International Trade Committee on Nov. 26th, 2013

[Devinder Shory, Conservative, Calgary Northeast, AB]

Thank you, Mr. Chair.

Witnesses, thank you for coming here this afternoon.

Ms. Janega, my understanding is that your sector is composed mainly of small and medium enterprises, 95% in fact. In my view, 80% of jobs in Canada are created by SMEs.

Considering the potential opportunity you see once CETA is implemented, and of course the position of the Port of Halifax is an extra advantage to boost business in this region, my questions are as follows.

How well prepared are the smaller enterprises you represent to jump into the EU market of 500 million consumers? What are the challenges for smaller enterprises wading into such a marketplace? Is your organization doing anything to help prepare them to take full advantage of the opportunities CETA offers? Lastly, is there an EU expansion strategy specifically aimed at manufacturers and exporters in Nova Scotia?

[Ann Janega]

Thank you very much.

How well prepared are small companies? I think obviously it varies by sector and by the individual company. I think most very small firms probably don't even think in terms of.... You mentioned the issue of creating jobs. I don't think their starting point is how many jobs they can create today. I think the starting point for most of these firms is whether there is a market there, if they can deliver value to their customers, and obviously if it can be profitable.

The answer to that question will vary by sector, and as I mentioned, some sectors are more progressive here in Nova Scotia than others. Aerospace and defence, for example, often have international partners that could be a key to success.

The challenge is waiting. I think whether it's access to information or help with some of the barriers, whether related to tariffs or language or customs, many partners are available to help with some of those challenges.

From CME's point of view, one of our most exciting initiatives is the one I mentioned earlier, related to the Enterprise Europe Network. This is an existing network that provides a matching service for opportunities with partners. CME is now the Canadian delivery agent for the Enterprise Europe Network. We've captioned it the Enterprise Canada Network. That's going to be a very easy, free way for a company to put its toe in the market and see what opportunities are available.

Finally, in terms of a European export strategy, our organization, which is a relatively lean operation in terms of staffing, has a presence in Europe and has the ability to communicate better with some of the opportunities and partners.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Today and yesterday we have heard from some witnesses who had reservations about CETA. What is the reaction of those you represent? Do they share those reservations, or is there a sense that increasing exports outside of North America will be overwhelmingly positive for small and medium-sized enterprises?

[Ann Janega]

Our organization would present questions about CETA that are yet to be explored, things like how the agreement will handle rules of origin, product certification, regulations related to business travel for people who are coming back and forth to support these opportunities. I mentioned government procurement. That's a question mark for us, and even issues such as dispute settlement are areas that we're keeping an eye on.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Mr. Malec, before I came to Canada we used to own a transport company, and the best scenario is when you can have loads, as we used to call it, both ways, going and coming.

You talked about supply chain efficiency, which will definitely benefit the port because of the loads you get from both sides. I'd like you to continue making your comments. You were cut off by this generous chair.

[George Malec]

Is it time for the Panama Canal?

[The Chair, Conservative, Rob Merrifield]

Yes, it's time for the Panama Canal. Go ahead and answer.

[George Malec]

Thank you.

On that note, let's extrapolate on that specific question on the Panama Canal. The impact we foresee on that is neutral to positive, because what's happening right now is shippers sending goods around the world on different services that are transiting the Panama Canal are doing it in ships that are basically carrying about 4,000 to 4,500 containers as their capacity. When the Panama Canal expansion is completed in 2015-16, that will allow shippers to economize by going to bigger ships. So instead of sailing two 4,000 TEU capacity ships—twenty-foot equivalent unit ships—it can be handled by one 7,500 TEU or 8,000 TEU ship. The fuel, operating costs, and a lot of things are more efficient.

Now, you're operating those ships on a round-the-world service. Let's say you're starting from Asia and coming through the Panama Canal and continuing on the east coast of North America and then on to the Suez Canal on your service. Coming to Halifax on that rotation will allow you to take that big ship and load it to its maximum carrying capacity because of our deep water and our container infrastructure, and of course every single container, every tonne of cargo you put on there makes that particular voyage more cost-effective.

That's how we foresee that the impact of the widening of the Panama Canal will be positively beneficial. It won't hurt us. It won't take anything we have right now, because much of the traffic you're looking to divert is going to be something that's going all water now to west coast ports, and it is being taken on a land bridge, by rail usually, to the eastern half of North America. The opportunity now for shippers will be to bring that on an all-water route and then discharge it directly into east coast North American ports. The sweet spot for us will be that added advantage of talking to shippers and saying “You can maximize the value of that voyage on that round-the-world service by using our deep-water infrastructure to load up that ship to its absolute maximum safe carrying capacity, instead of stopping in New York, where you're constrained by water depth on how much you can load out and what water mark you can load out at.”

Does that answer that question?

[The Chair, Conservative, Rob Merrifield]

Yes, no doubt.

Just as a follow-up on previous testimony, you could double the port capacity right now?

[George Malec]

We could triple it, sir. We can triple the container volume on our two terminals right now, and CN can triple the amount of freight volume it's carrying on its major rail artery connecting central Canada to the eastern seaboard here.

[The Chair, Conservative, Rob Merrifield]

It's a tremendous opportunity.

With that, I want to thank you all for your testimony. We look forward to great prosperity ahead as we capitalize on the opportunity of CETA. Thank you very much.

With that, we'll suspend as we set up for the next panel.

[The Chair, Conservative, Rob Merrifield]

We'd like to call the meeting back to order. We have our second panellists here with us.

From the Eastern Shore Fishermen's Protective Association, we have Mr. Peter Connors, president. From the Halifax International Airport Authority, we have Jerry Staples, vice-president, air service, marketing, and development.

We're very pleased that you could join us for this time. We look forward to your testimony before committee.

We'll start with you, Mr. Connors. The floor is yours.

[Peter Connors, President, Eastern Shore Fishermen's Protective Association]

Thank you very much, Mr. Chair.

I'm Peter Connors, and I represent fishermen from the eastern shore between Halifax and Canso. I represent a small community and the very beginning of the supply chain, I guess you could call it.

I don't have much expertise in trade. That's really somebody else's purview. It's not my expertise, by any stretch, but I wanted to come as a fisherman and explain to the committee the hopes that we, as small fishermen and small communities, have for the opportunities that might come out of the European free trade deal. I'd also like to pass along some of our concerns for your consideration, which I hope you might be able to allay, or at least take note of, and that may be of some benefit to you.

I represent 220 independent businesses, really. They are individual enterprises: fish harvesters from the eastern shore of Nova Scotia from Halifax to approximately Canso. Most of these are inshore harvesters who fish lobster, snow crab, and groundfish, which is right now limited to halibut, but also herring, mackerel, and tuna. It's a multi-species fishery really, although the groundfishery is presently limited to halibut.

While our exclusion from the groundfishery was a blow to our area in the late eighties, the increase and abundance of snow crab and lobster could have somewhat compensated for the loss of the income that we had from groundfish had the marketing capacity been able to correspond.

If existing world markets cannot economically absorb the sustainable production of our seafood, it is needless for me to point out how important new markets and reduced tariff barriers are for our industries. To that end, we support the efforts by our trade delegation to expand trade with other countries. I must caution, however, that our support is tempered by our concern for local sovereignty over what is considered essentially a strategic asset for our regions, it being the main reason—the resource, that is—for our existence and the only immediate prospect for our prosperity.

We are concerned for our capacity to maintain the policies that we have worked hard to have put in place to protect local control of this strategic resource, and effort and benefit distribution. While we are anxious to trade what we produce, we are not prepared to trade our means of production or our self-reliance for any price. We support trade being an implement of integration with other communities, and even a degree of equalization, but never an instrument of acquisition or conquest.

We would ask that our negotiators take extreme caution as to the possible application and consequences of provisions proposed by other countries and even corporate interests of our own business community and the international business community. Please appreciate the vulnerability of these rural communities and the consequences that the failure to protect their economic interests would have on the democratic structure and the social fabric of our regions.

With regard to the theme of the effect trade has on economic, operational, and social structure, let me give an example of how this may be relevant to the independence of our region, which is a primary concern for us.

If trade is pursued by a particular corporate interest for their own interest, and subsequently is controlled by that interest—if the trade is controlled by the corporate interest—it could impact significantly on the operations of a free market system. That would diminish the capacity that local producers need to encourage local private investment, and it would, in effect, make us a ward of those corporate interests, with a loss of social structure. In that case, we would become a more unionized employee society, rather than independent business communities, with all the business spinoff effects, especially profits, being transferred to who knows where.

That's an important one for us, control of the resource and ownership of the resource, which, as of late, has been traded, and we're very concerned about how that might play out.

Many believe that circumstance is already prominent in the marketing of our products—the capacity of these international corporations to arbitrarily set the price of our product in whoever's interest they decide. Drawn to its conclusion, this power would completely control and alter the economic and political system we now refer to as a free market system governed by democracy.

Politically and economically, we are at a crossroads, and we will be watching for the signs that indicate how we must structure our response. We in our industry feel that in order to maintain our heritage as a small boat fishery, fishing shallow water harbours, fishing near the small communities—these small communities that exist just for that purpose, so that these fishermen can fish near them, which is the necessary way to fish that area—and marketing our product as coming from those sorts of enterprises, and being supported to do just that, we would need a trade conduit, if you will, or a trade highway that is accessible to small business, to all independent business, so that they can operate independently of monopolized businesses or corporations, in order to prevent the levers of trade power from consolidating and allowing monopolized toll-gating of an otherwise competitive free market system.

Democratic governments or otherwise universally democratic institutions, if we are to remain democratic, must control these mechanisms. As part and parcel of such a trade highway, there may also have to be some national mechanism considering the export value of some of our products, so that predator pricing by overcompetitive corporations...especially in times of abundance, as we find now with our all-important lobster industry.

According to a report by Gardner Pinfold, our national lobster exporters are subject to the negative consequences of competing against each other for foreign markets. This whole pricing regime/guidelines and the trade conduit-sharing mechanism to protect the competitive system is something that could be addressed by an integral body skilfully facilitated by those who have the capacity to bring power to bear. As of now, it still remains within the purview of our democratically elected governments to affect the nature of our politics, our economy, and social structure going forward as a consequence of trade.

Societies are all about trade, both personal and international. Modern-day governments will ultimately—through these decisions on trade now—have to take responsibility for future judgments by future societies that will be moulded by the provisions of trade agreements they make now.

Again, we are not prepared, for any price, to relinquish local control of local resources and our independence. I appreciate the competing individual versus collective business philosophies and the inherent need for both. Whether they operate competitively, side by side, or whether they can be incorporated into a singular integrated structure is a consideration and a negotiation that is well worth the effort if we are to construct a solution to the competing strengths and enjoy the benefits of both those systems, rather than constructing an acrimonious confrontation going forward and all the stress that accompanies it.

As I stated earlier, we are at a crossroads, and it is a strategic time for the formidable neutral powers to intervene. I'm applying to you, senators, as sober, thoughtful intellectuals to champion the propagation of this message to the appropriate negotiating powers.

I thank you for your time.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We're actually members of Parliament, not senators. The hair went up on the back of our necks, but nonetheless....

[Voices]

Oh, oh!

[Peter Connors]

It's a standing committee, and I misunderstood that from the beginning, or things might have been different.

[The Chair, Conservative, Rob Merrifield]

That's fine.

Mr. Staples, the floor is yours.

[Jerry Staples, Vice-President, Air Service, Marketing and Development, Halifax International Airport Authority]

Thank you, Mr. Chair.

Good afternoon. I am Jerry Staples, vice-president of air service, marketing and development for the Halifax Stanfield International Airport Authority.

Tom Ruth, our president and CEO, sends his regrets and greetings. He is unable to be here because of schedule conflicts.

I'll give you a bit of background. On October 25, the airport authority went out with a news release with the headline “Airport Authority Applauds CETA”. We support this program, primarily because of our strategic objectives to grow cargo, air cargo.

Further to Peter's comments, lobster is a huge, important commodity for us at Halifax. In fact, lobster accounts for 80% of what's moving as air freight. It's a high-value, dense product and the carriers like that.

We have target markets, which are in Europe. Frankfurt is one of them. We currently enjoy service with Air Canada and Cargojet: Cargojet to Europe, Air Canada to London Heathrow daily. It's a passenger aircraft, a 767 aircraft, that has belly capacity. I point that out because with airlines operating under very thin margins, the ability to haul cargo can be the top-up that makes them profitable and allows us to sustain the passenger activity.

We also have demand for dedicated freighter aircraft, which is the Cargojet I referenced, an all-Canadian—the only all-Canadian—cargo operator with dedicated freighters and with international service. We enjoy their business at Halifax.

Working with them and other carriers, there's an opportunity to grow as lobster and other seafood commodities.... These are in fact commodities such as silver hake, which as a species is not eaten in this market, but for which there is demand in Europe. So we see opportunities there. This is very well aligned with what we have been pursuing for our strategic objectives.

In fact, we processed 29.5 million kilograms of cargo in 2012. We look at doubling that over the next five years.

Although there are unknowns with the CETA agreement, we will do our homework and our research and work with industry partners to get that supply to move by air. We have that capacity, and it's a reasonable expectation to double.

We've made an investment. The airport authority, along with private companies, Gateway Facilities Inc. built the common-use cargo facility. I'm suspecting most of you will be departing by air, and as you approach the airport, you'll see that facility on your right as you exit the main highway. That facility is a 40,000-square-foot facility, with 7,000 square feet of climate-controlled space. When that was built, it was a bit of a chicken-and-egg situation to accommodate better handling of the cargo, the perishable products.

Actually, north of Miami, with direct airside access, that is the largest and most modern efficient facility that exists. It's a hugely important asset for us.

Just about a year ago, actually it was mid-November 2012, we brought online the runway extension of 10,500 feet. We thank the federal investment and provincial investment that helped us make that possible. But the sole reason we did that was not for passenger activity; it was to align with our cargo strategy. A wide-body heavy aircraft needs that extra length to go out fully loaded.

So, again, those are two key pieces of infrastructure that are in place at this point.

There's more in my speaking notes. Basically, the airport is an economic generator. We're doing over $1.27 billion in terms of economic impact. Passenger and cargo clients have access to markets across Canada, the U.S., the Caribbean, and Europe. It's a 24/7 operation, with no noise restrictions. That's key, and that's a huge part of our value proposition, because as we look at CETA coming online and we see our competitors in the U.S.—basically Boston and the New York airports, Newark and JFK—those airports have noise restrictions. So after a certain point in time, usually somewhere just before or at midnight, those airports shut down, plus they are very congested airports. That's not the case in Halifax. We're wide open 24/7, with customs service, which creates a huge advantage.

Cargo has to move in two directions on aircraft, so we've been in the unique position at Halifax of having an imbalance, in that most airports in North America are importing, are net importers, and we're net exporters. Again, it's the seafood. One of the things we see as a possibility is repatriating some of this import activity that's arriving at Boston and New York for North American markets, bringing it through Canada, and putting it on trucks or moving it further by air into major markets within 13 or 18 hours, thereby creating jobs and increasing the tax base for the enjoyment of Canadians.

We're a world-class airport. Our mission statement is quite clear: “a world-class airport creating prosperity for our region by connecting Atlantic Canada to the world through flight”. We've been focused on growing the air service, as I said, on the cargo side, but it's important to remember that the cargo will sustain the growth on the passenger side. We are really focused on two key things.

I think you heard from Joyce Carter and Nancy Phillips from the Halifax Gateway Council yesterday. I was able to participate in that recent mission. We focused on the CETA announcement, which, coincidentally, coincided with our planned trip to Europe. The $115 billion in megaprojects that are on the books for Atlantic Canada were very well received, but from my perspective, there's a huge opportunity, an obligation on some of our parts, to get this message out in Europe. It's just not as high up on the radar as it needs to be, in my opinion.

The elimination of tariffs on fresh commodities like live seafood is going to boost our cargo demand. We see a very strong upside. This, combined with the elimination on forestry and fresh agrifood products such as blueberries, bodes very well for us at Halifax International. After all, if you look at Oxford, Nova Scotia, it is the blueberry capital of Canada.

The workforce movement component is equally important to us. When you're looking at the $115 billion worth of megaprojects on the books, the actual horsepower, if you will, does not exist in Atlantic Canada to deliver on all those projects, so it's probably going to mean, from a skilled labour perspective and on the professional side, that people will have to come in from other countries to work this coast . We see that in the CETA agreement. Again, that hasn't unfolded yet, but we see what the intent is, I guess, and we look at that positively.

These early days are critical, again, to enhance the awareness of CETA. We'd like to be part of that, in particular, in the European markets. I guess I would add also on the European side that as we become successful at attracting more cargo capacity to Europe, these aircraft have the ability to move beyond. If you're looking at Frankfurt, which is a destination high up in our strategic priorities, the connections that would give us to Asia, the Middle East, and Africa would be huge. That's also possible through other major centres. While the finer details of the agreement will be worked through, we're going to need to focus on quantifying the potential for ourselves and the positive economic impacts that it will bring.

With regard to aligning the administrative interpretation among the various government departments, it has been our experience with the Canada-EU Blue Sky agreement or Open Skies, if you will, that there were several departments involved in making that possible. These are early days, and I would ask that consideration be given to coordinating the various departments, be they Finance or DFAIT, as I still call it—I understand the acronym has changed recently. The various departments that have legislation and regulations they have to administer and interpret need to be talking together sooner to avoid becoming an impediment to implementation, because in some cases I see two years in this document, and five or six years in other cases, depending on what aspect you're looking at. From an administrative perspective, that can go off the rails quite easily. It has gone off the rails in the past. We'd encourage you to look at that.

Thank you for the opportunity to share a few thoughts.

[The Chair, Conservative, Rob Merrifield]

Than you very much, both of you, for your testimony.

We'll now move to questions and answers. We'll start with Mr. Chisholm.

The floor is yours, sir, for seven minutes.

[Robert Chisholm, NDP, Dartmouth—Cole Harbour, NS]

Thank you, Mr. Chairman.

Thanks to both of you, our guests, for being here this afternoon and sharing your thoughts with us on this important issue.

First of all, Mr. Connors, you came through loud and clear. You represent a group of 226, was it?

[Peter Connors]

Yes. It's approximately 220.

[Robert Chisholm, NDP, Dartmouth—Cole Harbour, NS]

Yes. They are individual enterprises and small businesses in communities throughout the eastern shore, from, as you said, Halifax to Canso. They harvest a resource that is, as we've talked about in the past few days, something that people talk about as a very valuable commodity in trade with Europe. What I sense is that there's some concern about losing your members and about the small businesses losing some control over that.

I just want to seek some clarification. I understand that this probably comes out of activity over the past couple of years on the owner-operator fleet separation and the question of control over licences and effort. Would you describe that a little more for the committee?

[Peter Connors]

Yes, that's where we're at. For this resource, we're probably looking at some $30 million or $40 million worth of resource in the areas I represent. They're small communities. There's nothing else there to attract industry other than that resource. The value of that resource, the ownership of it, the quotas—we call it allocation—and then the access to it, which is the ability or the licence to catch it, which are two different things.... We have to maintain the value of that resource in order to finance our communities and keep them there, because that's the only source of independent income and sustenance we have.

That's come under threat. There are corporations, of course, that would like to buy the resource, just like any other resource, like oil or anything else. It's valuable, and it's only going to get more valuable. We appreciate that.

[Robert Chisholm, NDP, Dartmouth—Cole Harbour, NS]

Right, and right now there are policies in place that prevent the purchasing of and the gathering together of those licences.

[Peter Connors]

That's right. We have a fleet separation policy that provides for owner-operators. In other words, the individuals who live in those communities are the only people who can hold licences right now. Because we consider it a strategic asset, we've pushed for that. There's an element with regard to adjacency there, too, in that you have to live adjacent; you have to live in these communities.