Thank you, Mr. Chairman.
Good morning, ladies and gentlemen.
I'll say just a quick word about the Canadian Trucking Alliance. We are a federation of Canada's seven provincial and regional trucking associations, collectively representing over 4,500 motor carriers coast to coast. CTA is the voice of the Canadian trucking industry on policy, legislative, and regulatory issues at both the national and international levels.
I will say just a few words about the structure of the trucking industry. Trucking in Canada is made up of for-hire carriers, private carriers, owner-operators, and couriers, and it's an almost $60-billion-a-year industry. The for-hire sector, comprising over 10,000 carriers, accounts for about half the industry's total revenue. Overall, the industry employs more than 400,000 people, including 260,000 drivers. There are just over 600,000 commercial trucks on the road, and half of these are classified as heavy trucks, including about 200,000 tractor-trailers.
Trucking is Canada's dominant freight mode, accounting for an estimated 70% of domestic shipments by value. Trucks carry almost two-thirds of Canada-United States trade, 50% of exports, and 75% of imports. Cross-border transportation represents over 40% of the industry's revenue stream.
Trucking is a derived-demand industry, and therefore economic conditions in domestic and international markets are reflected in the industry's freight volumes and financial performance. The high value of the Canadian dollar, combined with the general weakening of the U.S. economy, the resulting reduction in Canada exports to the U.S. and the manufacturing downturn, particularly in central Canada, are all having a profound impact on the trucking industry in most parts of the country.
In January 2008, the proportion of manufacturers stating that they would decrease production over the next three months stood at 33%, a nine-point increase from October 2007. This was partially offset by 19% of manufacturers who expected to increase production during this period. Nonetheless, the balance of opinion for production prospects was the most negative since January 2002.
It is in the cross-border market that the Canadian trucking industry is being particularly hard hit. From November 2006 to November 2007, Canada's total exports to the U.S. declined by 3.8% and imports by 1.9%. However, these aggregate figures do not tell the whole story. Trucking specializes in the carriage of relatively lower-weight and higher-value products when compared with other freight modes. In fact, just five commodity groupings of manufactured or partially manufactured goods traditionally represent over three-quarters of total exports by truck to the U.S. A comparison of export statistics for November 2006 and November 2007 shows year-over-year decreases of 4.4% in the industrial goods, 3.7% in machinery and equipment, 5.9% in automotive products, and 9.9% in other consumer goods.
I'll say just a word on the cost pressures on the industry. Diesel fuel represents the second-largest component of the trucking industry's cost base next to labour. Commercial diesel volumes are massive, with over 16 billion litres consumed annually in Canada for road use. On every litre sold, the federal government collects 4¢ in excise tax. As Mr. Barone has mentioned, the federal excise tax on motor fuels, which was introduced in the 1980s ostensibly as a deficit-fighting measure, has since that time clearly outlived its stated purpose. Unlike the GST, the excise tax on commercial diesel fuel is not a flow-through tax and therefore achieves little but to boost the government's general revenues, but in so doing it heaps an additional input cost on the trucking industry. The Canadian Trucking Alliance has long argued that this type of tax is both unjustified and regressive. It should therefore, in our opinion, be overhauled and treated as a flow-through tax similar to the GST or, preferably, be abolished altogether.
The continually rising price of diesel fuel has in recent years created an enormous burden for the trucking industry and its customers. Using retail prices as a reference point, the average price in Canada has risen from 75.9¢ per litre in 2004 to 113.2¢ per litre on January 15, 2008--just about two weeks ago--an increase of 49% over a three-and-a-half-year period, and this is after the 2¢ reduction in the GST during this period.
While motor carriers have been able to pass some of this increase on to their customers through fuel surcharges, current economic conditions in the industry make this increasingly difficult to accomplish.
Competition is fierce, largely as a result of excess capacity--what has been referred to as too many trucks chasing too little freight--in the current economic environment. As a consequence, rates are at best stagnant and in many cases are discounted just to keep trucks on the road.
Industry margins, traditionally thin, are being squeezed even more as many carriers find it increasingly difficult to fully offset the rising cost of diesel fuel by way of fuel surcharges.
I have just a concluding comment on the issue of border security. Truck transportation security programs, particularly at the U.S. border, continue to result in duplication, overlap, and ever-increasing costs. Like the exporters whose goods we carry, the trucking industry is concerned that the cost of moving goods continues to be driven up by security measures that are developed and rolled out in isolation from one another. The big picture, and an appropriate balance between security and trade efficiency based on an assessment of risk, seems to have been lost.
The trucking industry fully understands how the Canada-U.S. trade picture has changed since September 2001. It has, in fact, played a key role in trying to maintain the balance between efficient trade and enhanced security by participating in a wide range of Canadian and U.S. border security programs. However, more than six years after 9/11, it is becoming apparent that Canada and the U.S. have created an array of programs that don't always dovetail with one another. And the situation seems to be getting worse.
Thank you, Mr. Chairman.