Industry Committee on Oct. 5th, 2006

[Belinda Stronach, Liberal, Newmarket—Aurora, ON]

Has your sector lost investment that has gone elsewhere to other jurisdictions, because there isn't such a level playing field? For example, in the automotive industry, which I know reasonably well, there's been a great deal of jobs leaving North America, and even Mexico, to go to lower-cost plants.

[Glen Fisher]

The same thing has happened to us, probably not quite as dramatically or as suddenly, but definitely a lot of production is being done in Mexico and a lot of components are being imported from China. So we've lost those, and it's a substantial loss.

[Belinda Stronach, Liberal, Newmarket—Aurora, ON]

What do you see as the risk to jobs if this doesn't go forward, if there isn't a level playing field with respect to the capital cost allowance?

[Glen Fisher]

I think a continued deterioration in freight car purchases, which will probably result in one or the other of the two freight car manufacturers in Canada giving up and moving to Mexico. So we'll go down from about the four we had twenty years ago to two now, and only one, if we don't get some redress on that issue.

[Belinda Stronach, Liberal, Newmarket—Aurora, ON]

I'm a big supporter of making sure we have a sector by sector strategy to maintain competitiveness, to keep manufacturing jobs here in Canada. Given the global environment, the competitive environment we're in, I think we in government have an obligation to ask how we can enable your sector to become as competitive as possible.

Are there any other risks to your future competitiveness aside from the capital cost allowance that would need to be addressed?

[Glen Fisher]

Do you mean that are within our control or the control of the government and government policy?

[Belinda Stronach, Liberal, Newmarket—Aurora, ON]

Yes.

[Glen Fisher]

There are things that are a little bit difficult to deal with. I hesitate to single out one incident, but the generalization that the one incident shows is that there are imports coming from countries duty free because they were considered developing countries. Canada Customs and Excise shouldn't be granting duty-free status to countries that are not actually still developing countries.

There's one instance that happened not too long ago, and I think this would help us. I'm all for helping the developing countries. I don't mean to say anything negative about that. It is good that we would buy equipment with duty exemption from countries that are less developed, but once these countries have become an industrial power, even if they were once developing countries, that status should be removed. They should have to compete like any other developed country, and where there are some duties for import from those regions of the world, then they should apply to these countries too.

[Jay Nordenstrom]

I would like to add two things. One is the R and D. We need predictable, stable funding in those areas where we can go. The only thing we have to our advantage is our technology. Labour has gone now. It has gone elsewhere. We have to have the best product. They are going to pay more for it, but they're going to have better usage, better efficiencies, and better environmental standards.

Second, we need to get better at getting our product from university out into the market. It is simply not there yet.

[The Chair, Conservative, James Rajotte]

Thank you, Ms. Stronach.

Mr. Shipley, you have five minutes.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Thank you, Mr. Chairman.

I want to thank you for coming. I find it interesting. When I was mayor, we had a lot of trains that went through my municipality, and we still do.

He is not here right now, but Mr. Angus talked about transit and getting ridership up and those sorts of things. I would like your comments, because what we are trying to do, especially in the large built-up urban areas, is get people out of their vehicles as much as we can by having improved rail and transit systems for riders to use.

We introduced a transit tax credit of 16%, and I am wondering whether we are on the right track. I would like to get your comments and your position on that.

[Glen Fisher]

It's a little off to the side of our direct interest, but I am quite interested in it because it affects the market for our services and products very strongly. I would rather see some way of reducing fares for everybody rather than a tax credit, because a tax credit doesn't help students or people who have marginal incomes who really need to use the public transit. But some arrangement whereby something like a larger percentage of the burden for the capital cost of new equipment would be removed from the transit operating agencies--anything of that kind that would allow them to reduce their fares by the same amount--is a very positive thing, because public transit, and certainly intercity passenger train transportation, is extremely cost-sensitive. The market shift from one mode of transport to the other is very much affected by small differences in cost.

Everybody likes riding by train better than driving their own car in traffic, for sure, but it has to be cost-competitive, and unfortunately it isn't. Even the commuter operations now, while they're cost-competitive, are not seen by the public as being cost-competitive. A hundred dollars a month for a commuter pass is a lot for some people to shell out, unless they know exactly where they're going all the time, they have a regular job, they know they'll have to pay for parking--that kind of thing. So anything we can do to lower those costs, for example, lower the one-trip cost from something like $5 down to $2 or $3, will help.

There are things that can be done--perhaps working with the transit agencies themselves to get their views on what kind of help would work best for them, whether it's capital equipment or some other approach.

It's the right direction to go. I agree with you totally on the first step, but I think there are other things that need to be done.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

I think you'll find that things usually will take place a step at a time. I think we need to respect the fact that we've tried to take one step, and I wanted to get to that. When I go to Europe, for example, there's an unbelievable rail system, and I want to go back to that.

Actually, the numbers were amazing. I think 20% less fuel; tonnes per kilometre is 500% or better. Did I hear that right?

[Glen Fisher]

No, it's only 20% of the amount of fuel; it's 500% less fuel.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

When you start talking these sorts of numbers, does this take in the actual capital cost of all the infrastructure, or is this just for the--

[Glen Fisher]

Yes.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Roads and everything?

[Glen Fisher]

It's amortizing the track, the road, the tunnels, the bridges, the rolling stock--everything.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

In comparison to a truck on the road, with the road--

[Glen Fisher]

With the road not being part of the truck's direct cost except through licensing fees and gasoline--

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

To really help, I'm wondering what sorts of alliances you've built with the train companies--the CPs, the CNs, the whatevers of the world that are out there. It really makes sense to me then, if you have built-in efficiencies, including the capital cost. Then it's almost a no-brainer. Yet we had tracks being ripped up, and you just talked about taking out two tracks.

If we're talking about the environment and you're becoming that much more efficient than delivering by other means, I'm wondering about your strategy on marketing--you touched on that, but I mean the other part of it, building alliances so that we aren't ripping up the rail to be moving these goods.

[Glen Fisher]

Did you want me to add some comments to that?

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Well, the question is, I guess--

[The Chair, Conservative, James Rajotte]

You're out of time.

If you want to add a brief comment...but if you don't, that's fine.

[Glen Fisher]

Comparison with Europe and North America is very difficult. Our freight rates are one-quarter of what they are in Europe, but our passenger service is nowhere near as good as European passenger service. That doesn't mean that the passenger fares are necessarily cheap in Europe. They have some great plans, though. In Switzerland you can get an annual pass and you can go anywhere on Swiss railways for a very reasonable price if you buy the annual pass.

The problem we have that is so different from the Europeans is geography and distance. I live in Montreal, and as I have to explain to people about some of these things, you can put the whole of western Europe in the province of Quebec geographically. We have a totally different problem with intercity passenger train service.