moved that Bill C-66, an act to amend the Western Grain Transportation Act, be read the second time and referred to a committee.
Mr. Speaker, on behalf of the government and in particular on behalf of my colleague the Minister of Transport, I am pleased to open debate on Bill C-66, an act to make certain short term amendments to the Western Grain Transportation Act, commonly known as the WGTA.
This bill deals with three specific changes to the current legislation. Two amendments address problems in the move-
ment of grain to port for export. The third removes the WGTA subsidy on shipments of wheat to Mexico and is intended to facilitate our continued access to a very important market for Canada in Latin America.
At the outset I should note that the amendments in Bill C-66 are no substitute and are not intended to be a substitute for the major reforms of the grain handling and transportation system which will be brought before this House later on in this session. Rather, this bill fulfils a commitment that the government has made to farm leaders and to the grains industry that we would deal with certain particular issues that have caused significant delays and other problems in Canada's grain transportation system, especially over the course of the last year or so.
Because it is essential procedurally that these amendments are in place before the beginning of the 1995-96 crop year in western Canada which begins on August 1, the government tabled the legislation which is now before us in December. We are urging its quick passage through the House so that the legislation can be in effect in time for the beginning of the next crop year.
On the broader reform issues, we will be moving forward with them just as soon as possible after the upcoming federal budget.
One of the specific changes in Bill C-66 will end the practice of backhauling, that is the so-called scenic route backhaul subsidy on U.S. bound grain which has been moving from the prairies to Thunder Bay and then back to either Fort Frances or Winnipeg before finally heading south toward its final destination.
This practice has arisen because the existing transportation subsidy in fact makes it cheaper for shippers to move their grain to Thunder Bay at subsdized rates before moving it to destinations in the United States at commercial rates, rather than moving it directly at commercial rates for the whole distance.
Using Winnipeg as a reference point, backtracking or backhauling increases the length of hauling grain by about 450 miles in the case of Canadian National Railways and about 860 miles in the case of Canadian Pacific railway. Obviously this practice is inefficient and has led to longer car cycle times and much less effective use of the grain car fleet. The WGTA was never intended to foster this kind of backhaul situation and everyone agrees that it must be terminated.
With the passage of Bill C-66 the amendment to end subsidized backhauling would take effect no later than August 1, 1995, that is, the beginning of the next crop year. It could be brought into force earlier by order of the governor in council if there is a consensus in the grains industry that an earlier implementation date would be desirable.
I must point out that the opinion of virtually all of the players in the industry I have spoken to with some exceptions is that the most convenient and expeditious date for the implementation of the change would be coincident with the beginning of the new crop year on August 1.
Another change included in Bill C-66 will implement a system of demurrage and storage charges on railcars carrying grain, other crops and products under the WGTA when they are in fact misused by shippers for storage purposes. This will be coupled with a despatch system to encourage the expeditious use of cars.
Demurrage refers to charges that are levied when a shipper does not load or unload a railcar, a ship or a truck within the specified free time at either the origin or the destination point of the railcar. Car storage is similar to demurrage but refers to excessive time that a car spends on railway property before being positioned for unloading. Despatch refers to benefits that a shipper can earn by loading or unloading a car in less time than that which is considered normal or reasonable in the circumstances.
Under this bill the railways would be able to implement demurrage and car storage charges for delays in loading and unloading. This measure would encourage faster turnaround in the use of railcars. This is obviously important in our grain transportation system which is stretched to the limit with no cars to spare.
This amendment would also come into force for the beginning of the next crop year, no later that August 1, 1995. Or again, it could be implemented earlier by an order in council.
On the flip side of the storage, demurrage and despatch for the use of railcars equation, we have to focus upon the issue of railway performance. The WGTA already provides for sanctions to be applied against the railways if they fall short in their obligations in grain transportation. That provision has been in the WGTA since the act was first enacted about 10 years ago. Therefore it is not necessary for us to amend the legislation to put in the law the provisions with respect to sanctions having to do with railway performance.
What has been missing in terms of enforcement of any such sanctions is a precise government regulation to give practical effect to what is already in the WGTA about railway performance. I am pleased to inform the House that the necessary research and analytical work has been done. The drafting work has been done pertaining to such a regulation. Such a regulation could be brought forward very quickly if one is needed in respect of railway performance. I mention this point just for the sake of balance.
If there are to be demurrage charges and storage charges in the system of despatch applying to the shippers in order to ensure that they conduct themselves properly in terms of the use of railcars and other aspects of the grain handling and transporta-
tion system, we must also point out there needs to be a corresponding system affecting the activities of the railways. Should a regulation be required, it will be brought forward quickly.
The two proposed amendments in Bill C-66 to which I have referred aimed at reducing inefficiencies in the grain transportation system have very widespread support from industry. They are a direct result of industry-government collaboration and consultations over the last number of months, a period which began in May 1994.
During the first half of 1993, all of the best brains in the grains industry in Canada were looking forward to the 1993-94 crop year as what everybody expected would be a fairly normal grain shipping season. Then it started to rain in the Mississippi valley. The colossal flooding that resulted was the worst in 300 years. It caused the United States to use up all available railway rolling stock, including that which would otherwise have been available for leasing, as was the normal practice, into Canada.
In addition to that shortage of railcars, our harvest in the 1993-94 crop year was complicated by very poor quality. Added to that was a severe winter which limited unloading at country elevators and slowed movement through the system. The winter season through the Rockies was particularly difficult.
The port of Vancouver was tied up for a short while in an industrial dispute and we were stuck with one big transportation backlog. At one point there was a backlog of 41 vessels on the west coast waiting for grain. This situation cost Canadian producers about $35 million in ship demurrage charges imposed by the ship operators who were waiting in the harbour.
These factors along with others led many of our grains and oilseeds customers overseas to question Canada's reputation as a reliable supplier in the marketplace. In China, Japan and Korea last spring I heard those complaints firsthand. Our customers were not happy.
To avoid any finger pointing, buck passing or stalling, I called all the major operational players in the system together for a face to face meeting. It was held on May 16 in Winnipeg. They were to work out practical solutions to alleviate the immediate backlog problem and to prevent, as much as humanly possible, that situation from happening again.
The issues were also studied by subcommittees of the House of Commons standing committees on transport and agriculture and agri-food. Joint hearings were held in the spring of 1994. Again I want to commend those subcommittees for their very good work and for the production of a useful report.
I discussed the report in detail with all the private sector players involved in our grain handling and transportation system at the meeting in Winnipeg on May 16 and thereafter. I am pleased to say that not quite all but virtually all of the recommendations that came forward from those subcommittees have now been implemented.
The amendments before the House today have the support of the group of industry and labour leaders who are now referred to as the May 16 group. I hope they also have the support of the House committees that studied these issues last year.
At my invitation, the May 16 group of farm and industry leaders continued to meet about every two months or so through 1994. They were to deal with the immediate issues of getting our grains and oilseeds to port and to do a little brainstorming about the future direction of the grains and oilseeds industry in Canada.
At one of the meetings of that May 16 group held in October there was general agreement that the two amendments I have mentioned so far in my remarks today should be in place for the 1995-96 crop year. This would allow time for grain marketers and shippers to adjust sales and supply programs accordingly and to get used to the changes that are coming.
In a perfect world I would have preferred an earlier implementation date. However, it was broadly agreed that implementation of these two amendments part way through a crop year would add to congestion problems and thus aggravate the very kind of situation we were trying to solve. Therefore, we have selected August 1, 1995 as the implementation date unless there is a prior consensus in the grains industry that we could move more quickly than that.
Today we are more than half way through delivery of the 1994-95 crop. I am happy to report that we have made very steady progress in dealing with our grain handling and transportation situation. We caught up on that 1994 backlog during the summer. So far in this crop year the situation has improved.
I remember in the late winter and early spring of 1994 reading the newspaper stories and seeing the clippings of the situation that was developing in terms of that backlog at the west coast. The clippings were not very positive. Today we see newspaper stories from the Regina Leader-Post on February 2 talking about how the grain trains are rolling.
Another story on February 2 in the Saskatoon Star-Phoenix : ``Grain cars are hopping''. This is a much more positive scenario in the winter heading toward the spring of 1995 than we saw a year ago.
As of the end of January, half way through the current crop year, our grain transportation system has shipped some 16
million tonnes of grain, with 10 million tonnes through the west coast and 6 million tonnes through Thunder Bay. In the movement going both east and west our performance this year is 43 per cent better than at the midway point in the previous crop year.
Even more important, our grain handling and transportation performance to date in 1994-95 is also 20 per cent better than the long term five-year average. So far, so good. However, we are by no means out of the woods yet. We have half of the crop year yet to go. No one can take anything for granted or rest on any laurels. For the balance of this year we are going to need full co-operation and flat out top performance from all of the players in the system to get the necessary volume of grain through our ports and into export position.
Bill C-66 also proposes to eliminate the WGTA subsidy on wheat shipments to Mexico. This is obviously a separate issue from the other two I have been discussing so far this afternoon.
Last April the Mexican government, concerned that subsidized wheat imports from both the United States and Canada were having an adverse effect on its domestic market, launched a countervailing duty investigation. Canada participated in the Mexican government's investigation in order to ensure that all of the relevant facts were brought forward.
For example, we wanted to ensure that our Mexican friends and customers were fully aware of the fundamental differences between Canadian programs and policies like the WGTA and the far more insidious and damaging American trade distortions caused by things like the U.S. export enhancement program.
Our move now in Bill C-66 is to eliminate the WGTA subsidy on wheat movements to Mexico. It is intended to help resolve this outstanding countervailing duty investigation in Mexico as far as Canada is concerned and help ensure continued access to that very important market for Canadian farmers.
In the 1993-94 crop year Canada exported 909,000 tonnes of wheat to Mexico. If a countervailing duty were imposed by Mexico the potential cost to Canadian wheat exporters of losing that market could be over $22 million a year. It is obviously very important that we work hard to alleviate the Mexican concern.
It is very important to note, though, that this is not a case of unilateral disarmament on the part of Canada. The United States has voluntarily agreed to withdraw its use of its export enhancement program on wheat exports to Mexico. In addition, in order to safeguard the Canadian position we retain the option of reinstating the WGTA subsidy by order in council if that should be necessary and appropriate at some future date. Payment of the subsidy would end whenever Bill C-66 is proclaimed.
As I close, let me remake two points. First, the amendments contained in Bill C-66 are short term measures flowing from the circumstances experienced last year in the Canadian grain handling and transportation system. They have broad support from farm organizations and industry leaders. They are intended to take effect at the beginning of the next crop year or earlier if possible and reasonable. I hope the House will deal with them promptly and positively.
However, the important but relatively minor changes proposed in Bill C-66 will not be sufficient in themselves to fix everything that ails our grain handling and transportation system today. Broader reforms are necessary for four very strong reasons.
First, we must deal with the harsh reality of fiscal limitations and the battle against debt and deficits. Second, we must comply with the requirements of the new GATT agreement with respect to the disciplines that apply on trade distorting export subsidies. Third, we need to unlock new grain handling and transportation efficiencies, leading to a lower cost and faster system overall. Fourth, we need to foster greater agricultural diversification and a trend toward more value added processing and further processing.
To accomplish these objectives and to lay the foundation for the needed broader reforms, the Minister of Transport and I have been conducting two sets of comprehensive consultations with all of the players in the Canadian grain handling and transportation system over the last number of months.
For my part I have been concentrating on the issue of how the so-called Crow benefit under the WGTA can best be paid to western farmers themselves rather than indirectly through the railways.
For his part, the Minister of Transport has been focusing in his consultations on a broad range of transportation efficiency issues. In the next short while we will bring these two sets of inputs together in one set of comprehensive and inter-related grain transportation reforms. These will obviously go substantially beyond the short term measures that are put forward in Bill C-66.
While I am sure members will be anxious to debate Bill C-66 in great detail, I hope that will just whet their appetite for the larger debate that is to come a few weeks down the road.
My second and last point is to express my thanks to all of the farm leaders, farm organizations and grains industry representatives that have been intensely involved over the past several months in all of the various consultative processes I have referred to today. They have been involved since May 16 last year in the work that has led up to Bill C-66. The group of people who worked very hard at the May 16 meeting and in a series of meetings since that original encounter deserve a lot of credit for bridging their gaps and differences and working
constructively together to arrive at practical solutions to keep the grain moving and never mind the fights over turf.
The process that will lead to the broader reforms with respect to the WGTA that I just referred to has also been a process in which consultation has been extremely important. In that process with respect to the broader reforms very close to 100 different individuals, groups, organizations, private firms and levels of government have been involved in the consultative effort. They have worked very hard and very conscientiously to bring forward the best possible advice to address what all of us in this House know are some very thorny issues in terms of western transportation policy.
To all of those who have participated in this consultative process in the House of Commons committees that were involved, in the May 16 group as it evolved over the course of 1994 and most recently those who have been involved in the broader consultations about the future of the WGTA, on my own behalf and I am sure on behalf of the Minister of Transport and the government I want them to know that their efforts are very much appreciated.
