International Trade Committee on Oct. 7th, 2022

[Mark Hemmes]

I would point out that right now, they are probably crating the trains in Los Angeles and Long Beach very close to the dock. However, what Burlington Northern is planning to do—they've announced this, and I think they will do it and it will be in place in the next two years—is take them far away from the dock to what equates to an inland terminal, much the same as what Murad has created in the city of Regina.

We don't do that a lot here in Canada. There's an inland port just outside of Kamloops, B.C. There is the one that Murad has in Regina. They're trying to do the same thing in Winnipeg, but we don't really do that in Canada. I think it comes down to a total rethink of how we manage our supply chain and the logistics within the country.

A lot of that is going to require the railways to get on board with this idea. A lot of it is going to require investment.

[Arif Virani, Liberal, Parkdale—High Park, ON]

If I could, I'll build on that, because I think it was Mr. Negad who first gave us that statistic about the ranking of the Port of Vancouver. How much of that ranking is informed by the length of time it takes to off-load the containers from the ships in the Port of Vancouver?

Maybe Mr. Negad or Mr. Hemmes could try to answer that. Thanks.

[Mark Hemmes]

The report he's referring to was done by the World Bank and it was published in January and February. It had a timeline of what was going on in 2021. That's why I say that it's not exactly fair to judge the longer-term efficiency of those ports based on what happened in 2021, because they were going through the pandemic. The ranking has to do with the amount of time that ships are in harbour and how long containers, both loaded and empty, dwell sitting on the dock and how fast they're processing the vessels through the port.

When confronted with the situation they were in during the last part of the pandemic and the postpandemic period in 2021, it seems only reasonable that they would end up in that situation because they are the four or five ports that exist on the west coast of North America, and almost all of the traffic flowing into North America is going to flow through those two ports out of the Asia-Pacific countries. That's how they ended up in that situation.

As I said, it's a real statistic, a real measurement. I don't think it's fair to judge their efficiency based on that isolated period of time.

[Arif Virani, Liberal, Parkdale—High Park, ON]

Mr. Negad, do you want to add to that?

[Masoud Negad]

No, other than to ask what the future could bring, because as we've talked about in other comments, there's still an opportunity for infrastructure. Whether Vancouver ends up being the third-worst port or not, the point is that there is an opportunity for us to review this to see where the Government of Canada wants to be involved in terms of adding to infrastructure.

[Murad Al-Katib]

Could I add one thing? If the containers don't come into Canada, we don't have a chance to use them on the way back out. The more efficient we get in our ports.... We need the U.S. volume of consumer goods to drive the availability of containers in Canada. Our population is too small and our productive output is too big.

This is the incentive. If we get efficient, then we draw the U.S. volume into Vancouver and, going by rail, into the Midwest, and then we get the containers on the way back. That's the advantage for Canada.

[Masoud Negad]

If I may add—

[The Chair, Liberal, Judy Sgro]

Do so quickly.

Go ahead, sir.

[Masoud Negad]

If I may add, today those steamship lines don't want to come to Canada because, whatever the reasons are, we're taking too long to turn their ships around. We won't be able to achieve the goal that Murad is after unless we have more efficient processes in place.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We'll move on to Monsieur Savard-Tremblay for two and a half minutes.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Thank you, Madam Chair.

I'd like to hear the witnesses' thoughts on the local situation. I'll explain.

According to a Reuters article that came out in June 2020, the world can expect port congestion and high shipping rates to persist into 2023. From your perspectives, should we expect the same in Canada? In other words, do you think that rates will stay the same or even increase and that port congestion will persist?

[Murad Al-Katib]

I could give a perspective to start. I want to make this gloomy Friday afternoon a little lighter.

As I look out my window to our container terminal, I note that I haven't seen this many containers in Regina in the last two years. Equipment supply is loosening and our steamship line rates for the periods of November, December and January are declining quite rapidly.

We are seeing a global slowdown related to inflation, and the slowdown in global demand is starting to show its benefits. I'm a believer that by mid-2023 we will be getting back closer to the rates we saw in the period of 2019-20.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Thank you.

Mr. Al‑Katib, earlier you said it was necessary to revisit the strategic importance of ports, so I'd like you to elaborate on that, please.

[Murad Al-Katib]

The bottom line is that the productive capacity of Canada is growing in every sector, whether it's the resource sector or the manufacturing and value-added sectors. Containerization is needed. Our agriculture sector, as an example, is not based on bulk vessels any longer. That's a commodity business. The future of Canada is feeding the middle-class income growth in Asia and in emerging markets around the world. That requires containers for value-added product. We need port infrastructure to be planned and we need it to be connected.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We'll move on to Mr. Masse for two and a half minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Madam Chair.

I want to follow up on the port infrastructure challenges we have had. I think it was Mr. Hemmes who mentioned the lack of data that's available.

Is that something we can get from regulation through the Canada Marine Act, which the ports operate under? The ports have politically appointed boards and they are connected to the Canada Marine Act. Is that something we can do through regulations? If you don't know, I can follow up and find out myself. I'm just curious.

[Mark Hemmes]

I'm certainly not a person who could answer a question on creating legislation, but because those stipulations already exist in the Canada Transportation Act and the Canada Grain Act, I can't see a reason why you couldn't extend them to containers as well, whether it's through the Transportation Act, the Grain Act or the Marine Act.

There are stipulations in the Marine Act that I'm aware of that call for information and data, but it's not necessarily to the same degree of disaggregation that would be required for any usable analytics or measures. That's what we need. We need more visibility in how containers move from origin to destination, what port they flow through and the rate and speed at which they move.

Right now, we're wholly dependent on the data that's processed and provided by the port authorities, and they do that on a voluntary basis for the most part.

[Brian Masse, NDP, Windsor West, ON]

I can assume there are probably no standards on comparables.

Really quickly, Mr. Negad, does most of your information come from your own private research or is it from government resources? I'm curious, because you have done a lot of work here.

[Masoud Negad]

It's information from our third party logistics providers and research that's available to all of us. The full brief that I've submitted has all the sources.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We'll move on to Mr. Aboultaif for five minutes.

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

Thank you, Chair.

It's good to see you. It's been a while since I've been on this committee.

I've been in international business all my life and what I see in the shipping market is unbelievable. It is hard to understand and hard to comprehend. Truly, it's beyond many people to be able to clearly understand or explain what's going on.

What comes to mind, based on the conversations and the observations that we've had today from the witnesses, is that the problem is on three levels. It's the government, the transportation industry and the business industry.

The question to Mark is, how do we sit down in front of each other, face to face, and say we have a problem? If a container goes to the west coast but to the United States, it will cost three or four times less than if it comes to Canada. Thus, we have a problem. Let's face the truth.

What are we doing wrong in this country that we cannot solve this problem and bring goods into Canada or ship goods out of Canada in the most efficient way, compared with other economies?

[Mark Hemmes]

I can't speak to the rate issue, but I know that rates have been fluctuating and are coming down now, from what I'm told by the shippers I speak to.

I think the biggest difference is probably in the level of competition. You have so many more ports with much more capacity in the United States, plus a population that is 10 times greater than that of Canada. As Murad alluded to earlier, in Canada we don't have the same demographic composition as in the United States. Because the majority of the traffic coming into Canada is consumer goods, they are always going to prefer going through the U.S. route if that route is shorter.

Where Canadian ports and Canadian railways have been able to compete is by moving into some of those primary markets faster and more efficiently than their U.S. competitor railways can. That's what has been key to the growth in Vancouver and Prince Rupert, in particular.

I think what we have to do is get back to the basics of competition and get those ports back to being more efficient and more inducive for shipping lines to want to move through those areas.

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

What's stopping Canadian companies—importers—from using U.S. companies, and bringing the product to the U.S. to then truck it to Canada? That would cause Canadian ports to lose business.

Based on what I'm hearing, that's really the direct result of how prices in Canada are unaffordable and so high. We're not talking about 10%, 15% or 20%. We're talking about a difference of 100%, 200% or 300%.

If we're going to continue on this path, we can see the situation worsening by the day, because if I'm an importer, I would rather bring product to Seattle and then maybe truck it to Canada instead of bringing it to Vancouver and paying three times more.

[Murad Al-Katib]

In our business, going to the U.S. would cost us more, even with the higher rates. It's not an option to do that. It would cost us more to off-load trucks than it would to continue to go through Canada.

One thing Mark said is that we always have a tendency to beat up on the railways. In this case, the railway service into the Midwest has actually been faster than U.S. railway performance. We need to just continue to tune our chain.

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

I can understand that the pandemic is definitely a big cause of what happened, but now we're out of it, and we don't seem to be going back as fast as we should, so we are losing an industry.

Again, if I'm going to look at the three factors—government, the transportation industry and businesses—which one is more responsible and which one should make the first move to solve this problem?