EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, November 7, 1996

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[English]

The Chairman: Let us begin. I would like to note a couple of things before we turn to our witness.

Last night, thanks to a lot of very hard work by the members of the committee, we finished with the seaway and the ports legislation. So Bill C-44, as far as this committee goes, is history.

Today is the first full day in which we are able to turn our attention to transportation, trade and tourism. Members will know that we began this with the Minister of Transport back in June. We've had a series of partial meetings on this as we travelled the country and we are now into transportation, trade and tourism.

I very much appreciate the fact that the minister from Alberta is here to speak to us on this.

I also appreciate your patience, Mr. Minister. As I explained to you, we were up very late last night finishing off the bill. I have to say that upon completing a piece of legislation, as I'm sure you will appreciate, being in government yourself, there is both the physical act of banging the gavel at the completion of the bill and there is the revisiting of the process that takes place afterwards for an hour or two...or for three, four or five.

I do appreciate your presence here. I'll let you begin your presentation. I'm sure members will have questions.

Hon. Robert Fischer (Minister of Transportation and Utilities of Alberta): Thank you very much, Mr. Chairman. Given that you were up late last night, and given that I know what it's like to stay out late on some of our legislation, I'll try not to bore you too much with things. We'll skip along as quickly as possible. I understand that we do have a question period afterwards, so we can discuss it further if my notes don't take everything into consideration.

Gentlemen, I appreciate the opportunity to appear before you today on behalf of the Government of Alberta. My objective is to outline Alberta's position on the critical role that transportation plays in our trade and tourism sectors. I also intend to focus on one or two of the sixteen recommendations contained in our written submission.

First, I want to compliment your committee for taking on the review of this very important topic. We all know that Canada is a major trading nation. Our economy and our national prosperity depend heavily on our ability to trade.

Our country is also blessed with a clean environment and some wonderful scenery, including the Rocky Mountains in Alberta. These features attract tourists from around the world to Canada and to Alberta.

But we have to recognize and emphasize that goods can't move to markets and tourists can't reach their destinations without a good transportation system. So my remarks to you today will focus on what Canada and Alberta need from the transportation system to support the trade and tourism industries that we rely so heavily on.

Trade and tourism are two of the major driving forces behind our economy, and much of Alberta's future growth will be derived from these two sectors. The value of Alberta's exports to the rest of Canada and to the rest of the world has grown by more than 20% in the last decade, and that's an increase from around $35 billion in 1984 to almost $43 billion in 1994. The total value of our exports now represents more than 50% of our province's gross domestic product.

When people talk about Alberta's economy, the first thing that usually comes to mind is our traditional natural resource sector. While it's true that we're still exporting a lot of oil, gas, coal, grain and other raw materials, since the late 1970s we have also seen a tremendous increase in exports of manufactured and value-added products. These include petrochemicals, pulp and paper, telecommunications equipment, high-grade beef cuts, building products, and many other manufactured or processed goods. In fact, over the last decade or so, the value of Alberta's manufactured goods and value-added products has tripled. I'm proud to say that the trend towards increasing value-added exports is partly due to our province's diversification strategy and our overall economic strategy.

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The type of products we're exporting is changing and so are the markets we're shipping to. Our trade used to be mainly east-west. Now, as in other parts of Canada, there's a lot more north-south trade. About 40% of the goods and services we export is shipped to other provinces. The other 60% is shipped to other countries. Of those countries, the United States continues to be our biggest trading partner. That's why I want to convey my appreciation for the federal government's decision to invest in the significant improvements to our border crossing facility at Coutts, where there is a proposed $15 million improvement.

In 1995, we shipped around 77% of our international exports to the United States. That trade was worth over $21 billion to Alberta. With the implementation of the North American Free Trade Agreement, we expect that the north-south trade with the United States will continue to grow. I can tell you that in Alberta we are very happy with NAFTA for what it has allowed us to accomplish so far. We believe that free trade will continue to foster prosperity in years to come. Exports to other international markets, particularly to the Pacific Rim countries, are also growing at a very healthy pace. In fact, they are growing at a faster pace than our U.S. markets are.

Having touched briefly on the trading patterns, let me switch gears and talk about tourism for a minute. While trade is the engine that drives Alberta's economy, tourism has been the force behind the substantial growth in Alberta's service sector over the last decade.

Tourism is a $3 billion industry in Alberta and it's continuing to grow rapidly. Almost half of this revenue is spent by tourists coming to Alberta from outside the province. With our fabulous scenery, clean environment and low Canadian dollar, and our renowned Canadian friendliness towards visitors, along with our safe streets, Canada and Alberta will continue to be very attractive vacation destinations for our tourists.

I think it's fairly obvious that transportation is critical for tourism. In fact, driving safety, quality of road surface, and the time spent travelling are clearly major factors in a tourist's decision on whether or not to travel to a particular destination.

Today tourists are demanding competitive transportation costs, less travel time, seamless connections between modes, a high level of safety and comfort and a high quality of service. Tourists often leave with a long-lasting impression of the transportation facilities or services that they've used, whether it's a highway system or an airport terminal.

In order for Alberta and Canada to compete in the global marketplace for tourism dollars, it's essential for us to have a first-class transportation system to support and complement our natural tourism advantages.

Mr. Chairman, that's a brief overview of trade and tourism in Alberta. I hope that background information illustrates the importance of these two key sectors to Alberta's economy.

Now I'd like to focus on Alberta's recommendations for improving the links between transportation, trade and tourism.

Let me say first that the link between transportation and trade competitiveness cannot be overstated. The fact is that transportation costs can be a major factor in pricing commodities at market destinations. As a result, the cost of transporting goods can have a considerable impact on the competitiveness of shippers and exporters. For example, the cost to transport some bulk commodities from Alberta to the west coast ports can represent 45% of the delivered price.

If we want to support our manufacturers, producers and shippers and help them to compete in the global marketplace, I believe that the federal government has to do more in two specific areas: highway infrastructure and transportation regulation.

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The primary recommendation I submit is one you no doubt heard from many other participants in this series of hearings. What I'm referring to is a national highway program for Canada.

Our system of national highways plays a significant and growing role in supporting trade and tourism, and I've already outlined how critical transportation is in these two sectors in Alberta. We've all seen the studies telling us Canada spends considerably less federal money on highways than any of the other industrialized nations we compete with in the global marketplace, yet many of these competing nations are not faced with the vast geography we have here in Canada. I know you'll agree that our shippers and our tourism industry face a natural disadvantage in that marketplace if they can't transport goods and people as efficiently as their competitors.

Of course we all know this is about money. We know the federal government collects over $5 billion in road use taxes each year but puts back only about $300 million into the system. We've heard the federal government say they can't increase highway funding because that would add to the deficit. So we appear to have a catch-22 situation here.

There are no simple solutions, but I don't think it's good enough for the federal government to simply say they can't afford a national highway program. It's simply a matter of priorities. What I'm respectfully suggesting is that the federal government has to give a higher level of priority to the national highway infrastructure.

Our ability to trade and compete effectively in the global marketplace depends on getting our priorities right. Our highway trade corridors must be high on the fiscal priority list. We simply can't allow our national highway system to fall behind when other nations we compete with are pouring millions of dollars into their systems every year. I guess I'm almost referring to the U.S. system, which we compete with.

We must reassess our priorities and we must recognize that Canada's future prosperity is partly dependent on our ability to transport goods and people as efficiently as other competing nations. That requires a high-quality, efficient highway network that links our production centres to our domestic markets, to our national port system and to our markets in the United States.

I understand there's a possibility of a new two-year national infrastructure program with a small highway component. That is a nice start, but it's far too modest to address the needs of our national highway program. What we need is a long-term, comprehensive approach. We need a strategy similar to what the federal government in the United States has done with its multi-year funding for the interstate and primary highway improvements.

I also understand there's a high degree of interest within the federal government in private sector involvement in highway financing. Let me say I'm a firm believer in the ability of the private sector, and as you know, we in Alberta have outsourced all of our highway design, construction and maintenance to the private sector, but I don't think we can assume private sector involvement will solve all of our problems.

Some highway projects are naturals for a private sector role, such as Ontario's Highway 407 project, but whether or not a public-private partnership will work depends on the right features being in place for a particular project. We've had the private sector look at specific projects in Alberta, but the features weren't right, so we weren't able to proceed with a partnership arrangement.

The other key recommendation I'd like to focus on is the need to ensure that government regulation of Canada's transportation system is effective. We need to have good regulations that ensure safe transportation systems. That's a fundamental responsibility we have to the public. But those regulations also need to promote competition within the transportation industry, and they need to encourage the seamless flow of people and goods.

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So we have to make sure our regulation of the transportation industry isn't bogged down with unwarranted and bureaucratic rules. We also have to make sure the regulations we have don't create artificial barriers that get in the way of competition and efficiency.

If we want to compete effectively, we need a supportive regulatory environment. We must have a fair and competitive tax regime for all modes of transportation. We must have minimum government interference in the marketplace. We must harmonize our regulations in the areas of truck weights and dimensions, taxation, and customs at border crossings. We must work to remove barriers to trade and tourism in such areas as intercity bus services, bilateral air agreements with other countries, foreign ownership restrictions on airlines, north-south rail services, and so on. I refer you to our written submission for more details on these issues.

The federal government has a significant and important role to play in achieving improvements in Canada's regulatory environment for our transportation industry. When it comes to the impact of the transportation industry on interprovincial and international trade and tourism, there is only so much individual provinces can do. The federal government has to take a major leadership and coordination role in working with the provinces to break down the barriers and achieve more uniformity and harmonization. If we don't achieve these objectives, then this great country of ours will continue to shoot itself in the foot when it comes to trade and tourism, and we simply won't be able to achieve the efficiencies from our transportation system which we need to be able to compete effectively.

My primary recommendations are, first, that the federal government must take the lead in developing a national highway program which is cost-shared with the provinces. What we need here is a separate program for highways, not a component of the new infrastructure program. Second, we need to continue to improve our regulation of the transportation system. We need a supportive regulatory environment, a competitive tax regime, and more harmonization of regulations.

Let me conclude my remarks by confirming again our support for the federal government actions to reshape and modernize the transportation sector in Canada. These initiatives have included new legislative and policy initiatives, privatizing CN Rail, allowing local groups to operate major airports, commercializing air navigation services, and pursuing increased flexibility for port operations.

Thank you very much for the opportunity to submit our comments and recommendations on these important issues.

The Chairman: Thank you very much, Minister.

Now we'll have a round of questions from members. Mr. Caron.

[Translation]

Mr. Caron (Jonquière): Very well.

Thank you for your presentation which was quite exhaustive. I would simply like to corroborate what you said about tourism in Alberta and about the fact that Canadians want to visit Alberta. I think you are quite right about that. I had the chance to go myself, but as a member of Parliament. You arrive at the last minute, you attend a meeting and you leave right away. On the other hand, I was lucky because the meeting was held in Banff.

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I was especially interested me in what you said about the harmonization of the regulations. Do you mean harmonization among provinces? I agree with you that we have to clean up and simplify regulations. Could you though give me a few examples where a lack of harmonization between provincial or national regulations has harmed trading, tourism or transport in general in Alberta?

Mr. Fischer: I'm referring to both interprovincial in Canada and international into the western U.S. Our trucking weights and dimensions are awfully different. We did go down and meet with some of the states along the Interstate I-15, which we use an awful lot. Our weights are very different from theirs. One of the things they pointed out to us in a hurry was, well, what have you done to harmonize and get the same kind of rates within your provinces in Canada?

The end result is that it certainly costs a lot of money for truckers and for the cost of that transportation because of the disharmonization. So yes, I'm saying, to both interprovincial and international.

The Chairman: Mr. Gouk.

Mr. Gouk (Kootenay West - Revelstoke): I have a couple of areas. The first is to carry on with the weights and dimensions.

I too would like to see some standardization. However, there's a problem; and the problem is called British Columbia, for which I am a proud member. For Alberta, except for the spillover of the B.C. Rockies into the western borders of your province, you have a somewhat typical prairie scenario of highways that are flat and relatively straight. In British Columbia they're very hilly and very curvy in a lot of spots. It brings in a problem. You can obviously run a heavier, larger truck almost anywhere else in Canada, and in some areas in B.C., but they are a real problem in the mountainous areas. It affects you a bit. It affects us very significantly.

Following the old axiom that a chain is as strong as its weakest link, how can we come to a standard unless the standard fits the lowest denominator? Do we want to do that? Do we want to set a standard for all of Canada that downsizes the weights and dimensions of trucks to make them safe and most appropriate on the curved, hilly part of British Columbia, or do we try to work some kind of blend to harmonize, to the extent we can, but recognize there are some constraints we're not going to overcome?

Mr. Fischer: Certainly it is a problem, but that is one of our ideas with the national highway program. Maybe we can get them upgraded in your province a bit more, and yes, there will have to be a blending. However, we need to be flexible ourselves, which we are prepared to be, and not just with you people but certainly with the U.S.

Mr. Gouk: Mind you, we have to clean our own house first, then talk with the U.S.

Mr. Fischer: Yes. But I think that gets back to our national highway program. We may have to put some more money into our major routes like that and try to make that weakest link a little stronger.

Mr. Gouk: In your recommendation 12 you've touched on foreign ownership with reference to airlines. It's a very timely comment, given that an Alberta-based airline is in significant problems and one of four possible scenarios for it is relaxation on foreign ownership. There was an inference there that we had to continue with this because of competition. Of course, with some of the other scenarios, the other possibilities for what might take place, the question arises then that if Canadian Airlines, which of course is what we're talking about, is either downsized significantly or merged with Air Canada, as a couple of possibilities, then there would be no competition.

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Do you feel there is competition when you have the two airlines leaving on the same route at the same time for exactly the same fare? Or is the competition more likely to come, certainly in these shorter hauls, from foreign competition, in terms of open skies and, more locally, with Alberta-based companies like WestJet?

Mr. Fischer: I know that the airline industry is very complicated. I know that when you do something with one, it certainly impacts the other one. We were saying that we would like to see a really good review on that to see whether or not the amount of foreign ownership is at the right place.

We just want to bring to your attention that we feel it should be reviewed. We don't really have a position on it to say it should be right here or right there. We want it to be reviewed to do everything possible to keep us with two airlines in this country and without getting financially involved.

Mr. Gouk: You're not making any specific recommendations?

Mr. Fischer: No.

Mr. Gouk: There's just one other thing I want to touch on quickly. I know there are others here who have questions.

Take dedicated revenues. You talked in terms of dedicating infrastucture funding per se. What is your position on the concept of both the federal and provincial governments dedicating at least a portion of their excise fuel taxes...? This started as a highway fund in its original concept. It was generally accepted as that. Now it goes to anything and everything. Would the province of Alberta be prepared to dedicate at least a portion of their provincial fuel taxes to spending on highway infrastructures if the federal government were to do the same?

Mr. Fischer: Certainly, we would be happy to do that. We haven't exactly worked out how we would do that. Right now, we put all of our fuel tax into roads. We also put all of our licensing and everything we can into our roads. Yes, we would find a way to match that. We would be happy to dedicate it that way.

Mr. Gouk: Thank you.

The Chairman: Thank you, Mr. Gouk. I have Mr. Cullen and then Mr. Keyes.

Mr. Cullen (Etobicoke North): Thank you, Mr. Chairman. Thank you, Mr. Fischer, for your presentation.

I have a more general topic. It has to do with the role of the private sector in the transportation infrastructure. One could come at this in a number of different ways, but I'd like to come at it from this point of view.

I know Alberta is diversifying the economy, but still natural resources play a pretty important role in your economy. We read about increasing exploration for oil and gas.

I'm wondering about roles. Look at these developing areas. There are main roads, development roads and infrastructure. What sort of role do you see the private sector playing?

The Great Slave Lake Railway comes to mind. It was put up to access Pine Point. Pine Point is not operating now, as I understand it. That rail line was put in for a fairly specific purpose.

What is that rail line doing now? What is it being used for? Maybe you could comment from a more general perspective on the role of the private sector and public sector in the transportation infrastructure, such as developing and maintaining that infrastructure.

Mr. Fischer: First of all, I'm not aware that we use that railway at all. As for bringing the private sector in, we do now negotiate with the oil industry - that's so for some of our pulp and paper as well - to try to get them to be a partner with us. It has worked fairly successfully.

We're in the process now of trying to set a policy that would be fair to all of our industries so that they know where they stand before they come in. That's a difficult one, because it's different in different areas.

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Certainly in the northern part of the province, we don't have very many roads. We have to open those roads up. Are they industry roads or are they public roads? That question has to be answered yet. But we are bringing in some dollars from the industry to help with that. The oil industry does quite a bit of partnering with our municipal governments as well.

Mr. Cullen: I'm more familiar with the forest products industry, whereby you would go into what could be an operating area. So there are main roads and then development roads. But when that area comes on stream, there will be logs and processing plants.

When you're going in to drill for oil, I guess you're going into a certain area, but there could be unsuccessful drillings, or whatever they're called.

Mr. Fischer: A dry hole.

Mr. Cullen: A dry hole. So that area could be unsuccessful, and you would have a bunch of infrastructure that I guess you write off. Hopefully, the industry has been very much a part of that package, as you say.

Mr. Fischer: Yes, they certainly are, and yes, there's a cost there. However, it has worked out fairly well for us with that. That's not a major item in our budget, if you like.

I guess we're trying to focus as much as possible on a major national highway system that helps us in the provinces, as well as in our province. That's because we have to go in every direction, and you're only as good as the weakest link. When we have to compete against that I-15 in the U.S., it's difficult. There's a difference in the cost of your product. It changes a lot.

Mr. Cullen: Are a lot of logs still moving from Alberta to B.C., or has that been -

Mr. Fischer: I think that's slowed down an awful lot. The price has kind of changed, so there isn't that same incentive.

Mr. Cullen: Thank you.

Mr. Fischer: But that was the problem, yes.

The Chairman: Thank you, Mr. Cullen.

Mr. Benoit, do you have a question?

Mr. Benoit (Vegreville): Thank you, Mr. Chairman.

I'd just like to follow up on some of the comments made by Mr. Gouk. Part of the problem in having standard regulations within provinces is that there are different situations in different provinces. But in fact, that can be dealt with within each province by setting classes of highways, such as one, two, three or four, based on the grade, etc.

That way, truckers could go freely onto some roads in British Columbia without getting into dangerous situations. We have problems in places like the Peace country of Alberta. It's the same kind of situation on the Alberta side as on the British Columbia side, yet trucks can't move freely. Why does that have to be?

Of course, it doesn't have to be. It's a lack of willingness to complete the Agreement on Internal Trade so that the regulations can be standardized and at least you could move on similar roads right across the country with similar types of trucks.

Mr. Fischer: I guess if we could just start on our primary highway system and get some national standards on it, then certainly when you get to your other main roads, there would be a big difference. I would shudder if we had to try to standardize all of them.

Mr. Benoit: It's not a matter of standardizing; it's a matter of classifying. It's so that it makes sense. It's so that where there's no good reason for a truck from Alberta not to drive along a particular road in another province, then it can do that. That's part of the problem.

Has there been any serious progress made that you're aware of in standardizing the regulations or making it easier to move with trucks between provinces? Is there any progress on the Agreement on Internal Trade?

Mr. Fischer: Not recently, no. But we certainly work continually on it.

Mr. Benoit: There's no concentrated effort on that on the part of the federal government and all the provinces together of which you're aware?

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Mr. Fischer: Well, no. What happens between provinces - and you people can probably tell more about it than I can - is you finally agree to disagree on certain things, and that's the way it gets left.

Mr. Benoit: Yes, and actually there's no appearance of a lot happening. That's why I was asking for your point of view.

You're talking about the national highway system. You'd think that with $6 billion spent in the last few years on an infrastructure program, our national highway system would be in pretty good shape. That's an awful lot of money. If it had been targeted on true infrastructure, surely enough of it would have found its way to the national highway system so it wouldn't be a big problem any more. But you're saying it is, and we all know it is.

There's some talk of another infrastructure program. If that were to happen, have you any plans to try to direct it towards real infrastructure, particularly the national highway system?

Mr. Fischer: We had hoped we could focus more on highways than on some of the other utilities, but you will get a strong argument from the municipal governments about what they need. They're not so concerned about the primary highway system in our province. They're more concerned with some of the other infrastructure needs.

You say we direct. It is a federal program, and they have their guidelines in place and give the opportunity to the municipal governments to make that decision.

I don't know. You can argue about where the dollars should be spent, but most of those dollars were spent quite well in our province. I could quote you some that were spent very poorly, but most were spent quite well.

Mr. Benoit: In terms of Alberta, what are your plans over the next few years regarding roads?

Mr. Fischer: What are our plans?

Mr. Benoit: Yes. What's happening with that?

Mr. Fischer: Well, our main one right now is our Canamex route, which is the I-15 in the U.S., and it goes right from Coutts to Grande Prairie and out to the B.C. border. We have a 10-year program in place now. We call it our Canamex trade corridor. We will have that twinned, hopefully, in our 10-year program. Highway 43 up to Grande Prairie is a lot of space that -

Mr. Benoit: But it's north-south mainly.

Mr. Fischer: It's north-south.

Mr. Benoit: You're really trying to tie in to those American highways.

Mr. Fischer: Yes.

The Chairman: Thank you, Mr. Benoit. Thank you, Minister.

Mr. Keyes.

Mr. Keyes (Hamilton West): Thanks, Mr. Chairman.

Mr. Fischer, thanks for coming all this way and making your presentation to the committee. We appreciate your input.

Mr. Fischer: It's a pleasure.

Mr. Keyes: I know you touched on it slightly, but I just wanted to ensure that the record is clear on Mr. Benoit's statement that you'd think the money spent by the federal government on an infrastructure program would have done a lot of good road repair, etc.

Mr. Benoit, it was not the federal government's call. It was an infrastructure program based on an agreement and a partnership between the municipalities, the provinces and the federal government. We relied on the municipalities to tell us where that money would be best spent. I just wanted to make sure that was on the record.

Mr. Benoit: Well, it was a federal government program. It was -

The Chairman: Thank you, Mr. Benoit.

Mr. Keyes: No, no, it was municipally oriented and that's the way it was structured.

Mr. Benoit: A lot of the funds were -

Mr. Keyes: A lot of municipalities thanked the federal government intensely for that opportunity to set the agenda.

Mr. Minister, can you tell me what the total tax income would be for the provincial Government of Alberta?

Mr. Fischer: It's around $600 million or so. Let's say $650 million; I think that would be closer.

Mr. Keyes: That's the total bill?

The Chairman: No, that's just excise tax.

Mr. Keyes: I'm talking about the whole thing: income taxes, liquor taxes and all that stuff.

Mr. Fischer: What we've put into roads?

Mr. Keyes: No, no, the income of the provincial government - the provincial revenue. What would be the total provincial revenues?

Mr. Fischer: Around $13 billion.

Mr. Keyes: How much of that money would be collected in gasoline taxes, licensing taxes and all that kind of stuff?

Mr. Fischer: The fuel tax is just under $500 million. Our licensing and everything else is a little over $200 million. So we total $650 million altogether, and our transportation budget is about $680 million.

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Mr. Keyes: So you supplement that income with more money for your roads and highways.

When you spoke in your report to us about the cost-sharing opportunities that could be had with the federal government in a national highway infrastructure program, or national highways building program or whatever you want to call it...what do you think the cost-sharing number might be, fifty-fifty, twenty-eighty? Have you given any thought to that?

Mr. Fischer: We've given a lot of thought to it. Probably Alberta is a little more fortunate than some of the other provinces, and that's where we get bogged down a little. We said okay, fifty-fifty is a number you could start at. I think it has to be flexible, to tell you the truth, because some of the provinces, for instance the eastern provinces, can't afford that.

Mr. Keyes: So it would be flexible. Have provinces would pay fifty-fifty, and have-not -

Mr. Fischer: I guess so, but we didn't want you to forget about us altogether out there.

Mr. Keyes: No, we wouldn't forget about you, but I just wanted to know where Alberta was coming from on the cost-sharing. It would be prepared to go out to as high as fifty-fifty.

Mr. Fischer: I think one of the things a national highways program would do...you could focus on it from a federal point of view, so if there is a weak link, wherever it is, you could find a way to strengthen that link. Maybe it'll take more dollars in certain provinces. Just because of our differences, I don't think you could have a cut-and-dried formula. But the fact that you focus on it and get something done about it is what we're talking about.

Yes, we need our routes out to B.C., and we need them badly - and east as well. It's quite important to us to try not to have a logjam. Then we have places around our cities in Alberta where we have to do some more work.

Mr. Keyes: Sure.

Thank you, Minister. I appreciate it.

The Chairman: Mr. Jordan.

Mr. Jordan (Leeds - Grenville): I sensed some enthusiasm for the infrastructure program there. Would the Government of Alberta be interested in participating if the federal government announced another one, with some changes?

Mr. Fischer: Absolutely.

Mr. Jordan: You would be on board.

Mr. Fischer: Yes.

Mr. Jordan: I wonder if the Reform Party would declare where they would be on an infrastructure program if it were announced. Would you be supportive of it?

Mr. Benoit: I would be happy to do that. Infrastructure obviously should have -

Some hon. members: Hold on.

The Chairman: Mr. Benoit, I'm chairing this meeting. You might speak to Mr. Gouk.

Mr. Benoit: I certainly respect the chair. I was asked a question and I was just -

The Chairman: Jim, were you asking the question of Mr. Benoit or the minister?

Mr. Jordan: I was asking the minister if Alberta would be interested.

The Chairman: The minister.

Mr. Jordan: He said he thought the province would be, if I understood him correctly. But I was just curious about the others.

The Chairman: Perhaps we could have that discussion in a different forum.

Mr. Minister, I would like to ask one question of my own here. Mr. Cullen is our resident expert on this committee on finance. We have had some presentations from groups who talk about private-public partnerships. I know you made reference to that and I know Alberta has moved aggressively in privatizing certain aspects of highway development.

You talk about a ten-year program. We've had presentations that have suggested that with private-sector investment the highway infrastructure could be built much more quickly and simply amortized over a longer period. There are examples of that where we have direct tolls, as in Nova Scotia and Ontario. I'm from Manitoba, so I know tolls are not necessarily the direction people in the prairies want to take. However, the concept of shadow tolls or other forms of government payment in order to pay for use and allow private-sector development is something that has come to the fore lately. Has Alberta spent any time thinking about public-private partnerships and how they might involve the private sector in the complete financing and development of roads?

Mr. Fischer: I had a meeting the night before last with the Hambros Bank folks, and that's probably what you're referring to.

It's difficult. We're in the very early stages of looking into that. My first impression of that wasn't very good, but it's too early yet to say.

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I don't want to force our people and say they have to take this road and they have to pay. I don't know how you'd do that when you have all the public roads around it. People will go around that road if the cost is too high. Because of the sparseness of our population in Alberta - I'm sure it's the same in Manitoba - it's not quite the same as where you have heavy traffic and heavy population. There are a lot of things to be worked out with that before we could see it happening in our country, but I wouldn't totally discount it.

The Chairman: Mr. Minister, I'm going to end it at this point, because I know you have to get on and we have another witness coming. That's an area we will be looking at. If you are developing information in that particular area, we'd be interested in knowing about it also.

Thank you very much. I do appreciate your taking the time to come here, and hopefully we'll see you again.

Mr. Fischer: Thank you and good luck to your committee. We wish you the best of luck when you take it back to the House.

The Chairman: Now I'd like to call, from the Better Roads Coalition, Mr. Harold Gilbert.

Welcome, Mr. Gilbert. I have been informed of your very lengthy career in this area and I'm very pleased that you could come before us to discuss this topic.

Mr. Harold Gilbert (President, Better Roads Coalition): Thank you very much, Mr. Chairman. My name is Harold Gilbert. I am chairman of the Better Roads Coalition of Ontario. Formerly I was deputy minister in the Ontario Ministry of Transportation and Communications for 11 or 12 years.

With me today I have David Bradley, president of the Ontario Trucking Association and Nick Ferris of the Canadian Automobile Association. They are both vice-chairmen of the Better Roads Coalition. You will also be meeting one of our coalition officers, Brian Crow, of the Ontario Motor Coach Association. He will be making a presentation on behalf of that association and will, in particular, outline the impact the national highway system has on their industry and the tourism industry.

As you can see, the Ontario Better Roads Coalition, through our 14 association members, represents the majority of road users in Ontario. We have an opening statement that I'm sure is in front of you now, but I would like to read from this opening statement.

The Ontario Better Roads Coalition was formed in 1987 as a coalition of road users. It has constantly attempted to make governments aware of the cost of neglect of our road system, not only to transportation in Canada and Ontario but to trade and tourism within Canada.

As part of our attempt to make governments, particularly our national government, aware of our concerns, we prepared in January 1996 a brochure entitled Ontario and the National Highway System, Road to the Future where we summarize in detail the consequences of this neglect. We wish to include this brochure as part of our submission, and I know all of you have that in front of you.

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There are, however, a number of issues to which we wish to provide further comment. They are as follows.

First, the Minister of Transport, the Hon. David Anderson, has made constant references to the Constitution of Canada in which he states that highway matters, including the Trans-Canada Highway and the national highway system, are a provincial rather than a federal responsibility. The Better Roads Coalition would reply that this completely ignores the wisdom that led to the actions of our national government in the late 1940s and early 1950s that resulted in the Trans-Canada Highway Agreement. In other words, there is a precedent for national government involvement in our national highway system.

Politicians of that era recognized that there was a problem, and if Canada was going to develop as a nation, if the east-west trade was going to develop, if Canadians were going to travel across the country rather than through the United States to visit and do business with other Canadians, they required a national highway suitable to allow this to happen.

This, I would add, is where you as politicians find yourselves today, only more so. Now, why do we say this? Our east-west highway is totally inadequate, considering both its structural condition and its capacity to carry today's trade. Business and tourist travel are once again having to use the U.S. routes, particularly through northern Ontario.

I would add on a personal note that in 1952, as a young engineer having been transferred from Kingston to Kenora, I was surprised, I'd say, or shocked, to find I had to travel the U.S. route because the Canadian route was too unreliable. Today, information is being made available at border points - that is, International Falls in particular - advising tourists to travel the U.S. route to avoid poor Canadian roads. In other words, gentlemen, we are now back to where we were in 1952.

That is an example of what the condition of our national highway, the Trans-Canada Highway, is doing to our valuable tourist industry. Added to that is the fact that our north-south trade has expanded at an unprecedented rate, and just-in-time inventories are a fact of life.

Trade is the engine of economic growth in Ontario. The Ontario economy is an export-based economy, so our international competitiveness is essential. One-quarter of Ontario's GDP is exported and three-quarters of Ontario's exports go to the United States. The major northeastern and mid-west U.S. markets are all within one day's truck drive from Ontario. By value, 75% of Ontario's exports the United States move over the road, as do 83% of U.S. imports into Ontario. That translate into 80% of Ontario's trade with our largest trading partner moving by road. More trade crosses the Windsor-Detroit gateway than any other gateway in the entire world.

Our highway infrastructure is a key factor in attracting direct investment in manufacturing and assembly plants to Ontario. Transportation costs are a significant factor in the international competitiveness of our manufacturing industries. High value-added manufacturing, which is key to Ontario's current and future economic prosperity, needs an efficient highway infrastructure to support just-in-time inventory systems.

Considering the task of this committee, roads are an integral part of trade and tourism. If Canada, as a nation, makes trade agreements with the U.S., Mexico and other countries and if it is concerned about national unity, then we cannot separate the instrument that makes it possible; that is, the road, our national road system.

Secondly, in our brochure Road to the Future, we make reference to the revenue the federal government now receives from the Ontario road user. Updating the statistics shown in this brochure, we know that in gasoline and diesel fuel alone, Ontarians are now paying $2.2 billion per annum to the federal government in road user taxes.

In his correspondence, the Hon. David Anderson, the minister, constantly makes us aware of the fact that road fuel taxes become part of the consolidated revenue fund. We are aware of this, but surely there has to be some recognition given to the source of this revenue, that being the road infrastructure. In other words, if for no other reason than to ensure that this revenue will continue, the national government should be prepared to put something back into this infrastructure.

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We are aware of the ongoing debate that goes on with regard to construction jobs and its effect on the rate of employment, particularly on a so-called permanent basis. Often forgotten in this debate are several basic factors.

Construction workers, truck drivers, equipment operators, etc., cannot be retrained for something else while no other jobs exist. We cannot ignore the fact that these jobs include design engineers and technicians - all highly skilled positions. In fact, I would like to mention that on a recent visit to my own alma mater, Queen's University, I was shocked to learn the majority of our civil engineering graduates have to turn to North Carolina and other U.S. states, since there are no jobs in Canada.

Finally, while supplying work that is urgently needed during construction, we provide security for our service and manufacturing jobs in the future.

In conclusion, we must emphasize that Canada is the only modern federal state without a national highway policy. We must also emphasize what a joint federal-provincial study showed: that of the 25,000 kilometres of national highway system, almost 40% is below recommended operating standards, with the most strategic sections located in Ontario.

As stated in our brochure, we realize that the national government has directed some funds to the national highway in some parts of Canada through transitional funding, brought about by the closing down of other programs. As we have stated, not only is Ontario completely left out using this approach, but this process does nothing to recognize the national highway system as a national system.

The national highway system has to be viewed nationally, not as a series of fragmented sections. It has to have a functional entity. If we're going to remain a trading nation that takes advantage of its differences, we must find a way to address our national highway system before it is too late.

Gentlemen, the stakes are too high to ignore it any longer. I say this because, to be quite honest with you, I have been involved in transportation for a long time and have been talking personally about this for most of those years.

As I mentioned, Mr. Ferris and Mr. Bradley are with me, and we'll be very glad to answer any questions you, Mr. Chairman, and the committee wish to ask.

Thank you very much.

The Chairman: Thank you, Mr. Gilbert. Mr. Gouk is next.

Mr. Gouk: Thank you.

There's just one area I want to touch on, with maybe a couple of questions on it. I've written policy for our party based on dedicated revenues. It's based on the concept that the government is showing as well a move toward user-pay, which I support. But in order to have user-pay, you first have to know what the user is already paying. There we get into our fuel taxes, gas and diesel.

Are you in favour of a fund being established dedicating revenues from the fuel taxes at federal and provincial levels in order to rebuild and maintain the highway infrastructure?

Mr. Gilbert: Are we talking about existing funds that are coming in?

Mr. Gouk: That's the second part of the question. I am talking first about the concept of taking those funds. In the case of British Columbia, whose figures I am more aware of, almost $1 billion per year goes into general revenue to be spent on whatever, even though it's extracted from the transportation industry. Are you in favour of that money going instead back into a dedicated fund where it can only be spent on the sector it was taken from?

Mr. Gilbert: Yes. I thought you were talking about levying new fees.

Mr. Gouk: I'm going to talk about that, but the first part is just the concept of having dedicated funding.

Mr. Gilbert: Definitely.

Mr. Gouk: That is as far as my policy has gone. But in conversation with others who have come before us, we've heard pros and cons on this, and certainly the trucking industry would be impacted as heavily or heavier than anyone else.

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Would you be in favour of having an additional tax placed on fuel, provided it was matched by both the federal and provincial governments and set up in such in a manner that it was in excess of current provincial and federal funding? In other words, whatever they spend they would take - say, 2¢ at the federal level and at the provincial level and a new 2¢ tax, provided the entire 6¢ went into a dedicated fund to be spent only on highway infrastructure in excess of moneys currently spent.

Mr. Gilbert: I wouldn't be in favour while there's $2.2 billion in Ontario alone coming in from the gasoline and diesel tax. If you were on a level playing field at the present time and there were needs there.... Quite frankly, if you took even part of that $2.2 billion that is now going into federal revenue and put it back into the system, you would look after the problems as far as the national highway system is concerned.

We are not convinced there is any need to start levying additional dollars when there's already $2.2 billion. Dedication to us is dedicating funds that are already coming in.

The Chairman: I'd like to ask a question related to this and just expand upon the point you've been making.

Leaving aside whether it's a new tax or existing revenue, with this concept of dedicating a tax - as they do in the U.S. - where would that money go? Would an entity then receive and administer those funds on behalf of the national highway system?

I wouldn't want to even begin to think through the complexities of getting all the provinces and the federal government to agree to do it. Are you proposing that there be some sort of independent federal-provincial organization that would receive and administer these funds to ensure the upgrading of the national highway system?

Mr. Gilbert: We are in favour of dedicated funding. If it is done by a so-called legislation that prevents it from being spent...that would be an ideal situation.

At the same time, if the federal government said it was prepared to put in 2¢ per litre of the $2.2 billion now being collected to get this national system going, that would be fine. Each province could handle it in whatever way it wanted. But actually dedicating or saying that we recognize the money coming in is coming from the infrastructure so we're prepared to put it in would certainly be satisfactory.

The Chairman: Mr. Gouk.

Mr. Gouk: I have written policy for our party based on dedicated revenues, and it has been mentioned in here correctly that the responsibility for highway building is provincial. Whether it should be or not, it is right now, except for where highways pass through federal property, namely federal parks.

I would think the answer to the chairman's question is that the commitment will be to hold that money aside at the federal level and provide it to the provincial government, which would hold the dedicated funds and hopefully match them as well. The responsibility then would be for the provincial government to account for those funds and spend them on the highway infrastructure straight out of there. At least that's my position.

Mr. David Bradley (President, Ontario Trucking Association): We're not sure we can give you a definitive answer today, but it seems to me, at least when it comes to land transportation, that the federal Government of Canada has virtually abdicated any role on the regulatory, capital, or whatever side of things.

In the United States, I know they have some of the same problems in terms of harmonization and standardization as exist here. We don't hear about them as much because the U.S. federal government, by holding onto the purse strings, can impose and exert pressure on the states to ensure some higher level of standardization and cooperation on a host of land transportation issues.

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Frankly, the federal government has zero leverage in Canada now to do that kind of thing. I heard some questions of the previous group about truck weights and dimension standards and those kinds of things. Well, the federal government has virtually no role left in that area. You might want to consider a highway trust fund as a way to in fact bring about some national uniformity again.

The Chairman: Good. I'll come back to you, Mr. Benoit.

Mr. Cullen.

Mr. Cullen: Thank you, Mr. Chairman.

Thank you, Mr. Gilbert. I'd like to congratulate you on an excellent brief and a case that is very well put.

I would like to talk a bit about, and get your reaction to, this notion of public-private partnership and financing highway improvements and maintaining highways.

To pick up on the discussion of funds and dedicated funds, having worked in government myself - and I know you were a former deputy minister of transportation in Ontario - I have developed a certain cynicism about funds. It seems the funds are set up with all the best of intentions; they come and then they go. It's happened in British Columbia; it's happened in Nova Scotia.

In the United States, they seem to have developed this model of public-private partnerships. I'm wondering if there are any lessons to be learned from them. Do they have a way, for example, of hooking the private sector into some dedicated funds that causes governments to think more carefully about uncoupling these funds? If we wanted to promote these public-private partnerships, how would you go about it? What would your advice be?

Mr. Gilbert: It's difficult when it comes to existing highways. I'll use Highways 17 and 11, and what have you - the Trans-Canada Highway, for example.

I should mention that it was the Better Roads Coalition that put the policy in front of the former government that got 407 going. We could see that 407 wasn't going to go anywhere, even though they had announced they were going to build it. We knew that it was going to take so long to build and take so much money - recognizing they didn't have the money - that we had to do something.

We put together a suggestion to the former government and outlined some conditions that the Better Roads Coalition members could support - and believe me that was no easy task, because we had truckers and automobile people and what have you. One of the main conditions was that there be an alternate road. The problem in northern Ontario is that there is basically only one road.

When you come to public-private partnerships through some of the greatest needs as far as Ontario is concerned, it is very difficult. I would say that if there were some way that it could be done using existing funds, so that a toll wouldn't be added to that road, then there are some possibilities. But as for saying, as they have on the 407, go ahead and build this thing and we're going to allow you to put on a toll - we couldn't support that. I don't see how any government could support it, because there is no other alternative available for the public to use.

Mr. Cullen: Mr. Gilbert, how does it work in the United States? Is it working well there?

Mr. Gilbert: Oh yes.

Mr. Cullen: Do they have different problems?

Mr. Gilbert: A lot of it goes back to the fact that they have an alternate road, as you know, that is available. If you don't want to travel on that toll road or whatever it was, then you don't have to. You have a choice.

The Chairman: Thank you, Mr. Cullen.

Mr. Caron.

[Translation]

Mr. Caron: Thank you for your presentation, Mr. Gilbert. It was very interesting.

You have mentioned at the beginning that the minister Anderson had told you that roads were a provincial matter. It must mean that you contacted the minister a few times to ask the federal government to work towards a national highway system.

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You also stated that an agreement was possible; you give the example of the Trans-canadian in the early 1940s. I know, from my own experience, that in my region, Saguenay - Lac-Saint-Jean, there was a federal-provincial agreement to build a highway. In other words, it is possible to conclude agreements about that.

I have two questions. Here is the first one. Do you think Ontario would be in favour of a federal-provincial agreement on highways? What would be the position of the other provinces, as far as you know, for example, of Alberta and of British Columbia? If that should raise a constitutional problem, do you think a solution could be reached? Could the various interested parties come to an agreement?

The second question is about what involves a trans-canadian system. One always think of a east-west system. However, with NAFTA and a growing north-south trade, don't you think that some governments would rather have a north-south system, as some railway companies are doing?

Mr. Gilbert: I'll answer your second question first. The Roads and Transportation Association of Canada, which the federal government is part of, initiated a study to identify the needs of transportation, and they included both the north-south as well as the east-west requirements. They came up with a report that outlined these conditions. All of the provinces agreed to that report and the needs outlined in it. The federal government also agreed with that. In getting together to determine whether the federal government was going to be part of paying for it, that's where the problem developed and the whole thing fell apart. But certainly, the north-south highways were identified as well as the east-west highways.

We talk more in this paper about our east-west highway, because through northern Ontario the needs of that east-west highway are very, very high - so much so that it is affecting our public, as I mentioned, whether it be by way of tourism or by way of trade. Our north-south highway is needed, as we have pointed out. The Windsor-Detroit gateway has the most truck traffic anywhere in the world. So the needs are there for north-south, but the requirements also are very, very high for the east-west.

The Chairman: Thank you, Mr. Gilbert.

We are into overtime, but this is an interesting area and one the committee has been concerned about, and I have two other questioners. I'm going to permit the two other questioners to pose their questions and then give you a chance to respond at the end. Mr. Benoit, can you pose a brief question?

Mr. Benoit: Thank you, Mr. Chairman.

To Mr. Bradley, you commented that the federal government has no jurisdiction that would affect the movement of freight between provinces. That's actually not the case. In fact, under sections 91, 92 and 121 of the BNA Act, the federal government clearly has not only the right but the responsibility to see that trade barriers between provinces are never set up.

These trucking regulations often are used, particularly in the case of B.C., Saskatchewan, and to some extent Ontario, to keep truckers from other provinces out. They are unfair trade barriers, and the federal government clearly has the jurisdiction in those areas. In terms of building roads, of course the federal government doesn't have jurisdiction, nor should it.

The Chairman: Thank you, Mr. Benoit.

Before you respond, Mr. Bradley, Mr. Jordan, do you want to pose a question also, please?

Mr. Jordan: My question is for Mr. Gilbert, but Mr. Bradley might want to add something. You mentioned Kingston and Queen's, and I think you'll be able to identify with this. There's a straight stretch of Highway 401 between Gananoque and Kingston, where it goes for several miles, four-lane, and it runs parallel to the railroad track. I drive that quite frequently, with trucks behind me, trucks beside me, and trucks ahead of me and trying to get on top of me. But I look over at the railroad and there's nothing going on there.

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So I wonder if the trucking industry would see that the problem is perhaps that we have been too liberal as to the loads, the length of the loads, the weight of the loads, and so on. How would he react if that was a reality?

The more you use the road, the sooner it's going to wear out; the heavier the load, the sooner it's going to wear out. Those are realities. If restrictions were placed on the trucking industry to have lighter trucks designed, carrying lighter loads perhaps, what would your reaction be to that?

The Chairman: Okay, now, we have two questions. Mr. Bradley, I'll let you respond to those questions. Then I know you have to go.

Mr. Bradley: Sure, and I'd be pleased to discuss it further outside.

But my point with respect to the federal government was not one of their legal right under the BNA Act or any other act; it's the fact that they have abdicated that responsibility and transferred it to the provinces to a great extent. The internal trade agreement as it pertains to trucking, quite frankly, has been a miserable failure.

In response to your question, sir, about modal shift, the last major east-west trade corridor in Canada is Toronto and Montreal. It's already moving lightweight manufactured product that is not efficiently moved on the rail. Toronto to Montreal is only 350 miles, and the railways as yet have not been able to develop the technology to take that freight off truck and move it as flexibly and as efficiently as the trucking industry is able to. Even if they were and if you were to double-stack every inch of that track between Toronto and Montreal, you would make such a small dent in the amount of truck traffic moving over that system that it wouldn't be noticeable.

Our members, the trucking companies, really don't care if freight is moving over rubber or over the steel highway, as long as it's transparent to the shipper and the manufacturer in terms of price and service. So you can penalize the trucking industry, you can force freight onto rail, but what you're going to hurt in the end is the competitiveness of the high valued-added manufacturing base and the export base of the province.

The Chairman: Mr. Gilbert, do you have a final comment?

Mr. Gilbert: Mr. Chairman, I do want to thank you on behalf of our coalition for the opportunity to meet with you today. As I mentioned, from a personal point of view I have been part of this problem for a long, long while. I've heard the argument that is constantly raised about the federal government having no constitutional responsibility and what have you. But as I have said on behalf of the coalition, in the 1940s the federal government at that time, politicians at that time, said, look, we know there is a problem; let's do something about it. I really think that's what the federal government has to do again. You have to accept the fact that trade, tourism, national unity, whatever it is, is there, and it's part of the whole problem.

The Chairman: Thank you, Mr. Gilbert. At this point we can meet you halfway; we know there's a problem.

Mr. Gilbert: That's good. Thank you very much.

The Chairman: Thank you.

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Our next witnesses are from VIA Rail: Terry Ivany is the president; Christena Keon Sirsly is vice-president of marketing and information services; and Roger Paquette is vice-president of planning and finance and treasurer.

Welcome. My name is Reg Alcock. I'm the chair of this committee. I tell you that simply because the VIA Rail maintenance centre in Winnipeg is someplace I know very well and is dear to my heart, and we look forward to seeing it grow.

Mr. Terry Ivany (President, VIA Rail): And dear to ours, Mr. Chairman.

The Chairman: Thank you. I appreciate that.

You know the process; you've been before committees before. Would care to make your introductory remarks? I know there are a number of questions, including some of my own.

Mr. Ivany: Thank you, Mr. Chairman, and I will be brief because I do appreciate the fact that you may have some questions for us. I'd like to say it's a pleasure to be here today. I'd like to talk to you about what we view as a new VIA and its contribution to Canadian transportation and tourism, of course.

Modern and efficient transportation systems today are a strategic asset for any country. Our contribution to that asset is a cost-effective, attractive passenger rail service system that serves the needs of Canadians.

I want to address three points here today. First, since 1992 VIA has become a high-quality, low-cost operator compared to any passenger rail service anywhere in the world. I believe we are lean and efficient and very much customer-oriented these days.

Second, VIA makes a significant contribution to tourism.

Third, VIA is providing important transportation alternatives in congested areas such as the Windsor-Quebec corridor.

Let me start by saying that four years ago VIA was a very different company, lacking in customer focus and recovering only 31% of its costs through the fare box. VIA's immediate challenge was to dramatically reduce its dependence on funding, and we had to make a choice. The choices were to slash the train services network by another 25% or to change our approach to the way we do business. To us, the choice was clear. Since then, we have maintained the network intact and changed our whole approach to doing business.

We knew if we could take all unproductive cost out of the operation while improving quality, we would soon be in a position to pursue and capture high levels of ridership, revenue and yield. VIA, since 1992-93, has cut its government funding from $331 million to $222 million at the end of 1995, an improvement of $109 million a year, while at the same time maintaining the network.

As I said, we haven't allowed service to decline. As a matter of fact, we've improved it. We've replaced the old steam-heated equipment in southwestern Ontario with our new silver trains. In the west, we've turned the Skeena into a daylight service that caters to residents and tourists alike. We also introduced refurbished equipment on the northern services, providing better services and new opportunities for adventure tourism.

In June we introduced a frequent-user program, VIA Preference, similar to those offered by airlines, which we expect will spur continued growth in ridership and revenues, and we have, of course, many ideas in the pipeline.

We're the first ground transportation service in the world to link up to airline reservation systems such as SABRE and Worldspan. This has opened a huge delivery system, I think, for our product.

In 1997 we will introduce our own completely new reservation system that will give us added flexibility and provide better customer service.

We also have planned a significant station improvement program, which will modernize the current facilities, again providing better service and reducing cost.

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All this hard work has resulted in recognition for VIA as a top quality transportation service. A few years ago, who would have thought that VIA Rail would be asked to chair Canadian Quality Month? That's exactly what we did in October of this year at the request of the Canada Quality Council.

More importantly, we can now afford to consider new opportunities. In fact, we can't afford not to explore every opportunity, because rather than costing us money, they can now make us money. Any new initiative we pursue must make a net contribution to the bottom line or we don't do it.

That brings me to my second point: VIA has a responsibility to take advantage of every opportunity to improve its own revenue picture and to return a dividend on Canada's investment in VIA. In fact, VIA activities contribute more than $100 million a year to the country's balance of trade.

Tourism, being the country's fourth-largest industry and one of the fastest growing sectors, is obviously critical to Canada. It creates work for half a million Canadians and adds $27 billion to our economy. VIA has had an important role to play. It operates a national system with trains and routes that are often destinations in themselves. We continually improve our products and add capacity where we know we can attract new customers and improve our bottom line. VIA has built strong strategic alliances with the Canadian Tourism Commission, provincial and local tourism authorities, and many industry associations.

VIA has received recognition for its accomplishments. A global award was presented by the World Travel Market - I'm going back to 1992, but it was at that time that we really started to improve - for our Silver and Blue service as having made the most significant contribution to tourism in Canada. We have received Brunel Awards - in an international railway design competition - for our silver train, our refurbishment project in 1994, and our new uniforms in 1996.

To tell the world about what we have to offer without the enormous cost of advertising, we work with trade shows around the world, support our suppliers, and work with tourism promotion partners to attract free editorial coverage of VIA and Canada. These efforts have been enormously successful. For instance, National Geographic featured both Canada and VIA's coast-to-coast network in The Seven Greatest Journeys in the World, their most recent hardcover book. The television service, BBC Worldwide travelled the country by VIA for their latest and very popular instalment of Great Railway Journeys which is currently being broadcast in more than fifty countries. You can see it here in Ottawa on PBS this month. And last spring, Good Morning America presented a week-long focus on Canada. This fine example of public and private sector cooperation brought more than $20 million worth of advertising exposure for Canada as a tourism destination.

This is only a fraction of the coverage that VIA facilitates as we host more than 300 top-level international journalists per year. This work benefits not only VIA but also Canada and the entire tourism industry.

Consider that in 1996 alone, VIA's economic impact in Canada is responsible for 21,000 full-time jobs, and by the year's end, we will have contributed $1.5 billion of economic activity. This means that for every dollar of operating funding, we contribute $8 to the economy. And consider also that 50% of tourists on our western route come from outside the country, generating a significant influx of foreign capital.

But VIA is also about domestic tourism. Our fares for families, seniors and students make rail travel a popular prospect for Canadians who want to visit their own country.

My final point is that an exciting prospect for VIA is our improvements to services in the Windsor-Quebec corridor. These improvements are positioning the train as a viable alternative to the overcrowded highway system. VIA is a key player in this area, with some 20% of the public transportation market. VIA transported more than 3 million passengers in the corridor in 1995, and we're committed to seeing that number rise.

VIA recognizes that Canadian business is changing, with more self-employed individuals and small businesses. These travellers are particularly value-conscious, and we are currently reviewing our corridor service to bring about major improvements that will better address their needs. But we have a long way to go.

Currently, all forms of public transport - train, bus, plane - make up only 15% of travel in the corridor. Since cars make up 85%, it is an obvious target for us to increase ridership. Most of the highway congestion in the corridor occurs near major urban centres, and VIA Rail has begun to explore the market for a reliable, low-cost, long-distance commuter service to address this particular problem. This type of service doesn't add another highway, highway lane or parking lot. It's more environmentally friendly than automobile traffic, and t's a ready-made solution for overcrowded highways. This approach is just one more way in which VIA is trying to provide Canadians with passenger rail that makes sense.

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VIA is focused on providing high-quality, low-cost travel to Canadians. Innovation, efficiency and superior service are the key characteristics of what I classify as the new VIA. Through our impact on Canadian tourism, our search for new solutions to transportation challenges, and our increasingly efficient operation, VIA pays and will continue to pay dividends to Canadians.

That was just a brief opening statement, Mr. Chairman. I'd be very happy to answer any questions, and if I can't answer them, I'm sure my colleagues can.

The Chairman: Thank you very much, Mr. Ivany.

I'm going to start the questioning with Mr. Gouk this time.

Mr. Gouk: Thank you, Mr. Chairman, and good morning, gentlemen.

As you know, the government is moving toward privatization and a removal of subsidies. On aviation, they've basically devolved the airports and have privatized the air navigation system. The committee just finished a bill last night that will do the same thing with ports in order that ports will produce a net revenue for the government. In highways, a large net source of federal revenue is from the highway system - and I emphasize that it's a net source of revenues. And in the case of rail, CN Rail has been privatized and freight subsidies are being removed.

Given all of that in all sectors, with the one exception of VIA Rail, which is subsidized - and you can correct me if the figures have been revised downward, but the last figures I have are subsidies to the tune of $600,000 a day - what is the justification for VIA Rail getting this huge subsidy when every other sector of transportation in this country, including rail, has been commercialized and there are no longer any government revenues going into them?

Mr. Ivany: That's a very good question. And by the way, that $600,000 a day is down $300,000 a day from two years ago, so it's going in the right direction.

I don't necessarily agree with your statement that there are no subsidies in these other modes of transport. Wherever you go in the world today, there is some kind of subsidy for public transportation, whether it be airlines, airports or whatever. I know the government is moving into local airport authorities. In some of these cases, there are negative kinds of leases in which subsidies will certainly continue for capital improvements and other operating things. I've been involved in a few of them myself.

I think you just finished a discussion on highways and on whether or not there are subsidies for different modes of transport. Yes, there is a net benefit to the government in terms of the taxes that they charge, but in terms of the actual mode paying its fair share, I think there's probably some reason to discuss and some arguments pro and con. I used to be in the trucking industry at one time and we were always accused of not paying our fair way.

So in terms of the actual subsidy that VIA pays, it is clear. There's nothing hidden here. We use the tracks of CN or CP, they charge us, and we send them a cheque each month. It's clear that this is what we pay for.

In terms of subsidy for passenger rail, I'm not aware of any country in the world where there is not a subsidy involved. I know there are many countries trying to resolve this particular problem, with certain degrees of success. In our country, whether or not we have a passenger rail service is not for me to decide, of course; it's for the government to decide, because it is a public policy statement.

One of the problems we have in this country when I compare it to Great Britain, for instance.... The British say they're privatizing British Rail. They have 25 segments - they call them TOCs - nine of which have been so-called privatized, yet with that privatization goes a certain amount of subsidy. As a matter of fact, the remaining TOCs are not so-called privatized yet. The subsidy to British Rail this year, with the new configuration they have, will double to £4 billion per year.

So in terms of whether or not the government of this country should continue to subsidize VIA Rail, again that is not my decision. All I can tell you is what's happening elsewhere.

The Chairman: Thank you, Mr. Ivany. Truckers are known for their short responses.

Mr. Ivany: It's been six years, Mr. Chairman.

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The Chairman: Mr. Gouk, one final, very short question.

Mr. Gouk: You mentioned that the airports are still getting some subsidization, $35 million, from the the airport capital assistance fund. The government derives that much income from Vancouver airport alone.

Given your comment that there has to be some subsidization...the Rocky Mountaineer started with VIA and was turned over to the private sector, which has bought certain assets of VIA, including running rights. They send the same cheque to the other rail lines at a higher rate.

The Chairman: And your question is?

Mr. Gouk: Now that they have built their success from the 6,000 and some odd that they took over from VIA to 42,000, and continue to expand, what is the justification for VIA going in and competing with that?

You said you're only going into areas where there's a net contribution. But given that your infrastructure is already there - your offices, your directors' offices, and all those things - the fact that it produces a net increase to a company that's already being subsidized at $600,000 a day is not a net profitable thing from a direct competition point of view. So what is the justification for going in now and competing against the private sector as a government-subsidized company?

Mr. Ivany: Mr. Chairman, I think this is not going to require a terribly lengthy response, but I think I should take the opportunity to respond to that, because I would like to respond to the spin versus fact of exactly what is happening with respect to the GCRC.

In 1990, Mr. Chairman, we operated I think fourteen trains through Jasper. We had 700,000 passengers, I think, on the Transcontinental; 325,000 went through Jasper on our particular service. We identified - this is before my time - a very niche market, a very different product that could be initiated in that particular area, and that was the Rocky Mountaineer. As a matter of fact, in 1990 the Rocky Mountaineer made a net contribution to our bottom line of $1 million. So it was a very attractive piece of business. But the government of the time thought that obviously private enterprise would be interested in doing that particular segment - it was different from our regular service - and they went ahead and offered it up. The GCRC were the recipient.

The business is such that we have tour operators who block a lot of space, and I think there was a number put forward during the RFP that didn't manifest itself. Every time I hear the story, the number of passengers that GCRC get goes down. But I think it was around 7,300 at the time that took place. They have done a commendable job since then. It's been six years and they've built it to 43,000 passengers this past year, so we congratulate them.

As a matter of fact, we have helped them out considerably with good rates on maintenance, good rates on cleaning, and good rates with respect to sharing our facility in Vancouver. As a matter of fact, it was only last year we negotiated a very good rate for them to have some office space upstairs. These are not the actions of a company that's trying to put another company out of business.

At the same time, let me say that our number of frequencies since then through Jasper has been down to three times a week. In 1990, 325,000 passengers went through there. This year, less than half that number will go there. These passengers have gone somewhere; there's no question about that.

The other thing I'd like to say is that this is not a new service. This is a continuation of an existing service. This service was never taken off. It is a very different product altogether.

GCRC has a very interesting and attractive product. In other words, it's all daylight service; it's a tourist-oriented service, it's vacation-like in terms of its festivities. You overnight in Kamloops at a hotel, you have a barbeque. It's that kind of service.

Our service is more basic transportation in that you get on the train in Vancouver at 8 p.m., we offer you not even a meal but a few hors-d'oeuvres, you go to bed. Then you wake up in the morning and you're in the mountains; we offer you a brunch, and you get off in Jasper at 2 p.m. End of deal. We don't offer tour packages, although tour companies take that segment of our particular piece of traffic and put it into a tour package, which they sell.

So I think it needs clarification that this is a very different service from what GCRC offers.

The Chairman: Thank you, Mr. Ivany. I believe you have provided that clarification.

Mr. Cullen.

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Mr. Cullen: Thank you, Mr. Chairman. I'll be very brief.

First of all, I'd like to commend VIA for its new focus on the customer. Certainly, it's evident to me as I use the service from time to time in Montreal, Toronto, and Ottawa. I think it pervades your staff and the way business is done.

I can't resist the opportunity with the CEO of VIA here to ask about the desirability and feasibility of a fast train between the corridors of Montreal and Toronto. What are your views on that?

Mr. Ivany : Being in the railway business, I think it is always desirable to go faster. Our position on that is, if not to go fast, certainly to go faster. The various levels of governments have done extensive studies on that, and I think the price tag is a little frightening, at $18 billion.

All I can say to this is - and obviously I won't make that decision as to whether we spend $18 billion - that VIA today is very focused on customers, very focused on cost, very focused on reducing our reliance on public funding. Regardless of whether or not there's a fast train in the Windsor-Quebec corridor, we want to be the obvious choice to operate it because of the way in which we do business.

The Chairman: Thank you very much.

Mr. Gouk, you wanted a 10-second rebuttal. I'm counting.

Mr. Gouk: You said you made $1 million carrying 7,300 passengers, using your figures.

Mr. Ivany: No, I didn't say $1 million.

Mr. Gouk: Net contribution to -

Mr. Ivany: Not carrying 7,300; 7,300 is the number that GCRC received after we had finished the last year. It was the previous year.

Mr. Gouk: I heard you say you contributed $1 million.

Mr. Ivany: We did indeed do that, yes.

Mr. Gouk: That's $137 a passenger in 1989. That's pretty -

Mr. Ivany: We carried 15,000 passengers, Mr. Gouk.

The Chairman: Thank you all. Mr. Caron has been waiting very patiently.

[Translation]

Mr. Caron: Thank you for your presentation. I will ask you a question about services and liaisons in remote areas. There is no doubt that I see things differently from my friends of the Reform Party, because if you don't subsidize services in remote areas, they disappear.

Let's take, for example, the line between Montreal and Jonquière, not because I'm the member for Jonquière, but because it's the line I know best. In any event, I have noticed that, in the last few years, VIA has made a special effort to consult the population, to maintain the service, to foster communications and to develop a partnership.

The question I want to ask you is the following: will VIA Rail keep doing all that's possible, and even more, to maintain a passenger railway service in remote areas? For a number of towns, this is very important, and for others, it is a necessity. For some of them, its very important because it allows a diversification of transport modes and that reduces the road traffic.

In any event, I'm not sure that subsidizing this service is too expensive for the population, if you take into account the cost of maintaining the highway system. Passenger railway service could be to our advantage.

This is the question I wish to ask you: are you really committed to keep offering a service in remote areas, to preserve a partnership with areas as far as promoting tourism and tuned to the wishes of those areas?

[English]

Mr. Ivany: Obviously, VIA looks at the remote areas as being a very important part of our mandate. I think in your particular area, this past year we've introduced new Silver and Blue equipment, which is much better than the old steam-heated equipment.

We have met, and are meeting on a continuous basis, with the communities, because I do believe, as you do, that it's very important for us to communicate, especially in the remote areas, with people on that alternative transport mode.

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Third, we have recently been promoting - with great zeal - ecotourism or adventure tourism. Obviously, the remote areas are a natural resource for just that kind of activity.

The Chairman: Thank you, Monsieur Caron.

Thank you, Mr. Ivany. I believe it is the case that VIA Rail has, if not the lowest, one of the lowest levels of subsidy in the industrial world. I thank you for your time today. I appreciate your attention to this topic. We look forward to meeting with you again.

Mr. Ivany: Thank you very much, Mr. Chairman. It was a pleasure.

The Chairman: At the request of the clerk, we will take a two-minute recess to recharge things.

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The Chairman: Okay, let us begin.

Now we have, from the Brotherhood of Maintenance of Way Employees, Mr. Housch.

Mr. Housch, the floor is yours. I would ask you to confine your remarks to about 10 minutes, and then members will have at you.

Mr. G.D. Housch (Vice-President, Brotherhood of Maintenance of Way Employees): Thank you, Mr. Chairman. It's indeed a pleasure to be here to present our point of view.

I'll give a brief background. Our union's about 127 years old, and we've always been a railway union, strictly railway. We've seen a lot happening over the last 100 years, and we've certainly seen a lot happening over the last 10.

The focus of this committee's investigation is on highway infrastructure, and we think this concept has to be broadened. If the government is going to fund an infrastructure program for highways, it could and probably will reduce the efficiency of the transportation system, certainly for the railway industry. The federal government has provided funds to the provinces for highway infrastructure, and future federal investments in transportation should be broadened to include other modes of transportation.

Examples of multi-modal transportation investment are certainly well documented in European countries such as Sweden and even in the United States, with their Intermodal Surface Transportation Efficiency Act, or ISTEA. They provided funding for truck-train intermodal terminals, railroad infrastructure to ports, restoration and improvement of railroad passenger train stations and commuter train infrastructure and improvements.

Any future federal funding for infrastructure projects must permit flexibility to fund non-highway modes, such as rail-marine, rail-truck terminals, rail branch lines, commuter train projects and urban transit.

The State of Florida is committing $70 million per year for 30 years to provide half the capital required to build a TGV high-speed train system from Miami to Orlando and Tampa. They've justified this as an alternative to expanding highway systems. It is also going to be drawing on federal highway dollars to finance this investment, if the Republican Congress agrees to that.

Intercity rail passenger projects should qualify for funds under any new Canadian infrastructure program. Relatively inexpensive incremental improvements to VIA Rail's service can provide significant benefits with minimal investments.

In the 1980s VIA invested about $36 million upgrading slow-speed tracks between Ottawa and Brockville to improve the Ottawa-Toronto route for the new LRC trains. Time of travel was reduced from 4 hours and 45 minutes to 4 hours and 2 minutes. The number of passengers increased from 328,000 in 1985 to 516,000 in 1994, and recovery of direct costs increased from 64% to 97.8% in 1994. This investment was paid back through higher revenues and declining operating subsidies.

Investment of a modest $7 million in VIA's Toronto-Windsor route reduced travel time by 34 minutes. To achieve that kind of time-saving on a similar highway route would require hundreds of millions of dollars improving highway infrastructure.

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By adding non-stop train and investing $4 million, VIA was able to reduce the travel time between Montreal and Toronto from 4.5 hours to just under 4 hours. A Montreal-Toronto non-stop train schedule of almost 3 hours and 30 minutes is feasible with existing train equipment by increasing the average speed through modest plant improvements. These incremental improvements will provide the foundation for later electrification, new equipment and better tracks and high-speed rail service such as that being built in Florida and the U.S. northeast corridor.

As incremental improvements are made to VIA corridor services, subsidies will decline as faster running times attract riders and improve productivity of equipment and staff. As ridership increases, government and taxpayers will save costs for road accidents, road construction and auto pollution. This will free up resources to support improved VIA services in the Maritimes, northern Quebec, Ontario and certainly in the west.

As we move to a high-speed train system, the operating profits from the corridor can subsidize the services outside the corridor, and this is why we firmly believe that if there's going to be a high-speed operation, it should be done by VIA. Any future infrastructure programs should include opportunities to improve the efficiency and attractiveness of intercity passenger train service.

Canada has embraced a user-pay policy for railway freight transportation. Trucking, fuel taxes and licence fees do not cover the cost of roads. The subsidy to trucking distorts the freight market away from rail and marine, which are also less polluting and safer than trucking.

The following information, prepared by the Transportation and Climate Change Collaborative, shows that the subsidy to trucking in Canada is 6.8 times that to rail for each tonne shipped one kilometre. Canada's roads and bridges are being damaged by trucks weighing up to 137,000 pounds. According to the Government of Quebec, one tractor trailer does as much damage to the road for each kilometre driven as 29,000 automobiles.

Independent research for the Transportation and Climate Change Collaborative finds that the total annual subsidy to trucking in Canada is $2.8 billion. Subsidies to trucking should be reduced to put all freight modes on equal footing. This can be accomplished by having trucks pay a weight-distance tax, proposed by the 1992 royal commission, to pay the costs not covered by the big truck fuel taxes and licence fees.

For railroad infrastructure, under the new Canada Transportation Act there's no public interest review of any transfer or abandonment, even of main lines critical to the national interest and upon which thousands of jobs depend. The act is part of an overall government policy to abandon responsibility for the national transportation system.

The theoretical niceties of the new transportation policy have encountered economic reality. Loss of rail rate parity for the port of Prince Rupert has closed an $280 million grain terminal this summer and put people out of work. In effect, the government moved Prince Rupert 310 kilometres further away from the source of prairie grain. Loss of grain traffic will increase the pressure for higher rates on coal shipments to cover the remaining overhead cost. This could jeopardize mines, the railway and the port itself.

Thousands of mining and forestry jobs in northern Manitoba are at risk from the abandonment of the Sheridan line. CN has listed this line for discontinuance rather than transfer in its three-year plan, because it does not expect to find a short line buyer.

Restructuring of the elevator and railway industry has threatened the port of Churchill. The port cannot survive under the current policy of the government. It has a future only if the government intervenes in the market and provides support to a solution.

The busiest industry in Thunder Bay today is the demolition of grain terminals. Restructuring of grain-handling transportation on a continental basis will divert grain away from Thunder Bay to Duluth or the Mississippi. Some important pieces of our national rail infrastructure that may not be profitable on a stand-alone basis should be supported as public infrastructure upon which to build private business and employment in our regions.

With regard to rail safety, we've seen a 50% decline in our membership in the last 10 years, while railway traffic has actually increased. This doubling of productivity is impressive, but it is also, we believe, affecting safety.

During the first seven months of 1996 the number of main track derailments increased almost 50% over the same period in 1995. Even after adjusting for the marginal increase in train movements, the main track element rate is still 45% higher than in 1995, and it's no secret that the railways are planning further cuts in that regard.

With regard to how that relates to trucks, the regulation of truck safety is much more relaxed than railway safety, and it's compounded by the ruthless impact of deregulation in 1988, which has pushed trucking companies and drivers to perform, often at the expense of safety. The penalty for delivering a truckload of merchandise late can be as high as $7,000 an hour. Ontario has been hit hardest by the storm of deregulation and destabilization. The proportion of trucks in Ontario ordered out of service for mechanical defects during government inspections jumped from 23% in 1989 to 39% in 1996.

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When the Senate approved deregulation legislation - the Motor Vehicle Transport Act 1987 - it did so on the condition that a national safety code would be implemented. The original timetable was to introduce those standards by 1990, and it's still not complete in 1996. I think we have reached the safe limited regulation. Profitability must not come at the expense of safety.

With regard to tourism, we believe that train travel is a unique tourist attraction that is not easy to replace by other modes. This is particularly true of overseas and especially European tourists, who are used to good service at home and prefer to travel by train when abroad. If they cannot ride trains in Canada, they will ride them somewhere else. For example, Amtrak in the U.S. operates several heavily patronized double-decker transcontinental trains. It has also invested in modern, efficient, inexpensive-to-operate transcontinental train technology.

In 1992 VIA's expenditures amounted to $533 million, which contributed $693 million to the GDP. Passengers spent another $368 million on hotels, restaurants, etc. for an additional GDP contribution of $434 million. There are 23,542 full-year jobs dependent on VIA's operations and related off-train spending by passengers, with wages and salaries of $651 million. Total economic activity in 1992 generated by VIA was 4.73 times the amount of government funding.

In addition, a lot of regional tourist railways are operating and promoting a tourism mode for rail.

That completes my opening submission. I tried to make it as brief as possible, Mr. Chairman. I'll welcome any questions you may have.

The Chairman: You will be interested to know that my very able and experienced researcher commented that you have moved very efficiently through a very large brief. I thank you for that.

Mr. Keyes.

Mr. Keyes: Thank you, Mr. Chairman.

I want to clear up one matter. I thank Mr. Housch for his report. It's a good analysis and full of statistics.

I have one concern, Mr. Housch. On page 8, when you talk about rail safety, you also talk about the doubling of employee productivity being impressive, but you say it is affecting safety. I have a concern about that, because Transport Canada places priority one on safety, and statistics can be misleading. For example, you say that during the first seven months of 1996 the main track derailments increased 50% compared to 1995. Maybe they have, but can you tell me what the breakdown is on those derailments? How much was weather a factor? How much was vandalism, youngsters throwing stuff on the track? How much operator failure, employee failure, is there in those two figures?

Mr. Housch: Certainly. There are a lot of variables when you talk about main track derailments, I'll give you that. But with regard to weather and those types of things.... For example, if your track infrastructure is in good shape, hot or cold weather really won't affect it to the degree it does today. We have seen both main line railways delaying capital investments over the last number of years. We've seen tracks that 20 or 25 years ago were 50- to 60-mile-an-hour tracks, and they're now 20- to 25-mile-an-hour tracks.

So there is a limit to how far you can go in reducing your costs. Unfortunately, the railway industry is a very capital-intensive industry. With the squeeze they've been under since 1987, they unfortunately haven't been maintaining their infrastructure to the standards they should be.

Mr. Keyes: I just worry that when you're talking about the employees and productivity advances and you say it affects safety and then you give a figure of 50% but don't break it down, it can be somewhat misleading.

Mr. Housch: It can, but I would point out to the committee that it's very concerning, not just to me but to our membership.... With regard to track safety, we've had to amend and do some very drastic things that have led to great concerns. Frankly, being track people, we've seen some track that passenger trains are running over that has scared us immensely. We've raised those concerns with the minister, and I'm sure he's going to look after them, but we have some very grave concerns with regards to track safety.

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Mr. Keyes: To better enunciate your position on track safety and to dispel any fears or perceptions, I would say a breakdown of this kind of number would probably go a long way. Rather than just throwing the number out there and having everybody say it's not broken down, they're just scaremongering, it would go a long way in helping us develop a more focused plan to our safety.

Mr. Housch: I believe Transport Canada is in the process of doing that right now, but it is alarming to realize that there's a 50% increase in main track derailments.

Mr. Keyes: There you go again. You didn't break it down.

Mr. Housch: That is alarming. That's something we should be very concerned about.

Mr. Keyes: Yes, as long as it's safety that was causing it.

The Chairman: Thank you, Mr. Housch. Thank you, Mr. Keyes

Mr. Caron.

[Translation]

Mr. Caron: Thank you for your presentation.

About the debate on the respective advantages of trucking versus railway, in my region, we tried a combination of both transport modes. We would load on the railway car a container that was brought in by truck. This system was not profitable and it just stopped.

I notice that you suggest some type of tax on trucking. On page 7 of your brief, you mention a royal commission of enquiry on transport in 1992 that recommended a tax on load and the distance. According to you, has this ever been done in Canada, in some provinces? Are there some places where there is a special tax or an additional tax on trucking, based on the weight and the type of road used? Or have we left the trucking industry develop rather freely, as it is doing now, and let the railways slowly decline, as a member was saying a while ago?

[English]

Mr. Housch: That's a very good question. I think that if you're going to have a true user-pay system, it has to be equal through all modes. Unfortunately, we're not seeing that today.

We did a study in 1992 concerning the social costs of truck compared to train. That was before the WGTA was eliminated, so those figures will be somewhat skewed now. At that time to move a tonne of freight by rail was about 0.5¢ per tonne per kilometre to society. To move the same tonne by truck was about five times that amount - over 2.5¢. Now that we've eliminated the WGTA that will even be more. So I think that if you're going to have user-pay, it has to be user-pay through all modes.

What we're seeing now is railways having to compete head to head with truckers who are operating on a public infrastructure. That inequity has to be addressed somehow. I think one option that is open is the way the railway is taxed. For example, the fuel tax they pay could be looked at. As well, another thing that has always been a concern to the railway industry, and indeed the manufacturers of railway equipment, is the ability to write down their capital expenditures. In the United States most railway equipment is written off over seven years, I think, but in Canada it's double or triple that in some cases.

The Chairman: Thank you, Mr. Housch.

Mr. Benoit.

Mr. Benoit: Thank you, Mr. Chairman.

With regard to your statement that truckers are operating on the public infrastructure and therefore they're not operating on the same basis as railways, billions and billions of dollars of taxpayers' money has gone into the rail system in Canada, into the infrastructure, so the railways haven't been operating on railway-funded roadbeds and rails either.

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In terms of the truckers, for years now, through federal and provincial budgets, fuel tax increases often have been targeted specifically at road improvement. It hasn't been spent on that, but it has been so targeted.

So taxes worth billions of dollars have been collected from truckers that are supposed to go to building roads. I think your statement maybe isn't quite as accurate as it could be.

Mr. Housch: I would point out that each province also has a locomotive fuel tax. In the province of Saskatchewan, I believe it's around 15¢ a litre.

Using your argument, that same tax can be used to build roads. If that fuel tax is provincially budgeted for roads, then in fact what's happening is that the railways are subsidizing the road infrastructure indirectly by their provincial fuel taxes.

Mr. Benoit: The amount of fuel used by rail traffic compared to road traffic is minimal.

Just along another line - I just wanted to bring that up - the Reform policy is to privatize VIA Rail. VIA said this morning that their taxpayer fund - they were actually talking about operating costs - or their subsidy has been reduced from something like $330 million a year to $220 million. I was later told that by 1999 that subsidy on operations will drop to $140 million. So they're clearly moving to a time when there won't be public subsidy.

What are your comments on the possibility of privatizing with that in mind? Privatization in many cases brings more efficiency into the system. This may well allow the system to build way beyond what it is now.

Mr. Housch: The question for the government is what's the public interest? Certainly VIA could be privatized. When that happens, we'll see a lot of the routes disappear. Take, for example, the route to Churchill, which a lot of people depend on as a method transportation. The western routes would certainly change substantially in terms of how they marketed it. Whether in fact there would even be train service between Winnipeg and Edmonton would be questionable.

As a privatized entity, I think the public interest disappears. If VIA were to operate a high-speed train, for example, the money they generated could be used to offset the operating costs of the marginal or money-losing lines. Under a private scheme, those money-losing lines will just disappear. So it's a question of public interest: what is in the public interest?

Mr. Benoit: That's a good question: what is in the public interest? Is it in the public interest to spend millions and millions of dollars on a line for which clearly the demand isn't there?

As for Churchill, certainly privatize it. If someone is interested enough in it and thinks they can make a go of it, let it operate privately. Make it a short line.

Mr. Housch: That's certainly a viable alternative, but then the issue comes up that if you were to privatize VIA tomorrow, those marginal routes would disappear.

Frankly, I think there's a role for those routes to exist. I think it's important for, especially up to Churchill, the passenger train to exist. We have a lot of people working up there who depend on that passenger train for transportation.

Mr. Benoit: Will they disappear? We've seen it in Ontario. We've seen it in other places across the country. When the larger railway has given up on a piece of a track on a route, smaller short lines have come in and made them very successful.

Mr. Housch: There are a few examples of that in Canada.

Mr. Benoit: Quite a few.

Mr. Housch: A few, not very many. We've certainly seen a lot more abandonments than we have operators of short lines.

Mr. Benoit: But is that all wrong?

Mr. Housch: That's the question: what is the public policy? Grain transportation is a good example. Saskatchewan, which is just north of North Dakota, has already rationalized its network to a great degree.

Today it's cheaper to move a car of grain from Saskatoon to Vancouver than it is move a block of cars from North Dakota to Spokane. Now, if we rationalize to the degree that we're talking about in North Dakota, that will cost the Province of Saskatchewan an additional $96 million a year in road costs. All that grain traffic will now flow to major terminals and it'll go mainly by highway to a large elevator that will then move it wherever. Saskatchewan has a lot of thinly paved roads that will frankly have to be upgraded to gravel.

I think that when we make policy, we have to look at all costs.

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The Chairman: Thank you, Mr. Housch.

I'm always interested in discussions about the great port of Churchill and the rail line that services it, which I am convinced will remain in operation throughout my entire lifetime.

I appreciate your time here, sir. We will now move on to our next presentation.

From the Ontario Motor Coach Association, we have Mr. Brian Crow, president. Mr. Crow, you've already been referenced by an earlier set of presenters. We would ask that you confine your remarks to about ten minutes. As you can see, the members are interested in discussing these things.

Mr. Brian Crow (President, Ontario Motor Coach Association): I'll try to be even shorter than that, if I might, Mr. Chairman.

The Ontario Motor Coach Association represents companies in the motor coach, tour and tour-related business. We have 1,209 members, who are located in all provinces, 43 states, and Mexico, as well.

I believe you have a copy of our submission, which we submitted to you. I will briefly make a couple of comments on that submission.

We recognize that any government review, such as the one you're doing of our industry, must be assessed in terms of public interest.

We see no conflict, though, between a healthy Canadian bus and tour industry and the public interest in passenger transportation. Rather, we see strong positive links between our members' commercial goals and the objectives and principles of transportation and tourism policies.

Our view of transportation is that it should be safe, environmentally efficient and economically viable and provide a broad network of passenger services by ensuring a realistic mix of all travel modes.

Our view of the public interest reflects the needs of consumers and taxpayers, as well as the greater, more general, public need and interest.

Our industry provides scheduled service; charter service; tours; BPX, which is bus parcel express; and transit and contract services.

We're quite proud. Our industry originated with the many small-bus generalists who pioneered services in this country, some of which have grown to be the largest in North America.

Motor coach operators are only part of a much larger industry grouping that includes suppliers of travel, tour operators, hotels, attractions and tourism destinations. These industry partners are dependent, some to a greater degree than others, on a healthy bus industry.

Canadian communities are realizing more and more the importance of motor coach tours. Each motor coach tour generates revenue of, on average, more than $6,000 a day per bus in the community.

Our industry does have challenges: a decline in scheduled services; low profitability; market uncertainty; subsidized competition, which I've heard something of this morning; and the image of bus travel itself. Yet there is great potential for growth.

We are eager to meet these challenges, but can only do so successfully in an environment that permits carriers to make effective, long-term strategic plans that ensure fair and efficient competition.

We address numerous issues in our submission.

Our industry is becoming more intermodal. OMCA applauds the efforts, by the way, of Transport Canada. They hosted a meeting of transportation providers and tourism associations. One of the recommendations was to address the issue of intermodalism. Transport Canada has acted upon that.

We are working with railway lines. We are interlinking with VIA Rail. We are interlinking with airlines.

Governments should continue on their paths of commercialization for rail, air and bus, and not compete with the private sector.

We address technological developments, whether that's on-board computers or technologies such as Internet services, which we're getting into.

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We identify a role for government and we address international competition and foreign ownership.

I've heard a bit about safety this morning too. Safety is not only of utmost importance to our drivers, our passengers and road users, but it also makes good business sense.

In Ontario there's approximately 30,000 buses operating every day of the year, some 24 hours a day. Insurance statistics state that on an annual average there are only 164 third-party liability and benefit claims on that whole industry. It pays out only $2.7 million on average per year.

While this is an excellent record, we don't take safety for granted, especially as we move into a deregulated environment. Safe travel is dependent upon a well-maintained and adequate highway infrastructure. We must work in partnership with government to ensure there's safe travel.

With respect to financing infrastructure, it is our position that the province and the federal government should reinvest a significant portion of the revenue generated through fuel taxes in the highway infrastructure. There should be no increases in fuel taxes or fees.

We support the use of road tolls only on new highways, provided these tolls are used only for new highways where there is an alternative non-toll highway.

We strongly endorse the Ontario government's recommendations to this committee. They had five very good key recommendations.

Earlier today you heard from the Ontario Better Roads Coalition. We are a founding and supporting member. I won't repeat their message, but emphasize that in addition to transportation and trade, tourism is needed by Canada. Tourism needs a well-maintained and expanded highway system.

New motor coaches are a luxurious way to travel and are more and more appealing to a more sophisticated traveller. But no vehicle can compensate for a deteriorating road that detracts from the overall tour experience. No matter how the tourist comes to Canada, virtually every single one of them will travel on a road or a street at some point in time in their visit. The federal government has not contributed in the way that it should to have this highway system maintained and expanded. It has allowed it to deteriorate.

Some tour buses are now bypassing Toronto because of highway congestion. Our onboard movie-viewing equipment to provide entertainment to our passengers breaks down much too frequently and the cause, we have ascertained, is due to rough roads.

Our submission includes a number of recommendations: giving priority to safety; emphasizing demand as the main criteria for service provision; and addressing needs, not wants.

We should be strengthening the private sector. We ask government to foster fair and efficient competition through the harmonization of safety standards and regulations to eliminate or limit subsidized competition and government ownership. We also ask the government to minimize taxes and support the industry; to clarify public sector roles and passenger transportation, since we're not sure what our roles are; to minimize the regulatory burden; to coordinate federal, provincial and municipal policies; and finally, to support and fund a national highway system.

Mr. Chairman, I'll conclude my remarks by stating that our 1,200 member companies are pleased to make this submission. We trust that the comments provided can lead to a better understanding of the many different aspects of the bus industry, the challenges facing our industry and the eagerness of our members to grow our markets and pay more taxes by growing our markets.

We look forward to participating as partners in this initiative.

The Chairman: Thank you, Mr. Crow. We appreciate your eagerness to pay taxes. I must confess that uninterrupted movie viewing has not been a factor in road construction to this point. I appreciate your bringing that in.

Mr. Crow: Mr. Chairman, we have one member who pays over $25,000 a year just to fix the electronic equipment for onboard movies.

The Chairman: Mr. Benoit.

Mr. Benoit: As a parent with three boys in hockey, I do appreciate the services provided, including the movies. It's a great way to travel, and it has been recognized as a safe way to travel.

I also appreciated the clear statement that there should be no more tax on fuel. Already over half the cost of fuel right across the country is tax of one form or another. That's why I find it very interesting that a member of the Liberal caucus has brought forth a private member's bill on looking into fuel prices. We know the biggest problem in high fuel prices is in the tax area. So I agree with you; there is no more room for that.

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In terms of the harmonization of standards, rules and administrative processes concerning safety and technical matters, this is an issue.

I'm the Reform interprovincial trade critic. Certainly in the trucking industry this may be more of an issue than it is in your industry. Can you see any reason why someone operating a bus right across the country should have to license it in more than one province? Is there any practical reason why you should have to get a licence in each province separately?

Mr. Crow: I'm not sure whether you're referring to the registration plate on the vehicle or the economic regulation - obtaining a permit or a registration to operate the bus.

Mr. Benoit: Both.

Mr. Crow: On the licence plate registration, we can now register the bus and only one vehicle through an interprovincial agreement. So a bus registered in Ontario only has to carry an Ontario licence plate and can operate in every other province.

With respect to obtaining authority or a public vehicle licence to operate, our industry is certainly mixed on that. We've seen such a deterioration of the regulatory enforcement over a number of years to the point where the regulatory system doesn't work. While we weren't in favour of deregulation, we've recognized the movement of Transport Canada and the movement of the Province of Ontario to deregulate the bus industry. What we're asking for is the harmonization of that. We cannot compete against other provinces that don't deregulate.

So when Transport Canada states they want to deregulate and when the Province of Ontario says they are deregulating, then we have to do it throughout the country.

Mr. Benoit: That's your main concern in that area, is it?

Mr. Crow: Absolutely.

Mr. Benoit: In harmonization again, in terms of administration, standards and rules, are there any other rules that make it difficult for a bus operator to set up in one province and move freely across the country back and forth?

Mr. Crow: It's not that hard to move freely. There's really no barriers to that movement, but there are some different things that come into play. There is different labour legislation. There are different weight restrictions in every province. It doesn't prevent you from moving between provinces, but it is restrictive, especially when we do so much travelling across North America.

Many of our bus companies have to have a lot of full-time staff just to sort out the different regulations, the different weight limits, the different permits and requirements and bonds that we have in every state and province.

Our concern is that cities are now taxing motor coaches. It's growing in the U.S., and we're afraid it'll come across the border.

Washington wants $95 a trip from every motor coach; New Orleans is somewhere between $0 and $200, depending on who you are; Chicago is $12; New York State now has a franchise tax. It's a burden that is creating so much employment in our industry that we have to hire these people to deal with all of this. It's putting us out of business.

Mr. Benoit: It's counter-productive.

The Chairman: Thank you, Mr. Benoit. It was very useful.

Mr. Caron, do you have a question?

[Translation]

Mr. Caron: I'll ask a quick question. You talked about the situation in Ontario, that I don't know very well, saying that the competition from the railway was not quite fair because railways were subsidies. It remains that in some areas which are not necessarily remote, as is the case in Quebec, without the railway as a competitor, there would be a monopoly on transportation.

In some regions of Quebec, there is only one bus company. One of the reasons why we sometimes want to protect the railways is to avoid a situation where the only public transportation left is a bus company. In that type of situation, you have a monopoly.

[English]

Mr. Crow: We are not against public ownership. We are not against the rail. We're working with the rail. We're sharing terminals. We're interlining now. We and VIA Rail are looking at a special training program for our Asian inbound. We enjoy that competition.

Our concern has come from the unlevelness of that competition. If they can operate a service between two cities and compete with us and have a huge subsidy go towards this, that's unfair.

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I'd like to comment also on your point where there is no other competition. Don't forget that the biggest competition to rail and bus is the private automobile. The private automobile, I think, looks after about 90% of the intercity traffic. We do not have a monopoly. If we had a pure monopoly and could charge anything we wanted, then you should be concerned. But if we charge too much - and in fact our fares are going down - they go to the car. So we always have competition.

We don't mind fair competition. I think competition is healthy. But the subsidy provided to some of these competitors...and it's not only rail; it's municipal transit. There are subsidies that have gone to some government-owned bus companies. The federal government is moving away from that in Newfoundland. Saskatchewan is looking at their entity, as Ontario is looking at their two bus companies. We're moving away from that and making it more competitive, but we're not a monopoly.

The Chairman: Thank you. It's that Newfoundland that's a problem again.

Mr. Byrne (Humber - St. Barbe - Baie Verte): Mr. Chairman, I just want to say that Newfoundland is gone; there's a private bus operator, and there's no subsidy.

The Chairman: Thank you, Mr. Byrne.

Mr. Jordan.

Mr. Jordan: With the condition of the roads - and everybody seems to think that's a major problem - if I understand you correctly, you mentioned one aspect of your equipment that is deteriorating because of road conditions.

Would you not think, though, that economically you'd be better off agreeing to the concept of charging your passengers more if that money could be seen and isolated and clearly identified that it would go to improve roads? Wouldn't that be to your advantage, or are you saying there's no way you would consider paying any more than you're now paying?

Mr. Crow: I've learned never to say never, but when the fuel tax came out in our province, anyway -

Mr. Jordan: Which province is that?

Mr. Crow: Ontario, I'm sorry.

Mr. Jordan: All right.

Mr. Crow: I refer to Ontario. When the fuel tax came out there, that was to be dedicated. That was for the maintenance and expansion of the road system. That is not the case any more. So if we were assured that new funding was going to go to new roads and to the maintenance of those roads and bridges and infrastructures, then we would consider that. We're not looking for a handout. But I think what we'd like to see first is that the governments use the money they're already getting from us for the road infrastructure before they come to us and say, look, trust us, we'll put on another tax and we'll put it to roads.

Mr. Jordan: So it's in the trust aspect of it that you're a little leery.

Mr. Crow: You might say that, yes, sir.

Mr. Jordan: Get after that Harris fellow. He's taking all this money and not doing the right things with it.

Mr. Crow: There is a significant amount of money collected by all provinces on fuel taxes. I think it's $2 billion that the federal government collects on road-user fuel taxes, and a very small portion of that $2 billion is reinvested. So we'd like to see that reinvestment happen first.

Mr. Jordan: I'm glad to hear that you wouldn't be against it if it could be justified in your mind that it was going to where it was supposed to go.

Mr. Crow: It's part and parcel of the question we just had over here as well, though, that it has to be a balance. If you're asking the bus passengers to pay significantly more but the car passengers aren't, or the rail passengers aren't, or you're going to use that money to subsidize our competition -

Mr. Jordan: Or the heavy truck operators.

Mr. Crow: Or the heavy truck operators, correct.

Mr. Jordan: Okay, that's my question and my answer. Thank you.

The Chairman: Thank you, Mr. Jordan.

Thank you very much, Mr. Crow. I appreciate your taking the time to be with us today.

Mr. Crow: Thank you for your time and the interest in the issue.

The Chairman: There's a great deal of interest on this committee, and I suspect we'll be pursuing this topic for a while. Thank you.

Now, for a return engagement, from the Canadian Wheat Board.... This is the board that is returning, not Mr. Machej, who is a commissioner at the board.

It has often been said around this table that the Wheat Board cannot appear before us too often. Being the only western member, I appreciate these opportunities - although we do have a western visitor with us - to educate the rest of the committee about the importance of the Wheat Board to the economy of this great country.

Mr. Machej, you know the process. Confine your remarks to about ten minutes and then -

Mr. Gordon P. Machej (Commissioner, Canadian Wheat Board): Thank you very much, Mr. Chairman. I'd like to introduce also Tami Reynolds, who is here with me today. She is an adviser in our policy group, and she has been working closely on all of the transportation issues. I think she has met many of your committee at previous presentations as well.

I certainly appreciate the opportunity to appear before your standing committee. In October my colleague Lorne Hehn discussed with you our recommendations for a more rigorous and consistent Canada Marine Act. Today I am addressing the other subject for which you are accepting submissions: trade, tourism and transportation.

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We commend the standing committee for addressing the link between these important components of the Canadian economy in this forum. As a commissioner of the Canadian Wheat Board, I will focus my remarks on trade and transportation because that is an important part of what we do as a wheat and barley marketer.

I would like to make a couple of key points today. The first is that trade is heavily dependent on a reliable and cost-effective transportation system. Second, in a new transportation environment that will be characterized by a rationalized railway system, we believe the federal government should lead industry in formulating a core transportation network policy. Third, to be a reliable supplier to world markets we need to be assured of reliable management-labour relations. We commend the federal government for the initiatives taken in this area.

In addition to serving the very important domestic markets, we focus a lot of our efforts in serving our export customers. Although our domestic market is very important, Canadians can only consume a portion of the annual production of grains and oilseeds and special crops.

This is a major trade activity and its importance to Canada is significant. Export wheat sales alone bring $4 billion to the Canadian economy, and barley export sales over $400 million. Using a multiplier of 2.5, this translates into $11 billion for the Canadian economy in spin-off benefits. As we look to the long term, we forecast increases in trade, and that is all to the benefit of Canadian farmers and the Canadian economy in general.

The length between trade and transportation is critical and plays an important role in moving our product to the markets. Canada has a substantial presence in world markets, but it also faces unique hurdles. We have talked to you before about the extra distances that Canadian grain has to travel to reach the west coast ports: 1,500 kilometres, and 2,000 additional kilometres for movement through the St. Lawrence. In the U.S. the distance varies, but it's substantially less - rarely over 1,000 kilometres.

Earlier this week we had the opportunity to meet with the president of the Australian farm federation, who explained to us that their average haul to port is about 350 kilometres. This avails them of truck movement, which can compete with railway movement. That's certainly an advantage they have in moving their products to port.

Our system has been shrinking relative to our exports. In fact, we have about 13 million tonnes of commercial storage capacity in Canada and this handles around 30 million tonnes of annual exports. With all our major competitors - the U.S., Australia, Argentina - storage capacity surpasses exports. In Canada we must have a just-in-time transportation system pulling grain from farms to meet the needs of our customers around the world.

To give you an idea of the parameters of this, I was told just yesterday by one of the companies operating country elevators that 10 or 15 years ago, if they turned their country facilities 4 or 5 times a year, they thought that was quite reasonable. In today's environment, with the new and larger facilities, they're looking at turns of 15 to 20 times a year from those large elevators. That underlines the importance of a good infrastructure to support movement from those facilities to the ports.

Western Canada's approach to grain trade objectives has been a concerted and cooperative one. The current logistics system is one that is set on agreed-upon industry procedures addressing issues such as rail car allocation at the primary elevator to rail car unload at the various ports. Each year these agreements are revisited and reviewed to ensure that the fullest potential can be developed.

The federal government has also instituted a number of reforms to legislation and policy to improve efficiencies in all modes of transportation, and we have participated in some of these discussions.

The industry has also witnessed passage of the Canada Transportation Act, which gives the railways, among other things, more control to manage their resources. An efficient and economic rail system is critical to the western Canadian grain industry because of its reliance on the export market.

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As I've outlined, we have a lot of grain to move offshore and a long way to move it. Let us make no mistake, the western Canadian grain industry is captive to rail movement on most offshore exports. We cannot truck our entire crop directly to the port like our competitors in Australia or Argentina, nor do we have a subsidized waterway slicing through one of our central growing areas like the U.S. has. When we design our physical and regulatory system, we must bear these realities in mind.

We must also bear in mind that one of our overriding objectives in developing a system is to maintain Canada's competitiveness in international markets. Often we concentrate solely on efficiency issues, but we must also keep in mind issues such as adequate system capacity. International competitiveness has more to do with meeting customer needs than anything else. Meeting customer needs may require shipping patterns that peak at certain times in the year, and adequate capacity to meet the peak demand can sometimes be in conflict with the objectives that place efficiency above all else.

We look forward to the Minister of Transport's 1999 statutory review to examine the effect of the new railway regime on our industry.

Let us not follow the example set by the U.S. system in their rapid deregulation. An interesting article in the trade journal Traffic World quotes an executive vice-president of a logistics company describing how deregulation in the U.S. and the resulting competition have forced rail and truck carriers to increase utilization of their assets. However, that gain in efficiency has been at the expense of capacity. This competition has reduced railroad assets by some 500,000 rail cars, 8,000 locomotives and 50,000 miles of track and eliminated 300,000 jobs. The Canadian system cannot afford this type of shrinkage.

The article states: ``A nationwide intermodal network is efficient because the sum is greater than the parts.'' However, in a totally deregulated environment, ``the need for profitability by the individual parts will undermine the whole. In fact, over-capacity in carrier assets is essential to handle seasonal and production peaks for efficient supply-chain management.''

It is in this spirit of national intermodal network that we raise the idea of a core transportation system for western Canada, one that will ensure the farmers will get their product to market on time and at a reasonable cost. These are the basic logistical concerns that affect all producers, marketers or shippers in an export-dominated industry such as grain, and concerns both rail and truck modes of transportation.

First of all, we believe that western Canadian farmers are entitled to a reasonable level of rail service. Although the CTA provides for common carrier obligations - and we are grateful for the inclusion of that clause - we are not convinced that will meet the requirement for a core rail network. Producers, shippers, carriers, governments and indeed the Canadian economy will be greatly affected by the railways' decisions with respect to rail network, yet those decisions will be made in relative isolation.

Western Canadian farmers have recognized the reality that the rail network will not be as extensive as it once was. They are now making the adjustments, making investments in equipment and preparing for longer hauls. Although the CWB has not traditionally commented on the highway system, we do believe that the highways will become an even more important part of the national transportation network and should be treated as such. For example, an adequate highway network would encourage competition between the railways by facilitating the movement of tonnage by truck between rail lines.

It is our suggestion that the federal government, on the recommendation of this committee, address this issue. The first step is to develop a strategy to determine the base network necessary to adequately service western Canada and then to develop a strategy to maintain the network at a reasonable level. The intent is to ensure that Canada's endeavour to fulfil expanded trade opportunities is fully supported by the necessary transportation infrastructure.

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I want to comment just briefly on management relations. I've noted that our system is very lean and must work like clockwork to ship western crops to the markets. However, any transportation system is only as good as its worst management labour relations.

We provided our comments to the Industrial Inquiry Commission into Industrial Relations at West Coast Ports and would like to reiterate some of our concerns to this committee.

Preventing work stoppages is a critical issue in our eyes. The disruptions in the past years have had a profound impact on Canada's reputation and on farmers' returns. In a highly competitive grain market, work stoppages seriously jeopardize opportunities for Canadian grain sales and have severe repercussions for farmers and the Canadian economy. These include direct revenue losses, uncertainty in the freight market, loss of capacity, loss of customer confidence and added costs.

An important part of our operations is its emphasis on the direct customer contact and service. Canada's top customers have at one time or another in the last few years raised strong concerns relating to work stoppages that hamper the movement of grain. It's not just a matter of inconvenience. An increasing number of customers rely on a just-in-time delivery system. They must receive the grain by specific dates to avoid jeopardizing their businesses.

Customers do not really care what labour-management dispute has stopped grain movement; they just care that it has stopped. The CWB would strongly support any mechanism that will promote quick resolution of disputes and avoid work stoppages.

I'd like to come to a process that's going on at the west coast at the moment, where the grain handlers and the terminal operators are working on a collective agreement. They're working closely with a conciliation commissioner to try to bring the two sides together. This agreement that is being worked on expired on December 31, 1992. This kind of timeframe doesn't give our customers the kind of comfort level that we feel is very important for us to retain the reputation as a reliable supplier.

In conclusion, I would like again to thank the standing committee for this opportunity. We look forward to your recommendations and we look forward to working with the federal government on these and other issues. Thank you very much, Mr. Chairman.

The Chairman: Thank you very much, Mr. Machej.

Mr. Benoit.

Mr. Benoit: Thank you, Mr. Chairman. Good morning, Mr. Machej and Ms Reynolds.

You mentioned, Mr. Machej, management labour relations and the problems we've had persistently over the years with stoppages either as a result of stoppages in the rail system or at the port or sometimes other. I would like you to give your views on the possibility of final-offer arbitration right from one end of the system to the other, so in fact there would be no strikes allowed in the system period.

I think final-offer arbitration has an advantage over what we've had for many years, which is government intervention. Management and labour have come to rely on government to stop these disputes. As a result, there isn't bargaining in good faith probably on either part most often.

With final-offer arbitration, the model that Reform has put forth is that a certain amount of time before the end of the contract, if there is no agreement reached, each side would be asked to submit their final best offer. The arbitrator then would either choose all of one or all of the other. That way you get very serious offers and there's no mixing and matching. We've had problems in negotiations in the past where both sides presented completely ridiculous offers. This way, the offer put forth will have to be their best offer.

I'd like you to respond with your feelings on that. If you have a better alternative than that, let's hear it.

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Mr. Machej: I would just say that we are not experienced in the labour management area to know specifically which of these mechanisms might be beneficial. Certainly we strongly feel that the process has to move in a way to bring results to the negotiations much sooner than has been the case.

We're not intimately familiar with all the details of the various offers put on the table, but I think one thing that's important is to have a mechanism that brings conclusions much sooner than, for example, in the case we have here, where a contract expired in 1992. There has also been the suggestion that perhaps first-offer arbitration might be a way to go, that whatever first offers are put on the table should be considered.

There are a number of mechanisms. We're not really wanting to zero in on any particular one but to simply say there has to be a better way. Perhaps final-offer arbitration is one of those, but there may be other mechanisms and we're just encouraging everyone to look at different ways of approaching the issue.

Mr. Benoit: Are you familiar with the legislation that has just been brought before this government?

Mr. Machej: As a matter of fact, it just landed on my desk last night. I will be going through it in some detail, but so far I haven't.

Mr. Benoit: So you're not prepared to comment on it now?

Mr. Machej: No, not at this stage. But I did quickly note some of the areas that certainly appear to be positive for resolving some of the issues. Again, as I said, we commend that process, because I think it came out of the Industrial Inquiry Commission into Industrial Relations at West Coast Ports. We worked with that group very closely. We thought that was a very positive way to address the issue and it's very good to see some concrete results.

Mr. Benoit: Thank you.

The Chairman: Thank you, Mr. Benoit.

I have a question for you. It's contained in your comments on page 3 about the core system. Certainly with the rail line abandonments, I suppose it could be said that we are shrinking our way to a core rail system.

The national highway system network, as defined from the previous work that was done on the national highway system, establishes it really along the Trans-Canada Highway, the Yellowhead route and some of the north and south links between the three prairie provinces and the U.S. When you talk about a core road system, are you talking about just the national highway system or are you talking about an expansion of that network?

Mr. Machej: As we look at the prairie landscape, we know that a number of rail lines are shrinking, so I think it is a good opportunity to try to develop an overall plan that perhaps goes beyond just the national network. We do see perhaps opportunities where some of the road network could facilitate movement from line to line to foster some competition amongst the railways. We feel that certainly it would be important to develop an overall plan and a strategy. We don't have all the details of that. It's more or less a concept.

The federal government certainly has the big picture view. They can see the total system. As we all know, funding is limited these days and will likely continue to be so. It's very important to define priorities so there isn't duplication of effort and spending, and to focus on those areas that give the best leverage for the overall infrastructure support for movement of product.

We're looking at a broad-based concept to look at all these pieces, because I think no single entity, whether it's railways or truckers, has that total picture view. I thinks it's a very good time to take that approach and give some attention to that kind of plan and strategy.

The Chairman: Thank you. Actually, it's an interesting comment in the sense that the committee has worked from the perspective that the national highway system, as defined in the work in 1989 through 1992, is the size of the system that we're dealing with. What you're introducing is the possibility that for trade-related reasons we might expand that core network, that part of the network that is important to the national interests. It's interesting.

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I have one other comment. You made the comment about Canada's relatively small amount of storage relative to its competitors. You then talked about the deficiencies inherent in turning the large terminals and the need of the system to respond in a just-in-time manner. Do you see that as an advantage or disadvantage? Does this make us more efficient than the others with these large storage capacities or does it create problems for us in meeting our ultimate objective of delivering grain to market?

Mr. Machej: Some of our competitors have developed huge storage in relation to their exports. If I look at the U.S., a lot of that was developed with government support programs years ago when there were surpluses.

Certainly if we had the luxury of very large storage, that's a large advantage, but in fact our actual storage capacity is shrinking. At the same time, the new facilities are much more efficient in terms of through-put. Our focus now is to further develop and enhance the efficiencies of through-put of those efficient facilities. That's why it's very important to have a reliable railway network as well as the cars and the locomotives to service that.

As a related point to that, one of the items in terms of overall efficiencies that would certainly be beneficial is improved management-labour relations, if we could have an element like full-weekend and 24-hour work at the port areas. That in itself would add some overall efficiencies to the logistic system.

The committee may be interested in this. We have some material on the storage of our competitors relative to their exports. We should provide that to you so you'll get a picture of the fact that our system has to work every day and it has to work efficiently to move the product.

The Chairman: Thank you. Ms Reynolds.

Ms Tami Reynolds (Corporate Policy Group, Transportation Transition Group, Canadian Wheat Board): In essence, our system is like a pipeline, so you're feeding it in at one end and unloading it at the other end without any facilities at either end to do a significant amount of storage. This is unlike the U.S. system or the Australian system, where you're feeding it in and you have a surplus capacity at the end to hold it, so in the event of any disruption in the system, it's already in place.

That's both an advantage and a disadvantage. We're lean and mean, very efficient, but any disruption has a disproportionate effect on the Canadian trade relations and backs off into the Canadian economy.

The Chairman: As an adjunct to this, Ms Reynolds, you are the transportation guru within the Wheat Board, as I recall.

Ms Reynolds: That's a scary hat to wear, but I'll say yes.

The Chairman: With respect to this question of core road capacity, have you done any modelling of that? Is this just a concept or is there actually an identification of specific pieces of road that would enhance this?

Ms Reynolds: We haven't specifically done this because we don't own assets such as elevators or any facilities on the ground, so that we would have to be working closely on this. As the key marketer, we are concerned with that.

We are aware of some work that is being done by the Saskatchewan government in conjunction with consultants and a series of other interested groups that are looking at modelling the entire transportation network. I think that type of work is invaluable because, as Mr. Machej pointed out, there are scarce dollars and there are scarce dollars at the federal, provincial and municipal levels. Given the scarce dollars and given the importance of trade, particularly to the Canadian economy, it makes a lot of sense for the parties to come together and agree to focus on where they're going to get it to get the most money for it.

One of the things that Mr. Machej mentioned is between railways. There's also between countries. Access to the United States to take advantage of their transportation logistics system in the event of constraints in Canada is important too. You need to have those bridges built as well.

The Chairman: Of course, there is also the very important link to the port of Churchill, which I knew you were going to mention.

Mr. Benoit.

Mr. Benoit: Thank you. It's interesting that an organization that purports to be working on behalf of farmers excludes them as part of the system when it comes to storage. When you consider on-farm storage, the percentage of the crop that can be stored is the same or very similar to that in other countries. It's just that it's on-farm much more in Canada than in the United States, but it's still part of the system. We have a different system. The storage is there, and I think you can't just pretend that on-farm storage isn't part of our system.

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Mr. Machej: Mr. Chairman, we're not pretending that it is not part of the system. We were trying to explain that in terms of the commercial storage system on track in ports, we were relating the differences in capacity. Of course, in order to move that grain from the farm to the port, it's greatly facilitated by having a good infrastructure and a commercial system that can move that product through.

I do know that our farmers have a very good on-farm storage system, but I think the focus is to move that product through the system. In other words, we have a huge storage on-farm, the funnel goes down to a very small funnel in the commercial system, and the real challenge is how to move that product through in an efficient way. As we are shrinking in capacity, we just have to keep working and finding ways to be more efficient in the movement.

Mr. Benoit: One of the things that can be done to allow that to happen is to give farmers more choice in where they're going to market their grain. I'm not going to get into this debate now as to whether they should or not, but if farmers had open access to the American market, first of all I think you'd see the railways probably used a lot less and you'd have to look at the road part of the system a lot more. But it would certainly give farmers more choices and it would probably make the system much more efficient than it is now.

Mr. Machej: I think that could be a debatable point, Mr. Chairman.

The Chairman: Thank you, Mr. Machej. I also note that any time you ask the farmers about this, the support for the Wheat Board is overwhelming, but we didn't want to get into that debate.

Mr. Machej and Ms Reynolds, I appreciate the time spent here and elsewhere in helping us understand these important questions.

Mr. Machej: It's a pleasure for us to appear here and to assist your committee in any way that you think we can be helpful.

The Chairman: Thank you.

The meeting is adjourned.

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