Transport Committee on June 15th, 2016

[The Chair (Hon. Judy A. Sgro (Humber River—Black Creek, Lib.)), Liberal, Judy Sgro]

I would like to call to order the 20th meeting of the Standing Committee on Transport, Infrastructure and Communities. I'm glad that we're approaching the end of our season, so whether there'll be a meeting 21 and 22, we'll just have to see.

Pursuant to Standing Order 108(2), we are studying the Canada Transportation Act review.

We have, as a witness today, Duncan Dee, the former advisor to the Canada Transportation Act review panel, something that we've been looking at off and on, and have the full intention of looking at more in detail in the fall.

Thank you very much. I'll open the floor to Mr. Dee for his comments.

[Duncan Dee, Former Advisor, Canada Transportation Act Review Panel, As an Individual]

Thank you, Madam Chair, for the invitation to appear before you today.

I know you had invited the former chair of the CTA review panel, the Honourable David Emerson, to appear before you, but unfortunately he was unable to attend. I'll certainly do my best to represent him and the rest of the panel members at today's meeting.

By way of background, as you probably know, the review of the Canada Transportation Act is conducted about once every decade. The Minister of Transport at the time appointed a panel of six members under the chairmanship of Mr. Emerson in 2014. The panel undertook its work from 2014 until December 2015, when we submitted our report to the Hon. Marc Garneau.

Over the course of the 18 or so months that we worked on the report, we undertook consultations with some 500 stakeholders, groups, experts, and academics. From the very start of the process, our chairman, Mr. Emerson, stressed four basic assumptions that would guide our work.

First, that Canada has been, is, and will very likely continue to be an economy greatly dependent on international trade for its national prosperity and its wealth. That Canada, by global standards, is a country with a small population spread over a huge continental land mass.

Second, that transportation is the key underpinning of not only the country's economy but also its society, its communities, and its people. It is no wonder that the foundation of Canada is very much identified with its transportation links, that the building of a transcontinental railway that allowed this massive land to be traversed efficiently and safely, is very much a part of our national identity.

Third, that Canada's competitiveness, as an economy, depends largely on transportation and logistic systems, which move goods and people efficiently, rapidly, and cost competitively. These are sometimes called global supply chains.

Fourth, that Canada is part of an integrated North American trading system. Our participation in the continental neighbourhood and our ability to coordinate our policies with our two North American neighbours will be a critical component in developing transportation policies now and well into the future.

As we looked into the various transportation challenges and opportunities that Canada faces, we examined them in the context of these assumptions and tried to answer the question of how best we could recommend changes to ensure that Canada was well prepared, and is well prepared, from a transportation perspective to participate effectively in the global economy, and to also serve this population, which is spread across the incredibly large land mass, north, south, east, and west.

As we sought the input of stakeholders, we heard a huge variety of thoughts on transportation challenges faced by industry, shippers, travellers, and communities. I'm sure, Madam Chair, that you, and the members of the committee, will agree that it seems like everyone in this country has an opinion on how best to solve the transportation challenges faced by the country.

The report that was submitted to the minister touched on every mode of transportation that falls under federal jurisdiction, including air, marine, and rail. It also dealt with some issues which, the minister at the time, specifically sought our input on governance; the north, which for our purposes was Canada north of the 60th parallel; and grain transportation.

Each adviser was assigned by the chair, Mr. Emerson, to take responsibility for a specific mode or subject. Minister Emerson asked that I focus my work on air and the north. For the air sector, the panel met with nearly 100 stakeholders, experts, and academics, who shared with us their views on the various government policies which impacted their sector. As you can imagine, when dealing with such large groups of stakeholders, each one brought their own perspective to the table, and provided us with sometimes conflicting perspectives and advice.

Through the recommendations, the panel attempted to strike a balance between competing interests with a view to ensure the strongest possible policy framework for the next 10, 20, and up to 30 years. The one issue, however, where we received near unanimity from the air stakeholders, was pre-board passenger security screening and CATSA.

Every stakeholder we met gave examples of inefficiencies and frustrations with CATSA and how CATSA was quickly becoming a bottleneck which was affecting their ability to grow, to offer new services, or to even maintain existing services without significant inconvenience to travellers and significant financial costs.

While the panel's time horizon was focused more on the long-term—a 10, 20, and 30 year time horizon—we felt that given the input we received, we had to look more intently at CATSA and provide our advice to the minister on how these issues could be resolved in the near-term.

We found that while we had a system that fulfills its core mandate of ensuring the security of air travellers, it does so at the great expense of service to customers and efficiency. Through our study, we found that while other agencies such as the Canada Border Services Agency had effectively used technology and their resources to enhance border security while significantly improving the traveller experience, CATSA had failed to do so and did not seem interested in pursuing ideas for improvement.

For the north, the panel focused its work on Canada north of 60, as I said earlier, and visited all three northern territories, meeting with stakeholders throughout its travels. The one key message we heard throughout our travels was that northern Canadians want to ensure that they remain a critical and vital part of the national transportation system and that while there had been major national efforts to link the country on an east-west basis, many of the northern stakeholders we met felt that improvements could be made to ensure that northern Canadians would also be included north-south.

We discussed and debated a number of ideas with them since several jurisdictions did, in fact, address the issue of remote communities as part of their national transportation systems. Ideas such as the essential air service program of the U.S., among others, were explored. In the end, however, based on the input we received from territorial government representatives, communities, indigenous representatives, and other stakeholders, we focused many of our recommendations on infrastructure improvements, which would address many of the concerns and issues that were raised in the north.

With that, Madam Chair, I am pleased to answer any questions you might have regarding the report.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Dee. We appreciate your very direct comments on the items we're very interested in.

Ms. Block.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

I'd like to welcome you, Mr. Dee. It's good to have you here. It's good to kick off this very important work that we want to see continue in the fall by having someone from the panel start this conversation.

I noted that you said that this act is reviewed once every decade. Given the ever-advancing technology and changes within our transportation systems, do you think that reviewing this legislation once every decade is enough?

[Duncan Dee]

We certainly encountered this very issue that you raise when we were out consulting various stakeholders, and quite a few of them mentioned the fact that the last time they had had input, or their organizations had had input in this type of a consultation, was actually more than 10 years ago—it was about 13 years ago—and so much had changed.

When you touch on the work that this committee does in this particular sector, transportation is fast-changing with the impact of technology. Many issues have arisen over the decade and a bit since the last review took place. There are things, for example, in the north, such as climate change, which has, in just a short period of time over that 10-year period, changed quite a few of their transportation priorities. In transportation, there are also external factors like security and safety, which just crop up and suddenly have a dramatic impact on policy. So I would say that 10 years is probably a little bit on the long end. I wouldn't think an annual review would be warranted, but probably somewhere in the middle would be much more appropriate.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

You also noted that we are part of a North American system. I looked quickly for a list of people who would have presented to you. Were there members or people from the United States, for example, and Mexico who would have presented to the panel on the issue of transportation?

[Duncan Dee]

Yes. We consulted quite widely, both in Canada and the U.S., and to a lesser degree in Mexico, where we sought best practices; we looked at ways in which the integration of the continent has taken place, and how we could best position Canada in light of that integration.

One of the fascinating things that we encountered, for example, was the movement of goods. So many Canadians, many of your constituents, shop online, for example. And when they look at their ability to have goods shipped across borders efficiently, those were things that we encountered as we consulted experts and academics across the border, and also in other parts of the world.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

I know that you were a member on the panel that was shepherding the chapter on the north. You also noted in your remarks that infrastructure is one of the main prescriptions you have made for the north. I'm wondering if you could provide us with your definition or the panel's definition of “infrastructure”.

[Duncan Dee]

Absolutely.

Let me just start by saying that our initial assumption was that we wouldn't be touching too much on infrastructure, because that would have been outside the scope of transportation. However, as we delved more deeply into this and looked at what other jurisdictions have done in their management of transportation policy, infrastructure was very much a part of how they positioned themselves.

In the north, we would define infrastructure, basically, as the basic building blocks on how you move people and goods. That would involve ports, airports, roads, and rail. But, obviously, in the north rail and roads aren't as prevalent, so in the north it would be more ports and airports, but more particularly airports.

In the case of the north and airports, unlike a lot of other northern jurisdictions, we found that in Canada with our user-pay model and practice over the years, we have northern communities that still rely on gravel airstrips for access. It's their only form of access in and out of those communities. The reason we felt that infrastructure was a key component of any look at northern transportation was that for many of these communities, those gravel strips have a very finite lifeline just because the aircraft servicing them are getting very old. We're getting to a point where there are no replacement aircraft of similar size that are capable of landing on gravel strips. Without addressing the fundamental infrastructure issues that are present, particularly in the north, we didn't feel that any transportation study would be complete.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Thank you.

[The Chair, Liberal, Judy Sgro]

You have half a minute left.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Okay. If we can extend the time that we have with this witness, I'll wait and ask questions later.

[The Chair, Liberal, Judy Sgro]

Yes, that's fine.

Mr. Sikand.

[Gagan Sikand, Liberal, Mississauga—Streetsville, ON]

Before I begin, I'll just point out that I will be splitting my time with my colleague.

The review recommended that the federal government increase the foreign ownership limits: 49% for commercial passengers and 100% for specialty services. My question is what do you think the effect would be on the Canadian economy if Canadian airlines had both better access to foreign capital but were also vulnerable to increased competition from these foreign airlines?

[Duncan Dee]

That's an excellent question, and it was one that we struggled with as a panel.

One of the elements I should note in this is that if foreign ownership increases to 49%, it doesn't necessarily mean increased foreign airline competition in Canada. It merely allows carriers, or airlines, or air services companies to access a greater pool of capital, which, unfortunately, in a country of this size isn't as large as a lot of these start-ups would like it to be.

We struggled with this, but in the current context where we've seen significant improvements in the financial performance of the Canadian air carriers, going up to 49% wouldn't be something that would create a dramatic change in the playing field. We noted that some of the carriers had at one point or another advocated increases in foreign ownership to 49%, but have subsequently changed their positions on this. In the Canada EU open skies agreement there are in fact provisions already to increase foreign ownership to 49%. So idea that increasing foreign ownership to 49% would have a direct impact on the competitive positions of income and carriers was definitely considered, but we felt that going to 49% wouldn't have a dramatic impact.

In terms of the 100% for speciality carriers, we were primarily looking at air cargo. In a country like ours, with a landmass like ours, we have not been able to generate a lot of activity in the air cargo business by Canadian carriers. We do have Canadian air cargo operators that operate primarily domestically, but from Canada to the rest of the world, based on the input we heard from shippers, a lot of those goods tend to be trucked to the United States and then shipped outside Canada through U.S. airports.

We felt that given the limited Canadian activity in that space, there should be not a huge impact by increasing it to 100%, which arguably is more radical than 49%. It would help stimulate investment activity in a sector that Canada doesn't participate in a huge way.

[Gagan Sikand, Liberal, Mississauga—Streetsville, ON]

How am I doing on time?

[The Chair, Liberal, Judy Sgro]

There are three minutes left.

[Gagan Sikand, Liberal, Mississauga—Streetsville, ON]

You touched upon a few things earlier that I want to bring up.

With regard to climate change and greater road and rail access in northern communities, what role do you see the aviation industry playing in Canada, along with the 100% foreign ownership of air cargo, for example?

[Duncan Dee]

In terms of the north?

[Gagan Sikand, Liberal, Mississauga—Streetsville, ON]

In the north, for northern communities.

[Duncan Dee]

In northern Canada you presently have two large carriers operating throughout the north, and smaller regional carriers operating to and from smaller communities. They play a vital role in northern transportation. Road and rail north of the 60th parallel, and to most of that territory, aren't viable alternatives because of the cost and the distances involved.

Air travel is pretty much the critical, year-round link for many of these communities. In some communities you have ice roads during the winter that allow for road access, but on a year-round basis, air travel is the key component.

In terms of the impact that changes in foreign ownership have on those activities, we didn't feel there would be any. In terms of passenger operators, meaning most of the ones we're talking about in northern Canada, such as Canadian North and First Air, increasing it to 49% doesn't change their competitive landscape as far as we can tell—

[Gagan Sikand, Liberal, Mississauga—Streetsville, ON]

My apologies. I don't mean to cut you off. I am sharing my time with another member as well.

Thank you very much.

[Duncan Dee]

Sure.

[The Chair, Liberal, Judy Sgro]

You don't have much left. You have 30 seconds.

[Kate Young, Liberal, London West, ON]

Well, maybe I'll leave it and come back with a question afterwards, if that's okay.