International Trade Committee on Oct. 18th, 2022

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

Thank you very much, everyone, for your comments today.

I'll start with what a number of you referenced on the role of the federal government in convening conversations and bringing people together for collaboration. You referenced Minister Alghabra and Transport Canada and some of the work that's being done. Obviously, we know there was a national summit in January of this year on supply chain irritants.

I'll direct this first question to Monsieur Daniel-Robert Gooch. You mentioned the announcement that was just made on Friday about an expansion of that port at Trois-Rivières. My understanding is that the total cost is $130 million, and our government is putting $30 million into that expansion. They're hoping to create about 630 jobs and have that terminal open by the end of 2023.

Can you comment upon initiatives like that and what kinds of impacts they will have in Quebec's ecosystem in terms of alleviating pressure on the port of Montreal in particular?

[Daniel-Robert Gooch]

I can speak in general terms.

The national trade corridors fund has provided nearly a billion dollars to Canada's port authorities. That's been essential. I come from the air sector, where our infrastructure is set out quite differently, but the way the port authorities are structured means they have strict borrowing limits, so their ability to make those investments themselves is quite limited. The national trade corridors fund has really filled in the gaps there.

More could be done. Canadian port authorities are currently barred from many federal funding programs that are out there, such as regional economic development program funds. I'd say the NTCF has been fantastic.

You referenced a lot of the work that's been done and is under way, such as the summit and the task force. I think what that adds to the picture is an umbrella over that. What I said at the beginning is that it's a very good beginning for looking at our trade corridors from a strategic perspective. Funding is part of it, but I think the work we've seen over the last year with the task force is a really good beginning to what we need to do next.

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

Thank you.

I'm going to direct the next question to Mr. Wilson, but it also dovetails with something Mr. Gooch raised, which is climate and climate impacts.

I salute you guys for the work you are doing in Vancouver and the efforts to make sure it's the most sustainable port in the world, as well as your efforts with inclusion of indigenous peoples on the land. That's all very commendable.

Can you talk to us a bit about the impacts? You talked about roads being washed out, etc. We know about the intense flooding that happened in B.C. I feel like within the last year, time is blurring it a little bit. Can you talk to us about climate impacts on the supply chain and how we can work as a government to alleviate them?

We're trying to make investments. We obviously have a price on pollution. These are significant gestures we're making towards addressing the impacts of climate change, but are there other targeted approaches you think would be necessary to help address the supply chain issues?

It's over to you, Mr. Wilson.

[Duncan Wilson]

Thank you.

There are some short-term and some longer-term implications. Obviously, extreme weather events will continue to happen. To the extent that infrastructure can be hardened and resilience can be built into the network, that's critical. The railways actually did an incredible job of restoring their infrastructure after the floods last year. I don't think any of us expected them to be able to get into operation as quickly as they did after that major damage.

From a longer-term point of view, obviously ports are at sea level and will be affected by storm surges and a rise in sea level. Over time, investment in hardening or raising the level of marine terminals is going to be important to protect them against those extreme weather events.

Last year the weather events didn't affect the port itself. The port, all the way through the pandemic and all the way through the weather events, was actually very resilient. It was the inland supply chain where things really broke down.

I would say the other thing that is critical, whether in the Lower Mainland of British Columbia or in the metro Toronto region, is land. We have a tremendous shortage of trade-enabling land. There is no surge capacity. We had to actually take, in partnership with Transport Canada, a marine terminal site that we're holding for development of a marine terminal and repurpose it on a temporary basis to take extra containers in order to get containers off the terminal, because there was nowhere to put them.

Marine container terminals shouldn't be used as container storage. Obviously, that's prime real estate that we need for trade. We do need that surge capacity, both to protect against climate events and to protect against other unforeseen supply chain shocks that will continue to occur in the future.

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

Thank you.

I believe I have about a minute left. I will direct a question to Mr. Dekovic.

You talked about other irritants to the supply chain. I believe you mentioned preparing for unforeseen events, such as blockades. Can you comment on the impacts that the blockades we saw last January, February and March had on the supply chains around Canada?

[Marko Dekovic]

Of course, as I mentioned, our terminals are connected to the rail lines. If the rail lines are blockaded, after a significant amount of time, as you heard, everything backs up onto terminals. Terminals are not intended to be warehouses. That's where supply chain challenges occur.

I believe it is four or six days of rail shutdowns that instantly can compound the challenges in the supply chain. There is existing capacity of probably about three to four days in terminals to absorb rail shutdowns. After that, you will start feeling it in the supply chain. If that occurs again for a longer period of time, we will probably have the same results.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We move now to Mr. Savard-Tremblay.

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

I want to greet the witnesses and thank them for their presence and their presentations. I also thank all of my colleagues, whom I also greet.

My question is not addressed to anyone in particular. I invite anyone who feels able to answer it to do so.

At the last meeting of the committee, about a week and a half ago, a witness pointed out that some shipping companies were significantly increasing the cost of shipping containers to Canada. For example, as of October 6, 2022, the cost of shipping a 40-foot cargo container from Shanghai to Seattle was $2,015, while the cost of shipping a similar container from Shanghai to Vancouver was $7,000.

That's a rather wide spread. Have such cost increases also been seen in eastern Canada?

[Daniel-Robert Gooch]

Unfortunately, I cannot answer the question. I do not have the necessary information.

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

Can anyone else respond?

[Duncan Wilson]

I can speak to it in the context of the west coast, but I can't speak to it in the context of the east coast.

We have seen, through the pandemic and continuing through the surge we've seen, significant increases in shipping rates for containers coming into North America, including Vancouver and the west coast of Canada. During that period of time, there was also a strong desire on the part of shipping lines to pull empty containers back to Asia as quickly as possible, which created the issue of having a shortage of empties for export.

We're now starting to see that situation reverse itself as we're seeing rates for freight coming to North America declining and more containers being available for export.

Hopefully it was a short-term problem. We are starting to see rates normalize. We are seeing demands sort of petering off. I'm not sure if it is the same situation on the east coast, but on the west coast that's what is occurring.

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

So you've seen an undeniable increase in your area, in the west of the country, and presumably the circumstances are not particularly different between the east and west coasts.

You said you hoped it was only temporary. Do you think anything can be done about this increase?

[Duncan Wilson]

Ultimately it's a market-driven system, so the market will set the price. With that huge demand, that was unprecedented. If you imagine that demand continuing into the future, the market would respond and there would be more shipping capacity available and you'd probably see prices normalize.

In terms of government intervening in that market mechanism, I think it's an area where we should be very cautious. In particular, I notice that in the United States they took some unprecedented steps. I would say that if we're looking to do any of those types of interventions, it would be very wise to look at harmonizing with the United States.

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

You say that measures have been adopted in the US. Have they had mixed results, beneficial or inconclusive? Can you tell us a little bit about that? We need to look at what's happening elsewhere to successfully counter these crises.

[Duncan Wilson]

I can't speak to the effectiveness of the measures in the United States. I would just say that market intervention should be the last resort, in our view, and that the market should naturally correct most of these situations over time, as we are now seeing with shipping rates coming down and an increase in the availability of export containers for Canadian exporters.

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

I don't know if other speakers want to add anything on the issue of costs. Should we get the government involved or let the market take its course?

[Doug MacDonald]

Thank you.

I always think it's best to let the market take its course. With that, there has to be oversight on how that impacts the overall economy.

I'll speak for what I do know, which is that overall on the west coast of the U.S., what they put in place had no impact whatsoever on the pricing model. It continued to be very high, over and above norms.

What we are told is that coming into the east coast also saw dramatic increases. They were not quite as high as on the west coast, but it also had a major impact on shippers coming into the coastal ports.

At the same time, I will confirm that rail—to bring it inland—works on long-term contracts, and our rates were all the same for that entire time period, and trucking rates were relatively the same, so all those rates were really going to the steamship lines.

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

So, if this experience is anything to go by, the policies adopted have been inconclusive. Finally, no one here is recommending intervention on the tariff issue. Rather, we should hope that the industries will come out of this with their heads held high.

Does that sum up your position well?

[The Chair, Liberal, Judy Sgro]

Could we have a brief answer, please?

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

You can answer with yes or no.

[Doug MacDonald]

I believe you should continue to let the market dictate pricing.

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

Thank you.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We will go to Mr. Masse for six minutes, please.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Madam Chair.

I have just a quick comment. I appreciate the comment to let the market take its course, but I also appreciate the fact that it often comes from people asking for public money because the market hasn't invested in itself over a number of different decades and is having record profits. If the market is supposed to correct itself, then maybe it can correct itself without public money for a change.

I do want to move towards the issue over just-in-time delivery and start with Mr. MacDonald. Mr. Dekovic, you mentioned it as well. This is something similar to what my friend and colleague Mr. Carrie will be familiar with.

When the auto industry moved to just-in-time delivery, what ended up happening is that we basically moved the warehouses that used to store the parts and supplies off the site of the assembly plants and off the site of warehouses onto city streets and highways, and you're indicating they're now in your yards.

Maybe you can highlight this. I don't think enough people are aware of how that situation has evolved and how difficult it is.

[Doug MacDonald]

Just-in-time delivery doesn't allow for any hiccups in the supply chain, so it's a great question.

Just-in-time delivery means that everything has to work perfectly or else something backs up, or else there has to be some capacity in the supply chain.

I'll say there is a little bit of fudge or capacity in all areas of the supply chain right now. We've added tremendously on the rail side and there are extra warehouses being built, and the ports have actually done a great job in trying to find extra places to put containers coming in. However, as soon as there is a bubble in the supply chain, it does create major problems, and that's what we've witnessed.