Canadian Chamber of Commerce
La Chambre de Commerce du Canada
Preparing Canada’s Transportation Preparing Canada’s Transportation
Industry for a Changing World Industry for a Changing World
Michael N. Murphy
Senior Vice- President, Policy
Canadian Chamber of Commerce
November 3, 2000.Canadian Chamber of Commerce Canadian Chamber of Commerce
• 170,000 members and 350 local chambers,
representing all industries and regions of
Canada
• 10 committees, including a Transportation
Committee made up of business leaders
from carriers and users of the transportation
sector.
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Canadian Chamber of Commerce
La Chambre de Commerce du Canada.Policy Development Process Policy Development Process
• Recently conducted our Annual General Meeting and
policy sessions
•“ Grassroots” process where communities and businesses
from across Canada introduce and discuss policy issues.
• Many local Chambers, as well as the CCC Board of
Directors, identified transportation as a critical issue for
Canada’s economy
• Economic growth, competition, infrastructure and the need
for a national transportation framework were common
issues.
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Canadian Chamber of Commerce
La Chambre de Commerce du Canada.Transportation : Transportation :
An Essential Component of Canada’s Economy An Essential Component of Canada’s Economy
– Canadian economy is dependent on a reliable
and sustainable transportation system.
– Transportation is fundamental to moving goods
and people in virtually every sector of the
Canadian economy.
– Canada is an exporting nation; around 40% of
Canada’s GDP are the result of exports.
Canadian Chamber of Commerce
La Chambre de Commerce du Canada
4.Commitment to Competition Commitment to Competition
• Section 5 of the Canada Transportation Act
(1996) affirms Canada’s commitment to
“competition and market forces”, as well as
regulation only “where regulation is necessary.”
• This approach has been a positive framework for
Canada’s transportation industry and deserves full
support.
Canadian Chamber of Commerce
La Chambre de Commerce du Canada
5.Positive Results Positive Results
• Competition and market forces have been successful in
realizing competitive rates and improved service
throughout the transportation sector.
– Canada’s shippers enjoy the lowest rail freight rates in
the world (Railway Association of Canada).
– An abundance of service providers are operating in air,
rail, trucking, and marine transportation, both
domestically and internationally.
Canadian Chamber of Commerce
La Chambre de Commerce du Canada
6.Time to Take the Next Step Time to Take the Next Step
• In reviewing the Canada Transportation Act , Canada has
the opportunity to examine its policy of allowing
competition and market forces to be the prime agents in
providing viable transportation services.
• Canada can use this opportunity to strengthen the current
approach, or we can retreat into delivering transportation
services through industry regulation.
• The Canadian Chamber of Commerce believes that the
Canada Transportation Act should reinforce its
commitment to market forces and competition, as well to
prescribe a national transportation framework for Canada
Canadian Chamber of Commerce
La Chambre de Commerce du Canada
7.Re- Regulation of Transportation Re- Regulation of Transportation
• There is a recent trend toward re- regulation of some
elements of the transportation sector.
• Airline merger regulations
• Grain- handling legislation
• Airport Rents
• Governments need to resist the urge to re- regulate the
transportation industry.
• Canada Transportation Act should affirm Canada’s
commitment to competition and market forces and protect
the service provider / client relationship.
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Canadian Chamber of Commerce
La Chambre de Commerce du Canada.Transportation as Commodity Transportation as Commodity
• Section 5 (b) of the Act prescribes a market- based
approach for transportation services, but section 5 (d)
allows for transportation to be employed as a regional
economic development tool.
• The Act allows governments to regard transportation
services as a commodity that can be employed for regional
economic development.
• The CTA should use this opportunity to emphasize
Canada’s commitment to “competition and market forces”
as the “prime agents in providing viable and effective
transportation services.”
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Canadian Chamber of Commerce
La Chambre de Commerce du Canada.Transportation Policy in Canada Transportation Policy in Canada
• Canada Transportation Act (1996) prescribes a
deregulated, market- oriented approach, but many trends of
today’s transportation industry are not addressed.
– Approach to devolution and divestiture
– Need for sustained and continuous investment in
infrastructure
– Canada’s increased integration into a North American
and global marketplace.
– Competition between modes of transportation.
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Canadian Chamber of Commerce
La Chambre de Commerce du Canada.Approach to Divestiture Approach to Divestiture
• Privatization is emerging in transportation services; the
relationship between the federal government and private
organizations is not fully clear. For example :
“We are concerned that eight years into the transfer process,
Transport Canada has yet to clearly define its role as
landlord and overseer of the National Airports System”
(Auditor General of Canada, October 2000)
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Canadian Chamber of Commerce
La Chambre de Commerce du Canada.Approach to Divestiture Approach to Divestiture
• The federal government’s approach to devolution and
divestiture is not consistent throughout the different modes
– NAV Canada was sold entirely to private interests and is now a
model for the world in air navigation.
– Some marine ports are maintained as public entities.
– National Airport System (NAS) airports were devolved through a
series of individual and inconsistent lease agreements.
• National transportation framework should more clearly
define the role of the federal government in transportation
and include parameters for the devolution of transportation
services.
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Canadian Chamber of Commerce
La Chambre de Commerce du Canada.Infrastructure Infrastructure
• Transportation is among the most capital- intensive industries.
• Railways are highly capital intensive; railways reinvest almost 25%
of their revenue in capital. (Railway Assoc. Canada).
• Canada’s air transportation system depends heavily on capital
investments. In some cases, the viability of small airports is in
danger due to lack of capital funding.
• Road use in Canada is steadily increasing and our National Highway
System requires significant investment to restore it to an acceptable
standard.
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Canadian Chamber of Commerce
La Chambre de Commerce du Canada.Infrastructure Infrastructure
• With increased privatization, Canada’s transportation
industry must have the attractiveness and capability to
procure investment capital
• The Act focuses on governing the carriers, for the
protection and benefit of the consumers, but is largely
silent on infrastructure.
• Canada should regard infrastructure funding as an
investment.
• National transportation framework should ensure a first
class, seamless multimodal system that recognizes the
strategic importance of Canadian transportation
infrastructure.
14.North American Integration North American Integration
• Canada- US Trade is growing by approximately 10 per cent
each year; 85% of Canadian exports go to the U. S.
• Canadians require efficient transportation throughout our
North- South trade corridors.
– North- south traffic, to and from the US, grew from 18% of total
Canadian rail freight tonnage in 1985 to 28 % in 1997.
– 50% of Canada’s air cargo traffic is trade with the United States.
– Constant improvements to border crossings and transportation
infrastructure are vital to ensuring the continued advancement of
Canada- US Trade
• National transportation framework should recognize
Canada as a competitor in an international economy and
emphasize trade facilitation issues such as border
crossings.
15.Competition with U. S. Carriers Competition with U. S. Carriers
• Transportation services are in direct competition with U. S.
carriers as well as other modes.
• In a number of ways, Canadian components are
disadvantaged.
– Canadian ports are taxed on their property, U. S. ports can float tax-
free municipal bonds to assist investment.
– Canadian railways face aggregate taxation rates that are 51 percent
higher than in the U. S.
– The U. S. Transportation Equity Act for the 21st Century (TEA- 21)
program contemplates the spending of $218 billion through 2003.
Much of this spending is directed at infrastructure projects.
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Canadian Chamber of Commerce
La Chambre de Commerce du Canada.Competition with U. S. Carriers Competition with U. S. Carriers
• Traffic that is lost to U. S. carriers is difficult to
win back.
• National transportation framework should
recognize that the viability of Canada’s
transportation sector requires Canada to be
competitive with the U. S.
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Canadian Chamber of Commerce
La Chambre de Commerce du Canada.Competition between Modes Competition between Modes
• Similarly, there is direct competition among the modes of
transportation, a positive development for Canada.
• To realize the benefits of competition, public policy should
provide the environment where carriers can attract
investment and recover costs. Tax equity between modes
of transport and between jurisdictions is essential.
– E. g. High fuel taxes means more costs for carriers and shippers
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Canadian Chamber of Commerce
La Chambre de Commerce du Canada.Conclusions Conclusions
• Canada should take this opportunity to reiterate its
commitment to market forces and competition as the prime
agents in providing viable and effective transportation
services.
• Canada should resist the urge to re- regulate the
transportation industry.
• Canada Transportation Act should prescribe a national
transportation framework that is comprehensive, clearly-
defined and regards transportation as a key enabler of the
Canadian economy.
Canadian Chamber of Commerce
La Chambre de Commerce du Canada
19.Conclusions Conclusions
• National transportation policy should provide a framework
that clearly defines the role of government in the provision
and management of transportation services.
• This framework should be reflective of the changing nature
of this industry by addressing items such as :
– The need for consistency in devolution.
– Canada as a competitor in North American and global markets.
– The importance of infrastructure.
– The need to provide an level- playing field between modes.
Canadian Chamber of Commerce
La Chambre de Commerce du Canada
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