THE C ANAD IAN CHAMBER OF COMMERCE
LA CHAMBRE DE COMMERCE DU CANADA
Keeping Canada Moving:
Transportation Infrastructure and the
Economic Realities for Canada’s Transportation Policy
May 4, 2001.2
CONTENTS
Background 5
Executive Summary 6
1.0 Introduction 11
2.0 Transportation in Canada 12
2.1 Tourism and Business Travel 12
2.2 Trade and Commerce 13
Commercial Activity 14
Globalization 14
Trade Corridors 15
2.3 Advanced Technologies 15
2.4 Environment 17
Climate Change Process 17
2.5 Looking Forward 19
3.0 Transportation Policy in Canada 20
4.0 Moving Forward: National Transportation Policy for Canada 23
4.1 Canada’s Integration into a Global and North American Economy 24
North American Trade 24
Current Initiatives 26.3
4.2 Need for a Long-Term Infrastructure Strategy 29
National Highway System 30
Border Crossings 31
Airports 31
Marine Infrastructure 34
Rail Infrastructure 35
Pipelines 36
4.2.1 International Comparison 36
4.2.2 Infrastructure: An Integrated Platform 38
4.3 Integration, Competition and Cooperation Among
Transportation Modes
41
Taxation 42
Infrastructure 42
4.4 Approach to Devolution and Divestiture of Transportation 44
NAV Canada 44
Port Authorities 44
Airport Authorities 45
Inconsistent Approach between Centres 45
More Consistent Approach Necessary 46
Conclusions 47
5.0 Summary of Recommendations 48
5.1 Economic Development and Regulation 48
5.2 Canada’s Integration into a Global and North American Economy 49
5.3 Need for a Long-Term Infrastructure Strategy 49
5.4 Integration and Competition Among Transportation Modes 51
5.5 Approach to Devolution and Divestiture of Transportation 51
Reference Materials 52.4
TABLES AND GRAPHS
Table 1 : Domestic Trade in Canada 1992 – 1998 13
Table 2 : Comparisons of Truck Traffic within Canada and across
the US Border : 1990 and 1996
25
Table 3 : Capital Funding Shortfall for Airports 33.5
BACKGROUND
The Canadian Chamber of Commerce is Canada’s largest and most
representative business organization. The Canadian Chamber of Commerce
represents more than 170 000 members, including a network of chambers of
commerce and boards of trade in communities throughout the country. The
membership of the Canadian Chamber of Commerce reflects the diversity of
Canada’s transportation sector. The Canadian Chamber has members from
every mode of transportation, every industry in Canada, and every region of our
country. Each of our members depends on reliable and efficient transportation to
move their people and goods, and all of Canada benefits from the maintenance
of a world class transportation system.
This report stems from a process that began at the Annual General Meeting of
the Canadian Chamber of Commerce in October 2000. During the policy session
of that meeting, a number of policy resolutions related to transportation were
introduced. These resolutions related to all modes of transportation, including
infrastructure, airports and air transport, railways, highway and marine
transportation, as well as trade facilitation issues such as border crossings.
Given the integrated nature of Canada’s transportation system, and the
importance of transportation for trading activities, delegates elected to create a
transportation policy document that would outline the Chamber’s priorities and
recommendations with regards to transportation policy in Canada. This report is
the culmination of that process, it was developed by a working group that
included chambers of commerce and boards of trade from across Canada, as
well as member companies from various industry sectors..6
EXECUTIVE SUMMARY
1.0 Introduction
Transportation has traditionally played an important role in Canada. Given
Canada’s vast geography and its sparse population, efficient and reliable
transportation is necessary to move people, goods and products throughout our
country. In fact, reliable transportation is one of the key factors that led to
Canada’s evolution as a unified, prosperous nation.
The importance of transportation is equally true for today’s Canada. Today,
Canadians are travelling further and more often to conduct business or partake in
leisure activities. The most pressing reason for efficient transportation, however,
is the one that makes economic and social prosperity possible. Namely, that
Canada is a trading nation, and successful trade requires a world-class
transportation system.
2.0 Transportation in Canada
Transportation is directly related to many of Canada’s economic activities, as well
as many of our social and environmental priorities.
2.1 Tourism and Business Travel
The most valuable commodity that is moved by transportation is the travelling
public. Both Canadians and foreign visitors travel throughout Canada for leisure,
business and other purposes. In 1998, tourism spending in Canada amounted to
$47.1 billion. 39 per cent of these expenditures ($18 billion) were spent on
transportation.
2.2 Trade and Commerce
Trade and commerce are vitally important to the Canadian economy. Canada is
dependent on trade to generate wealth and increase our standard of living. One
in three jobs is dependent on trade, and many of our important social programs
are made possible by our economic prosperity.
Increased volumes of trade have enhanced the demand for dependable
transportation. From 1992 to 1998, the volume carried by the various modes
increased by an average of three per cent, from 362 million to 429 million tonnes.
Rail accounted for the greatest share, increasing its portion from 46 to 50 per
cent of total tonnage moved. For-hire trucking followed closely, increasing its
share from 34 per cent to 41 per cent. Marine’s share declined slightly, from 14.7
to 11 per cent. The air industry carried less than one percent of Canada’s trade
volume, but 9% of its trade value.
Trade corridors are essential to facilitating important trading links, both
internationally and domestically. These corridors provide gateways and
connections to major trading regions and include the necessary concentration of
resources to safely and quickly move large volumes of freight and many
passengers.
In some cases, Canada’s trade corridors are proving insufficient for carrying the
levels of traffic that our economy demands. This is especially true in urban
corridors that carry high levels of NAFTA trade. Trade corridors in Southern
Ontario and the lower mainland of British Columbia, for example, are prone to
excessive levels of traffic congestion. This “gridlock” has a negative impact on
our economy and the environment. As we move forward, it will be imperative
that Canada’s trading corridors be renewed, enhanced and maintained to support
Canada’s growth.
2.3 Advanced Technologies
Recent history has seen significant advances in information and communications
technologies and their ability to enhance the productive capabilities of firms.
These advances are allowing companies to better share information, better
connect with their clients, and to streamline their operations. While electronic
commerce will allow companies to expand their markets, it will be the reliability of
distribution networks that will be critical to realizing the potential of Internet-based
commerce.
Technology is also changing the way in which transportation companies manage
the movement of people and products. One significant trend in this regard is the
emergence of integrated logistics chains. By coordinating the management of
inventory, packaging and transportation as a single function, companies are
shipping and receiving products through a seamless, multi-modal system.
The travelling public is similarly taking advantage of advanced technologies to
enhance their transportation needs. Many travellers use the Internet to make
their travel arrangements.
2.4 Environment
The transportation sector is inherently linked with Canada’s environmental
priorities. Air, water and noise pollution, Greenhouse Gas Emissions (GHG), as
well as the use of land and other natural resources are direct consequences of
transportation activities. These environmental matters are generated through
transportation activities such as the construction of infrastructure; the production,
operation, maintenance and disposal of vehicles; as well as the provision of.8
energy and fuel. While these issues and their regulation are highly complex,
transportation and economic policy initiatives have an important contributing role
in meeting Canada’s environmental objectives. With regard to climate change,
the position of the Canadian Chamber of Commerce has been that measures to
address climate change must focus on voluntary, flexible and cost-effective
approaches which will provide for continued strong economic growth while
reducing net emissions of greenhouse gases.
2.5 Looking Forward
Canada’s transportation sector is currently facing a number of challenges as well
as a number of opportunities for growth. Solutions to these challenges should
be introduced with the aim of providing high quality transportation services to
shippers and the travelling public, keeping in mind the importance of viable
operating conditions for Canadian carriers.
3.0 Transportation Policy in Canada
The Canada Transportation Act (1996) provides the policy framework for
Canada’s transportation sector. Section 5 of the Act prescribes a “National
Transportation Policy”, a statement that identifies the priorities of Canadian
transportation policy. The National Transportation Policy indicates that
“competition and market forces are, whenever possible, the prime agents in
providing viable and effective transportation services.” The section also states
that “economic regulation of carriers and modes of transportation occurs only in
respect of those services and regions where regulation is necessary.”
The Canada Transportation Act (1996) represents a significant development for
Canada’s transportation industry. This policy established that the federal
government’s approach to the economic side of transportation would be one of
deregulation, that the federal government would devolve the maintenance and
operation of many transportation services to private entities, and that competition
and market forces would ensure the delivery of transportation services.
The Canadian Chamber of Commerce agrees with the principal tenets of the
Canada Transportation Act (1996) and believes that competition and market
forces have proven successful in making Canada’s transportation sector more
competitive and more responsive to the needs of our economy. Some of the
benefits of deregulation and competition have been the following.
! Increased air passenger and air cargo traffic with the United States resulting
from the liberalization of air traffic with the United States.
! Increased efficiency and speed in logistics as a result of deregulation in
surface transportation such as highway and rail transportation..9
! Increased growth in the short line rail sector.
The implementation of Canada’s policy framework, however, has been ad hoc
and inconsistent. In many cases, the implementation of this policy has not
supported the NAFTA trade approach and has not recognized that Canada’s
transportation capacity is an integrated part of a North American economy. As a
result, the full benefits of a competitive, market-based system have yet to be
realized, and barriers to growth and profitability remain. In addition, some rural
areas have yet to realize the benefits of a competitive system. Deregulation has
brought about changes in the transportation industry as firms seek greater
efficiencies, and some rural and non-hub communities have yet to see the
benefits of a multi-carrier market.
Canada’s response to these shortcomings has tended towards a re-regulation of
the industry. The federal government needs to resist the urge to re-regulate the
economic side of transportation services in going forward towards a more
competitive environment. While the Canada Transportation Act (1996) began
the move towards competition and market forces, the establishment of a National
Transportation Policy Framework is the next step in the evolution of Canada’s
transportation system. Canada is at a crossroads. If we do not use this
opportunity to move ahead and promote a competitive environment we will fail to
realize our economic objectives.
4.0 Moving Forward: National Transportation Policy for Canada
The Canadian Chamber of Commerce believes that Canada’s transportation
system requires a comprehensive transportation policy framework to realize its
potential as a competitive, market-based system.
The Government of Canada needs to show leadership in developing this policy
framework, reiterating Canada’s commitment to a market-based system and
providing a set of principles or priorities that will guide the implementation of this
policy. Without a coordinated, long-term strategic plan, Canada’s competitive
position will dissipate. This strategy should relate to all modes of transportation,
as well as the needs of both shippers and carriers. In particular, this policy
framework needs to recognize trends and set principles in the following areas:
! Canada’s integration into a global and North American economy,
! The need for a national, multi-modal infrastructure strategy.
! Increased integration, cooperation and competition between modes of
transportation, and the need for common treatment of the modes in areas
such as taxation, safety regulation and operating standards.
! Approach to devolution of transportation services.
! Enhancing the financial, social and environmental sustainability of Canada’s
transportation system..10
! Strengthening Canada’s economic union by harmonizing standards
throughout Canada and enhancing interprovincial trading links.
Conclusions
Moving forward, Canada needs a comprehensive framework for the development
and implementation of a modern transportation policy. Canada can no longer
afford to develop public policy without considering the broader implications for
our international competitiveness, our environment and our society. As such,
Canada’s transportation policy should recognize the importance of international
trade, infrastructure, integration among the modes, and the devolution of
transportation services. Each of these factors is fundamentally related to the
capacity of our transportation system and our economy, and each of these
factors needs to be recognized by a modern transportation policy..11
SECTION 1 - Introduction
Transportation has traditionally played an important role in Canada. Given
Canada’s vast geography and its sparse population, efficient and reliable
transportation is necessary to move people, goods and products throughout our
country. In fact, reliable transportation is one of the key factors that led to
Canada’s evolution as a unified, prosperous nation.
The importance of transportation is equally true for today’s Canada. Today,
Canadians are travelling further and more often to conduct business or partake in
leisure activities. The forces of globalization are transforming the economic,
social and cultural landscape of the world, and Canadians need safe and
affordable transportation to connect them with the international community and to
bring visitors to our great country.
The most pressing reason for efficient transportation, however, is the one that
makes economic and social prosperity possible. Namely, that Canada is a
trading nation, and successful trade requires a world-class transportation system.
In its interim report, the Canada Transportation Act Review Panel recognized this
reality.
It is the Panel’s view that any responsible proposal to
revise transportation policy must recognize that
Canada is a trading nation and the effectiveness and
efficiency of its transportation system has a direct
impact on its ability to compete internationally. At
stake is the wealth of the country and the well being
of its citizens.
- Canada Transportation Act Review Panel, January 2001.
Canada’s economy is currently facing a number of challenges as well as a
number of opportunities for growth, and our transportation sector is essential to
realizing economic growth in Canada..12
SECTION 2 - TRANSPORTATION IN CANADA
Transportation is directly related to many of Canada’s economic activities, as well
as many of our social and environmental priorities.
2.1 Tourism and Business Travel
The most valuable commodity that is moved by transportation is the travelling
public. Both Canadians and foreign visitors travel throughout Canada for leisure,
business and other purposes. In 1998, tourism 1 spending in Canada amounted
to $47.1 billion. 39 per cent of these expenditures ($18 billion) were spent on
transportation. 57 per cent of travel expenditures were directed at air travel,
while 35 per cent of travel expenditures were used to travel by motor vehicles.
About 70 per cent of the transportation expenditures on tourism are spent by
Canadians, the remaining expenditures are brought into Canada by foreign
travellers. A dependable transportation system is required to move Canadians to
work and play, as well as to attract foreign travellers to Canada.
1 “Tourism” includes both leisure and business travel. “Tourist” travel includes any trip that is at least 80
km from the traveller’s place of residence. This definition of tourism is used by Statistics Canada and the
Canadian Tourism Commission..13
2.2 Trade and Commerce
Trade and commerce are vitally important to the Canadian economy. Canada is
dependent on trade to generate wealth and increase our standard of living. One
in three jobs is dependent on trade 2 , and many of our important social programs
are made possible by our economic prosperity. As table 1 indicates, levels of
trade within Canada increased steadily from 1992 to 1998.
(Source: Interprovincial and International Trade in Canada: 1992-1998
Statistics Canada, June 2000).
2 WESTAC and The Van Horne Institute, Moving Forward: A Guide to the Importance of Transportation
in Canada. (December 1999) p. 35.
0
20000
40000
60000
80000
100000
120000
1992 1993 1994 1995 1996 1997 1998
Table 1 :
Domestic Trade in Canada 1992 - 1998
Total Goods Total Services.14
Increased volumes of trade have enhanced the demand for dependable
transportation. From 1992 to 1998, the volume carried by the various modes
increased by an average of three per cent, from 362 million to 429 million
tonnes.3 Rail accounted for the greatest share, increasing its portion from 46 to
50 per cent of total tonnage moved. For-hire trucking followed closely, increasing
its share from 34 per cent to 41 per cent. Marine’s share declined slightly, from
14 to 11 per cent. The air industry carried less than one percent of Canada’s
trade volume, but 9% of its trade value. 4
Commercial Activity
As is the case in all industrialized nations, commercial activity in Canada has
changed over the past two decades. Today, manufacturing processes are more
decentralized, materials are being shipped to different locations as they move
throughout production cycles. Regions are increasingly interdependent,
provinces and communities rely on transportation for their economic
development and prosperity. Customers and markets are further away, goods
produced in Canada are being shipped throughout the country and the world.
It is important to note that we refer to transportation as an industry, but
transportation is a sector that supports all industries. Indeed, transportation is
used to ship materials for nearly every sector of the economy and to deliver
products to every region of Canada. Similarly, every sector of Canada’s economy
and society uses transportation to move people.
Globalization
Canada also moves people and goods throughout the world. For a small, open
economy such as Canada’s, international trade is essential for economic growth.
3 Transport Canada Annual Report 1999.
4 WESTAC and Van Horne 1999, p. 63..15
In fact, more than 40% of Canada’s GDP in 1999 was exports.5 Canada’s
dependence on exports is particularly focused on trade with the United States,
more than 85% of our international trade is conducted with the U.S.
Trade Corridors
“Trade corridors” are essential to facilitating important trading links, both
internationally and domestically. These corridors provide gateways and
connections to major trading regions and include the necessary concentration of
resources to safely and quickly move large volumes of freight and many
passengers. Situating businesses along them offers significant economic
development opportunities. In fact, these routes could more accurately be
described as “economic corridors.” Recognizing and developing long-term,
strategic plans around this reality is essential.
In some cases, Canada’s trade corridors are proving insufficient for carrying the
levels of traffic that our economy demands. This is especially true in urban
corridors that carry high levels of NAFTA trade. Trade corridors in Southern
Ontario and the lower mainland of British Columbia, for example, are prone to
excessive levels of traffic congestion. This “gridlock” has a negative impact on
our economy and the environment. As we move forward, it will be imperative
that Canada’s trading corridors be renewed, enhanced and maintained to support
Canada’s growth.
2.3 Advanced Technologies
Recent history has seen significant advances in information and communications
technologies and their ability to enhance the productive capabilities of firms.
These advances are allowing companies to better share information, better
connect with their clients, and to streamline their operations. Advances in
5 Statistics Canada, Gross Domestic Product (expenditure-based) 1999..16
technology have even created the opportunity for the emergence for new forms
of commerce such as electronic commerce.
Advanced technologies are providing individuals, firms and customers with the
capability to communicate and share information over great distances. And
while electronic commerce applications will allow companies to expand their
markets, it will be the reliability of distribution networks that will be critical to
realizing the potential of Internet-based commerce.
Technology is also changing the way in which transportation companies manage
the movement of people and products. One significant trend in this regard is the
emergence of integrated logistics chains. By coordinating the management of
inventory, packaging and transportation as a single function, companies are
shipping and receiving products through a seamless, multi-modal system.
Supply chains are not the only impact of technology on transportation. Intelligent
transportation systems (ITS) incorporate advanced navigation, route guidance,
communication, sensor and computer technologies and apply them to a broad
range of transportation applications, facilitating a greater movement of people,
products and goods throughout the world. Technology is enhancing the levels of
accessibility, sustainability, productivity and safety of our transportation system.
The travelling public is similarly taking advantage of advanced technologies to
enhance their transportation needs. Many travellers use the Internet to make
their travel arrangements. Transportation companies need the capability to
adapt to the changing business environment in order to deliver competitive
services to their customers..17
2.4 Environment
The transportation sector is inherently linked with Canada’s environmental
priorities. Air, water and noise pollution, Greenhouse Gas Emissions (GHG), as
well as the use of land and other natural resources are direct consequences of
transportation activities. These environmental matters are generated through
transportation activities such as the construction of infrastructure; the production,
operation, maintenance and disposal of vehicles; as well as the provision of
energy and fuel. While these issues and their regulation are highly complex,
transportation and economic policy initiatives have an important contributing role
in meeting Canada’s environmental objectives.
Climate Change Process
Transportation was one of 16 “issue tables” that were developed as part of
Canada’s National Strategy on Climate Change. The "issue tables" were multi-stakeholder
advisory groups that discussed options for climate change action for
various sectors.
The Transportation Issue Table recommended different approaches for reducing
the amount of greenhouse gasses emitted in Canada each year. Potential
approaches included technological improvements to vehicles, fuels and
infrastructure; changing the way transportation is used; as well as managing the
demand for transportation. The following were identified as a list of potential
programs to implement these goals.
• Research, Development and Demonstrations
• Government Operations
• Regulation
• Economic Instruments
• Voluntary Agreements.18
Recommendations of the Transportation Issue Table on Climate Change
The Transportation Issue Table commissioned 24 research studies to consider
these various approaches, and then evaluated the feasibility of these approaches
in their November 1999 “Options Paper.” In reviewing the Options Paper, it is
clear that some of the final recommendations of the Transportation Issue Table
are related to the Canadian Chamber of Commerce position on GHG and climate
change and are worth mentioning here.6
The Transportation Issue Table considered market mechanisms such as
prices, fees and charges but could not reach consensus regarding the
feasibility of these options. The Canadian Chamber of Commerce has
maintained that Canada’s climate change strategy should achieve a balance of
Canada’s environmental and economic objectives within the context of our
dependence on international trade. The Canadian Chamber believes that using
mechanisms such as taxes and fees to effect transportation will diminish the
competitiveness of Canada’s transportation sector and our economy. The
Chamber has indicated that Canada produces only a fraction of the GHG
emissions that are created by the industrialized nations and that Canada’s
position within the global economy requires that it maintain a competitive
advantage.
The Transportation Issue Table identified the increased use of intelligent
transportation systems (ITS) to improve traffic flow among the “most
promising” measures to reduce GHG. The Canadian Chamber of Commerce
has similarly indicated that measures to enhance traffic flow and reduce traffic
6 The Canadian Chamber of Commerce adopted a comprehensive position on Greenhouse Gas Emissions
and Climate Change at its 1998 Annual General Meeting. The “Greenhouse Gas Emissions and Climate
Change” resolution is available at www.chamber.ca or in the Chamber’s annual “Policy Positions”
booklet..19
congestion will prove not only to increase Canada’s economic performance but
will enhance the sustainability of transportation activities.
The Transportation Issue Table recommended that a more frequent
resurfacing of the National Highway System was a “more promising”
measure to reducing greenhouse gas emissions. Infrastructure that is
better constructed and better maintained contributes more to the long-term
sustainability and competitiveness of Canada’s transportation system.
The position of the Canadian Chamber of Commerce has been that measures to
address climate change must focus on voluntary, flexible and cost-effective
approaches which will provide for continued strong economic growth while
reducing net emissions of greenhouse gases.
2.5 Looking Forward
Canada’s transportation sector is currently facing a number of challenges as well
as a number of opportunities for growth. Solutions to these challenges should
be introduced with the aim of providing high quality transportation services to
shippers and the travelling public, keeping in mind the importance of viable
operating conditions for Canadian carriers..20
SECTION 3 - Transportation Policy in Canada
The Canada Transportation Act (1996) provides the policy framework for
Canada’s transportation sector. Section 5 of the Act prescribes a “National
Transportation Policy”, a statement that identifies the priorities of Canadian
transportation policy. The National Transportation Policy indicates that
“competition and market forces are, whenever possible, the prime agents in
providing viable and effective transportation services.” The section also states
that “economic regulation of carriers and modes of transportation occurs only in
respect of those services and regions where regulation is necessary.”
The Canada Transportation Act (1996) represents a significant development for
Canada’s transportation industry. This policy established that the federal
government’s approach to the economic side of transportation would be one of
deregulation, that the federal government would devolve the maintenance and
operation of many transportation services to private entities, and that competition
and market forces would ensure the delivery of transportation services.
The Canadian Chamber of Commerce agrees with the principal tenets of the
Canada Transportation Act (1996) and believes that competition and market
forces have proven successful in making Canada’s transportation sector more
competitive and more responsive to the needs of our economy. Some of the
benefits of deregulation and competition have been the following.
! Increased air passenger and air cargo traffic with the United States resulting
from the liberalization of air traffic with the United States.
! Increased efficiency and speed in logistics as a result of deregulation in
surface transportation such as highway and rail transportation.
! Increased growth in the short line rail sector..21
The implementation of Canada’s policy framework, however, has been ad hoc
and inconsistent. In many cases, the implementation of this policy has not
supported the NAFTA trade approach and has not recognized that Canada’s
transportation capacity is an integrated part of a North American economy. As a
result, the full benefits of a competitive, market-based system have yet to be
realized, and barriers to growth and profitability remain. Some rural areas, in
particular, have yet to realize the benefits of a competitive system. Deregulation
has brought about changes in the transportation industry as firms seek greater
efficiencies, and some rural and non-hub communities have yet to see the
benefits of a multi-carrier market.
Canada’s response to these shortcomings has tended towards a re-regulation of
the industry. For example, Bill C-34 (2000) amended the Canada Transportation
Act and introduced a revenue cap on grain transportation by railways. Policy
initiatives such as these may meet short-term objectives, but they run contrary to
the tenets of the Canada Transportation Act and diminish the benefits of a
competitive environment. The federal government needs to resist the urge to
re-regulate the economic side of transportation services in going forward towards
a more competitive environment.
While the Canada Transportation Act (1996) began the move towards
competition and market forces, the establishment of a National Transportation
Policy Framework is the next step in the evolution of Canada’s transportation
system. Canada is at a crossroads. If we do not use this opportunity to move
ahead and promote a competitive environment we will fail to realize our
economic objectives..22
Recommendation: In developing transportation policy, the federal government
should reiterate its commitment to competition and market forces and develop a
more comprehensive policy framework to support NAFTA and govern Canada’s
transportation system. This framework should be relevant to all regions of
Canada, enhancing the commercial and social viability of both rural and urban
areas.
! Transportation policy should enhance Canada’s economic union by
harmonizing regulatory standards and removing barriers to trade within
Canada. No additional regulations or standards should be imposed on
Canada’s transportation system without a substantial cost-benefit analysis.
! The federal government should move to equalize the tax burden on
transportation with that of the United States.
! Efforts and partnerships need to be explored that will remove the significant
development barriers that are present in with respect to linkages with rural
and non-hub markets.
! Federal rents and charges should cover only the actual costs incurred by the
federal government in fulfilling its duties under the National Transportation
Policy..23
SECTION 4- Moving Forward:
National Transportation Policy for Canada
The Canadian Chamber of Commerce believes that Canada’s transportation
system requires a comprehensive transportation policy framework to realize its
potential as a competitive, market-based system. The Government of Canada
needs to show leadership in developing this policy framework, reiterating
Canada’s commitment to a market-based system and providing a set of
principles or priorities that will guide the implementation of this policy. Without a
coordinated, long-term strategic plan, Canada’s competitive position will
dissipate. This strategy should relate to all modes of transportation, as well as
the needs of both shippers and carriers. In particular, this policy framework
needs to recognize trends and set principles in the following areas:
• Canada’s integration into a global and North American economy,
• The need for a national, multi-modal infrastructure strategy.
• Increased integration, cooperation and competition between modes of
transportation, and the need for common treatment of the modes in areas
such as taxation, safety regulation and operating standards.
• Approach to devolution of transportation services.
• Enhancing the financial, social and environmental sustainability of
Canada’s transportation system.
• Strengthening Canada’s economic union by harmonizing standards
throughout Canada and enhancing interprovincial trading links.
Public policy should reflect these realities. Competition rules and regulations
need to balance the interests of users with those of providers, while
transportation policy framework needs to provide the environment where
Canadian carriers can grow and compete. These trends and their importance will
be discussed below and the recommendations will be summarized in section 5..24
4.1 Canada’s Integration into a Global and North American Economy.
It was mentioned earlier that globalization is creating opportunities for Canadians
to trade throughout the world. Many of our export resources such as grain, coal,
potash and forest products come from points that are far from tidewater and
offshore markets, and transportation is critical to moving these commodities to
markets throughout the world.
Marine transportation is vital to Canada as a major trading nation, particularly for
trade with countries other than the U.S., where road and rail are not options.
Canadian ports handled 376 million tonnes of goods in 1997, three-quarters of
which was international shipments.7 These shipments also included 20 million
tonnes of containerized goods, most through Montreal, Vancouver and Halifax.
North American Trade
Canada’s integration into a global economy is particularly true within the North
American continent. Canada-U.S. trade is growing by approximately 10 per cent
each year. 85% of Canadian exports go to the U.S., 50% of Canada’s air cargo
traffic is trade with the United States, and more than 28 % of Canada’s rail freight
tonnage is destined for the United States.
The most common mode of Canada – U.S. trade is trucking. In 1998, trucks
carried 63% of Canada’s $270 billion in exports to the U.S., while 80% of
Canada’s $204 billion in imports from the U.S. arrived by truck.
Truck traffic between Canada and the United States has increased significantly
since the coming into force of the Canada-U.S. Free Trade Agreement in 1991
and the North American Free Trade Agreement in 1994. Currently, more than
thirteen million trucks pass between Canada and the United States each year, or
7 WESTAC and Van Horne, 64..25
about 36 500 per day.8 This is compared to about seven million in 1990. Table 2
illustrates this trend. As the table indicates, the percentage of truck traffic that
travelled across the US border (north-south) increased during the period 1990-
1996, when compared with truck traffic within Canada (east-west).
Table 2 : Comparisons of Truck Traffic within Canada
and across the US Border : 1990 and 1996 9
Traffic within Canada Traffic across US Border
1990 70% 30%
1996 59% 41%
(Source : WESTAC and the Van Horne Institute, 1999).
Although truck traffic is the most common mode of Canada – US trade, railways
carry a higher percentage of tonnage. Railways carry 59% of the tonnage moved
by surface transport, and carry as much as 70% of the tonne-km generated by
surface transport. Much of this rail freight consists of commodities such as
lumber, potash, newsprint, wood pulp and containers on flat cars.10 Railways
transport large volumes of these commodities to ports for export by water, and in
many instances, deliver them directly to the US.
Canada – U.S. transportation has also increased in the area of passenger travel.
The number of air travellers between Canada and the U.S. increased from 12
million passengers in 1988 to nearly 18 million in 1998. The number of
scheduled Canadian commercial flights to the U.S. has expanded by about a
third in the last five years. Passenger rail is a similarly important component of
intercity transportation and carries people to destinations throughout Canada and
the United States.
8 Transport Canada, based on Statistics Canada, International Travel Section
9 This table reflects the percentage of all for-hire truck traffic on a tonne-km basis (e.g. the movement of
one tonne of freight a distance of one kilometre).
10 WESTAC and Van Horne (1999) p. 58..26
Canada’s increased integration with the United States has not happened without
direction. Rather, Canada’s integration with the U.S. has resulted directly from
public policy choices to liberalize the trading and transportation environments.
NAFTA, open skies and surface deregulation initiatives have all contributed to a
greater degree of integration within North America.
Current Initiatives
The Government of Canada should be commended for its current initiatives
towards broadening Canada’s linkages with the international community. For
instance, the federal government has been working to expand Canada’s air
service agreements with other countries and has recently negotiated agreements
with Austria, Poland and Iceland. Agreements such as these will expand the
destinations available to Canadians and increase the opportunities for foreign
business to arrive in Canada. The Canadian Chamber of Commerce believes
that similar agreements with the potential to expand opportunities for Canadian
carriers and passengers should be pursued where the benefits of the agreement
are reciprocal.
The federal government should also be commended for its work in facilitating
travel and trade in North America. The government has been working to
enhance transportation infrastructure at border crossings and points of entry, as
well as implementing new and innovative programs to streamline border
procedures and facilitate movement between Canada and the United States.
The following are prime examples of initiatives are being taken.
! the CANPASS program was designed to facilitate border crossings in airport,
marine port and highway points of entry. CANPASS program has been
successfully implemented at a number of Canada-U.S. points of entry.
! a “Commercial Vehicle Processing Centre” was designed to reduce delays at
the Fort Erie-Buffalo border crossing,.27
! the Government of Canada recently signed an agreement with the United
States to expand the framework for in-transit preclearance (ITPC) services at
major Canadian airports such as Vancouver, Edmonton, Calgary, Toronto
and Montreal.
! the rail industry is working closely with customs agencies in both Canada and
the United States to develop preclearance procedures for rail transportation,
thus increasing the efficiency of the rail system and facilitating greater trade in
North America.
The implementation of these programs enhances efficiency, reduces waiting
times and increases border traffic capacity.
A wide range of public and private sector groups are currently engaged in
discussions and projects that seek to improve border infrastructure and the
transportation systems which use them. The recent establishment of the Canada-US
Partnership (CUSP), a forum which examines border cooperation among
other issues, is a positive step forward in discussing and resolving common
border concerns. The CUSP discussions are focused not only on congestion at
specific border crossings, but on the larger issue of shared border management.
The continuing growth in the volume of Canada-US trade and traffic requires a
shared vision and strategic approach to border management that will allow both
countries to work together in a coordinated fashion. There are significant
benefits for both Canada and the US to a longer-term strategy developed by
governments and business so that border management actions facilitate
business and do not hamper it.
Although this discussion has focused on a degree of cooperation, policy needs to
recognize the degree of competition that similarly results from North American
economic integration. Canadian carriers from all modes are faced with
competition from U.S. rivals and require an “even-playing field” when competing.28
with U.S. firms. Regulatory areas such as taxation and operating standards
should not disadvantage Canadian firms competing with U.S. firms.
Recommendations
It has been shown here that transportation is closely linked with Canada’s
economic priorities. Canada’s National Transportation Policy Framework should
reflect the international nature of trade, and like NAFTA and the Canada-U.S.
Free Trade Agreement, should recognize the integration of our North American
economy.
• Canada’s transportation policy should be used to facilitate greater access,
cooperation and competition with the global economy, particularly within
North America.
• Canada Transportation Act should recognize that international trade is
fundamental to the well-being of Canada and that transportation is
fundamentally related to our economic growth.
• Excessive levels of taxation should be reduced to promote competition and
profitability in the transportation industry.
• Levels of regulation and operating standards should be minimized and
designed to facilitate increased movement within North America.
• Transportation policy needs to pay close attention to trade facilitation issues
such as customs procedures, immigration rules, cargo liability regimes,
security arrangements, and all other components of transportation, including
input taxes, that if not harmonized and streamlined, could prevent the best
performance of our carriers and facility operators.
! Maximize the use of advanced technology applications in all modes,
especially to enhance the flow of traffic at border crossings. Such systems
include advanced traffic management systems, advanced traveller
information systems and advanced vehicle control systems.
! The federal government should work with provincial governments to provide
necessary road and other infrastructure improvements at border crossings..29
4.2 Need for a long-term infrastructure strategy.
A fundamental aspect of a transportation system is infrastructure. The Canada
Transportation Act (1996) considers the relationship between shippers and
carriers, but says little about the maintenance and enhancement of infrastructure.
Infrastructure is the platform upon which the entire transportation system
operates. It is the roads, railways, air transport facilities, pipelines and port
systems which Canadian carriers use to deliver services and compete with U.S.
carriers. Infrastructure also includes the facilities that the travelling public use
for business and leisure travel, it is a vital element to the competitiveness and
efficiency of our transportation system.
WESTAC estimates that federal revenues from transportation activities reached
$4.185 billion in 1997 / 1998.11 These revenues include federal fuel excise tax
from rail, air, road diesel and road gasoline, but do not include fuel excise tax
from domestic marine carriers or user fees for Coast Guard services. 12
WESTAC also estimates that federal spending on direct subsidies and grants to
transportation was $1.781 billion during this period. WESTAC emphasizes,
however, that “annual spending is only a snapshot of a single year”, and that
these amounts do not include the investments in facilities and services (e.g.
airport operations, marine safety and Coast Guard) that the federal government
has made over the years.
As indicated earlier, forecasts for Canada’s economic growth are increasing.
Canada’s transportation infrastructure is under stress, and will continue to erode
as economic growth, trade and travel continue. The essential segments of
transportation infrastructure are described throughout this section.
11 WESTAC and The Van Horne Institute, page 44.
12 This amount applies only to federal revenues. WESTAC estimates that the provinces and territories drew
$8.711 billion from transportation activities in 1997 / 1998, ($5.8 billion from fuel taxes and $ 2.9 billion
from licence fees)..30
National Highway System
Canada’s National Highway system (NHS) is approximately 25 000 km of
highways that extends from coast-to-coast, connects all capital cities, major
population and commercial centres, important ferry terminals and major access
points to the United States. The NHS facilitates both interprovincial and
international trade for Canada’s economy. Levels of road use and traffic have
risen in nearly every region and the NHS has been under increasing stress.
Nearly 80 billion vehicle-kilometres were generated in 1996, up almost nine per
cent from 1993 and almost 40 per cent from 1986. 13 Traffic is most heavily
concentrated around Canada’s urban areas, although rural areas are similarly
dependent on viable highway infrastructure. Canada’s busiest corridor is the
401-Autoroute 20 corridor running from Windsor to Quebec City. 14 Ontario and
Quebec generate more than 60 per cent of the total vehicle-kilometres driven on
the National Highway System. The second busiest corridor is a portion of the
Trans-Canada Highway in the lower mainland of British Columbia running from
Chilliwack to Vancouver. British Columbia generates 14 per cent of the total
vehicle-kilometres driven in Canada. The third busiest corridor is Highway 2
running between Calgary and Edmonton; Alberta generates 11 per cent of the
vehicle-kilometres driven in Canada.
The most recent report commissioned by the Council of Ministers Responsible
for Transportation and Highway Safety indicates that the NHS is in need of
significant work to restore it to satisfactory levels. Based on 1997 conditions, this
report estimates the cost of restoring the NHS as $17.4 billion.15
13 Transport Canada Annual Report 1999, p86.
14 Transport Canada Annual Report 1999, p86.
15 Council of Ministers Responsible for Transportation and Highway Safety, National Highway System :
Condition and Investment Needs Update 1997 (September 1998)..31
Border Crossings
Vehicle traffic between Canada and the United States has similarly been
increasing over the past few years. Crossborder traffic is heavily concentrated
among a small number of sites. From 1997 to 1998, almost 90 per cent of total
truck movements passed through 20 border-crossing sites. Ontario has four of
the busiest truck crossings, the bridges at Windsor, Sarnia, Niagara Falls and
Fort Erie handled 6.6 million trucks in 1998, or 54 per cent of the total truck
traffic. Driven by NAFTA trade, this traffic contributes to the high levels of traffic
congestion and gridlock in Southern Ontario trading corridors that was described
earlier. The next busiest crossings were the Pacific Highway in British Columbia
and at Lacolle, Quebec. In addition to these two crossings, B.C. and Quebec
each had three border crossings each in Canada’s top 20. New Brunswick had
two border crossings in the top 20, while the Prairie provinces each had one.
While this discussion has used the term “border crossings”, it is important to note
that points of entry are not necessarily on our borders. Points of entry into
Canada are also located in airports. Increased levels of infrastructure and
service at points of entry in airports are similarly important in facilitating the
movement of people and goods into Canada. Constant improvements to border
and transportation infrastructure are vital to ensuring the continued expansion of
Canada-US trade and the efficient movement of tourists and business people
across the border.
Airports
The National Airport System (NAS) comprises 26 airports in provincial capitals
and major centres across Canada. Together, all NAS airports handle 95% of
passenger and 98% of cargo traffic in Canada. The National Airports Policy.32
(1994) established the framework for providing greater local control of NAS
airports, and the Government of Canada has been active in devolving these NAS
airports to Canadian Airport authorities (CAA). In addition, airports in Calgary,
Edmonton, Montreal and Vancouver were devolved to local airport authorities
(LAA) prior to the introduction of the National Airports Policy. These airport
authorities are not-for-profit entities that operate and fund the airports.
Canada’s air transport system similarly depends heavily on capital investments to
maintain safety and efficiency. CAAs that manage National Airport System
airports are fully responsible for capital improvements to their airport. CAAs and
LAAs do not qualify to receive public funding for capital improvement projects. In
fact, Transport Canada has moved from a position of spending as much as $400
million annually on airports in the middle 1980s to receiving $250 million each
year in “rent” on those same properties. Over the next several years, the NAS
airports will pay rent to the federal government that will inflate to half-a-billion
dollars per year, while the effect of the federal government’s historic investment
in airport infrastructure will continue to decline. This has important implications
for the air transportation system and must be addressed by the federal
government..33
Table 3 : Capital Funding Shortfall
Source: Main Estimates ProgramSummaries. Departmental Revenue
Forecasts, Draft Airports AuthorityGroupBusiness Plan(1989/90)
0
500
1000
1500
2000
2500
3000
1990/91 91/92 92/93 93/94 94/95
Cumulative Capital Requirement
Cumulative funds available from operations, appropriations and
the Air Transportation Tax
$Millions
As indicated above, the federal government’s business plan anticipated a
cumulative capital requirement of nearly $3 Billion by 1994/95, and projected a
$1.4 Billion financing shortfall by that date.
Canada’s transportation system also includes hundreds of small airports that
serve communities and regions throughout the country. In fact, these small
airports are often vital links to the communities and economies of rural areas.
Many of these non-NAS airports, those located in smaller communities
throughout Canada, have been devolved to the local municipalities. Unlike NAS
airports, these facilities are eligible to receive funding for capital improvements
through the Airport Capital Assistance Program (ACAP). This program, however,
is too small and too restrictive to provide adequate support. Some small airports
are in danger of reducing services to bare minimum levels or even closing due to
lack of capital funding..34
Although Transport Canada has divested itself of most financial obligations to
small airports, it still has the authority to impose regulations concerning safety.
While there is little doubt that safety is a principal concern of a viable air
transportation system, many of these regulations have significant cost impacts on
smaller airports that are not in a position to meet them. A case in point is CAR
308 “ Aircraft Emergency Intervention Services.” In many cases, local airport
authorities may have other equally important safety priorities such as
improvements to lighting or runway resurfacing. However, the mandatory nature
of CAR 308 threatens large cost burdens on small airports and, in the process,
leaves them little scope to pursue other upgrades. New and unsupported
regulations such as CAR 308 are being imposed without any acceptable risk
analyses will further jeopardize the future of these airports.
The management and operation of Canada’s airports will be discussed further in
the section on divestiture of transportation services.
Marine Infrastructure
Canada’s transportation system is similarly dependent on a viable marine
infrastructure system. Canadian shipping companies using the Great Lakes / St.
Lawrence Seaway moved over 70 million tonnes of cargo, and combined with the
U.S. domestic fleet moved more than 210 million tonnes of cargo between U.S.
and Canadian markets. Marine infrastructure not only includes ship as well as
ports with marine terminals and modern container facilities that can transfer
cargo to other modes of transportation, but also includes Coast Guard Services,
piloting and other navigational aids, and channel dredging. Although the
government’s approach to shipbuilding is generally done through its industrial
policy, ships are a vital part of transportation infrastructure and shipbuilding
should be regarded as an important form of capital investment in Canada’s
transportation system..35
Vancouver is Canada’s largest port and the main terminal for goods being
shipped to the Asia-Pacific region. In Eastern Canada, shipments are divided
among several ports, including Montreal, Halifax, Port Cartier, Sept-Iles, Saint
John and Quebec City.
Like Canada’s air transport system, the Government of Canada has been
devolving marine infrastructure to give local regions greater control of their ports.
The Canada Marine Act implemented the National Marine Policy that called for
three categories of ports: independently managed Canada Port Authorities
(CPAs), regional and local ports and remote ports. This policy also
commercializes the St. Lawrence Seaway.
Rail Infrastructure
Canadian railways operated almost 50 000 route-kilometres of track in 1999. This
includes both the Class I network carriers such as CN, CPR and Via Rail
Canada, as well as the Class II and III network that comprises smaller carriers
such as regional and shortline railways.
Canada’s railways carry both people and goods. VIA Rail carried 3.9 million
passengers in 1999-2000, generating more than 900 million passenger miles.
Passnger rail is an important component of intercity transportation, especially in
central corridors such as Ontario and Quebec. It is worth reiterating that railways
carry 59% of the tonnage moved by surface transport, and carry as much as 70%
of the tonne-km generated by surface transport. Much of this rail freight consists
of commodities such as lumber, potash, newsprint, wood pulp and containers on
flat cars.16 Railways transport large volumes of these commodities to ports for
export by water, and in many instances, deliver them directly to the US.
16 WESTAC and Van Horne (1999) p. 58..36
Canada has a relatively small population and market, but vast geography and
sparse population creates the need for a larger rail network. Per person, Canada
maintains more than twice the rail lines of the United States and more than six
times the rail lines of Western Europe. Maintaining and enhancing these
networks is costly, and railways are among the top industries in Canada when
comparing the percentage of revenues that are reinvested into capital. Railways
reinvest almost 25% of their revenue in capital. Canadian National and the
Canadian Pacific Railway invested $6.1 billion in capital over the last five years.
Via Rail has also made significant investments in rail infrastructure, particularly
within the Windsor-Quebec City corridor.
Pipeline
Pipelines are another means of transporting resources. Canada’s pipelines are
privately owned, operated and maintained, they gather crude oil and natural gas
from producers and distribute these resources to consumers. Pipelines are also
a means to exporting these resources, exports accounted for 54% of the natural
gas and 49% of the crude oil shipped by pipeline in 1997.17
4.2.1 International Comparison
Canada’s investment in infrastructure has been minimal when compared with
other industrialized nations. Canada is the only G8 country without a
comprehensive, national transportation infrastructure plan. The quality and
reliability of transportation infrastructure is one of the foremost factors affecting
decisions to locate businesses. As a result, transportation infrastructure is a key
element of Canada’s productivity and competitive position.
17 WESTAC and The Van Horne Institute, Moving Forward: A Guide to the Importance of Transportation
in Canada. (December 1999) p. 11..37
The competitive implications of Canada’s lack of significant investment becomes
clear when we consider the infrastructure plan of our major trading partner, the
United States. The United States began its comprehensive federal investment
plan for transportation infrastructure in the early 1990s. Enacted in 1991, the
Intermodal Surface Transportation Efficiency Act, known as ISTEA (“ICE TEA”),
was the most significant restructuring of surface transportation programs since
1956. ISTEA authorized $121 billion in federal aid for highways, $1.6 billion for
safety, and $31.5 billion for transit. ISTEA funded transportation infrastructure
projects throughout the 1990s and received strong bipartisan support for its
continuance and reauthorization.
The American commitment to infrastructure improvements continued with the
enactment of the Transportation Equity Act for the 21 st Century (TEA-21) in 1998.
18 Like its predecessor, TEA-21 represents a significant investment in
transportation infrastructure. TEA-21 is a six-year program with a total budget of
$217 billion, it is particularly targetted at intermodel investments and the
efficiency of trade corridors. TEA-21 regards transportation as a single,
integrated system, and it regards infrastructure as an “integrated platform” upon
which that system operates.
The U.S. government has also demonstrated a concerted effort to increasing the
sustainability of trade corridors and facilitating NAFTA trade. The National
Corridor Planning and Development Program and the Coordinated Border
Infrastructure Program are targetted at border crossings and trade corridors.
These programs include significant investments in both infrastructure and
technology.
The U.S. also uses flexible financing tools to facilitate private sector investment,
including tax abatements, tax increment financing and personal and corporate
18 The TEA-21 website can be found at : http://www.fhwa.dot.gov/tea21/index.htm. This site provides the
legislation and funding tables detailing the apportionments and allocations..38
income tax exemptions or credits. The result is that the U.S., based on a strong
lead by the federal government, is investing heavily in infrastructure renewal to
benefit economic growth.
4.2.2 Infrastructure : An Integrated Platform
While the various elements of transportation infrastructure have been described
here individually, this does not mean that the transportation system should be
regarded as multiple systems. On the contrary, each of these infrastructure
elements is one component of an integrated transportation system. To a certain
degree, each component is dependent on the others to bring people and
materials to its location, or to deliver its shipments to its final spot. Indeed, many
end-to-end movements involve more than one mode of transportation with the
various modes of transportation acting as part of a larger transportation network.
The costs of inadequate infrastructure are substantial. First, there is the impact
on the environment. During Canada’s climate change process, the
Transportation Table recognized this fact when it recommended that Canada
enhance the viability of National Highway System in order to reduce congestion,
improve the flow of traffic and reduce Greenhouse gas emissions (GHG).
Second, there is the loss of transportation activity and the economic loss that
accompanies it. It is not unusual for Canadian trucks to travel along east-west
corridors primarily through the United States. Similarly, Canadian railways and
ports are in direct competition with U.S. competitors to deliver goods in North
America. This “ bypass” trend has a negative impact on the Canadian economy.
Once traffic is lost to the U.S., it is difficult to win back. A number of Canada’s
smaller airports are in danger of reducing services. As many of these
communities are dependent on these airports, reduction of service will be
detrimental to the economy and business climates of those regions. Moreover,.39
investment in Canada will diminish if the environment is not attractive and
conducive to growth.
Finally, there is the impact on Canada’s regional and social development. The
quality of life for Canadians and Canadian communities, in both urban and rural
areas, is negatively impacted when transportation infrastructure is inadequate.
For instance, traffic congestion and “gridlock” has an impact on economic,
environmental and social prosperity. As indicated earlier, this is especially true
in Canada’s urban areas and along our major trade corridors.
Recommendation: The Government of Canada should take a leadership
role in ensuring a world-class infrastructure for Canada. The federal
government should not regard its investment in infrastructure as
subsidizing a particular industry or mode, but rather as providing
Canadians with the platform that they require to compete and prosper.
Cost-benefit analyses should be performed to ensure that best use and
maximum efficiencies are achieved for each of the modes.
! Amend the Canada Transportation Act to acknowledge the importance of
infrastructure as part of a national transportation system.
! Create a National Transportation Investment Strategy. This strategy should
be multi-modal and funding should come from within the current spending
envelope without raising taxes.
! Commit the revenues collected from fuel excise tax towards a fund for the
maintenance and renewal of infrastructure. Funds should be directed
towards the mode from which they were derived.
This fund should operate for a period not less than 10 years in such a manner as
to mobilize municipal, provincial and private sector capital in the following
structure:
! Federal government infrastructure development objectives must be clearly
identified and communicated to institutional investors, the public and other
levels of government
! A broad range of private sector investment (acquisitions, partnerships,
outsourcing) must be pursued within the fund.
! Selected infrastructure projects must contribute to the productivity,
competitiveness and quality of life in Canada.
! A formal process for evaluating unsolicited public-private partnership
submissions to the fund must be developed..40
! The RFP process must be streamlined to mitigate pursuit costs, maintain
confidentiality and expedite decision-making.
! Innovative delivery mechanisms to stimulate investment in strategic
infrastructure must be explored.
This strategy should also include the following:
! A federal/provincial-territorial agreement on a long-term funding formula to
provide for the ongoing maintenance and construction of the National
Highway System in Canada.
! The funding program will also include provincial, territorial and federal
priorities related to trade corridors, border crossings, strategic economic
transportation corridors and intermodal rail facilities as part of a broader
investment strategy.
! Enhance the capitalization of small airports by directing rents into an “airport
reserve” which should be used to increase the Airports Capital Assistance
Program (ACAP) funding to small airports, rather than revenues going into the
general revenues of the federal government.
! Create a National Corridor Planning and Development Program, as well as a
Coordinated Border Infrastructure Program.
! The Government of Canada should establish an agency to administer and
implement its infrastructure programs..41
4.3 Increased integration, cooperation and competition among
transportation modes.
A significant trend in the transportation industry has been the rise of intermodal
shipping. Intermodal shipping takes advantage of the strengths of two or more
transportation modes to deliver its cargo. Intermodal traffic is carried by a
combination of ship, rail, truck and air transportation as it moves towards its
destination. The rise in intermodal shipping and the increased integration of the
modes means Canada’s transportation needs are being delivered by a true
"transportation system.”
Public policy should acknowledge this trend in Canada’s transportation industry.
Namely, that people and goods are being moved by a seamless, multimodal
transportation system. While the current policy framework states that
“competition and market forces are…the prime agents in providing viable and
effective transportation services,” this policy is generally focused on competition
between carriers within a particular mode. The policy framework should
recognize that Canada’s transportation system is increasingly a single, integrated
system, and that competition and market forces should apply to competition
between the modes as well as between carriers.
If the transportation system is to provide a high level of integrated services, then
each mode within that system must be able to compete and grow. Public policy
should not provide one mode of transportation with a significant competitive
advantage over another. Carriers from all modes must be given equal
opportunities to recover costs, reinvest in infrastructure and new technologies,
and expand their services. Just as the federal government needs to ensure that
taxation and fee structures are consistent within North America, the government
similarly needs to ensure that levels of taxation and regulation and consistent
between the modes of transportation. In particular, the government cannot allow
its tax regime to disadvantage any particular mode..42
Taxation
Excessive levels of taxation have an impact on the ability of firms to recover their
costs and maintain competitive rates. For example, excessive levels of fuel
taxation have a negative impact on transportation companies. The federal
excise tax of 10.0 cents per litre is applied to all gasoline sold in Canada. For
diesel fuel the federal excise tax is 4.0 cents per litre. These taxes are added to
the ex-tax price or pre-tax price of gasoline paid by retailers. These excessive
levels of taxation have a significant impact on the ability of carriers to provide
affordable transportation services. Moreover, this impact is felt in all modes of
transportation and is ultimately passed on to the consumer.
The transportation sector is also highly capital-intensive and rates of depreciation
of assets and taxes on capital affect the ability of firms to compete. For example,
Canadian railways face aggregate taxation rates 51 percent higher than those
faced by U.S. railways. Canadian trucking firms also face competitive problems.
In the U.S., tractors are fully depreciated after four years and trailers after six,
while in Canada the remaining balance on tractors is 17.3% and on trailers
14.3%. This provides an incentive in the U.S. for faster fleet turnover, and by
extension more rapid introduction of cleaner engines. The federal government
needs to ensure that levels of taxation within the transportation sector do not
disadvantage Canadian carriers as they compete for North American traffic.
Infrastructure
Another element of the transportation sector that impacts on intermodal
competition was described above – infrastructure. Competition between carriers
and modes will only enhance our transportation system if the infrastructure
provides the environment where firms can deliver high quality services..43
Competition between modes is a vital element of an integrated transportation
system, shippers need the assurance that they are employing the most efficient
method of transportation to move their people and goods. A competitive
environment will result in increased levels of choice and service for Canadian
businesses and the travelling public. Even where market entry is marginal, the
possibility for competition that is provided by a competitive environment will
realize these benefits.
Recommendation: In developing transportation policy, the Government of
Canada should:
! Recognize transportation as a seamless, multi-modal system that can provide
integrated packages of low cost services to meet customer demands in new
ways.
! Examine the current operating environment for carriers and ensure that
opportunities for competitive markets are maximized, including a review of
international agreements and their impact on carriers (e.g. Open skies).
! Develop a specific strategy that addresses the economic disadvantages for
rural and non-hub centres, including a workable, commercially-based solution
that better integrates rural and non-hub transfer of goods and people that
makes transport from and to those areas economically feasible and not a
barrier to economic development..44
4.4 Approach to the devolution and divestiture of transportation
services.
A significant trend in the transportation sector has been the changing role for
government. Traditionally, the federal government has owned, maintained and
operated transportation services such as airports, ports, and even service
providers such as airlines and railways. Not-for-profit, non-shareholder
corporations have become popular vehicles for the federal government to convert
operating activities previously housed within a federal department or Crown
corporation to a quasi private sector structure. As described throughout this
report, this approach has largely been a success as not-for-profit, non-shareholder
corporations have proven to be an excellent alternative method of
delivering service.
The federal government’s approach to the devolution of its transportation
interests has not been consistent. Rather, the federal government has taken a
series of different approaches to devolving transportation services to not-for-profit
corporations. The prime examples of these various approaches are as follows.
Nav Canada
Created under its own legislation, Nav Canada owns all of its assets
having purchased them outright from the Crown for 1.5 billion dollars. The
role of the federal government is to appoint 3 directors, approve by-law
changes, ensure that the legislation is being honoured and to act as the
safety regulator.
Port Authorities
Unlike the other models in which the corporation is explicitly described as
not an agency of the Crown, Canadian Port Authorities are clearly.45
designated as agencies of the Crown. They are the managers of a federal
property, paying an annual stipend based on gross revenue to the Crown
for that privilege. Five of seven directorial appointments are controlled or
approved by the Minister.
Airport Authorities
Airport Authorities have long-term leases with the Crown that are complex,
intrusive and highly restrictive. The Crown nominates (not appoints) two
directors, ensures compliance with the lease, approves all major capital
investments by outside organizations, approves the land use plan and
requires a host of other compliances and approvals. Furthermore, the
leases are not consistent between the various centres. As will be
described below, the lease arrangements for airport authorities in Canada
are not consistent among the various centres.
Inconsistent Approach between Centres
The implementation of the National Airport Policy (NAP) is a prime example of
the inconsistent approach to devolution, both between modes and between
centres. In his October 2000 report, the Auditor General of Canada indicated this
concern. “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.”19
The NAP prescribed that airport assets would be transferred to local authorities
through a series of individual lease arrangements, and that these arrangements
would be pursued according to the principles of fairness and equity. In his 2000
report, the Auditor General of Canada questions the consistency of Transport
19 Report of the Auditor General of Canada to the House of Commons, October 2000. Chapter 10,
paragraph 10.2..46
Canada’s approach. “Transport Canada cannot demonstrate how the deals done
for all of the transferred airports are equitable, uniform, consistent and fair with
one another as the government directed.”20 Moreover, the Auditor General noted
that “Transport Canada was unable to demonstrate how the significant
differences among airports in, for example, the base revenue per passenger and
the base operating and capital cost amounts (three key components of the CAA
rent formula) ensured equity and fairness among the transfer deals.” 21
More Comprehensive Approach Necessary
The Government of Canada must clearly define its role in transportation and
implement a more consistent approach in devolving transportation facilities to
local authorities. Canada’s transportation policy should have, at its core, a clear
idea on what the role of government is in transportation, and public policy should
reflect this position. Moreover, the federal government must regard these
facilities as part of an integrated transportation system and not as individual
assets.
Recommendation: Canada Transportation Act should prescribe principles for
the devolution of transportation infrastructure and services to private entities.
These principles should address the following.
! Establish a consistent governance model for the management of
transportation facilities across all modes.
! Ensure a federal government focus on safety with respect to airports, leaving
the management of airports to local airport authorities.
! Establish a more transparent process for determining rents that are imposed
upon Airport Authorities.
! Base rents on the real costs and expenses incurred by Airport Authorities.
! Initiate a rent cap for the total rents the Government of Canada extracts from
individual airports.
20 Report of the Auditor General of Canada to the House of Commons, October 2000. Chapter 10,
paragraph 10.2.
21 10.99.47
Conclusions
Moving forward, Canada needs a comprehensive framework for the development
and implementation of a modern transportation policy. Canada can no longer
afford to develop public policy without considering the broader implications for
our international competitiveness, our environment and our society. As such,
Canada’s transportation policy should recognize the importance of international
trade, infrastructure, integration among the modes, and the devolution of
transportation services. Each of these factors is fundamentally related to the
capacity of our transportation system and our economy, and each of these
factors needs to be recognized by a modern transportation policy..48
Section 5 – Summary of Recommendations
Canada needs a comprehensive, national transportation policy framework . This
framework should recognize Canada as part of an international economy and
establish a competitive environment for Canada’s transportation system. The
objective of the policy framework should recognize the importance of
infrastructure and create a climate where carriers can recover costs and where
trade can be conducted.
The Canadian Chamber of Commerce also believes that transportation policy
should be developed in consultation with regions and communities from across
Canada to ensure that the policy framework constitutes a true “national policy.”
RECOMMENDATIONS
5.1 Economic Development and Regulation
5.1.1 Transportation policy should enhance Canada’s economic union by
harmonizing regulatory standards and removing barriers within Canada.
No additional regulations or standards should be imposed on Canada’s
transportation system without a substantial cost-benefit analysis.
5.1.2 The federal government should move to equalize the tax burden on
transportation with that of the United States.
5.1.3 Efforts and partnerships need to be explored that will remove the
significant development barriers that are present in with respect to
linkages with rural and non-hub markets.
5.1.4 Federal rents and charges should cover only the actual costs incurred by
the federal government in fulfilling its duties under the National
Transportation Policy..49
5.2 Canada’s Integration into a Global and North American Economy
The federal government should reiterate its commitment to competition and
market forces and develop a more comprehensive policy framework to support
NAFTA and govern Canada’s transportation system. This framework should be
relevant to all regions of Canada, enhancing the commercial and social viability
of both rural and urban areas.
5.2.1 Canada’s transportation policy should be used to facilitate greater access,
cooperation and competition with the global economy, particularly within
North America.
5.2.2 Canada Transportation Act should recognize that international trade is
fundamental to the well-being of Canada and that transportation is
fundamentally related to our economic growth.
5.2.3 Excessive levels of taxation should be reduced to promote competition
and profitability in the transportation industry.
5.2.4 Levels of regulation and operating standards should be minimized and
designed to facilitate increased movement within North America.
5.2.5 Transportation policy needs to pay close attention to trade facilitation
issues such as customs procedures, immigration rules, cargo liability
regimes, security arrangements, and all other components of
transportation, including input taxes, that if not harmonized and
streamlined, could prevent the best performance of our carriers and facility
operators.
5.2.6 Maximize the use of advanced technology applications in all modes,
especially to enhance the flow of traffic at border crossings. Such
systems include advanced traffic management systems, advanced
traveller information systems and advanced vehicle control systems.
5.2.7 The federal government should work with provincial governments to
provide necessary road and other infrastructure improvements at border
crossings.
5.3 Need for a long-term infrastructure strategy
The Government of Canada should take a leadership role in ensuring a world-class
infrastructure for Canada. The federal government should regard this
investment in infrastructure as providing Canadians with the platform that they
require to compete and prosper. Cost-benefit analyses should be performed to
ensure that best use and maximum efficiencies are achieved for each of the
modes..50
5.3.1 Amend the Canada Transportation Act to acknowledge the importance of
infrastructure as part of a national transportation system.
5.3.2 Create a National Transportation Investment Strategy. This strategy
should be multi-modal and funding should come from within the current
spending envelope without raising taxes.
5.3.3 Commit the revenues collected from fuel excise tax towards a fund for the
maintenance and renewal of infrastructure. Funds should be directed
towards the mode from which they were derived.
5.3.4 This fund should operate for a period not less than 10 years in such a
manner as to mobilize municipal, provincial and private sector capital in
the following structure:
! Federal government infrastructure development objectives must be
clearly identified and communicated to institutional investors, the
public and other levels of government
! A broad range of private sector investment (acquisitions, partnerships,
outsourcing) must be pursued within the fund.
! Selected infrastructure projects must contribute to the productivity,
competitiveness and quality of life in Canada.
! A formal process for evaluating unsolicited public-private partnership
submissions to the fund must be developed.
! The RFP process must be streamlined to mitigate pursuit costs,
maintain confidentiality and expedite decision-making.
! Innovative delivery mechanisms to stimulate investment in strategic
infrastructure must be explored.
This strategy should also include the following:
! A federal/provincial-territorial agreement on a long-term funding
formula to provide for the ongoing maintenance and construction of the
National Highway System in Canada.
! The funding program will also include provincial, territorial and federal
priorities related to trade corridors, border crossings, strategic
economic transportation corridors and intermodal rail facilities as part
of a broader investment strategy.
! Enhance the capitalization of small airports by directing rents into an
“airport reserve” which should be used to increase the Airports Capital
Assistance Program (ACAP) funding to small airports, rather than
revenues going into the general revenues of the federal government..51
5.3.5 Create a National Corridor Planning and Development Program, as well
as a Coordinated Border Infrastructure Program.
5.3.6 The Government of Canada should establish an agency to administer and
implement its infrastructure programs.
5.4 Increased integration, cooperation and competition among modes of
transportation.
In developing transportation policy, the Government of Canada should:
5.4.1 Recognize transportation as a seamless, multi-modal system that can
provide integrated packages of low cost services to meet customer
demands in new ways.
5.4.2 Examine the current operating environment for carriers and ensure that
opportunities for competitive markets are maximized, including a review of
international agreements and their impact on carriers (e.g. Open skies).
5.4.3 Develop a specific strategy that addresses the economic disadvantages
for rural and non-hub centres, including a workable, commercially-based
solution that better integrates rural and non-hub transfer of goods and
people that makes transport from and to those areas economically
feasible and not a barrier to economic development.
5.5 Approach to the Devolution of Transportation Services
Canada Transportation Act should prescribe principles for the devolution of
transportation infrastructure and services to private entities, including the
following priorities:
5.5.1 Establish a consistent governance model for the management of
transportation facilities across all modes.
5.5.2 Ensure a federal government focus on safety with respect to airports,
leaving the management of airports to local airport authorities.
5.5.3 Establish a more transparent process for determining rents that are
imposed upon Airport Authorities.
5.5.4 Base rents on the real costs and expenses incurred by Airport Authorities.
5.5.5 Initiate a rent cap for the total rents the Government of Canada extracts
from individual airports..52
REFERENCE MATERIALS
Canada’s Transportation System, a report of Transport Canada,
www.tc.gc.ca/pol/en/brochure/default.htm
Canada Transportation Act Review Panel, Interim Report 2000, (Ottawa:
December 2000).
Interprovincial and International Trade in Canada: 1992-1998, Statistics Canada,
(Ottawa: June 2000).
Moving Forward: A Guide on the Importance of Transportation in Canada,
Westac and the Van Horne Institute, (Vancouver: December 1999).
The National Highway System: Condition and Investment Needs Update 1997
Council of Ministers Responsible for Transportation and Highway Safety
Report of the Auditor General of Canada to the House of Commons, Chapter 10:
Transport Canada – Airport Transfers: National Airport System.
Transportation in Canada, Transport Canada Annual Report 1999, (Ottawa:
2000).