Thank you, Mr. Chair.
I'm going to talk about a view from south of the border, from the United States.
I was born in Montreal. I'm a Canadian who has lived in the United States for about 28 years. I've been dealing with the issues of container shipping, international trade and logistics.
For the next few minutes, I'll tell you what I am aware of with the cross-border mechanisms for container transportation and with the current predicament of the stagnation of the Canadian container port systems on the east coast. The figures do not look very good.
I'll discuss those two points in more detail, and there are a few observations.
First, we can talk about what's been working very well. Many of you are keenly aware of the customs pre-clearance system for air transportation with the United States. It has been in place for quite a long time. It's effective. It's one of the most comprehensive in the world. Millions of travellers use it each year.
However, the pre-clearance system is based on a few preconditions. These involve designing areas for airports that are a form of extraterritoriality over which U.S. Customs and Border Protection has a form of jurisdiction in terms of admission. That's the first aspect. When this takes place, it allows Canadians to travel quite effectively through multiple airports within the United States. This is very well known.
What is less well known is that this agreement was expanded recently to involve cargo also, although it's not being used at this time, as far as I can tell. There have been a few pilot studies involving Prince Rupert and Montreal, but the mechanisms are in place to allow more effective movement of containers across the Canada-U.S. border. That's fair enough. That's good.
When I looked at the east coast system—or you could say the St. Lawrence system—all the way to Halifax, I noticed quite a few challenges.
The first one is strategically worrying. Based on my investigation, the most dynamic ports in North America require a draft of at least 45 feet. At the threshold of 45 feet, you start to have a significant level of container activity. Unfortunately, on the St. Lawrence, Montreal is below that threshold, so it creates a challenge. There are constraints in terms of the potential to use the east coast of Canada as a gateway to access the United States with cross-border arrangements. There might be a reluctance to invest in a system because of that.
The second point is that there is a complete divergence of the growth dynamics between Canada and the United States for the last 15 years or so. Growth rates in Canada have been at about 18% for a period of 10 years or so. In the United States, they are well above double that. There has been a divergence taking place between the dynamics of the U.S. container port systems and the Canadian ones. When this happens, the market share of Canadian ports with access to the United States gradually becomes eroded.
All the ports on the east coast, including Montreal and Halifax in particular, are declining in terms of their peak. Montreal peaked in 2019, and it has not recovered. As far as I can see, there's virtually no growth observed on the eastern seaboard. That creates a conundrum.
As far as I can calculate—this is subject to a lot of revision because the share's declining—something like 18% or 19% of the containers handled by Canadian ports are bound for the United States. Of course, it varies substantially. Prince Rupert is a very important gateway because it's a direct corridor to Chicago. It has around 65% of the volume, which are American imports, but the rest has been gradually declining for a variety of reasons.
In conclusion, what we call “cleared once, accepted twice” will have quite a few challenges. This means that once a container has cleared Canadian customs, it may be allowed to enter the United States without a second inspection.
The first challenge is that Canadian growth on the east coast is stagnant, as far as containerized traffic is concerned. There's not much of an incentive to look it up.
The second one is that the pre-clearance system we have in place underlines that you need customized facilities with personnel who are there to inspect. This means that for the container ports in Canada on the east coast, technically you will need a custom-bounded area—effectively, a foreign trade zone over which the United States will exert a form of authority, or at least a right of inspection. Again, we have a precursor to that. It's the system we have with air transportation. It will be an adaptation. Otherwise, I don't think this will be very effective, to say the least.
As well, the geopolitics are not very good in terms of the U.S.-Canada relationship—