Government Operations Committee on Sept. 26th, 2016

[Réal Couture]

To be honest with you, I've never sat down and thought about it. Looking forward, in my world—and I know Canada Post is more of a government platform—if you can't make money, not big money but a certain kind of money, you won't survive. Either you rationalize the whole thing, and then you see that you have to stop doing this and you have to stop doing that, or you put a price on what you want. The shortfall for that is that your competitors will come around the corner and say if Canada Post is going to charge you $8.00 to carry something from here to there, they'll do it for $7.99, and that's going to be the end.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

That's an interesting example because in Montreal we had some of the postal union workers and the councillors from Montreal, and they were both citing the report by The Conference Board of Canada. They said there was a discrepancy in whether the company was profitable or not. It was interesting because Ernst & Young did the audit and yet there is a discrepancy of about $500 million.

Yes, there is a potential for this business to be successful. It's a crown corporation. It has a mandate to deliver mail, but it also has logistics as its core competence. Having logistics as its core competence, how do you collectively see it helping your businesses? You talked about e-commerce and you talked about the Universal Postal Union. That was created 141 years ago. The United States has renegotiated 13 treaties, so how do you see that challenge of the UPU helping, or how do you overcome it? Do you want Canada Post to renegotiate it? What would you like to do?

I couldn't get the idea of how it is impacting. If I were a Chinese exporter and you were importing my goods, how is it cheaper for them to deliver my goods to the consumers?

[Andréa Alacchi]

China is actually a good example, because they don't only subsidize their postal service, they practically render it free. If you go on aliexpress.com or alibaba.com and you choose something you want to buy, you click on it and you choose delivery to Canada. They will either charge you very little or they'll do free shipping. You get it in about four or five days. It's very quick. They fly it in and then Canada Post delivers it. It comes in pretty quickly, in Montreal, of course. Maybe in Nunavut it will take more time. But the point is you see on the package what's written, in terms of Hong Kong dollars, what they paid for it, and it's probably something equivalent to maybe, for a small parcel—I don't know what the exchange is—probably around three or four dollars, that type of thing. It's probably cheaper than what it would cost me to send something to my neighbour.

I believe all they're charging is the postal union fee, and the Communist government there is simply encouraging their exporters by putting it on a plane and sending it to Canada free. That's the extreme. I don't know how you can fight that. It's a form of subsidy, basically.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Have you seen any similarity in Europe, say, since Britain and France and Germany...? Mostly Britain and France have a very strong unionized environment.

[Andréa Alacchi]

Yes. Unfortunately, I only see this as a consumer, not as a businessman. I myself don't buy from Europeans, so I don't know what they do. I do buy from Americans, and I do see what the American rates are, since I'm also a client of the United States Postal Service. As I said, they will mark up a product coming to Canada, maybe 30% to 40% more than domestic, whereas we tend to mark it up a lot more in Canada.

They regard it as follows. Getting it to the country costs you something. Then once it's in that country, it's whatever the postal union rate is. We can either charge a lot for the service of taking it out of the country, so that we can recover costs for domestic in doing so, or we can just deliver it to the United States at cost, let's say, or close to at cost, and then pay the fee for delivery in the United States. It would probably be more competitive that way.

[The Chair, Conservative, Tom Lukiwski]

Thank you.

Mr. McCauley, five minutes, please.

[Kelly McCauley, Conservative, Edmonton West, AB]

Thank you, gentlemen, for being here. There have been some interesting answers.

This morning we were meeting with another online retailer. They were commenting on the price with Canada Post and a lot of the new competitors coming in to take away the business, etc. Are you finding the same, or are you using Canada Post solely on a price basis?

[Andréa Alacchi]

When you say “competitors”, do you mean the competitors to my business?

[Kelly McCauley, Conservative, Edmonton West, AB]

No, I mean lower-cost delivery. I'm sitting here listening to you, and you sound like you're saying, well, we use Canada Post, and Canada Post only.

[Andréa Alacchi]

We do. We do only use Canada Post.

[Kelly McCauley, Conservative, Edmonton West, AB]

But this morning you said, oh, there are lots of cheaper competitors.

[Andréa Alacchi]

No, I never said that. Maybe the person this morning said that.

[Kelly McCauley, Conservative, Edmonton West, AB]

Okay.

[Andréa Alacchi]

What I said was that it's cheaper for foreigners sometimes than it is for us to send to remote areas in our country. Canada Post does provide a very good service. If we use UPS or other carriers, we will do so only on larger packages and only when we really need the tracking, because this is something Canada Post doesn't do very well. They don't really track the packages that well. If it's expensive, if it's fragile, if it needs to be insured, we'll go with the other carriers.

I would say that 99% is Canada Post. It's not a bad service. It's a good service. If it weren't, we would ship it from the U.S. like we used to. The reason we don't do that anymore is that the exchange rate helps, but it's also the image. How would you like to buy something on lencrier.ca en français and get it shipped from New York? It doesn't look good. We take the hit to preserve the corporate image. Even on our Canadian website, inkpot.ca, we're not going to take a hit on our image. We're Canadian. We ship from Canada.

If it ever gets as bad as it used to be at one time, we'll reconsider that policy, but for now that's the policy.

[Kelly McCauley, Conservative, Edmonton West, AB]

You spoke very well about Canada Post being like an infrastructure item. That's very interesting.

I'd like to ask you other three gentlemen how you feel about that. We start getting into what he called the paradox where we're finding that everyone wants all the service, everyone wants everything, but no one wants to pay for anything. It's very clear: no higher taxes, no subsidies, no more for stamps, and by the way, deliver it all.

I mean, you're compatriots there. How do you feel? What are your thoughts on that? Do we charge more and have the taxpayer subsidize it, which would be you and all of us?

[Christian Fréchette]

The business model, the way it should be built, is pretty simple. On the B2B side, on the business side, it should be a profit centre. On the flip side, for the consumer market, it should be a service. The business side should subsidize the public side.

[Kelly McCauley, Conservative, Edmonton West, AB]

Unfortunately, from what I understand, it's the other way around. The door-to-door subsidizes the other.

[Christian Fréchette]

Absolutely.

[Kelly McCauley, Conservative, Edmonton West, AB]

This wouldn't happen, obviously, but let's say Canada Post ended tomorrow. Who would you use for your shipping? Would you go to UPS? Or are there any competitors able to do it?

[Christian Fréchette]

It really depends on where and what you're shipping, and on the deadline you're facing.

With regard to Mr. Couture's last point, I could not agree more. Canada Post is probably the most efficient service you can have—if you have time. If you want to get something shipped ASAP, you don't consider Canada Post. If there's one place that should be improved more at Canada Post, it's on that side.

[Kelly McCauley, Conservative, Edmonton West, AB]

Yes. Well, there's such a thing as when it absolutely has to be there on time, life and death, it's FedEx, but otherwise it takes a couple of days. It's just reality.

Mr.—

[The Chair, Conservative, Tom Lukiwski]

Very quickly, Mr. McCauley.

[Kelly McCauley, Conservative, Edmonton West, AB]

I'll pass. It was just following up a bit on Ms. Ratansi again about the price difference with the U.S. about cross-border, but I don't think we have time to go into it. Maybe in the next round I'll follow up.

[The Chair, Conservative, Tom Lukiwski]

Our final questions will come from Mr. Whalen.

[Nick Whalen, Liberal, St. John's East, NL]

Thank you, Mr. Chair, and I'll pick up on that point because I also want to flesh it out.

Regarding this idea about the Universal Postal Union and differential rates, Canada gets access to the U.S. Postal Service on the basis of the treaty we have with them under the UPU. We get access to Europe.

The U.S. Postal Service is subsidized to the tune of about $18 billion U.S. per year. When you get your products into the U.S., you're taking advantage of that subsidy. The counterpoint would be that Canada could increase its rates for foreigners using our service, but then we wouldn't get access to the same preferential rates if foreigners had to use our service at the true cost.

Do you think that Canadians should up the prices that we charge foreigners to use our internal postal service and no longer be able to access their subsidized service to sell to U.S. customers or Chinese customers, or do you think that Canada should subsidize our postal service to the tune of about $1.8 billion U.S. a year to provide the same level of universal service, if we could do it?

I'd like to hear from everyone on that point because, if selling to the U.S. is such an important concern, that's the money issue.