Transport Committee on April 4th, 2022

[The Chair, Liberal, Peter Schiefke]

I call this meeting to order.

Welcome to meeting No. 12 of the House of Commons Standing Transport, Infrastructure and Communities. Pursuant to Standing Order 108(2) and the motion adopted by the committee on Monday, January 31, 2022, the committee is meeting to study the State of Canada’s Supply Chain.

Today’s meeting is taking place in a hybrid format, pursuant to the House Order of November 25, 2021. Members are attending in person in the room and remotely using the Zoom application.

Per the directive of the Board of Internal Economy on March 10, 2022, all those attending the meeting in person must wear a mask, except for Members who are at their place during proceedings.

I would like to take a few moments to clarify some things for our witnesses.

First, please wait until I recognize you by name before speaking. To those participating by video conference, click on the microphone icon to activate your mike, and please mute yourself when you're not speaking.

For interpretation for those on Zoom, you have the choice, at the bottom of your screen, of the floor in both languages, or English or French. For those in the room, you can use the earpiece and select the desired channel. I would remind you that all comments should be addressed through the chair.

Finally, to ensure that members are provided with the time they have been allocated to ask questions and hear testimony, when the allocated time is up, I will interject to let them know and let you know. I encourage you to hold your thoughts, if you do get cut off, until the same member or another member addresses the same theme or question.

Appearing before the committee, we have, from the Association of Canadian Port Authorities, Daniel-Robert Gooch, president and chief executive officer, and Debbie Murray, senior director of policy and regulatory affairs. From the Canadian Airports Council, we have Monette Pasher, interim president. From the Chemistry Industry Association of Canada, we have Bob Masterson, president and chief executive officer—it's good to see you again, Bob—and Kara Edwards, director of transportation. From GCT Global Container Terminals Inc., we have Marko Dekovic, vice-president of public affairs. From the Seafarers' International Union of Canada, we have Chris Given, director of government relations. From the Shipping Federation of Canada, we have Karen Kancens, vice-president.

Witnesses, on behalf of all members, I would like to welcome you and thank you in advance for your time and your testimony today.

We will begin with opening remarks. I invite the Association of Canadian Port Authorities to begin. You have five minutes.

I turn the mike over to you.

[Daniel-Robert Gooch, President and Chief Exective Officer, Association of Canadian Port Authorities]

Thank you, Mr. Chair.

I want to begin by acknowledging that I'm joining you from the traditional territory of the Algonquin Anishinabe peoples.

Ladies and gentlemen of the committee, thank you for the opportunity to meet with you today as part of your study on the state of Canada’s supply chain.

My name is Daniel-Robert Gooch and I have been in the role of president and CEO of the Association of Canadian Port Authorities for just under two months.

I am accompanied by Debbie Murray, who is our senior director of policy and regulatory affairs who will support me with some of your questions.

ACPA represents all 17 of Canada's port authorities, including our largest ports like Vancouver and Halifax, but also many smaller ports like Port Alberni and Saguenay. While they are all very different and face different challenges, they are all looking to the future and the investments needed to meet Canada's trade objectives while contributing in positive ways to the communities they serve and operating in financially, socially and environmentally sustainable manners.

Tomorrow, seaports across the Americas commemorate Western Hemisphere Ports Day to recognize the role of ports in the hemisphere's maritime industry and economic prosperity. This year, we are focusing on the role of ports in COVID-19 global pandemic response and recovery, so your study is very timely.

ACPA would like to commend Transport Minister Alghabra and his colleagues in cabinet for the government's attention to Canada's supply chains. The national supply chain summit in January was a robust discussion on the supply challenges Canada faces today and may soon face. We support this work.

The role of supply chains in the everyday lives of Canadians and the health of our export sectors has never been more prominent than it has been these past two years. Canada's port authorities have managed relatively well through the global disruptions we've seen in other parts of the world, but it is not guaranteed that we will be able to manage as well in the future. Our port authorities are fully committed to doing the work needed to ensure that we have adequate exporting capacity for the years ahead while also participating fully in Canada's commitments on climate change through decarbonization and innovative ways to improve the efficiency of our ports and supply chains.

Ton for ton, marine transport has the lowest greenhouse gas emissions, and our ports are improving on that. We have several recommendations on ways to improve supply chains in order to promote supply chain and navigation corridor resiliency, decarbonization and trade facilitation.

I want to talk first about empowering our ports. While the federal government has a role to play in providing financial support, which I'll speak to in a moment, having greater financial flexibilities for our port authorities would allow many of them to privately finance investments rather than relying solely on federal funding. This would require structural changes by the federal government to permit risk-based access to private sources of capital and acceleration of major infrastructure project completion.

For example, most port authorities have borrowing limits set decades ago, which are now insufficient to allow them to raise the capital needed for many of our port infrastructure needs. Amending borrowing limits must be simpler and quicker. We'd also like to see the lending criteria for ports be determined by commercial lenders, as is the case for other infrastructure businesses to access capital.

Other recommendations include providing continued national trade corridor funding to support supply chain efficiency, capacity, innovation and resilience, and filling the gap in what Canadian port authorities can fund themselves within the current regulatory framework and economic realities that each faces. Our port authorities have received about $880 million in NTCF funding. This valuable funding is allowing ports to make investments in new technology, such as at the port of Vancouver; to improve container inspection efficiency; to build new container facilities, such as the one in Halifax; to reduce border inspection turnaround times and to reduce port congestion. NTCF funding is helping smaller ports with ongoing maintenance needs and economic opportunities. Low volumes and revenues make self-funding challenging. There's more need here, and the Canada Infrastructure Bank may be able to help if we can get smaller projects to be eligible for that bank.

We need quicker approval of projects that have gone through appropriate impact assessment consultation. Ports and their partners in communities have invested significant resources into the project approval process. If ports are to optimize their role in supply chains, infrastructure projects must be approved in a timely manner. We encourage dedicated funding for decarbonization and the energy transition. This is a big need across our supply chains, and ACPA recommends creating a new fund or a specific stream within NTCF.

Finally, Canada has become a signatory of the Clydebank Declaration for Green Shipping Corridors, and we applaud that. This is an important recognition of the role of ports in decarbonization, and our port authorities are keen to support it, but we urge the federal government to scale up the support to port authorities across Canada.

In closing, Canada's port authorities are looking to the future, to how we can emerge and prosper after COVID-19. Recovery is an opportunity to transition Canada into a leadership role in green, inclusive, digital and resilient port supply chains. The recovery will require trade and global connections to build wealth. Our port authorities will be central to facilitating our country's sustainable recovery.

Thank you. I look forward to your questions.

[The Chair, Liberal, Peter Schiefke]

Thank you very much, Mr. Gooch.

Now we'll go to Ms. Pasher.

The floor is yours. You have five minutes for your opening remarks.

[Monette Pasher, Interim President, Canadian Airports Council]

Mr. Chair and members of the committee, on behalf of the Canadian Airports Council, thank you for this opportunity to join you today. I'm pleased to speak to our sector's views on supply chain resiliency, a critical file that has become intensely important over the last several months, including for our sector.

We are encouraged by the interest of parliamentarians in ensuring that Canada's supply chains are resilient and effective, so that Canadian families can count on access to goods like food, medicine and other critical supplies needed for their daily lives. For our part, we see opportunities for strengthening our current approach to better handle disruptions and to stay competitive.

The Canadian Airport Council represents more than a hundred airports across the country. Our members handle virtually all of our nation's air cargo and international passenger traffic, and 90% of domestic passenger traffic from coast to coast. Prior to the pandemic, Canada's airport sector saw over 160 million passengers and employed more than 200,000 people.

As members of the committee know, the pandemic has had an enormous impact on our sector, primarily due to the steep drop in passenger volume, which is our main source of revenue. The pandemic has also put into perspective the important role that our airports play in Canada's supply chains. As e-commerce has climbed and the importance of parcel volumes has risen as a share of shipped goods, airports have played a growing role as key transit hubs in a web of global supply chains. Our airports are not only transit points for dedicated cargo aircraft, but passenger flights carry an important share of cargo in their bellies as well.

To illustrate further, excluding trade with the U.S., prepandemic almost 25% of Canada's imports and exports were shipped by air. What's more, 80% of our cross-border e-commerce is transported by air. Express air freight, pharmaceutical and health products, and food and beverages are three categories of goods which rely on air cargo for a substantial amount of transportation due to their shipping requirements.

As such, based on the trends, we project that our sector will continue to play a growing and important role in supply chains. This means a range of measures will need to be considered to protect those channels and support their effective growth and resiliency so that Canada's interconnected gateways will effectively get Canadians what they need.

For our sector's part, there are a set of key recommendations that we would like to highlight today.

The first point is infrastructure. We recommend the continued recapitalization of the national trade corridors fund, and providing funding for on-site infrastructure investment and ground access improvements. For air cargo, it will be essential to conduct active forward planning on the use of industrial land and roads around our country's most significant logistic zones, which include airports.

We also need to modernize our current foreign trade zones to create real free trade zones that will move Canada forward in its competitiveness and attraction of business. Canada's current FTZ offering is confusing, not competitive, and an administrative burden with minimal benefit. This does require legislation.

With the disruptions experienced in our supply chains, Canada has an opportunity to reap the benefits, but we need to reduce the paperwork and the red tape and create one common digital technology platform to move and clear goods. We need to make it more seamless for companies and shippers to want to move goods through Canada. Navigating a myriad of different legal frameworks and requirements is more challenging in a heavily paper-based environment and fragmented system.

All-cargo seventh freedom rights are also in need of review. ICAO has been encouraging a wider adoption of seventh freedom rights to foster greater resiliency in the global supply chain. For us, doing so would create a greater opportunity for trade with the U.S. and an ongoing key source of revenue for our country.

Another key element is protecting and developing Canada's labour pool. We will continue to need drivers, pilots, warehouse workers and beyond. Increasing access to training and long-term career opportunities could be a possible measure to ensure that these workers will be available to sustain Canada's needs.

I hope this gives the committee members a helpful snapshot of the role that airports play in Canada's supply chain.

That concludes my remarks. I look forward to the discussion.

[The Chair, Liberal, Peter Schiefke]

Thank you very much, Ms. Pasher.

Next, we have Mr. Masterson, from the Chemistry Industry Association of Canada.

Mr. Masterson, the floor is yours. You have five minutes for your opening remarks.

[Bob Masterson, President and Chief Executive Officer, Chemistry Industry Association of Canada]

Thank you, Chair Schiefke. It's nice to see you again. It has been a while.

I am joined today by Kara Edwards, our director of transportation.

Canada's chemistry industry is the third-largest manufacturing sector in the country and the second-largest rail shipper. Every day, we ship 550 railcars—that's over 4,000 cars a week—and we do that 52 weeks a year. Our industry continues to be robust globally and, in the last couple of years, we're finally seeing some signs that Canada might participate in the surge of new investments taking place in the sector.

Right now, we're tracking over 10 global-scale chemistry investments in Alberta and Quebec. Each and every one of those is premised as net-zero carbon from day one, and each and every one of those is intended to serve not only Canadian markets, but primarily global markets.

Here's the thing: We have challenges already. We have critical transportation infrastructure that is deeply constrained at existing volumes, so we have to call on you, as the committee and as the government, to take intentional and meaningful steps to grow our transportation infrastructure to ensure that these new products that the world needs so much—and that Canada will benefit from producing—can reach their intended customers.

We also have to take a longer-term perspective from time to time. Canada has an objective of having 100 million people by the end of the century, which is 500,000 new Canadians a year. I think of that number all the time: 100 million people. The rail and transportation infrastructure we have today is already constrained, so you have an enormous job ahead of you to convince government and Canadians of what needs to be done to fundamentally allow our critical infrastructure to grow to meet the needs of this growing economy.

Our supply chain and transportation network is critical to achieving those objectives, both for our industry and for the economy across the nation. The system has to be safe, it has to be resilient, it has to be competitive and, my goodness, most important of all, it has to be much more reliable than it is today. That's not currently the case.

We poll our members regularly about their transportation needs and experiences. Today, 76% of our members—again, we're the third-largest sector in the country—note that their operations have been negatively impacted by the various supply chain disruptions over the last 24 months. That's a big number. I'll add another piece, since I talk about this often: 55% of our members have told us that they've lost sales in Canada and abroad due to the disruptions in the rail transportation service.

You've heard this already, as folks have talked about it, but we definitely need to make sure the national trade corridors funding gets where it's intended to go and grows commensurate with the needs of the growing population and economy. It's very important to help improve the resiliency of our rail transportation network in particular.

We have several other recommendations in our submission. In the interest of time, I'll leave those for now, but I do want to talk about a couple of them very briefly.

Over the last decade, we have seen severe rail network disruptions on a nearly annual basis, whether they're work stoppages, blockades, lockouts or weather events. They're too numerous to mention. That even includes actual strikes—and remember, in leading up to a strike, an industry like ours will be blockaded. You will not be allowed to ship. You'll be embargoed. You will not even be able to put the cars on the rails if you think a strike or lockout is coming, because some of these goods are dangerous and can't just sit on a siding somewhere.

Moreover, at the end of a disruption, at the end of a strike, it can take weeks to return the system to normal fluidity. These disruptions are important. They cost billions in lost sales and have tarnished our reputation as a reliable supplier.

The most important recommendation we would make to you is to look at finding a way to ensure that we can avoid rail labour disputes. Every week we're disrupted means $532 million in delayed or missed sales. I'll point out that in the United States, they have not had such a disruption for a hundred years. Their Railway Labor Act ensures better outcomes for everyone. We would encourage this committee to look very carefully at that experience in the U.S.

Thank you, Mr. Chair, for this opportunity. We look forward to your questions on our many other recommendations.

[The Chair, Liberal, Peter Schiefke]

Thank you very much, Mr. Masterson.

Next we have Mr. Dekovic, from GCT Global Container Terminals Incorporated.

The floor is yours. You have five minutes for your opening remarks.

[Marko Dekovic, Vice-President, Public Affairs, GCT Global Container Terminals Inc.]

Good morning, Mr. Chair and members of the committee. Thank you for the invitation to be with you today as you continue this important study on the supply chains.

My name is Marko Dekovic, and I'm the vice-president of public affairs with GCT Global Container Terminals. I'm speaking to you from the traditional and treaty territories of the Coast Salish people in British Columbia.

GCT is headquartered in Vancouver and operates two container terminals. GCT Vanterm, with a capacity of about 850,000 TEUs, is located in Burrard Inlet in downtown Vancouver. The other terminal is GCT Deltaport, at Roberts Bank near the city of Delta, with a current capacity of 2.4 million TEUs. This is currently Canada's largest container terminal, but Prince Rupert's Fairview terminal is quickly catching up to us. We are anchor tenants of the Vancouver Fraser Port Authority.

GCT is a majority Canadian-owned company, with three institutional investor shareholders: Ontario Teachers' Pension Plan, British Columbia Investment Management Corporation, and IFM Investors. Our shareholders are long-term, experienced infrastructure investors, committed to world growth of trade infrastructure in Canada and abroad.

As a result of our history, dating back to 1907, and our experience in the marine transportation sector, we are uniquely positioned to provide input to your committee on this study, which is focused on how to strengthen Canada's supply chain.

First, with regard to the effects of the pandemic and climate change on the supply chain, there can be no doubt that the last two years have brought a series of major disruptions to the overall logistics network, be that from rapid contraction as manufacturing and ports in Asia went into shutdown, or the extreme bounceback as things started opening up and consumers shifted their demands.

Canada is not immune to global supply chain challenges. We have seen them materialize in manufacturing, trucking, raw material supply and inland storage and distribution. Moreover, the extreme weather in B.C., namely devastating flooding and forest fires, furthered the problem of the closing of rail lines, resulting in backup of cargo ships at anchorages in the Port of Vancouver. The impacts are disruptions across the supply chain, increases in shipping costs, and longer delivery times.

However, it is important to note that container capacity at the marine terminals of Canada's west coast has not been a contributing factor. There is plenty of container terminal capacity in the system. In fact, Canada's Pacific gateway has done an exceptional job of handling pandemic-driven surges, thanks to a history of incremental, smart, market-driven investments by terminal operators and industry collaboration, such as data sharing, truck reservations and others, all supported by the hard work of essential supply chain workers.

As such, the supply chain challenges we have witnessed point to a need to solve a broader issue—building resiliency to ensure reliable operations at port terminals across the country and avoid more climate-related impacts and disruptions within supply chains. Our recommendation is that the government should invest in off-terminal, common-user, trade-enabling infrastructure that drives resiliency. The supply chain is only as strong as our weakest link. As we have experienced, having one road and rail corridor going through Canada's Rockies, which can be washed away due to climate change, is clearly a gap that government needs to address.

On the second focus of the study, the current state of container transport in Canada, it is important to note again that west coast container terminal capacity has not been a contributing factor to supply chain challenges. The fact is that Canada has container terminal capacity available to meet current and future demands. At present, there are over one million TEUs of excess capacity in the system, which does not even take into account the additional 1.2 million TEUs currently under construction that will be online in the next three years, both in Prince Rupert and in Vancouver. While Canada's west coast may eventually need additional container terminal capacity, forecasts show that it will be well into the 2030s, not in 2025, as some have suggested.

The recently released Vancouver Fraser Port Authority container traffic report reported a 2% decrease in laden or full TEU volumes, and a massive increase in empty container exports. This indicates that there is an imbalance in the supply chain. Furthermore, the port has also reported a 9% decrease in container vessel traffic into 2021, indicating that more volume is being moved by fewer and larger ships. This confirms what GCT and other terminal operators have been saying all along: The upsizing of the vessels and the consolidation of ocean carriers do not require building more terminal ports; rather, we need more supporting infrastructure that will keep the velocity of cargo volumes moving per each visit.

Related, then, is that the Vancouver Fraser Port Authority's Roberts Bank terminal 2 project is a solution to a problem that does not exist. RBT2 will essentially provide more parking spaces for fewer cars coming to the parking lot. The port authority needs to reflect on its core mandate and what it can actually do to help address supply chain challenges in collaboration with the industry.

As we continue on the path of postpandemic recovery, our recommendation would be that the federal government examine the business case, needs and requirements for container terminal capacity expansions on Canada's west coast, given the current market realities and well before any significant project-related decisions by government agencies are made. We believe that this would be an important undertaking in the context of the ports modernization review, which is reaching its conclusion, hopefully, this year.

I want to thank the committee for the opportunity to present today. I look forward to answering your questions.

[The Chair, Liberal, Peter Schiefke]

Thank you very much, Mr. Dekovic.

Next we have Mr. Given, from the Seafarers' International Union of Canada.

Mr. Given, you have five minutes. The floor is yours.

[Chris Given, Director, Government Relations, Seafarers' International Union of Canada]

Thank you, Chair and committee members, for taking the time to hear from us today.

My name is Chris Given and I'm the director of government relations for the Seafarers' International Union of Canada. The SIU represents thousands of Canadian and permanent-resident seafarers working on board all types of Canadian-flagged vessels operating from coast to coast to coast.

We're very pleased to be with you today to speak to the state of Canada's supply chain.

The domestic marine shipping sector and Canadian seafarers play a critical role in supporting and maintaining Canada's supply chains. In the St. Lawrence Seaway and the Great Lakes alone, Canadian vessels deliver more than 230 million metric tons of cargo, worth over $100 billion annually. These vessels deliver cargo such as iron ore, road salt, petroleum products, stone and cement, and agricultural products for domestic and overseas consumption. North American farmers, steel producers, construction firms, food manufacturers, power generators and Canadian households all depend on marine shipping.

The COVID-19 pandemic has had significant impacts on mariners throughout the world. Through the pandemic, seafarers engaged in international trade have endured great hardship, as thousands of workers were stuck on board vessels for up to 20 months and denied shore leave and access to medical care in many countries. Although the domestic workforce was spared some of the more terrible conditions endured by international seafarers, the situation has not been easy.

When we speak about “building back better”, we must ensure that present and future plans respect workers' rights and enshrine workers' health and safety. We're proud to say, as an industry, that domestic marine shipping has continued without any major stoppages throughout the pandemic. Industry and labour have done well to work together to ensure that vessels continue to operate and deliver for Canadians.

Of significant importance to the domestic shipping industry—both labour and ship owners—are the regulations of the Coasting Trade Act, which dictate that all domestic transportation of goods and passengers must be done on Canadian-flagged vessels using Canadian crews. The COVID-19 pandemic has largely drawn attention to the fact that having a dedicated domestic fleet of vessels and a capable and well-trained workforce is critical to maintaining our supply chain security. This segment of the industry, known as cabotage, has largely been spared from the supply chain backlogs and setbacks experienced in the international shipping sector. This is something that has been seen throughout the world during the pandemic, and many countries are refocusing efforts to ensure that they have sufficient capacity for domestically owned and operated fleets to be able to transport goods and passengers.

As the committee examines solutions to make the supply chain more resilient, we strongly advocate that cabotage and the domestic shipping sector can play a vital role in alleviating some of the congestion issues that become increasingly problematic. For example, short-sea shipping—moving goods via ships over short distances—can act as a complementary segment to road and rail. While large international vessels deposit containerized goods in major coastwise ports, very few of these containers are moved further inland or through the seaway via smaller vessels or tug and barge. There are opportunities there to capitalize on one of the most underutilized supply chain infrastructures in Canada: the seaway system itself.

As one seaway-sized vessel is capable of carrying the same cargo load as approximately 300 railcars, or almost 1,000 trucks, the use of Canadian vessels to alleviate container congestion is a safe and sustainable alternative. This has already been done successfully in the Arctic, where numerous Canadian shipping companies operate the annual Arctic sealift, providing a once-per-season delivery of critical goods, much of it containerized, to communities throughout Canada's Arctic regions.

In addition to addressing the need for resiliency, marine shipping can help Canada meet its needs to reduce harmful emissions and address sustainability issues in the supply chain. Domestic shipowners have invested over $4 billion over the last decade to refurbish and build new domestic vessels that use the latest engine and fuel technologies, giving marine shipping the ability to boast the lowest emissions per tonne moved by mode of transportation.

As indicated in the very recently released 2030 emissions reduction plan, the Government of Canada also plans to focus on the use of ammonia as another marine fuel alternative. This can only further improve emissions reductions in this sector.

In summary, Canada boasts some of the most technologically advanced and lowest-emission vessels in the world. They are owned and operated by well-established Canadian shipping companies willing to invest in additional tonnage and capacity. They are crewed by Canadian and permanent-resident seafarers, who are among the best trained and most knowledgeable mariners in the world, with continued access to leading training providers at Canada's marine schools and training facilities.

As part of the committee's work, we encourage you to look at ways to strengthen this segment of the supply chain and take this opportunity to increase jobs and investment in the domestic shipping sector using Canadian-flagged vessels and Canadian workers.

Thank you very much for the opportunity to speak to you today. I look forward to your questions later.

[The Chair, Liberal, Peter Schiefke]

Thank you very much, Mr. Given.

Next we have Karen Kancens, from the Shipping Federation of Canada.

Ms. Kancens, the floor is yours. You have five minutes for your opening remarks.

[Karen Kancens, Vice-President, Shipping Federation of Canada]

Thank you very much.

It's a pleasure to be here today.

I'm Karen Kancens, vice-president of the Shipping Federation of Canada. We're the national association that represents owners, operators and agents of ocean ships that carry Canada's imports and exports to and from world markets.

Our members' ships load and unload cargo at ports all across Canada. They carry everything from containerized consumer and manufactured goods to dry bulk commodities like grain and iron ore, liquid bulks like crude oil and oil products, and project cargoes such as heavy machinery and industrial parts. These ships, which are all ocean-going and foreign-flagged, carry virtually all of Canada's international seaborne trade, and they play an essential role in connecting Canada's importers and exporters to customers throughout the world.

Although we all tend to view Canada's supply chain challenges through our own particular lens, I think we can all agree that the system has been under tremendous stress over the last two years. I think we can also agree that a lot of that stress has been precipitated by two key factors. First we had the global lockdowns and worker shortages created by the COVID pandemic, and then the resulting and unprecedented surge in demand for imported consumer goods, most of which arrive in North America on board container ships from Asia.

These events have wreaked havoc on our transportation system—and I'm talking internationally here—by causing everything from chronic congestion and slow turnaround times at ports and terminals to shortages of vessel space and equipment and delays at many touchpoints along the inland transportation system, including on the truck, rail and warehousing sides. Although we're still facing those pressures, we're confident that these conditions will eventually subside, especially as COVID-19 transitions from pandemic to endemic status, and as the current level of demand for imported goods returns to more normal levels.

One thing we often hear is that the current state of the supply chain has been nothing but good news for container carriers, and that their ability to enter into alliances and other types of collaborative agreements is one of the main factors that have made container shipping capacity so scarce and profits so high. According to that line of thought, Canada should provide for greater regulation of the container sector, mainly by prohibiting shipping lines from entering into such agreements altogether.

That action would do very little to resolve any of the bottlenecks, delays or pricing issues that supply chain stakeholders are currently facing and, indeed, could potentially disincentivize some carriers from serving the Canadian market altogether. Operational agreements between container lines are essential components of the global service network, and most carriers rely on them to offset the extremely high capital costs of operating in the container shipping market.

Under these agreements, partners agree to share vessel space and operational resources, which allows them to offer regular service across a wider range of ports on larger and more efficient vessels than would be possible if they were all operating individually. About 80% of the world's container shipping services are provided through some form of operational agreements, and I can't overstate their role in ensuring the availability of stable, cost-effective transportation services for the movement of the world's trade.

If focusing on shipping alliances is, in our view, a kind of misguided response to addressing our current challenges, what kinds of actions should we be taking to strengthen our supply chain and especially its ability to weather future shocks and disruptions? I would suggest that we need to focus on three key factors: infrastructure, digitization and capacity.

First, we need a national coordinated approach to infrastructure investment, one that's linked to Canada's trade growth and trade diversification agenda, supported by clear objectives for approved projects and clear metrics for measuring success.

Second, we need a national supply chain digitization strategy that focuses on connecting the digital platforms that ports and other stakeholders have already built and leveraging the resulting benefits to optimize the performance of the system as a whole.

Finally, and perhaps more importantly, we need to find ways of temporarily injecting more capacity into our transportation system in response to specific needs. Among other things, this could mean making better use of underutilized trade corridors, simplifying reporting requirements when ships need to change their ports of call, or removing regulatory barriers that make it difficult to use all available assets in a given situation.

We think it's this combination of long-term strategies and short-term solutions that represents the best means of positioning our supply chain for success, whatever the future holds.

I will stop there and I am very happy to answer any questions.

Thank you.

[The Chair, Liberal, Peter Schiefke]

Thank you very much, Ms. Kancens.

I've been informed by the clerk that there is a chance that you haven't selected your microphone yet in Zoom. Before we proceed to any questioning, we want to make sure that you are able to do that. If you could confirm that, it would be helpful.

[Karen Kancens]

I'm not sure what that means.

[The Chair, Liberal, Peter Schiefke]

Mr. Clerk, do you want to jump in quickly and guide Ms. Kancens through the process?

[The Clerk of the Committee, Mr. Michael MacPherson]

Sure.

On the bottom left, you should have a little microphone icon, and next to that will be a little arrow. When you select that, it should give you various choices to select. We want you to make sure you are selecting your headset under the heading “select a microphone”. Make sure you have whatever headset you have there selected.

[The Chair, Liberal, Peter Schiefke]

That's perfect. Thank you very much, Ms. Kancens.

To begin the line of questioning today for our witnesses, we have Ms. Marilyn Gladu.

Ms. Gladu, the floor is yours. You have six minutes.

[Marilyn Gladu, Conservative, Sarnia—Lambton, ON]

Thank you, Chair.

Thank you to our witnesses for their excellent testimony today.

I'm going to start with my friend, Bob Masterson. I heard your discussion about the disruptions of rail service and what we need to do. Do you think we should deem rail service an essential service, following the pattern of the U.S., going instantly to binding arbitration?

[Bob Masterson]

We do. We talk a lot about regulatory harmonization with the United States, and this would be a good place to look, but I have a slight correction. The U.S. does not go first to binding arbitration. The first thing is that the two parties table their demands and needs. There is discussion among them, just as in Canada. If they are unable to get to a shared outcome, they go to mediation. If that doesn't work, then they are asked if they wish to go to binding arbitration. If they choose not to do that, there is a cooling-off period. They are given more time to think about their positions. They are given enhanced mediation and, ultimately, given a chance yet again to come back to binding arbitration. If they fail to do that, parties could still strike. Parties could still lock out others, but by that time, there has been so much work done that this would be a very rare outcome.

Again, the legislation has been in place in some shape or form since 1926, and we don't see the types of annual rail disruptions that we have here. It's in neither party's interest to either lock out or strike by the time you get to that—

[Marilyn Gladu, Conservative, Sarnia—Lambton, ON]

Very good. Thank you so much.

I'm going to Ms. Pasher now on a question about airports. If we look at the increase in the freight we are seeing, we need to do something to get some capacity. In Sarnia, the airport is not utilized anymore. We have free trade zone status and, of course, we're nicely located, close to the U.S.

Do you see that as being the kind of opportunity that you were talking about to get that expanded capacity?

[Monette Pasher]

Yes. Throughout the pandemic.... We need to remember that 60% of our goods were moved through belly cargo. It was a tremendous challenge throughout the pandemic, when we saw a lot of our passenger service eliminated during that time. It will start to build back. We've seen air carriers move to freighters.

In terms of our FTZs, we don't have a competitive setup right now for them. It's an administrative burden. It's barely creating positive impacts for companies to come here and value-add to products. It's just too cumbersome. We need to look at other jurisdictions, like Singapore, Hong Kong and China, where this is done properly, because we can create a lot of jobs for Canada.

[Marilyn Gladu, Conservative, Sarnia—Lambton, ON]

I have two questions for you, Mr. Dekovic. You mentioned the change that we need to make to off-terminal infrastructure. I'm interested to know more about that, and then a shift or an idea to take trucks off the road in favour of marine to reduce emissions.

I'm interested in what you have to say on those two things.

[Marko Dekovic]

To the first question, we're recommending that investments be made in the off-terminal common-user infrastructure. As was noted, during extreme climate events, be it flooding or fires, or rail blockades, like those earlier in 2020, the entire gateway on the west coast, in particular the Port of Vancouver, gets cut off. You could have seven new terminals built in the Port of Vancouver, and each one of them would be cut off if the infrastructure coming to it, road and rail, was not enabled or didn't have resilience.

That is something key, and it's where we feel there's a gap. That is where government should be playing a.... The private sector will always invest in a place where rail meets tidewater and road meets tidewater, as has been the case. The British Columbia marine terminals have a long and successful history of expansions and private sector investments.

Your second question was around short-sea shipping. I believe that was a comment from one of the other presenters, but I can comment on it, in fact, as we are advancing our incremental expansion at the GCT Deltaport terminal in the Deltaport berth four expansion project. In that project, we've incorporated the optionality to have a short-sea shipping berth, which could be utilized to move containers by barge in the local regional area, likely up and down the Fraser River, should short-sea shipping terminals be developed along the river.

Of course, moving up to a thousand or so TEUs via barge up and down the river could potentially eliminate a thousand or more container truck movements in an already congested Lower Mainland road network, in addition to obviously reducing emissions.

[Marilyn Gladu, Conservative, Sarnia—Lambton, ON]

Excellent.

Mr. Gooch, what do you think the federal government needs to do to ensure that we have the capacity to grow in terms of infrastructure, automation and the CBSA role?

[Daniel-Robert Gooch]

Thank you, Mr. Chair. I'm happy to respond.

There's a lot involved, as mentioned in your laundry list, which is one of the reasons that we've been calling, and supporting the calls of others, for a national supply chain strategy. Key to that is identifying, nurturing and promoting key dedicated trade corridors—for example, this tremendous marine highway that we have with the Great Lakes and the St. Lawrence system.

In terms of investing for capacity, certainly this is very important to Canada's port authorities in terms of both physical capacity and virtual capacity, which you get by investing in technology and innovation. That improves the efficiency of the capacity you have.

I'd say there are a couple of factors—