asked only one guy, he would never want to pay his fair share because he'd say the others will see to it. The state has to do that, so it has to get taxes that do not go back to the people who use it.
Mr. Harris: Mr. Minister, the government can add another 1.5¢ per litre in fuel taxes and raise a billion dollars or so. The motorists, the travelling public and the truckers, they're the ones it's having the biggest impact on. They're constantly saying we just had a 1.5¢ increase, why can't we see some of that coming back to the very infrastructure we depend on? Why are we always getting it? Why are we always having to pay for something else? It's a question that's asked over and over again.
Mr. Massé: Yes, and when I was deputy minister of finance in New Brunswick - in the provinces you're closer to people and you hear them more often - I kept hearing that. There is a bit of truth in it. If you tax something too much and you don't give back to that field, at some point you create a distortion you can't tolerate any more.
Essentially - and I'm giving you the kind of theory of taxation - you should get your taxes from wherever you can, but you can't go too far: incomes, sales taxes, import fees and so on. You redistribute them according to priorities, the priorities being defined generally as the needs of the population, including those who do not pay tax. That's the general theory.
In the field of fuel, if we were creating distortions in the use of roads - and perhaps we are, some studies show that we are - then you're beginning to have an argument for giving back more to that specific field.
The Chairman: Thank you, Mr. Minister.
Mr. Byrne.
Mr. Byrne: Thank you, Mr. Minister. I appreciate your comments that not all of the pay-back from taxation can go to the payer for the simple reason you mentioned - that we have a large country and larger issues at stake, such as the financing of other projects. As a comment to that, if you extended the analogy, it would mean that for those who receive health care services, only sick people would pay for health care costs because they're the users of the services. It goes without saying that they're often the last people who can afford to pay those costs, so they wouldn't be contributing much to the provision of health care.
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But you did mention that there are mature regions in our country that have an already-established transportation infrastructure and that therefore we are in a situation or a mode now where less of the financing for that infrastructure can be done from the public purse and more from the private purse.
I'd just like to get your comments, however, because there are other regions in our country that are less mature and do not have very well-established transportation links. I'm speaking of none other than the Northwest Territories and of Labrador, where there's a highway proposal in place. Can you comment about the more rural areas of the country and the public sector's role in fostering a transportation initiative in those areas that I would call less mature?
Mr. Massé: Yes. Basically, principles of social justice and principles of external economies - of growth and so on - are involved.
The principle of social justice is that when you form a country, you accept the principle that every member is responsible for the others, whether members are in high-density areas or low-density areas. This is why all kinds of services are being provided, including hospitals and so on, where the density of population by itself would not fully justify them. There are elements that are non-economic in our choices and they are usually motivators for these expenses.
External economy is a bit different. It's the role of the highway in a less-developed province as a creator of growth by itself. I was just in Natashquan on Saturday inaugurating a segment of road of about 105 kilometres. It cost a bit more than $100 million. It links two communities, one of which has 3,500 residents and the other one, according to the mayor, that has 435 residents.
If you look at it in terms of the immediate needs of these communities, it is clear that the highway is not justified, but if you look at it in terms of permitting growth and permitting access by people from the centres to the outlying areas so that they can enjoy the areas in terms of tourism and growth and hunting and fishing - the advantages that so far they haven't had - then what they are really paying for is availability of development, which is an external economy that you cannot recover from the local drivers who will be using the road. But it does have that secondary effect on the growth of the whole economy.
So these two principles together - and you could find other reasons too - are the basic reasons why governments go into financing public roads in these areas.
I think it is clear that the new public-private partnerships can only be used where the number of customers is large enough to help a private concern finance the deal. One of the very important elements that the public-private partnership brings in is the possibility of financing that the state - especially in its present conditions - can ill afford. And they can do it because they can make the customers pay the cost through tolls, for instance.
The Chairman: Thank you, Mr. Minister.
Monsieur Mercier.
[Translation]
Mr. Mercier: Mr. Minister, government policy is to transfer the management of public equipment used to provide a public service to private bodies wherever possible. For example, you entrusted ADM with managing airports in Montreal and NAV CANADA with managing marine equipment. I think this is very good in principle, but there is, I feel, a perverse effect to this policy and I would like your opinion on it.
I will take an example I know, like the Mirabel Airport, which is close to where I live. The perverse effect that I see in this policy generally is that when public service is provided by a public authority, the public can demand accountability and can have some influence.
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For example, the Member of Parliament can ask questions in the House, and citizens can ask questions of their Members of Parliament. That way, we can influence decisions and obtain information on the decisions made. This is not the case when a public service is provided by a private body which, for commercial reasons, can refuse to provide information because it is operating according to market driven policy.
For example - and this is just an example, because my question is on this policy in general - the ADM corporation has recently made a decision for which it cannot be held accountable. It is an organization made up of businessmen which also has a purely advisory body which is representative of the business community, but whose members are not elected. So that it is impossible to obtain explanations. It is even more impossible to influence this policy.
My question is not on a particular case in Mirabel. My question is on the policy in general. Do you not feel that when a public service is managed by a private body, the public loses its ability to exert influence and to obtain information?
Mr. Massé: The answer for the general principle is yes. When you transfer a public service to an entirely private body, you obviously lose your ability to exert influence over the decisions that are made by private decision makers. That is why I mentioned that the public-private partnerships that we have established are midway between public property and private property. We are not necessarily talking about privatization.
For example, NAV CANADA became a non-profit organization which, consequently, has a constitution and a group of directors that are different from those in a private profit-making corporation.
Take the case of the Ottawa airport, which is not as big as the one in Montreal, but which has been transferred to the community. Here, the chambers of commerce and the business community, especially those members who use airport services to import and export, as well as the municipal corporations have representatives on the board of directors, precisely for the reasons you mentioned. When we are talking about the public good, there must be some control by the public.
Mr. Mercier: The principle is good, but the application, namely in the case of the Aéroports de Montréal, does not work in that it is impossible to obtain information. The ADM advisory body receives almost no information.
[English]
The Chairman: Thank you, Mr. Mercier.
Mr. Minister, I'm going to let Mr. Cullen have one quick question and then we should think about moving over to the House.
Mr. Cullen: Thank you. I'll cut to the chase given the time available.
I think your comments on public good, private good, social justice and external economies will help us in our discussion. What we're trying to do when we look at public-private partnerships is to see how we can capitalize the benefits of the private good. But as you indicated, there will be areas, particularly low-density traffic areas, where there will be a public good that may have to be financed through the public sector. We're looking at a number of different options there.
I wanted to take this opportunity to talk about infrastructure programs - not to ask you if we're going to pursue another infrastructure program, but in the context of a national highway system renewal, for which the estimates come in at $13 billion to $18 billion. In terms of the framework for infrastructure programs, given the sizing of this initiative, given the federal-provincial-municipal jurisdictional dynamics, and given the timing, could you comment generally about whether this kind of program, given the residual that may end up in the public sector to look at, would fit within the context of infrastructure?
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Mr. Massé: You know that a number of provinces, New Brunswick and Manitoba in particular, have asked that there be a considerable highway component. That's advantageous in a way, because it's clearly a need, but of course it creates a bit of a cramp in a system that in the first program used all three levels of government, because highways are basically a provincial responsibility. So if there is a program, we're thinking of having a part of it that provinces could use for infrastructure works of their choice, including highways. So this is a possibility.
The highway program would, in any case, far exceed the capability of an infrastructure program, especially part of an infrastructure program, to finance the requirements. We have to find new ways to meet that need that perhaps do not imply direct provincial or federal financing, because the need is larger than what governments can afford to borrow at present.
The Chairman: Thank you very much, Mr. Minister. With that statement, you have taken this committee exactly full circle and back to our starting point - just how do we begin to fund the enormous need.
Just before we leave - I said it to Minister Manley and I'll say to you, Mr. Massé - the most precious resource on the hill is ministerial time. I appreciate your taking the time to be with us this morning. I'd like to thank your staff and note that Thérèse has been so helpful in facilitating this meeting.
For the information of members, we have a decision to make before we leave the room. We have a need for an in camera session to finalize the discussion paper. We can come back after this vote and do it then, or we can meet at 3:30 p.m. as we are scheduled to do. It is your choice. What would you prefer to do?
Mr. Cullen: Come back after the vote.
The Chairman: Immediately after the vote we will return here, deal with the in camera session, and then we will be done until the meeting on December 22.
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[The meeting continues in camera]