INST Committee Meeting

STANDING COMMITTEE ON INDUSTRY, SCIENCE AND TECHNOLOGY

COMITÉ PERMANENT DE L'INDUSTRIE, DES SCIENCES ET DE LA TECHNOLOGIE

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, November 1, 2001

• 0914

[English]

The Chair (Ms. Susan Whelan (Essex, Lib.)): I am going to call the meeting to order, pursuant to Standing Order 108(2). The committee is resuming its consideration of the economic impact on Canada of the September 11, 2001, tragic terrorist incidents.

The task of the committee is to anticipate the many but not-so-obvious consequences of these events and to advise the government on how to effectively respond to post-September 11. The committee invited industry stakeholders to define their specific circumstances further to September 11, to identify new problems they may face, to describe the immediate and longer-term responses, and to specify the actions they believe governments should undertake.

On Tuesday, the Honourable Brian Tobin opened the special hearings, followed by the representatives from the automobile sector, Canadian manufacturers and exporters, the Chamber of Commerce, the Canadian Federation of Independent Business, and representatives from the steel and mining sectors as well. On Wednesday, we met with a number of other sectors, including construction and aluminum, as well as the tourism sector.

• 0915

Today, we are continuing our special hearings with representatives from the Railway Association of Canada and the Air Transport Association of Canada. The hearings so far have been very insightful and helpful, and there's little doubt that the days and months to come will be challenging to all. But perhaps it is when we are challenged that we are at our very best.

I want to thank the witnesses for their willingness to appear before the committee. I hope we'll keep the presentations succinct so we can have a very constructive dialogue. That being said, we have three groups here this morning.

We have the Air Transport Association of Canada. We have with us this morning Mr. Warren Everson, the vice-president of policy and strategic planning. We have as well Mr. Cliff Mackay, the president and chief executive officer. From the Canadian Trucking Alliance, we have Mr. David Bradley, the chief executive officer, and Mr. Ron Lennox, the vice-president of regulatory affairs. From the Railway Association of Canada, we have Mr. Bill Rowat, the president; Mr. Bill Fox, senior vice-president, public affairs from Canadian National Railways; and Mr. Dennis Apedaile, senior adviser, government affairs, Canadian Pacific Railways.

We're now going to begin and we're going to start with Mr. Mackay.

Mr. Clifford J. Mackay (President and Chief Executive Officer, Air Transport Association of Canada): Thank you, Madam Chair. As you said, my name is Cliff Mackay. I'm the president of the Air Transport Association of Canada. With me is Warren Everson, our VP policy.

We represent commercial aviation interests in the country. We have about 320 members, everything from large carriers to charters to cargo operators to helicopter operators to flight schools—the full range of activity in the country.

I'll try to keep my remarks brief, Madam Chair.

Let me start off with a synopsis of 2001 from our point of view: 2001 was already a dreadful year for the airline industry and that was even before September 11 happened. In the first six months of the year, business travel declined 41% from levels in the previous year. We saw, overall, a 10% reduction in ticket purchases. Customer price sensitivity increased, and there was a flood away from high-margin business such as business travel towards more economic fares.

Airline demand in our business closely relates to gross domestic product. We're sometimes thought of as a lead indicator in terms of what's going on in the economy. With economists projecting a decline in North American GDP, we anticipated passenger drops and freight traffic drops as the year unfolded.

Unfortunately, though, in our business, airline costs were rising at the same time as demand was falling. Fuel prices rose 50% in the 1999-2000 period. While they didn't continue to go up, they certainly didn't abate in 2001 in any significant way.

Labour prices, too, were rising substantially above rates of inflation. Frankly, federal costs—things such as airport rents—went up 8% in 2000, 7% in 2001. That's a two-year increase of over $30 million of rents paid to the federal government for airports.

As a result of these factors, Canadian carriers lost almost $400 million in the first half of 2001. If you want any consolation, if you looked at the U.S. comparable numbers, U.S. carriers in the same period lost $3.3 billion. Many commentators have remarked suspiciously that the industry was already in trouble before September 11; this has never been in dispute as far as we're concerned. The short answer to that question is yes, it was. But what happened on September 11 turned a bad year into a disaster. The impact of the terrorist attacks was frankly catastrophic on the industry, not just simply here in Canada but worldwide.

Today we released traffic figures for the month of September and they tell a frankly grim story. All the major airports—Montreal, Toronto, Calgary, Vancouver—experienced traffic declines of greater than 30% in September. Toronto had a whopping 37% drop in traffic in September.

The traffic levels have stayed 15% to 25% below the North American average for this same time in previous years. We've seen some comeback in domestic traffic, but international and transborder traffic is frankly still extremely low by normal standards.

In Canada, we've already laid off over 11,000 people in the industry. Unfortunately, I must report to you that more is coming.

The international impacts, just for a minute, to name just a few... As I said, this is not simply a Canadian phenomenon. You're aware that Swissair has gone bankrupt. Swissair was considered to be one of the best airlines in the world. Belgian Sabena is now under protection. Irish Aer Lingus is desperately trying to find some cash to keep its doors open. In Australia, Ansett has ceased operations and a number of their regional carriers have also gone under. Korean Air just yesterday laid off 1,000 people. Air New Zealand is being renationalized because they found it impossible to find credit facilities in the commercial market. The Italian government has just given Alitalia somewhere between 500 million and 800 million euros. Aeroflot, of course, is looking for money. Japanese Airlines have cut 20% of their flights. I can just simply go on and on. This is a global, worldwide problem. We have never seen anything like it in the history of modern aviation.

• 0920

In the U.S., for example, airline revenues slid 45% in September; passenger traffic dropped 32%. And in the U.S., the return of passenger confidence is much slower than we're seeing anywhere else in the world. For example, well into October, traffic has remained down in the U.S. by 30%, and in some markets even more.

So my message, Madam Chair, is simple. If anyone believes this is somehow a public relations exercise, please stop believing it. This is a real-world, very serious problem for the airline industry worldwide. The closest historical period that we've tried to compare this with was the Gulf War. For those of you who were around at that time, traffic in the Gulf War had dropped precipitously to almost 30% in a period of a couple of weeks. It stayed down for about two or three months and then climbed back up again. We have seen the same sort of precipitous drop, in some markets an even greater drop. But what we're not seeing is any recovery. And we don't know how long this is going to last.

What that means to us as an industry—just to very briefly explain how things work from the financial point of view—is that we are an industry faced with very high fixed costs. Our aircraft are the single biggest fixed cost. Our supplier relationships and our union agreements build in a lot of costs that are extremely difficult to manage in short-term cyclical situations. The general rule of thumb in the industry is when you try to save costs, what you do is you park airplanes. You take capacity out of the system. Every major carrier in the world, including Canadian carriers, with two exceptions, is doing that. But for every 20% of capacity you take out of the system, you really only save 10% because you have a huge ongoing cost. Regardless of whether you fly the airplanes or park the airplanes, you have to pay for them. It's just that simple.

So those are the economics we're faced with. A fundamental concern is that customer confidence and passenger demand is the only long-term fix to this problem. In Canada, we just surveyed our largest 10 members. The overall news, frankly, going forward is quite disturbing. Among our members, a number have very serious liquidity problems. They are all moving to try to do everything they can: trying to get more equity out of their shareholders, dealing with their unions and suppliers to try to reduce cost, parking airplanes where they can. Essentially, they're trying to close that gap between what they see as their revenue prospects and their cost structure. The real issue will be whether they will be able to do that in the market going forward over the next few months.

The other issue in Canada that I think I should point out to the committee, Madam Chair, is that the operators in Canada are not operating in a homogeneous market. Just to give you some examples... Air Transat is a leisure carrier. It operates strictly in the leisure market and most of its flights are charter as opposed to scheduled. It's a matter of public record that they are experiencing significant pressure from a cash point of view. WestJet, on the other hand—a low-cost, no-frills domestic carrier with almost exclusively short-haul flights—is doing reasonably well in very difficult market circumstances. Its balance sheet is strong, and it's in a market niche that is not anywhere near as challenged as some of the other markets other carriers are in. First Air is another example of an airline that is weathering the storm well. It is a regional carrier, primarily in the north, and has a good mix of cargo and passenger facilities with a relatively low cost structure and is doing reasonably well.

Air Canada, on the other hand—and again it's a matter of public record—is facing very significant pressure on the demand side. Fifty percent of their business was in transborder and international and that market is not coming back. They have made major cuts and have to be very aggressive to try to reduce their cash requirements. Again, whether or not that will all be successful remains to be seen.

• 0925

In terms of what the government can do about all of this, there is not a clear consensus among our members. There is consensus on some areas. There is consensus that we urge the government to look at doing anything it can to reduce the cost pressure, on the most urgent of bases.

One example I can give you that the government has already moved on—and we're very grateful for this—is insurance coverage. We cannot get insurance coverage at an adequate level to protect us against war and terrorism risks; therefore the government has stepped in and given us short-term indemnification. Without that we would have had to park the fleets. We could not have flown. That's an example of something the government could and did do, and we're quite pleased. I think we need to publicly recognize that.

Security costs are another area. They are going up exponentially. We estimate our costs have increased in that area already by 300%, and we don't see anything that will slow them down in the near term.

Another area I've mentioned is airport costs. There are pragmatic things the government can do in the short term to take some cost pressure off, by either freezing or giving a holiday on airport rents, in the short term.

On fuel taxes, our industry—not just on the air side—is the only major industry left in Canada that pays significant excise taxes. No other industry does. On the air side, we also finance our infrastructure 100%, so we wonder why we're paying fuel taxes.

So even if government didn't wish to make long-term policy decisions, in the short term they could do a number of very useful and pragmatic things to help us through what is frankly an unprecedented crisis in our industry.

I'll stop there, Madam Chair.

The Chair: Thank you very much, Mr. Mackay.

I'm now going to turn to the Railway Association of Canada and Mr. Rowat.

Mr. Bill Rowat (President, Railway Association of Canada): Thank you, Madam Chair.

If people want to follow it, the presentation I'll make this morning is covered—

The Chair: Just a second, Mr. Rowat.

[Translation]

Mr. Bergeron, please.

Mr. Stéphane Bergeron (Verchères—Les-Patriotes, BQ): Madam Chair, I do not want to bother witnesses with this, especially since I am grateful to the railway industry for providing their document in both French and English, but I wonder if we could have French and English versions of the multimedia presentation they are giving this morning.

Mr. Bill Rowat: Do we have any French copies?

[English]

The Chair: No.

Mr. Bill Rowat: The hard copy?

The Chair: On the screen we just have the English.

Mr. Bill Rowat: There are a couple of maps I would like to use on there.

[Translation]

Only the maps.

The Chair: In French?

Mr. Bill Rowat: The maps are in French.

[English]

The Chair: So he's going to switch back and forth.

Mr. Bill Rowat: I'd like to start with who we are. The Railway Association of Canada represents 56 members. We represent virtually all railway companies operating in Canada today. We represent the class 1s—CN and CPR. We represent as well over 40 short lines, the majority of which have come into existence since 1966. We represent VIA, the intercity passenger rail.

We represent the commuter railways in Canada. I would emphasize AMT in Montreal, GO Transit in Toronto, West Coast Express in Vancouver, and a large number of tourist rail operators. Together we carry the majority of rail freight in the country and 51 million intercity commuters and tourist train travellers.

Since September 11, which was a tragic day for humanity, the U.S. has been almost totally focused on security, while in Canada our preoccupation has been very much on trade as well. Their security is threatened, and because of our dependence on them in trade, our trade is threatened.

What are some of the short-term outcomes? The economic slowdown that was already entrained will be exacerbated. There will be a significant negative impact on corporate profits, especially in the airline, tourism, and financial sectors.

• 0930

We've seen careful and strict controls in the processing of individuals crossing borders, and we've seen tremendous delays at borders, particularly for some of the other modes. There's a need, which we're seeing very clearly, coming forth for new demands on the government budget. But most importantly, the long-term implications are what we should be having a look at.

There's the potential for significant tightening of U.S. security at the Canadian border, both checking in and checking out. Since our long-term economic performance in Canada is so closely tied to the American economy and border efficiency, there's the potential for tremendous loss of investment in Canada. You've already heard several references, in the past weeks, to just-in-time inventory companies looking at possible investment decisions to move south, if they can't move their inventories in a rapid fashion.

There are some other important considerations. The U.S. economy is fuelled by consumer confidence, and this is clearly changing and coming into jeopardy. Weaknesses were prevalent in the economy before September 11, especially in corporate earnings. Canada's economic performance over the last few years was almost exclusively driven by exports to the U.S. We're the most trade-dependent nation in the G-7. Over 40% of our GDP depends on trade, and about 85% of our exports go to the U.S.

How has rail been affected by the events of September 11? Overall, class 1—CN and CPR—revenues have been flat in the third quarter. Rail traffic flows have not severely been affected by the September 11 tragic events. We have been impacted less than other modes. The real concern rail has is about the length and the severity of the economic downturn, and because we are a derivative industry, the potential lag effect on rail. The class 1 companies of CN and CPR are focused on reducing costs, in line with the slowdown. This is the tact they have clearly stated.

The impact of the economic slowdown on the short-line sector is still unknown, but could be significant. That's because many of the short-line sectors operating in this country—and remember there are over 40—are operating in remote areas and depend on a very limited base of commodities. As go the companies they depend on moving the products, so go the fortunes of the railways. There could be a significant impact on short lines.

On the intercity passenger side, VIA has seen a growth in ridership in response to the September 11 events.

I'll just move very quickly to the kind of security advantages rail has and why perhaps we haven't experienced the same problems other modes have.

We run dedicated, private, and controlled corridors. The large railways have their own police forces. Since 1997 we have had a memorandum of understanding between the Government of Canada and RAC, under which each railway has developed its own security plan and run tests and real-time simulations on those various tests. We engage in large movements of high-volume goods, with a small number of highly trained professional employees, who are pre-cleared to cross borders.

What else are we doing to increase security? We have been in regular contact with Transport Canada's security officials in Ottawa over the past number of weeks. We've taken numerous voluntary steps, and the RAC has been coordinating amongst the rail industry sector. We've linked into the North American 24-hour security control centre that has been set up by our American counterparts in Washington. We have increased vigilance at tunnels, bridges, and other critical infrastructure across the country. We've worked with the American Association of Railways to ensure coordination on a continental basis.

There are some other security considerations. We have to ensure that government measures adopted are collaborative, reasoned, and effective. The U.S. government is being extremely proactive in identifying funding to support new border and security measures. It's somewhat less so with the Canadian government. The Canadian government has to take a lead in ensuring that the flow of goods between the two countries is not compromised.

• 0935

CN and CP are the two prime movers in terms of cross-border companies and they are truly North American companies. This chart shows that rail carries by volume 44% and truck carries 56%. These are the two big movers of product between Canada and the United States. In terms of where they move, it's interesting to see the north-south flows. This map indicates there are parallel systems running north-south. The major highway arteries are paralleled by the major railway arteries flowing north-south, and it's similar in Canada. The point is CN and CP are two major North American operators on a north-south basis.

In terms of rail-related border initiatives, prior to September 11 railways were proactive in facilitating transborder movements. Almost 2 million shipments a year cross the border by rail. Rail is using electronic commerce. We've made significant investments in information technologies and we have the best data systems in the world. We have automated customs transactions and pre-filing systems in place for the vast majority of rail traffic.

What else can be done? Over the last number of weeks, we have been emphasizing four points that we think could lead to considerable improvement in terms of facilitating border flows.

Number one, we think there should be a better alignment of customs policies between Canada and the U.S.

Number two, we think we should pre-qualify low-risk freight and law-abiding people to focus the resources where they're needed. Let's get the customs resources focusing on the high risk and move the low-risk freight and people more quickly.

Number three, have customs inspections at destination or origin, where this practice is more efficient. The bottom line there is to move customs inspections away from the border, thus reducing the problems at the border.

Number four, use a centralized database and common computer systems between Canada and the U.S. for carriers, brokers, and importer-exporters where they can file the information pertinent to their cross-border traffic and simplify the system. Instead of two systems, have one overall system for use of both customs services.

I have a few points now on the resurgence of rail.

Tremendous progress has been made by Canadian freight railways since deregulation in 1987. Rates are down 35% since the mid-1980s. Productivity improvements are up over 200% since the mid-1980s. Freight rate subsidies have been eliminated, and there's been a return to financial sustainability—almost $10 billion in new investments since 1994. There's a new continental focus by the two class 1 rail lines fed by a very dynamic, burgeoning short-line sector.

Passenger and commuter sectors have also seen significant increases in activity over the last decade. VIA's operating grants have dropped from $442 million to $170 million a year, yet their ridership has increased by 20% over the same period. The ridership on GO commuter operations in Toronto is up 40% in the last five years. West Coast Express in Vancouver has increased 60% in the last five years. AMT commuter in Montreal has seen double-digit increases over the last five years.

But rail can do more. In terms of policy challenges, rail leaves a very small environmental footprint. Rail is five times more fuel efficient than intercity trucking. We have a parallel network that can lessen highway congestion and lessen land-use consumption for highways. We have dedicated corridors into the U.S., and we can lessen congestion at border crossings. And it's the most efficient way to move mid- to long-distance freight shipments.

We are privately funded. We pay our own capital. We pay our own operating costs. And we pay taxes on those expenses.

• 0940

How can Canada achieve increased modal balance? We're looking for intermodal approaches. We think, number one, there should be a better balance in the playing field in terms of tax policy—tax harmonization and equity—both with trucking and in particular our competitor, the rail sector in the U.S.

We think the Government of Canada could introduce innovative transportation policies to promote environmental sustainability and efficiency, thinking about commercial road user fees, green taxes, and incentives to use intermodal. We think the government has to develop and implement a comprehensive national surface transportation policy. Minister Collenette has a good start with his blueprint initiative.

We think the government should promote passenger rail by providing capital and regular operating funding for passenger and commuter rail.

In conclusion, Madam Chairman, trade is critical to Canada's economic performance. Border security must be enhanced, yet trade must continue to flow. Rail is an important component, but it could do more with some policy realignments. Rail's proposed initiatives can help accomplish these objectives.

Thank you very much.

The Chair: Thank you very much, Mr. Rowat.

We're now going to turn to the Canadian Trucking Alliance. We have Mr. David Bradley, the chief executive officer.

Mr. David Bradley (Chief Executive Officer, Canadian Trucking Alliance): Thank you very much, Madam Chair. Good morning, ladies and gentlemen.

The Canadian Trucking Alliance is a federation of the provincial trucking associations across Canada. We represent in excess of 4,000 trucking companies. Our members tend to be smaller, family owned establishments—which is a reflection of our industry, though we do have some of the larger conglomerates as well—primarily Canadian owned and predominately non-stock held companies.

Before I get into my formal remarks, many have said in the last few weeks that we can take our cue from the city and people of New York, who have suffered unbearable and horrific occurrences and are showing wonderful resiliency. There's an article in the October 29 edition of The New Yorker, that is somewhat instructive in terms of transportation.

I would just like to read a couple of quotes from it. The author is James Surowiecki, and he says:

The new infrastructure of prevention has illuminated one of the city's most vexing economic contradictions: New York, which is singularly dependent on trucks, is also singularly hostile to them.

There's no disputing that without trucks the city would starve. New York exports financial advice, media products, and fashion sense, and imports just about everything else...

Yet trucks get no respect. ...

Ever since the Second World War, New York has got away with making life miserable for trucks while relying on them for just about everything.

We in the trucking industry find that somewhat interesting, and perhaps there are some parallels.

About one-third of Canada's GDP is dependant upon trade with the United States, and about 70% of that, by value, is shipped by truck. There are 14 million truck crossings across the Canada-U.S. border every year; that is one every 2.5 seconds. The industry employs 400,000 Canadians directly, and about 70,000 of those are drivers involved in transborder trucking.

It's evident that anything that impedes directly the reliability of supply, in other words the ability of trucks to cross the borders to get to their destinations, will have an immediate and direct impact not only on our industry but most importantly on the manufacturers, retailers, and other shippers in this country.

There can be no doubt that the events of September 11 have had a dampening effect on short-term economic prospects, though perhaps not as devastating as one might think, so far. While day-to-day border disruptions still occur, the addition of enforcement resources on both sides of the 49th parallel, particularly the introduction of new U.S. customs officers and the deployment of the National Guard, has indeed helped with congestion in the short term.

While sporadic problems still occur, most of our carriers are telling us that things are fairly normal. But the border agencies are still on high alert, and it would be a mistake to think it's back to business as usual.

• 0945

The key factor in explaining the reduced delays so far has been the significant decline in traveller—i.e., car—traffic and a smaller but still evident reduction or slowdown in commercial truck traffic.

However, it is the longer-term impact that we think most distressing. The impact that's most worrisome for us specifically relates to direct investment in Canada. As we all know, the border between Canada and the U.S. was virtually paralyzed in the days immediately following the terrorist attacks. Then the delays were measured not in minutes but in hours, and often in days. This unprecedented situation created serious problems for industries that rely on just-in-time shipments to keep their assembly lines running, as well as for truckers hauling perishable commodities and livestock.

It's important to note that trucks touch 90% of consumer products and foodstuffs used and consumed every day in the country. We estimate the delays probably cost in the order of $20 million to $25 million a day in the three days following September 11. That's based on a conservative estimate simply of operating costs of trucks in normal times and on factoring in the delays. It doesn't include things like increased wages to the industry, lost business, or having to divert traffic to other border crossings and the like.

It's difficult, though, to divorce the impact of September 11 from the general malaise that's been confronting the economy and has particularly been enveloping the U.S. economy in recent months. What we're hearing from our carriers is the sky is not falling, yet things are extremely fragile. As I've said, our business is down somewhat—about 10%, crossing the border, on average—and with further economic slowdown we can expect to see further contraction.

Clearly, to date the impact on our sector has not been as great as on some of the other modes. So trade has not stopped. It's also important to note that there were problems at the border prior to September 11. But what the events of September 11 have done for us is create a pall of uncertainty that now overhangs economic prospects and particularly, as I said, the outlook for direct investment in Canada.

Reliability of supply is now in question. Sectors like automotive manufacturing that rely on just-in-time and time-sensitive shipments have taken on higher inventories. That is a hard cost to those companies, and there can be no doubt it will be factored into future investment decisions. We're extremely concerned that when the present supply contracts come due our investors in the United States will be looking at the reliability of supply and the reliability of the border.

In this way September 11 has also exposed and brought long-overdue attention to some longstanding border concerns. Prior to September 11 these concerns essentially were the truckers' problem. It has also underscored the importance of transportation in Canada and has highlighted Canada's unique position in terms of access to the U.S. market, a clear advantage we have enjoyed over other countries. At the same time it has underscored our vulnerability. No G-7 country is dependent upon trade to the degree to which Canada is.

It's essential therefore that we undertake the following.

Number one, we need immediately a bilateral border crisis-management plan that would be developed to handle emergency situations now. Six or seven weeks have passed since September 11, and we would still be in the position of reacting were we to see further terrorist or other emergency situations arise.

We must restore the confidence of our major trading partner in our national and international security. I believe Canada has something to offer in that regard in a bill that's recently been before the House to introduce a customs self-assessment system in Canada. I think it's the kind of program that in principle we could take to the Americans and sell. It involves data collection and pre-clearance of pre-qualified drivers, pre-qualified importers, and pre-qualified motor carriers.

The U.S. national security concerns are not new. In fact, in Canada and the United States, while there has been some coordination, there have been two philosophies. The Americans have always been much more fixated on national security. Clearly now we understand why that was. Canada's fixation, understandably, has been on trade facilitation.

• 0950

What we need now is a new bilateral approach. The sooner we can get across the table from our counterparts in the United States in government the better. We're very heartened by the fact that the immigration minister, the revenue minister, and the foreign affairs minister all have conducted or are in the process of conducting meetings of this sort with their counterparts.

There's certainly a much higher premium on security now than there has been before. One of the most pressing, if not the most pressing, domestic challenges we face is how to balance this need for increased security with keeping the economy moving.

One concept that's been under some fire of late is the so called perimeter strategy. In fact, I understand it's called the “P” word here in Ottawa. This concept has at times been called simplistic. At other times it's been said it's a prescription for having our laws written in Washington. It's really not new. It was first proposed a couple of years ago by Canada's then-ambassador to the United States, Raymond Chretien. And of course Paul Celucci, the ambassador to Canada, has recently been proposing it as well.

Supporters of that strategy see it as a better way of dealing with external security concerns, keeping the bad guys out, allocating our enforcement resources to the first point of arrival—our airports and our seaports—which we think makes a lot of sense. It would allow us then to concentrate on allowing low-risk people and goods to continue to cross our land borders more freely and in a facilitated fashion.

It's interesting—despite the political discussion that's been going on around this—that in terms of what they're looking at, Canada Customs' looks awfully like a perimeter approach now. We believe the Minister of Immigration's recent discussions with her counterpart in the United States also are suggestive of that approach.

So while it does come somewhat loaded, we believe we should get beyond the semantics and start dealing with this problem in earnest. Certainly we don't see a perimeter strategy as erasing the 49th parallel.

The real loss of sovereignty, in our view, will come from having the U.S. decide unilaterally what the border should look like. If you've been following at all what's been happening in Congress, about ten days ago we had passage of the U.S. Patriot Act, which basically restores section 110 of the Illegal Immigration Act—or certainly holds the prospect for that. There is a host of other bills being fast-tracked through Congress right now that suggest similar sorts of things—data requirements that will be imposed upon Canada, etc.

In fact, there is a bill in the stages of introduction right now from Senator Ted Kennedy where an entire section is dedicated to the perimeter national security program. It talks about the “North American National Security Cooperative” and directly states that the task force shall meet with the “appropriate representatives of Canada, Mexico, and the United States to establish, implement, and monitor an intercountry system to evaluate and determine the admission of foreign nationals based on national security concerns, including the monitoring of the entry and exit of foreign nationals from such countries.”

It's interesting that these bills are often coming forward in a bilateral sense as well. So—

The Chair: Mr. Bradley.

Mr. David Bradley: —the longer we... I will speed it up.

The Chair: Well, you're now past. Do your wrap-up in about 60 seconds.

Mr. David Bradley: Okay. We're always just in time in our industry.

But we do need to move forward in these manners. Also, most importantly I think for this committee, we need to ensure now more than ever that our economy and our industries are as productive and competitive as they can be.

We need to ensure we have efficient trade corridors. That involves not only infrastructure at the borders but the infrastructure leading to those borders. Our highways today are our rivers of trade. We're not looking for a bailout in the trucking industry. We're not looking for a subsidy. We're looking simply to see some of our tax dollars actually invested in our infrastructure. Presently we're the only major industrialized country on the planet not to have a national highway policy.

We need to look at the remaining non-GST taxes on our business inputs as a sector. As Cliff has pointed out, we're one of the few sectors still paying excise taxes. In the case of fuel taxes, they serve no policy purpose whatsoever.

• 0955

All sectors should be provided with incentives for investment, to be able to retool into the most productive, the most efficient, the safest, and the most environmentally friendly equipment—not just those sectors that on any given day are considered the most trendy or that produce the latest product or service. I think we can all take our cue from the high-tech sector in that regard.

At the end of the day, trucking is a derived demand industry. If our customers' businesses are not competitive there will be no reason for our industry to exist. But transportation can no longer be looked at as a necessary evil. It can no longer be viewed in isolation from manufacturing processes and the continental logistic systems. It is a bona fide and essential industry that is indelibly integrated with those sectors. This country was built on transportation—on the need to transport people and goods efficiently. Anything that upsets the fragile equilibrium that now exists between enforcement resources and traffic volume could choke off our vital gateways to trade.

I think I made that just in time. Thank you.

The Chair: Thank you very much, Mr. Bradley.

I want to thank all of our witnesses for their opening comments. They were very detailed and very informative.

We do have a number of questions, so I'm going to remind members that brevity both in questions and—to our witnesses—in answers would be appreciated.

Mr. Penson, please.

Mr. Charlie Penson (Peace River, Canadian Alliance): Thank you, Madam Chair.

I'm happy to see the group here this morning to tell us about your approach and what you're facing: very serious issues. That's what I gathered from your approach this morning—that this is a time when we have an opportunity to influence policy in the United States regarding the border protocol.

I noticed you're all members of the Coalition for a Secure and Trade-Efficient Border. We heard from Perrin Beatty this morning what he's saying. I just take out of his press release that what Canadians and Canadian industry need is a demonstration of leadership.

I note you have mentioned there have been some ministers meeting with their counterparts in the United States. I noticed, also, the absence of a mention of the Minister of Industry, which seems rather strange given that this is basically his area.

But I do want to ask you, isn't the real problem... I mean, you've talked about your industry really not being the problem. You're a low-risk industry in most cases, but does that matter in the overall context of this? If the Americans are not satisfied that we are dealing with this issue and are serious about security, aren't you going to be affected anyway? “Doesn't it represent a severe risk to your sectors?” is the question.

The Chair: Okay. We'll start with Mr. Mackay.

Mr. Clifford Mackay: The short answer is absolutely yes. If for whatever reason the U.S. government makes a judgment that we pose a security risk, then the implications of that decision are very serious.

In air travel, as you know, we have systems of pre-clearance at major airports where you can in fact clear U.S. customs and immigration procedures in Canada, which is something that's being looked at for other modes now. If that were to go away it would cause horrendous delays and difficulties, because in many of the places we fly to in the U.S., there is no customs and immigration capacity. This would force all Canadians to fly to a very limited number of entry points in the U.S.

Yes, that's a very serious problem, and I should say that in our industry—I should frankly commend Minister Collenette, because he's been working on these problems directly with Mineta, his counterpart in the States as well—there are a number of activities going on to try to increase the confidence between the two governments on passenger pre-clearance and security.

The Chair: Mr. Rowat.

Mr. Bill Rowat: I'll ask Mr. Fox to comment.

The Chair: Mr. Fox.

Mr. Bill Fox (Senior Vice-President, Public Affairs, Canadian National Railways; Railway Association of Canada): We agree, but that is why we are encouraged by the extent of the contact among various people from the Bush administration, from Congress, and from the government here—and from groups, as in the case of Mr. Beatty—to ensure that we come to a common understanding of how best to address the security challenge in a way that also meets the test of ensuring the flow of goods and services across the board.

Mr. Charlie Penson: Thank you, Mr. Fox.

The Chair: Mr. Bradley.

Mr. David Bradley: I think Canada is still, unfortunately—and I am pleased by what's been happening over the course of the last week—in reactive mode, it seems to me, to a great extent. Our approach as a country still seems somewhat diffuse. I think the business community has done a good job now in starting to come together, and we're talking to our counterparts in the States.

But I still think it's essential that Canada develop a detailed plan to take to Washington, and I can't emphasize enough that I really think we have some things to offer. A lot of the stuff we've called trade facilitation has been aimed at identifying high risk versus low risk, namely monitoring who's crossing the border and providing privileges to the low-risk traveller, shipper, and carrier. Those are exactly the kinds of things the Americans are talking about. We need to take a step back, look at what we're doing, look at where we may need to tighten things up to satisfy their security concerns, and then get out there and start selling this stuff. We are going to be dictated to as long as we keep waiting.

• 1000

We already have pre-clearance. We have inland border clearance now. These are all ideas that are in place.

Mr. Charlie Penson: I want to address that, Mr. Bradley. I'm sorry to interrupt you, but time is short and I do want to deal with the issue of pre-clearance and how that would be handled. I know it's important to the railways as well.

I was at the port of Vancouver recently. There's been a big increase in containers in the last seven years. Vancouver is now the first port of call for the China Ocean Shipping Corporation instead of Seattle. Isn't that at risk if we have to go through an extensive pre-clearance or delay system at the U.S. border? Isn't there a problem in that the terminal just may be moved down the coast to Seattle? In the case of Halifax, there's exactly the same potential for loss of business.

I'm not hearing the urgency this morning I would expect from your association and your company, Mr. Fox. Don't we have a short window here, and don't we have to react quickly?

Mr. Bill Fox: If I have failed to convey a sense of urgency, then I have failed miserably. Let me state first of all that there was a lot of very good work done in this area before September 11. That's an important point to make, because these ideas that are going to come forward in the next few days and weeks are not things that have been crafted in haste and in response to something. There's a lot of very solid work that's gone on.

What has changed is that it's been placed on the political and public policy agenda. We intend to be bringing forward very specific, very concrete suggestions in literally a matter of days to address that quite urgent circumstance.

The Chair: Thank you.

Mr. Penson, I'm going to have to move on. I'm sorry. Your time is up.

Mr. Bagnell, please.

Mr. Larry Bagnell (Yukon, Lib.): Thank you.

I saw the Railway Association here. I just want to go on record as supporting the great North American railway project of joining Alaska Railroad with B.C. Railway.

Now, my question is for Cliff Mackay. First of all, I'd say that there were a number of MPs who were very upset at what the insurance business did to the airlines after the disaster. We're doing some soul-searching as to whether that's too tightly a controlled oligarchy and is something we have to research.

Because this relates to borders, if you could, please give us any comments you can make on security, other than on the financing of security. Anything related to security is relevant because our interest is in ensuring that tourists, business travellers, and cargo continue to move freely, efficiently, and in a secure manner. If you could, please make any comments related to security on airlines that might be useful to us.

Mr. Cliff Mackay: I'll start, and I'm going to ask my colleague to say a few words because Warren deals with what we call in the industry “facilitation”, which is how you move people through the system.

Security has been the preoccupation since September 11, there's no doubt about it. What we've been trying to do first is balance the need to significantly ratchet up security in hundreds of different ways against, at the same time, the desire to do it in such a way that we minimize the inconvenience for the travelling public. Second, we've been trying to focus the resources on those areas that have the greatest need from a security point of view, and that's not easy.

We've been working on a whole range of things, everything from a much higher level of scrutiny on pre-clearing and the deployment of what in the end is likely to be hundreds of millions of dollars' worth of new security equipment—already about $50 million or $60 million has been announced, but there's much more to come—to a whole range of measures that take place in what we call the “backroom” as opposed to what a customer sees. Then we're working very closely with government security officials, not simply in Transport Canada but also in other agencies, such as Customs, Immigration, and security agencies, on what we can do to better improve the flow of information between ourselves as an industry and them, particularly at key entry points.

An example—and I'll ask Warren to speak to it—is a system called Advanced Passenger Information. Warren, you may want to say a word.

• 1005

Mr. Warren Everson (Vice-President, Policy and Strategic Planning, Air Transport Association of Canada): Very briefly, it's all the rage in airline security today to access the passenger information before the flight leaves so states can review the names, addresses, and payment methods against their databases to see if they can identify people who need to be looked at carefully before the plane actually takes off or lands.

It's illustrative of our situation right now that the United States has moved very aggressively forward. Canada is following with its own system. The systems are not compatible at the moment. We're dealing with the possibility of being asked to give two different sets of data for flights back and forth across the border.

The British access some of this information, and their system may be different too. We not only need to make our systems compatible and coherent with the United States system, we need to be the demandeur and get in first to craft a system that will work for us. We cannot economically survive if we just get the system other international carriers get. We can't live with what Air France and Germany will be asked to do in the United States market. Our system, our volumes, the types of aircraft, the stage length, and everything are different. If we are just lumped in with the rest of the world for data sharing, it will be catastrophic for us. We need a special deal, and we need to be in Washington now, crafting that deal for our own purposes.

The Chair: Thank you very much.

[Translation]

Mr. Bergeron, please.

Mr. Stéphane Bergeron: Thank you, Madam Chair. I am going to ask a series of questions, each specifically directed to an industry.

Regarding the railway industry, I would like to ask its representatives what impact the events of September 11 have had on passenger traffic, but I believe they already dealt with that in their presentation.

Regarding air transport, we heard yesterday afternoon from the representatives of the travel agency industry who talked very eloquently about the interrelationship between airlines and travel agents. Strangely, in all the demands the airlines have made, no mention has ever been made directly or indirectly of the importance of travel agents for the airline industry.

My question is quite simple. Does the airline industry believe that it can overcome its problems with government assistance without the travel agency industry getting government support or some other assistance, despite the fact that both industries are interrelated?

With regard to the trucking industry, the National Post reported a few days ago that the Americans are thinking about implementing a check-in, check-out system at the border. I would like to know your thinking regarding this suggestion that our neighbors to the South seem to have on their minds.

[English]

The Chair: How about starting with Mr. Rowat? Then we'll move down the table.

Mr. Rowat.

[Translation]

Mr. Bill Rowat: Could I ask Mr. Paul Côté, who is Chief of Operations at VIA Rail, to answer your questions on passenger volumes?

[English]

The Chair: He could just take a seat next to Mr. Apedaile.

Identify yourself, please, sir.

[Translation]

Mr. Paul Côté (Head of Operations, VIA Rail Canada): I am Paul Côté and I am Head of Operations at VIA Rail Canada.

Mr. Bergeron, in the immediate aftermath, during the first six or seven days following September 11, we had an incredible increase in ridership because of all the people stranded in airports that needed transportation to their final destination.

If I may, I will briefly describe our three major product groups.

In the Eastern part of the country, the Atlantic provinces, the events of September 11 allowed us to reverse a downward trend that started at the beginning of the year and that was mainly caused by the price war between airlines. We saw lower numbers of passengers than we had anticipated. This has been completely reversed. So it has been positive in the East.

In the Quebec-Windsor corridor, the numbers of travellers in business class are higher than projected, and markedly in excess of the figures before September 11. So this is a positive sign. The same goes for passengers in economy. Things got back to normal after the first week.

• 1010

Out West, we had a number of cancellations for foreign tourists. Many Japanese, Germans and Americans cancelled their trips. As a short term strategy, we tried to attract alternative business. This is not an easy task out West, which is mainly a tourist market. But as a general rule, we have been able to maintain our ridership.

[English]

The Chair: Thank you very much.

Mr. Mackay please.

Mr. Cliff Mackay: With regard to travel agents, you're absolutely correct, sir. Travel agents are an integral part of the whole, of what we would refer to as “the travel industry”. We're a part of that industry if you want to look at it from that point of view, particularly with regard to leisure travel. They are an important part of the industry, and they do act to this day as the major distribution vehicle for the selling of tickets, particularly in leisure travel. However, I must say that technology is changing that mix; the Internet in particular, the ability for people to buy their tickets directly, is changing the mix. You need to be aware of that going down the road.

You asked why the government did not provide assistance to the travel agents when they provided compensation for the shutdown period. For obvious reasons I would leave it to the minister to respond, but our general understanding of the logic behind that decision was that the government, like many governments around the world, recognized that this was a very unique thing. What happened was a result of government security decisions in North America. We were essentially forced to cease business for a period of days. That was unique. No other industry anywhere in this crisis was ever asked to do that. I think that's why the decision was made to limit financial support only to those people in Canada who hold what's called an operator certificate, which says you are in the commercial air business. That's why the decision was made. It wasn't expanded to hotels, for example, or to a whole range of other players in the industry.

The Chair: Thank you very much, Mr. Mackay.

And lastly we'll have Mr. Bradley, please—briefly.

Mr. David Bradley: How come just because I'm third, I always have to be the briefest?

The Chair: No, you have a minute, just as everybody else does. I just wanted to remind you.

Mr. David Bradley: We are very concerned by what we see coming out of Congress and out of the administration. It's barely been a year since the Government of Canada and Canadian business worked together to repeal section 110 of the Immigration Act, and this stuff looks eerily similar.

I think, however, that we have to face up to the fact that we are now going to have to address the U.S. security concerns. The collection of data on people and goods is going to be much more of a fact of life. Again, Canada has something to offer in this regard because the devil will be in the details. There's discussion of biometrics, for example reading the retina and those kinds of things for all truck drivers. Are you going to be able to feed that electronically from your truck, or are you going to have to actually stop and swipe a card? How its done can have a major impact in terms of whether the border continues to be efficient or not.

The caution is that everything in the United States right now is being looked through the optic of security. While the administration is saying the right things about trade facilitation and whatnot, Congress is an entirely different kettle of fish. Again, we have to be there, making sure that if they're going to move in this direction, it's something we can live with.

The Chair: Thank you very much, Mr. Bradley. Thank you, Mr. Bergeron.

Mr. St. Denis please.

Mr. Brent St. Denis (Algoma—Manitoulin, Lib.): Thank you, Madam Chair. I appreciate the chance to hear our witnesses this morning.

I'm just wondering if I could use the collective wisdom gathered here at the head of the table to give us a sense of the big picture in terms of U.S. attitudes towards Canada, attitudes on the part of industry and political players, as you see them. As some of you have already stated, for the U.S. it's security right now, while for us it's trade for the most part. CNN is helping to create a certain view of the world, mostly within the U.S.A., and this of course affects their political attitude.

You deal with your U.S. counterparts in the industry. Mr. Fox would have his equivalents in the U.S.A. who deal with their congressmen and senators. I'm just wondering if a few of you could characterize what you see, not just immediately but maybe six months or a year down the road. This is where the hard results will be, the results of U.S. attitudes in the main. What do you see as being the leadership's attitudes towards Canada and towards the importance of maintaining open trade with us? We can talk about how important it is, but are they talking about it?

• 1015

Mr. Bill Fox: If I could make two observations, one is, frankly—as a former Washington reporter—it's important to remind ourselves that there will be divisions in attitude between the administration and Congress. Regarding the administration, I think we enjoy excellent relations and there's a lot of really good work going on at the very highest levels of the two governments. Congress is often... Opinions there are shaped by the American media and the American media is obviously attracted to the notion of problems along the northern border. It's not been a story in the last several decades, so they will seek to highlight those exceptional circumstances where there is an incident. That is not without risk. That's why we think we have to be very active at the front end of this parade: we believe that Congress in particular will seek to restore the confidence of the American people in the security of its border and/or perimeter. So the only issue for us is whether we're going to be part of helping solve that challenge or whether we're going to hear about it. Clearly, our bias is to be part of the solution.

Mr. Dennis Apedaile (Senior Adviser, Government Affairs, Canadian Pacific Railways; Railway Association of Canada): Just to add a bit to that, recently you may have heard that the U.S. has done some work on where they need to beef up their border activity. They're far more concerned about beefing it up on the northern border than on the southern border, which has to tell you something about attitudes. But if we don't deal with the security, we won't get any action on trade. This is the perspective we're picking up.

The Chair: Mr. Mackay.

Mr. Clifford Mackay: I would simply share that, Madam Chair. I would make a couple of observations that are somewhat unique to the air mode. With regard to our colleagues south of the border, the U.S. carriers, they are not as concerned as we are about ensuring the system is as seamless as possible. But they are certainly concerned because they have significant interest in terms of their U.S.-Canadian routes, just the same as we do. So we do have allies. I would share the view that in working at the administrative level with the U.S. government, we are not getting anything but good cooperation, but the congressional overlay is very real and worrisome.

The second thing I would say is there is a different attitude in the U.S. about the air industry from what we have here in Canada or, frankly, in other parts of the world. It is seen as an integral part of their defence apparatus. Therefore, they will do things in that context, and they will take policy decisions that affect their industry for purely national defence purposes. They will not put a trade or an economic policy overlay on these things. We need to be cognizant of that when we're doing business with them. That's not a reality in Canada, but it is a reality in the United States.

The Chair: Thank you. Mr. Bradley.

Mr. David Bradley: I think we have to remind ourselves that the public in the United States doesn't think about Canada. It doesn't enter in. Congress doesn't think about Canada. A former consul-general at Los Angeles told me that only 40% of congressmen even have a valid passport. So I think we have to be mindful of that. I find that my counterparts in the United States, while essentially free traders, are being extremely cautious these days, in terms of being seen to be making security subservient to the free flow of trade. That's something we're going to have to deal with.

The Americans on the trucking side have been focused on Mexico much more than the northern border for a number of years now. What you see is that Mexico's share of imports into the United States is increasing. Canada's is staying flat. So if there's an economic interest, I'm not so sure that for many of them the focus wouldn't be south. Canada often just doesn't enter into it, and that's something we're going to have to grapple with.

The Chair: Thank you very much, Mr. St. Denis.

Ms. Desjarlais, please.

Mrs. Bev Desjarlais (Churchill, NDP): Yes, I have just a bit of a statement. Actually Mr. Bradley emphasized that the focus for security with the U.S. has been on Mexico. That's why they're in the process of beefing up security at the Canadian border now. There had been requests to put more people on those border points, and the U.S. didn't think it was necessary because it wasn't a major security issue. I think we need to be clear that it's not because, all of a sudden, they're recognizing that Canada is horrible. It's just that they're increasing security overall. I would guess that they're probably still increasing it even more on the Mexican border, but they're going to put more in on the Canadian border because they have let it fall for a number of years. They had far fewer people at the Canadian border than Canada had at the Canadian border; so I think we need to be clear.

• 1020

My question for each and every one of your industries is how you envision a pre-clearance process working. Instead of happening at the border crossing, do you envision it as—say, in Chicago, you've got major cargo or passengers coming through—having a customs officer who will check things at a certain spot or having them check things at a certain business in Chicago? I would just like some clarification as to how each of your industries will see a pre-clearance process working.

The Chair: Mr. Apedaile.

Mr. Dennis Apedaile: Thank you.

In rail, it can be at a distance that could be anywhere from a few miles to quite some distance from the border. The key thing in rail is to do the customs clearance at a place where you have the equivalent of a yard facility. Here you can break down the trains if Customs wish to hold a car for some reason; you can make up your trains in a way that suits the customs officials; and when you then get to the border, there is no disturbance in the flow of movement. What we sometimes experience is the stopping of a whole train and maybe even cutting a car out to have it inspected. Some of those things, because of the enforcement approach Customs takes—naturally you don't get notice of that.

You can visualize stopping a train of 100 cars or more right near the border and just having it sit there and pulling a car out is not only tremendously difficult from a logistics point of view and a smooth flow of trade, but it is also arguably less secure than having a secure area where you can deal with the customs quite some distance from the border.

Certainly, if we go to the perimeter concept, then again a lot of the materials that are moving through, even when they get made up in the train to go across the border, will have come already inspected at the perimeter.

So it's really both a security perspective and the perspective of the physical attributes from a movement of the rail equipment that suggest that you should be away from the border in kind of a yard facility.

Mr. Clifford Mackay: On the air side, we have pre-clearance. In six major airports in Canada, you already can pre-clear into the U.S. system, both Customs and Immigration.

Our big concern is to maintain the U.S. government's resource commitment to that and to ensure it's expanding.

Mr. Mineta announced just the other day 500 more inspectors, and the INS people are announcing more personnel on the northern border. One of our concerns, frankly, is to ensure that as they ratchet up those resources, resources are also allocated to Canadian airports for pre-clearance.

Frankly, we have been lobbying for quite some time to expand the six airports to eight or ten. It's a very efficient way to manage things.

I would make the same comments you've just heard with regard to the cargo side. We do pre-clear cargo, but there are a number of efficiency measures that, if implemented, would make the system much, much better.

One observation I would make on the Canadian side is we've been running a pilot program in Vancouver Airport called “In Transit” where you can fly from Tokyo and connect via Vancouver to Chicago. Until September 11 you could transit the airport without having to go through formalities to come into Canada, and then turn around and go right back out again.

Unfortunately, a Canadian decision has been made to cancel that program for now. So now when you land in Vancouver in transit to Chicago, you've got to clear Canadian customs and turn right around and go back out again. Frankly, it's not very sensible. We can't find any good reason for doing it from a security point of view, so we've been encouraging the government to look at that. If we can get in transit facilities in other places, I think it would be a good thing too in terms of facilitating people without in any way compromising security.

The Chair: Mr. Bradley.

Mr. David Bradley: From an operational perspective, my comments are similar to those of the railways. But I think it's important to keep in mind that there are only limited pre-clearance opportunities into the United States right now. It's not something they've really wanted to push. They've always had concerns about it.

One of the concerns that U.S. Customs has is once you pre-clear freight somewhere before you approach the border, what assurance do you have, what seal can you then put on that freight between there and the border?

So I think it's going to be a tough one to sell to the Americans. That's why I think it's also important for us to look at inland clearance as well as pre-clearance.

• 1025

Canada has historically had a system of inland border clearance, where a truck that's in bond will cross and will be inspected at a sufferance warehouse somewhere inland. They can be close to the border or 100 miles from the border. That's also something we want to talk to the Americans about. We want to push pre-clearance, but at the same time, post-border clearance is something they may be interested in as well.

The Chair: Thank you very much, Ms. Desjarlais.

I now have a real challenge. I have three members left who have to ask questions. I'm going to ask you each to ask one question.

Ms. Paddy Torsney (Burlington, Lib.): Can it have two parts?

The Chair: Ms. Torsney, one question, please.

Ms. Paddy Torsney: Thanks.

Certainly, Mr. Fox, you highlight all the work that has been done at the administrative level and the difference at the Congress level in some of the influences they have, whether it's media or what have you.

Some elements of your presentations have focused on what you're doing vis-à-vis your American counterparts to make sure those businesses you deal with on a regular basis are giving the right messages to Congress, so Congress is making the right decisions. I'd like to hear more about that.

It seems to me it's not just about security; it's also about making sure the fundamentals are right in your own businesses. Some of you have talked about little parts of that. Nobody has really talked about the employees and the role they play in making sure the business is achieving everything it can achieve.

Certainly with the air industry, some of the dealings I've had in the last week or so suggest I'll be one of Mr. Côté's customers in the future. What is being done internally? The employees are under a lot of stress. There's a lot of stuff going on. I don't hear many companies who come before us talking about the HR component here.

The Chair: Mr. Mackay.

Mr. Clifford Mackay: You're absolutely right. The employees in our industry are under enormous stress. I think I mentioned in my remarks that 11,000 people have been laid off already. I hate to say it, but I think there are more to follow. That is not what you'd call a conducive working environment. We are trying to do everything we can, in working through what is an unbelievably difficult time, to maintain employee morale. That's not easy.

At the same time, our employees are being subjected to a myriad of procedural and regulatory changes, some of them quite dramatic. They're being asked to interface with their customers right on the front line, in a way they haven't been asked to do in the past. That includes everything from locked cockpit doors, to reinforced cockpit doors, to video. You're an employee, you're at your job, and now you're going to be videoed every second you're on the job. That's what they're being asked to do. We are facing a major challenge, and I don't want to dismiss it or say it's not a serious issue. It is a serious issue.

The other piece of the puzzle is that there are serious negotiations going on between the employers and unions in our industry. As I said, a number of companies are facing significant cash issues, and part of their response to them, of course, is to sit down and negotiate with their unions.

We're very cognizant of the problems. Not just management, but our employees are trying to manage through what is an unprecedented difficult time as best they can. All I can say is we obviously seek the patience of our customers. I hope in most cases you're getting the service you're very much entitled to.

The Chair: Thank you.

I'll have to move on to the next question.

Ms. Paddy Torsney: Mr. Fox didn't—

The Chair: Ms. Torsney, I'll let Mr. Fox have 30 seconds, then I'll move on. Thank you.

Mr. Fox.

Mr. Bill Fox: In the four areas I talked about where we're looking for some proposals—inland inspection systems, integration, pre-clearance, and customs perimeter—all of that work is being done by our employees. The people actually operate the system.

Part of what we're about is being a scheduled railroad, and we're trying to make sure the product gets to the customer in a timely way. If we have a train stopped at a border point and somebody asks to take a car out of that train, a lot of customers, by extension, are implicated in that process, and it's pretty hard to keep to the schedule for them.

The Chair: Thank you.

[Translation]

Mr. Drouin, one question only, please.

Mr. Claude Drouin (Beauce, Lib.): Thank you, Madam Chair. I will ask just one quick question.

It has been said that we have been in a reactive mode rather than a proactive mode since September 11. I would just remind you that the Minister of Revenue had taken steps before September 11 in order to ease the crossing of the border on the American side. The Americans are very focused on security at the present time but they have always been very focused on protectionism and this has not improved since September 11. It is one of the difficulties we face and that we need to resolve.

• 1030

Madam Chair, the Minister of Transport has provided 600 million dollars over the next five years to improve the North-South transport corridors. If the provinces come up with their share, 1.2 billion dollars will be available.

Mr. Mackay, you talked about a 50% increase in gas prices. Does this include what happened recently? We know that there have been large price decreases. In view of the huge cuts you made in the commissions paid to travel agents... it is like asking salespeople not to take their car to sell their stuff because it would help the transportation sector. You mentioned that there was a worldwide problem in the airline industry before September 11. Did you look into the reasons why, before September 11, the world airline industry had problems? It seems important to undertake such an analysis. Maybe I did not understand you correctly and I would like to hear your views.

[English]

The Chair: Mr. Mackay, please.

Mr. Clifford Mackay: There have been some, although certainly not the definitive sort of one study, but we stay in touch with IATA and other colleagues in the U.S. IATA is the International Air Transport Association. The kind of picture I painted for Canada, you could paint in other parts of the world. You could certainly paint it in the U.S. In the U.S., the downturn and the implications of that have been even more dramatic than in Canada. In Europe, there have also been layoffs, shutdowns, and any number of those sorts of things.

I'm not sure if that was your question, and whether or not it had to do with travel agents, but with regard to travel agents specifically, the rollback in commissions is a global phenomenon. It's happening in the U.S., Europe, and Asia. It was happening even before September 11, and in part was a response to the slowdown in the economy. It was also a response to the introduction of new technology.

In the U.S., where it's been most dramatically pursued, there are companies where well over 50% of their tickets are now sold through the Internet and what you could generally refer to as e-commerce, rather than through the traditional travel agency network. Particularly the discounters are headed in that direction because there are significant cost economies.

The Chair: Thank you very much.

Mr. Volpe, please.

Mr. Joseph Volpe (Eglinton—Lawrence, Lib.): Thank you, Madam Chair.

I want to thank all the guests for their participation. They were intended to give us a better sense of what's happening at the border.

Just a couple of reflections. I find Americans are just like Canadians—very parochial. Many of us, when we think of international trade, think of Cleveland. When most people think of international trade, they think of someplace else. But I'm not sure a lot of the fears and concerns that have developed over the course of the last couple of months are singularly related to the events of September 11 themselves, or whether September 11 is being utilized for a series of other decisions.

For example, when it comes to security, the Americans, when I was last in the States at the end of July, took it upon themselves to shut down the Mexican border to all foot traffic. The move was identified as nothing more than just sheer and pure harassment by the truckers' association of the United States because they didn't like the competition from their Mexican partners down south. That's all. They came up with a reason, an excuse.

From what I hear today, you'd prefer to deal with the administration, as opposed to Congress, because the administration is a singular, linear authority that seems to be a little more receptive to the dynamics of north-south flow and international flow. Congressmen and senators are much more attuned to purely local interests. It's on this that I'd like to focus for a moment. I feel a little embarrassed because I'm going to pick on Mr. Mackay's industry for a second.

I think you're probably aware, Mr. Mackay, of an article—I think it was in Newsweek—that pointed out what the American airline industry did immediately after September 11. Essentially, it painted a picture of an industry that was in serious difficulty before September 11, but then descended like a real disease on Congress and the administration immediately following September 11 in order to secure a government solution to their economic problems, and that solution came dressed up in grants and in loan guarantees.

• 1035

You took great pains to point out that you had a slowdown like this in the Persian Gulf War. I was here then. I remember some of the things, although my memory is not as good as it used to be. Is it a little too early to make some decisions that we're never going to recover?

The Chair: Mr. Mackay, I would ask you to be brief.

Mr. Clifford Mackay: First, I hope I haven't left the impression that we will never recover. We will recover. I don't think there's any doubt in the long term that air transportation, particularly for people who want to travel distances greater than 500 miles—that seems to be the cut point—is going to be the preferred mode of travel in the future. We carry 80% of the international traffic in Canada, and I don't see that changing. So times will change and that will come back.

What I was trying to convey is that we're in a very unique circumstance, and the closest we could find was the Gulf War. The problem is that the level of uncertainty going forward is greater than we think we ever saw during the Gulf War. We just don't know what's going to happen, and that's the big dilemma we're in.

So I can't tell you whether it's 6 months, 12 months, 24 months, or 3 months. I can tell you pretty certainly it's not 3 months as to when you're going to see us come back out of this thing, and that's creating serious liquidity problems for some carriers—not all carriers, but some carriers. That's simply a fact, and that's what I was trying to convey.

The Chair: Thank you very much, Mr. Volpe.

I want to thank all the witnesses for being here this morning. We do appreciate not only your presentations but the dialogue we've had. Each of you are very important to what happens to Canada's economy.

I do want to assure you, Mr. Bradley, that when you say trucks get no respect, they get a lot of respect in my riding, as they do in a lot of other ridings. I truly understand the importance of how we move our goods across the border—between trucks and between rail—and we do appreciate your presentations. I hope the air industry comes back a lot stronger and that we can get those direct flights back from Windsor to Ottawa too while you're working on this.

That being said, we are going to continue to work on this issue and make some recommendations, and we would appreciate your continued dialogue with this committee as we move forward.

I want to thank you all for being here this morning.

I'm going to ask committee members to stay in their seats as we change witnesses without suspending.

I do want to remind committee members, as our witnesses are changing places, that we have a number of sessions this morning and we should look at what's happening.

We have joining us now the Business Council on National Issues, which will be followed by the Canadian Federation of Agriculture, the Information Technology Association of Canada, the Canadian Film and Television Production Association, followed by the Detroit Regional Chamber of Commerce, who will provide an international perspective from the American point of view, which I think is a very important point of view, to our committee.

I will now address myself to our witnesses who have been able to take their place at the table. I thank them for their patience. From the Business Council on National Issues we're very pleased to welcome Mr. Thomas d'Aquino, the president and chief executive officer; Mr. David Stewart-Patterson, the senior vice-president, policy and communications; and Mr. Sam T. Boutziouvis, the vice-president of international trade and global economics.

Now I'll turn it over to Mr. d'Aquino for your opening comments.

• 1040

Mr. Thomas d'Aquino (President and Chief Executive Officer, Business Council on National Issues): Madam Chair, let me begin by thanking the committee for this opportunity to assess the economic effects of the terrorist attacks of September 11 and how Canada can move forward from here.

I'll leave it to individual company representatives who are appearing before you to offer detailed assessments of the challenges being faced by their specific enterprises. I would suggest, however, that Canadian enterprises have been affected on three distinct levels, each of which demands different business and public policy responses: first, there are the one-time shock effects of the terrorist attacks, economic losses that can be directly attributed to the terrorist attacks themselves and to their aftermath; second, there are temporary, cyclical effects of the economic downturn that was, as you know, already underway at the time of the attacks; and third, there are persistent structural issues of Canadian competitiveness, problems that could be glossed over in better times but are now being brought to a head.

Travel-related industries were the hardest hit by the shock effects, and you heard from some of them, Madam Chair, a few minutes ago. Governments moved quickly to offer airlines compensation for direct event-related losses and to provide temporary backup insurance for airports. The cyclical downturn, however, was well underway before September 11. It began with the high technology sector, and it had already triggered tens of thousands of layoffs and reductions in corporate expenditures as well as business travel. The shock of September 11 accelerated the downward cycle, hitting an increasingly wide number of companies and workers, but central bankers worldwide had already taken action to counter its effects. They have responded to the terrorist attacks by cutting rates further—the Bank of Canada cut them by an additional 1.25 percentage points.

The impact of lower interest rates is not immediate, but it is pervasive and it is powerful. Monetary policy, we would emphasize, remains the best way of easing the cyclical problems facing Canadian companies and consumers alike.

In recent weeks we've heard a few scattered calls for massive fiscal stimulus as well. At best, we believe this would be counterproductive; at worst, it would disastrous. First, consumers are benefiting already from the major tax cuts announced by Finance Minister Paul Martin last year. Second, American experience with tax rebates suggests that in the current environment most would be saved rather than spent. Third, the new security-related expenditures the government must make will, in themselves, have an overall stimulative effect.

Above all, we expect that these current essential spending measures will eat up most, if not all, of the current-year surplus. In the absence of offsetting cuts and less essential spending, these needs may well push the government into deficit in the next fiscal year. The government may not be able to avoid a deficit for a year or two no matter what it does. But, and we emphasize this very strongly Madam Chair, it must at all costs resist spending its way into deficit. We can think of no policy that would do more damage to consumer and business confidence than a return to the scale of deficits that drove taxes up year after year for more than two decades.

Fiscal policy, we admit, is not the best means of combatting the temporary effects of the economic cycle, but it will have a profound impact on Canada's ability to deal with the structural challenges facing Canadian companies in a wide range of industries. The business environment that governments create through their choices on taxation, on spending, and on regulation will determine how successful Canadian companies are in evolving and growing in the years ahead.

In a recent published book, Northern edge: how Canadians can triumph in the global economy, my colleague, David Stewart Patterson, and I argue—and I know we have shared this book with a number of you—that Canada's goal can and should be ambitious, to make Canada the home of choice for global enterprises and global citizens. We say it's the best place in the world in which to live, to work, to invest, and to grow. To succeed, however, we must be relentless in our efforts to improve the economic environment, to seek advantage through more competitive taxation, more transparent regulation, more effective public investment in research, education, and skills, and in infrastructure and other drivers of future growth.

As industry minister, Brian Tobin said to this committee on Tuesday that we must not let the short-term crisis lead us to neglect the essential building blocks of a long-term growth in prospects, in jobs, in incomes. The government has already made important progress, for example, through significant reduction of personal and corporate tax rates and increased investment in research.

• 1045

But much more can and must be done, and I would strongly encourage the government to proceed with a forward-looking strategic agenda that continues to be centred on innovation and skills. The priorities and the timing of this agenda, however, must be shaped to the times. This is not a time for massive new spending programs. It is a time to reflect on how we can spend existing resources more effectively. It is a time to look for ways to reshape Canada's tax structure to make our tax burden more competitive without reducing revenue, and it's also a time to focus on regulatory issues that can have a powerful impact on growth without the need for new spending.

In the longer term, Canada needs to do much more, and we must go much further in reducing taxes to give the country a compelling edge in attracting investment. But for now there is much more that can be done to make our tax structure more competitive without any loss of revenue. Likewise, over time, we will need to increase investment in research and to improve access to lifelong learning, but in the meantime there is much that can be done to make the existing support for individuals, for communities, and for regions more effective.

Madam Chair, given today's fiscal constraints, an effective innovation agenda also must address key regulatory issues. Governments could improve the efficiency of the Canadian economy by fully implementing, for example, and extending the agreement on internal trade; renewing efforts to reform employment insurance could have a powerful impact on labour mobility; and reviewing competition policy and restrictions on foreign ownership could provide a spur to increased business investment.

Innovation is not about preserving the status quo; it is about doing things better. The government should continue in its vigorous efforts to encourage innovation of the public and private sectors alike, but I would suggest that a credible blueprint for moving forward must, at the very least, demonstrate that the lead government departments are committed to making more effective use of the resources they already have.

I would like to conclude, Madam Chair, by discussing the most urgent structural concern Canada faces today, and that is our continued access to the United States market. The immediate effect of September 11 was to create long lineups at the border. The lineups have shrunk for the moment because governments have assigned more inspectors, and fewer people and goods are trying to cross the border. The critical need now is to ensure that the temporary impact of measures to ensure border security do not cause persistent structural damage to Canada's economy.

Many measures can be taken quickly to improve security and efficiency at the border. These are discussed in a paper that was released this morning by a coalition of business groups that includes the Business Council on National Issues. Such efforts, however useful, in our view, in and of themselves will be insufficient. The health of Canada's economy, and therefore the key to its sovereignty, lies in its ability to compete for investment in businesses that serve the continental and global markets. In particular, access to the American market is crucial. Given the evolution of worldwide events, Canada must make some fundamental decisions about how to manage its overall relationship with the United States, and in dealing with this issue, time is short.

The BCNI has therefore begun to assemble a committee of Canadian chief executive officers who will work closely with their peers in the American business community, and we will also work very closely with government and parliamentarians in Canada. Our goal is to ensure that governments at all levels and in both countries are fully aware of our shared interest in ensuring an open border and that misperceptions do not lead to ill-conceived actions that might inhibit future trade or investment flows.

In times of crisis and confusion, unity of purpose and clarity of message are essential. Canada's efforts must proceed vigorously and visibly, because even the perception that the border might become a more serious barrier will begin influencing business decisions now, decisions about which plants to close, decisions about where new plants will be built. Whatever else we do to improve the business environment in Canada will be undone if we ever allow the 49th parallel to be seen as a serious impediment to trade and investment over time.

To conclude, Madam Chair, Canadian companies are suffering on many fronts and for a variety of reasons. Some of the impacts of September 11 were one-time and have now passed. The most serious short-term problems are primarily cyclical in nature but also have exposed serious structural weaknesses that we collectively must address. Now more than ever, Canadians can work together both to ensure our collective security in the short-term and to lay the foundation for competitive advantage in the future.

• 1050

Thank you, Madam Chair, and now my colleagues and I would be happy to answer any questions you have.

The Chair: Thank you very much, Mr. d'Aquino.

We're going to begin with Mr. Penson, please.

Mr. Charlie Penson: Thank you very much, and thank you to the BCNI for being here and making a significant contribution to this discussion.

Mr. d'Aquino, I think the last major external shock we've had in North America was probably the OPEC cartel in 1973. I guess we really don't know what the effects are going to be because it may not have all been played out yet. But I hear you saying very clearly that we need to do what we can to secure access to the U.S. market; therefore, we have to work closely with the Americans regarding the security issues. Even more important, I think, is to focus on doing what we can here at home.

So my question has to do with an issue you brought up, the internal trade problem we have in this country, where it seems we have better international trade agreements than we have here in the country. That seems to be going nowhere. Would you suggest that the federal government use its constitutional power, failing some kind of process moving quickly with discussions with the provinces, to move unilaterally to resolve this issue?

Mr. Thomas d'Aquino: That's not only a very good question, but also a direction that could be very useful.

Let me just stress one thing here. The problem we are facing is not going to be fixed even with a rapid fall of the Taliban. We're faced with a serious problem here, the aftershocks of which, at worst, could extend a recession or very low levels of growth for two to three years. Therefore, using an example such as the oil shock is a very valid comparison.

Therefore we have to use every conceivable resource we can to fix what needs to be fixed at home. All of you have engaged over time in this committee and have identified many of the issues. You've raised one, the internal trade barriers. We've talked about structural tax reform. There are many regulatory policies that could be improved.

I very much hope that you will use all the influence you can in your committee on the government and build a consensus, because this is not a time for partisanship; it's a time for everyone to put their shoulders to the wheel to say, let's move forward as quickly as we possibly can in this period of difficulty, and let's not even begin to imagine that it's going to end in six months' time.

That really brings me back to a point we made in the paper and a constant theme of the BCNI. Even before September 11, we were losing people. We were losing industries and head offices. The Canadian dollar today has hit a record low. This will continue and matters will get worse unless we resolve to make policies in this country such that we will be the best country in the world in which to invest. That is the only way to deal with the shortfall we are facing. The internal trade agreement is one of a long list of issues where I would hope particularly the premiers would say, now is the time, under the leadership of the federal government, to do this. Where our Prime Minister and the premiers say no deal, I would invoke the constitutional power without reservation.

Mr. Charlie Penson: Thank you. I certainly agree. I think there's power there to do that. A lot of estimates are suggesting $6 billion to $8 billion a year is the cost of that problem.

Mr. d'Aquino, you talked about the difficulties we had and the need to improve the fundamentals here at home. As you said, we were already facing difficulties there, a long-term fall in foreign investment in Canada. Even Canadians seem to invest more outside the country than our direct foreign investment in the country.

You talked about the foreign ownership regulations. Where would you see that fitting into the investment equation? Are there any specific categories or businesses where you would suggest we change the rules on foreign investment?

Mr. Thomas d'Aquino: Let me answer that question very directly.

• 1055

Again, if as a country we are serious about being leaders, being better than the Americans at what they do, in terms of attracting talent, keeping our home talent, building globally competitive industries from a Canadian base, and indeed increasing our standard of living, not to mention increasing the value of the Canadian dollar, that requires a very dramatic agenda, a change of attitudes that we can be best.

On the foreign ownership issue, and along with that you've raised the issue of internal barriers of trade, the regulatory issue, the best and most effective economies in the world are open economies, economies that can genuinely compete in terms of their workers and their industries. As long as Canada retains a significant level of protection for Canadian industries against foreign investment, that will, one, drive investment away, and two, make our own industries less competitive.

So in the best of all possible worlds, I would say this. If I could write the laws, if I were Solomon, I would say within five years' time all protections against foreign ownership should be removed; all industries should be given notice that within five years they would have to become competitive. Would that be good for Air Canada? Of course it would. Would it be good for banking? Of course it would be. Would it be good for transportation? One can go down the list. That would lead Canada to an open economy, one where we would be genuinely competitive and have the best chance of building this kind of world. And you know what? If we don't do it, we'll pay a cost because of disinvestment.

Secondly, ultimately I don't believe that as a result of a few people in the caves and the terrorists that are threatening us the pace of globalization and the quest for open economies will cease. But one day, as we've already seen, international regulatory agencies such as the WTO will force us to dismantle those regulations. So why not be pre-emptive and say we will do it on our terms rather than have it imposed upon us?

The Chair: Thank you very much, Mr. Penson.

Mr. Bagnell, please.

Mr. Larry Bagnell: Thank you, and in the spirit of your suggestion to be non-partisan, I'm glad that Mr. Penson and you have brought up the issue of internal trade barriers. I think we all agree that those have to go down, and I was delighted that you mentioned earlier on the importance of the innovation agenda. I'm delighted you have this committee of your peers to work on the border issues, because we need everything we can to solve that.

Some of your comments seem to suggest minimizing or the short term of this problem, but certainly if you watch anything by any of the security agencies, you realize that in regard to these terrorists, we are dealing with just the tip of the iceberg in this event. They're in virtually every country of the world, in a big network. If you saw the Dow Jones and everything, all business is hurt dramatically, and that affects government revenues seriously.

Also, as the last presenter said, there are 11,000 jobs just in their one industry. That's a huge bind on social payouts from government. So there is a huge effect on government's ability to do things. I don't think we can minimize the impact of this.

The Chair: Mr. d'Aquino, do you have any response to that?

Mr. Thomas d'Aquino: No.

The Chair: Thank you very much, Mr. Bagnell.

[Translation]

Mr. Bergeron, you have the floor.

Mr. Stéphane Bergeron: Thank you, Madam Chair. Mr. d'Aquino, perhaps I misunderstood what you said, but I was somewhat taken aback by your suggestion that the powers devolved to the federal government by the Constitution be used to force the provinces to do certain things. I would like to say, first of all, that we must not overestimate the constitutional powers granted to the federal government. We must remember that it is the provinces that, together, created the federal government for the good of the federation, and not the reverse.

That being said, I would like to ask you two questions, the first one dealing with tax reductions. It seems that you suggested in your presentation that the federal government should not approve further tax cuts, under the pretext that consumers tend more to save than to consume, to purchase or to invest.

• 1100

I would like to know what you are relying upon to reach this conclusion, given that interest rates are so low these days that there is nearly no advantage to saving or to investing in savings plans. I would ask you to share your views on this.

I would also like to ask you a question I put to our guests from the chambers of commerce that we heard on Tuesday.

You know that economic prosperity comes with consumption. For there to be consumption, there must be salaries. When a company with three or four employees lets one staff member go, even though the situation is dramatic for the employee who loses his or her job, the economic impact is rather limited. There are much greater repercussions if a thousand small companies each let go one employee. You represent Canada's large companies and for several weeks now they have been making massive job cuts. Is your companies' motto to limit layoffs as much as possible so as to not speed up the economic slowdown?

I know full well that your companies are not philanthropist organizations, but since our common goal is economic growth and strength, I believe that companies must participate in the collective effort and not simply ask the government to do everything to put in place the positive measures needed to maintain sufficient economic activity.

[English]

The Chair: Mr. d'Aquino.

[Translation]

Mr. Thomas d'Aquino: Thank you, Madam Chair.

[English]

Let me very quickly, if I may, answer the three points.

First, on the issue of the constitutional power, today is not the day to have a debate about how Confederation was brought together. I enormously respect the powers of the provinces, and I've always argued—and indeed our organization has—that the division of powers should be respected, perhaps much more than it has been over the last 25 to 30 years. That having been said, you and I know that under the Constitution of Canada the trade and commerce power is a power of the federal government. The reason the people who brought Canada together in their wisdom decided that should be the case is that they were building a country in which, they knew, trade and commerce had to cross borders.

I always work on the assumption that the best interests of the country as a whole will be taken into account, and if one accepts the statements that have been made by many of our premiers that they too have the whole of the country as their primary interest, then they must take steps that will go beyond the concerns they have in their individual provinces and commit themselves to ensuring Canada will be a country in which there are no barriers to the free movement of trade, goods, services, and people. That is the definition of a real country, and that's the kind of country I think most Canadians want.

Constitutional power should be used only if necessary, but in my view it should not be necessary because the leadership on the part of all provinces and all premiers should ensure these impediments are removed.

On the second issue, tax cuts, no organization in the country has argued more forcefully for tax cuts than we have. Indeed, we incurred the wrath of the current government a little over a year ago when we called for massive cuts in taxation, and we were told our suggestions were totally unrealistic. Mr. Martin brought in a $100 billion tax cut last autumn. Our suggestions were not unrealistic, and those measures by Mr. Martin were strongly endorsed by the people of Canada.

Our concern is that tax cuts now, at a time when there is going to be a very significant ramping up of spending, will inevitably drive the country into deficit. And neither you nor anyone around this table wants to saddle Canadians with a larger albatross than the one they already have, which costs taxpayers over $42 billion a year in the payment of interest because individual predecessors made the mistake of not keeping government expenditures in line.

So we're saying tax cuts by all means, in the future. Mr. Martin's current program of tax cuts should be implemented. Spending must be looked at very carefully, but we've accepted, as we've said before the finance committee, that expenditures on infrastructure, security, and the military will see a very significant escalation that was not originally anticipated.

• 1105

Thirdly, on layoffs, no company chief executive that I know happily lays off people. People are what make companies profitable. Every decision to lay off people is the most painful decision that I know any of my colleagues have to make, and a number of them say, let's hang on to people as long as we possibly can, because if we lose them, trying to get them back will be difficult and costly. I'm very sensitive to the point you're making, but I can assure you so are my colleagues.

The Chair: Mr. Boutziouvis, do you want to add something?

Mr. Sam T. Boutziouvis (Vice-President, International Trade and Global Economics, Business Council on National Issues): Thank you, yes. Since the point has been raised twice regarding interprovincial barriers to trade, I just want to say the business community is generally quite pleased with the comments that are being made by the new government coming out of British Columbia with respect to internal barriers to trade and trying to do something about it. As I think everyone in this chamber knows, the previous government in British Columbia was blocking efforts to move forward on the energy chapter on internal barriers to trade and on the MUSH chapter—the municipalities, universities, schools, and hospitals. We're actually encouraged there might be a window of opportunity to move forward with progress on internal barriers to trade and improve the existing agreement within the next couple of years, given some of the comments being made by Premier Campbell and other members of the government.

Secondly, on tax cuts, Monsieur Bergeron, the U.S. government instituted a temporary one-time tax cut in July on personal income taxes. The results came out as to what most Americans did with that personal income tax cut, the rebate cheque they received. The vast majority of that rebate cheque went to savings, slightly less than 50%. The next highest category was personal debt reduction. Lastly, Americans spent some part of that particular tax rebate. So the proof is in the pudding. Even Americans, who are obviously suffering a little bit more than we are with the downturn, chose in that period of time prior to September 11 to save first, then reduce debt, then spend.

The Chair: Thank you.

Thank you very much, Mr. Bergeron.

We're going to move now to Mr. Volpe, please.

Mr. Joseph Volpe: Thank you very much, Madam Chair. Gentlemen, good morning. Thank you very much for your presentation.

I noted you addressed the issue the committee wanted to address very quickly and expeditiously by pointing out that you attach your opinions to those the larger business community incorporated in a paper this morning. There were at least four items there. I believe they were going to establish seven.

You've concentrated your presentation, Mr. d'Aquino, on the larger issue and the issues that you and your organization tend to bring forward to government, with the intent, I imagine, of ensuring that the government has ever present a focus on the directions you would like it to pursue. As a good corporate citizen, that's most laudable.

I was particularly intrigued by the desire of both you and my colleague Mr. Bergeron to address the issue of federal authorities and federal leadership, not because I enjoy a good debate, but because in their presentations those people who preceded you at the table, colleagues from industry, talked about the disconnect between the real needs of the larger, evolving, growing business interests and those that were against the regulations, which were rather local—parochial, I might add—and the infrastructure you alluded to, which is basically a political infrastructure.

As I indicated—and you were probably in the room when I said it—it seemed to me your colleagues who preceded you at this table preferred to address the issues with an administration that was vertical and linear in its decision-making as opposed to lateral and, one might say, confederal.

Mr. d'Aquino, you've spent a great deal of time talking about the incentives that government might put forward without saying they have to make a monetary contribution. The incentives, as I followed your discussion, were more on the regulatory side and for infrastructure building for businesses. Are you saying that the system that is currently in place, political-economic, is a barrier to growth and development?

• 1110

Mr. Thomas d'Aquino: My colleague David Stewart-Patterson no doubt has some thoughts on this as well. But just let me very quickly say that we have a country that does very well by any global standard. For those of you who follow the work of the World Economic Forum in Geneva, it was only about two weeks ago that it released its report on competitiveness, and Canada was rated the third most competitive economy in the world. That is no small achievement. We've been able to do that through a lot of reforms over the last ten years.

I remind every member in this room that ten years ago, if I had been sharing this morning with you, we would be looking at a country where a debate was going on as to whether we were going to hit the debt wall and whether we'd have to bring in the IMF. Deficits were out of control and debt was soaring. Confidence levels were at an all-time low.

Mr. Joseph Volpe: I remember that presentation.

Mr. Thomas d'Aquino: In ten years we've made huge progress. However, in that ten-year period we've seen the impact of globalization and the opening of worldwide trade. In that kind of world, while we've made huge steps, we are still at a certain disadvantage vis-à-vis the most dynamic economy in the world, the United States. Therefore, what we've been arguing for a long time now, but we touched upon it here, is that unless we more aggressively address not just the short-term cyclical issues but the structural issues, we will not remain a leader.

I foresee a country five years from now where we will still be relatively well off but where the number of head offices in Canada will have been reduced to a small number. By then we will count the loss of the brightest and the best in the millions, not just in the tens of thousands. Those are the costs we will pay.

The appeal we're making is let's use that tremendous coming together of energy, commitment, and drive as a result of the crisis of September 11 to make sure we can move on the structural front.

In our paper we said we are strong advocates of the innovation agenda and the innovation initiative, but at the same time we have to be sure we don't rush ahead and spend $1 billion or $2 billion of taxpayers' money at a time when there's a good likelihood the government will go into deficit. What we're saying is everything in its own good time, because we don't want to shoot ourselves in the foot or rob Peter to pay Paul, to use the analogy.

Therefore, we're saying let's look at all the things we can do that are relatively costless, of which there are many. Let's really go at them. If we do that, we will see coming out of this crisis a stronger and better Canada. In due course, I hope I can appear before you and say, Madam Chair, isn't it wonderful that now we can bring forward the agenda on additional tax cuts and an agenda where we can actually spend some money on innovation? Remember, the reason we couldn't spend money on innovation in the last ten years is because we didn't have any money.

Mr. Joseph Volpe: Mr. d'Aquino—

The Chair: Thank you. I'm going to have to move on. I apologize.

Mr. Strahl, please.

Mr. Chuck Strahl (Fraser Valley, PC/DR): Thank you, and thank all of you for coming today.

I am slowly working my way through the Northern Edge. I think it may be necessary to put a little supplementary chapter in there on the post-September 11 stuff. Of course, much of the economic stuff is still germane, and it's a good read.

I have just a couple of comments. The comment was made that the previous B.C. government blocked initiatives to the free passage of goods and services. I can assure you they blocked an awful lot more than that, and out in B.C. we're plenty glad we have a new government there.

I have a couple of things. I don't want to get into the interprovincial trade thing again, other than to say that one of the things I've always appreciated about Quebec, the Quebec government, and the Quebec people has been their leadership on international trade and free trade and the ability to articulate that and to describe for all of us why that is a good thing not just for Quebec but for all of Canada. They've provided real leadership on that. One of the puzzles for me is why they, along with the rest of the premiers, have not seized on dismantling the internal barriers to trade. They've shown such good leadership internationally. We need that same leadership domestically or else the $6 billion to $8 billion problem is going to continue.

• 1115

I hope this continues. I share your belief that it needs to be pushed ahead. But I don't think it's going to be the issue seizing the country for the next while. The issue is going to be our access through the American borders.

The question I have for you is, if you had a wish list, Mr. d'Aquino—you've already mentioned “if you were Prime Minister”. It's one of those essays. It sounds like a start to an essay after your summer holidays.

I'd be interested, what is the priority? We've heard from other industry leaders who say there's a bit too much of the “business as usual” attitude and not enough of being seized by this new reality. In other words, people are pecking away at it. They're saying there's a little problem here—the Ambassador Bridge is a problem. The Ambassador Bridge is a problem, but it's symptomatic of a massive need to be seized by this issue. The whole just-in-time industry said if we don't get it right, and soon... It went from being a $500 million to being a $30 billion industry, and we're working our way back down if we don't get our act together.

So if you were Prime Minister and were to give the government one set of priorities, would it be, for example, to create either a super ministry, or a super committee, or some sort of indication to both our American friends and to Canadians that this is important, that we're going to move aggressively on it?

My fear again is that one of two things will happen. Either we'll lose what could be an opportunity to increase our trade or we'll let the Americans dictate the terms—because they're going to move ahead, and if we don't come up with some proactive suggestions, my fear is we're going to fall into the backwater.

Mr. Thomas d'Aquino: Mr. Strahl, when you get to the chapter in the book called “Marching Tall Among Nations”, you'll see that there is a significant section there on how to deal with an American strategy. This is before September 11.

One of the recommendations we make very strongly is that the structure of government should reflect the importance of that relationship, and we recommend, for example, that the Prime Minister should chair a committee of ministers that directs itself solely to the Canada-U.S. issue.

The reason for that is very clear. You all know that we have very able ministers of agriculture, culture, trade, defence, and so on, all of whom, because of the enormity of the relationship, tend to do things on their own.

What has been lacking is a certain cohesion. The reason that cohesion has not been there has been in part, in my view, not because of any shortage of very bright ideas in the East Block or the Langevin Block; it's because it's part of the DNA of this country that if we do things that appear to be too focused on the United States, somehow Canadians will disapprove.

Canadians I think are now demonstrating in poll after poll that that's not where their thinking is. Canadians want greater security. Canadians want a secure access to the United States. Canadians supported free trade, and even among the three countries—Mexico, the United States, and Canada—the greatest degree of support for free trade is in Canada, interestingly enough. Structurally we have to ensure that the importance of that relationship is reflected in the machinery of government in a totally unambiguous way.

The second thing we have to do is fix a lot of the things that should have been fixed long before September 11. Part of it has to do with structural investment in bridges and tunnels. Part of it has to be a new creative approach on the border, and you've heard a great deal—we won't go into it now, but you've heard it from other witnesses, you heard it in the coalition statement this morning, and you'll hear more about it from us in the future—about our need to think very innovatively about that border.

Whether we like or don't like the word “perimeter”, there is already in Canada and in North America a commitment to joint cooperation that started with the war and has continued and now is reflected in NAFTA, where addressing these issues of common concern is very much part of what we have committed ourselves to.

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The third thing that I think we have to do is be prepared—Mr. Strahl, to take your point—to take the baton and lead. What I'm very concerned about is that unless we can clearly develop a strategy that is in Canada's best interest as to what we have to do on immigration, counter-terrorism, trade, investment, cross-border traffic, security, and our military commitments, unless we define what we're prepared to do and run with it, to a large extent we'll either have it imposed on us or we'll be left outside the tent. Therefore we should be saying not what are the Americans asking of us, but we should be coming up with policies that say this is how we want North America to run. And you know what? A lot of those policies would be well received by the Americans. But I think we're the ones who should initiate them.

Mr. Chuck Strahl: Okay, thank you.

The Chair: Thank you, Mr. Strahl.

Mr. d'Aquino, to follow up, whether we talk about a perimeter or not a perimeter, I actually liked the terminology I heard earlier this morning. I think it fits more what you're actually promoting, either through your book or through past policy statements or ideas and initiatives: a zone of confidence.

I think it's easier for Canadians to understand, when we talk about that, that we're talking about confidence in our security, confidence in our trade, and building to move people and goods. I hope we can send that message, because I think a zone of confidence sends much more of a positive message and people don't get all disturbed about what we mean by perimeter.

But I do also hope that you are bringing to our provincial colleagues the same message you brought to us, that you at the BCNI and the members you represent are bringing those same messages to the premiers. Maybe you could comment briefly on that.

Mr. Thomas d'Aquino: Madam Chair, first of all, when you speak of zones of confidence, I know your historic proximity to the great border allows you to speak with some authority on the subject.

All our messages are delivered not only to the Prime Minister, to the parliamentarians of this House, but very much to the premiers as well. A great amount of Canadian economic activity and Canadian regulation, not to mention extremely important areas such as health care, falls squarely under the domain of the premiers. That's why we've made an appeal and will continue to accelerate our efforts to get premiers working together and with their counterparts in the Government of Canada.

I have to say to you, though, that in the contacts we have had, certainly before September 11 but particularly after September 11, there's a huge appetite for people to work together. I think this is one of the great advantages the country has at this time, that people are concerned. Remember that on September 10 there were a lot of Canadians who didn't think governments were relevant any more and a significant number of Canadians who didn't trust government. All that has begun to change quite dramatically, and this is an opportunity for governments to demonstrate that not only do they have a role, but it can be a very constructive role.

One of the things you can do is to take all those areas—and although some of them, such as internal barriers to trade, may not be, as was suggested, terribly sexy, we mustn't allow ourselves to say, “Regulatory reform, removing barriers to trade, God, that's all such boring stuff; let's just talk about how we get bin Laden.” Now is the time to really focus on those issues, even if they may not be terribly attractive.

I think the role of parliamentarians, in pushing those agendas, is extremely important, because if you don't do it, an awful lot of other Canadians are not going to think it's important. After all, the issue of internal trade barriers has been debated in this country for 25 years and still we do not have a complete, open, internal market in this great country, and we should have had one a long time ago.

The Chair: Well, I want to assure you, Mr. d'Aquino, that this committee will actually be focusing on those very issues once we finish our hearings on what we believe is the immediate economic impact, because we believe it's important to move Canada's agenda forward, and we appreciate your comments.

We also appreciate you rearranging your schedule to be with us this morning. We know you're very busy, and we appreciate all of you being here.

We are actually going to suspend now for three minutes, 180 seconds, while we change witnesses. We have more witnesses already waiting, and we're running a bit behind.

Thank you very much.

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The Chair: If I could, I'll ask members to take their seats. We have our next group of witnesses here and we're now going to resume.

We're very pleased to welcome our next group of witnesses, and we have with us the Canadian Federation of Agriculture. We have Ms. Brigitte Rivard, the executive director. We also have at the table the Information Technology Association of Canada: Ms. Linda Oliver, executive director of Government Relations, and Mr. Pierre Boucher, vice-president, customer advocacy, Entrust. From the Canadian Film and Television Production Association we have Ms. Elizabeth McDonald, president and chief executive officer. Accompanying Ms. Rivard is also Ms. Jennifer Fellows, farm policy analyst from the Canadian Federation of Agriculture.

What I would propose is that we have opening statements, and I'm going to begin in reverse order, if I could, with Ms. McDonald.

If I could, I'll remind everyone that we're hoping for about five minutes for opening statements, and then we can go to questions.

Thank you.

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Ms. Elizabeth McDonald (President and Chief Executive Officer, Canadian Film and Television Production Association): Thank you very much for this opportunity to appear before the standing committee.

My name is Elizabeth McDonald, and I'm the president and chief executive officer of the Canadian Film and Television Production Association. To gain some time, I'll use “CFTPA” through the rest of it.

The CFTPA is a trade association that represents the interests of almost 400 companies engaged in the production and distribution of English-language television programs, feature films, and interactive media products in all regions of Canada. The association also has an important responsibility in terms of our relationships with the creative guilds and unions through tracking rights and ensuring the dispersal of residuals.

This is the first time we've appeared before this committee, and we appreciate the opportunity to speak to you about our industry in the wake of the events of September 11. We appreciate too that the recent tragic events have had a far-reaching impact on major issues of international security and economic stability, all of which may not be fully known as yet. We recognize that the Canadian government must now reassess its own fiscal plan to ensure that the fundamental priorities of national and international security are met while continuing to encourage the growth of a healthy Canadian economy and society.

Who are independent producers? In their creation of programs, producers are entrepreneurs who bring a unique combination of business and creative skills. They take a concept or program idea through a myriad of development and production stages right to completion. They assemble the financing. They put together the team, including hiring actors, writers, directors, makeup personnel, set designers, and technical crews. All of this is done in accordance with negotiated guild and union contracts we negotiate on behalf of our members.

They also negotiate broadcast distribution rights, exercise financial and creative control over all aspects of the program or film from beginning to end, and bear full responsibility for ensuring that the production is realized. They assume all the risk. In return, they hold copyright for that production. This is key to their ability to exploit the marketplace both domestically and internationally.

I went through that description so you would appreciate the scope of the activity of the independent producer and the production company. Most of you will know a few names, such as Alliance-Atlantis and Nelvana, both of whom are proud members of the CFTPA, but the majority of CFTPA members are small and medium-sized companies.

I brought with me today copies of Profile 2001, our fifth annual industry profile, which is subtitled “Canadian Independent Production: Growth Opportunities in a Period of Consolidation”. It was produced by the CFTPA

[Translation]

and the Association des producteurs de films et de télévision du Québec

[English]

in conjunction with the Department of Canadian Heritage and in association with PricewaterhouseCoopers. We will be bringing out the next version of our Profile in February of 2002. Hopefully then we'll have more concrete numbers on the impact of recent events.

I brought copies of a study we commissioned in June with PricewaterhouseCoopers on the assessment of the economic impact of the Canadian Television Fund. We made that available August 3, 2001. It clearly demonstrates that this fund has been one of the most successful public-private partnerships in program funding. For every dollar of CTF money invested, two dollars of other money has been invested in Canadian production. To date, financial indicators and the performance of our industry show growth of nearly 130% over the last seven years, from under $2 billion to more than $4.4 billion in total production activity in 1999-2000. It is one of the fastest growing sectors of the Canadian economy, growing at an average annual rate of 9.1% from 1995 to 1999.

Employment has increased at an average rate of 13.4% over the past five years, making the sector a significant contributor to job creation. In 1999-2000 the industry supported almost 46,000 direct and 73,000 indirect jobs across every region of the country. We believe there is every indication that as long as the measures are kept in place to encourage production in Canada, our ability to create even more jobs will continue.

Independent production represents the largest portion of the $4.4 billion in total activity, accounting for more than $2 billion. Foreign location shooting—productions shot in Canada principally for U.S. studios and U.S. independent producers—represented in 1999-2000 $1.5 billion in economic activity. We expect the data we will bring out in February of 2002 will show that this segment of the industry has grown to substantially over $2 billion.

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In-house production by broadcasters represents less than $800,000 and has remained to date relatively constant.

Toronto, Vancouver, and Montreal are the dominant production centres, but there is significant production activity in all parts of Canada. Atlantic Canada and the prairies have also developed strong provincial and regional infrastructures. Canadian content has broad appeal to audiences bound by culture and geography.

The strong production and social value programs we create also appeal to the international marketplace. In 1998-99, foreign pre-sales and distribution advances for Canadian independent productions totalled more than half a million dollars.

This sector is making an increasingly strong contribution to the new information-based high-technology economy. The production sector is increasingly high-tech, with major technological developments occurring within traditional production and post-production environments as well as in the creation of new media. The jobs this sector creates are highly skilled, well-paying, creative positions. They provide new opportunities primarily for young people in a knowledge-based economy—and as the mother of a 21-year-old son, when I say these are jobs you want your children to have, I mean it.

The Chair: Ms. McDonald, I am going to have to ask you to wrap up. Sorry.

Ms. Elizabeth McDonald: Sorry.

Government support for the film and television production industry remains critical for us, and while the level of public financing of certified productions has not increased significantly, the volume of what we have been able to do with it has.

The partnership we have had with the government has become even more important since September 11. A softening in the market in both television and newspapers will have an impact on how Canadian broadcasters will buy their programming. American studios and the media convergence occurring in the industry both north and south of the border have increased debt loads for these new companies, leaving fewer dollars for program development purchases and triggering the start of layoffs.

We have tremendous concern over the potential decrease of foreign location shooting—or service production, as it's commonly known. Renewed patriotism in the U.S. has increased the desire of the Hollywood community to keep for itself productions now filmed in Canada. Until now this activity has been extremely beneficial to Canada, to Canadian jobs, and infrastructure. Indeed it has actually accounted for 44% of the total production activity.

Recent changes in the tax system, announced on September 18, have created additional uncertainty that, coupled with the Americans' concern about travelling, could be very problematic. We would urge the government to maintain its commitment to encouraging a healthy financing environment for location shooting and to review its support for that sector to ensure that we are able to keep the level of activity.

I would like to point out that it's an extremely competitive sector. Australia has just introduced a new tax incentive directly aimed at getting this type of work, and in terms of remaining competitive, in the past year the sale-and-lease-back program introduced in the United Kingdom has delivered £4 billion in economic activity.

The Chair: Thank you, Ms. McDonald. I am going to have to stop you there because we have to move on to the other presentations. We asked to try to keep them to five minutes and we're almost double that now. We'll get back to you hopefully during the question period.

I'm going to turn it over now to Ms. Oliver from the Information Technology Association of Canada.

Ms. Linda Oliver (Executive Director, Government Relations, Information Technology Association of Canada): Thank you, Madam Chair, for inviting us here today. My name is Linda Oliver. I represent the Information Technology Association of Canada. With me today is one of our members, Pierre Boucher, the vice-president of Entrust.

ITAC is a significant contributor to the economy in Canada. We represent 70% of the 512,000 jobs in ITC. We represent $116.4 billion in revenue, $4.4 billion in R and D expenditure, and $27.4 billion in exports annually in the Canadian economy. Our presentation will be oral today; however, I have left with your clerk, Mr. Radford, a copy of our paper on innovation, which was launched earlier this week. It summarizes how our industry is recommending government deal with issues relating to IT post-September 11.

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However, for a more direct answer to your issue on the impact on the IT sector, I would ask Mr. Pierre Boucher to make the presentation.

[Translation]

Mr. Pierre Boucher (Vice-President, Customer Advocacy, Entrust, Information Technology Association of Canada): Thank you very much, Madam Chair. I am Pierre Boucher and I work for the Entrust Company.

Entrust develops security products that provide for secure Internet services for government and businesses.

[English]

Following the events of September 11, we observed an almost complete stop in business transactions, particularly in government and financial sectors in North America. Typically, large software sales are done late in the quarter, which equated this time to a slippage in revenues in North America for a lot of companies in software.

In a market already difficult prior to the events, we do expect to see a lot of medium and small software companies go out of business. Those that do not have good cash reserves are simply not equipped to wait through the storms.

We have not observed the same impact in Europe, which still allowed us, at Entrust, to deliver a very strong quarter.

On a positive side, what we have observed is a renewed interest in enhanced security, as illustrated by the Ottawa Citizen article of October 29 describing the strong interest generated in Washington by the speech of our CEO to members of Congress and U.S. senators.

We have observed a similar interest from the financial industry, which all of a sudden realized their physical integrity was at risk and their capability to continue to operate in a situation of disaster could be enhanced through the use of tools like virtual private networks and secure messaging. These will allow their staff to work remotely and continue to operate even if their facilities are not accessible.

We see a very strong focus developing around IT security. The very present threat of anthrax, as an example, is making it so much more attractive to do business electronically—including through such applications as secure messaging, government-to-citizen service delivery electronically, etc.

This is very much the case in the U.S., where there are discussions today to create a $1 billion fund as an incentive package to build up government-to-citizen capability. We have been asked to participate in the planning and to deliver a proposed approach to the U.S. government on how to implement such a system. It is essentially based on the work we're already doing in Canada for the secure channel program within the government online initiative.

We're seeing such initiatives and interest happening in many other areas of the world as nations start to build IT infrastructures that can resist cyber-terrorism. To date, Canada has been leading the world in establishing a secure environment under which delivery of services to business and the population can be made. We hope Canada will in fact deliver on its commitment to have electronic services completed by 2004.

However, the indications we are now getting lead us to believe the focus is moving away from this initiative. Whereas we understand the interest in counter-terrorism activities directly related to military and intelligence, we also believe the secure channel program, under the umbrella of government online, plays a key role in enhancing Canada's security posture by delivering a secure environment in which to conduct business.

As illustrated by the U.S.'s and other governments' sudden interest in the subject of infrastructure security, we believe reducing spending on the government online initiative will have a negative impact on the overall security posture of our country. We see benefits to the government online system.

First, it provides a robust and secure environment that is resistant to cyber-terrorism. It provides a citizen an alternative vehicle to receive services, one not subject to bio-terrorism threats. It will, once fully implemented, save a significant number of dollars in operating expenses, as it will improve the efficiency of the government's operations. On its own, it is a significant incentive program for the IT industry as it leads the way for other levels of government in Canada, be they provincial, regional, or municipal, and also the business sector to develop and create employment in building and upgrading these infrastructures.

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We already see other governments in Canada taking advantage of the work that is being done at the federal level. A significant business opportunity for the IT industry will emerge if Canada can demonstrate the success of the program.

I'd like to briefly touch on another point, export controls. Export controls are a vehicle by which government limits the export of certain materials that could have use if they were to fall into the wrong hands. Over the past four to five years the export control regime for cryptography in Canada has improved significantly. Although there are pressures in the U.S. to go backwards in terms of controlling the flow of encryption products, we have not seen any evidence that this will happen. In fact, the U.S. authorities have in that regard reassured us they would not go back to where they were before.

We are not seeing such pressures in Canada, but I think it is important to reiterate that concern to you. Increasing the controls on export would have an immediate adverse impact on our industry. We have worked with the Canadian and U.S. authorities in developing a very balanced approach to ensure that our products do not fall into the wrong hands. Those measures have proven very efficient to date, and therefore we see no need to change the regime.

The Chair: Mr. Boucher, if I could, I'll ask you to wrap up, please.

Mr. Pierre Boucher: In summary, we have seen an immediate impact since September 11 with an immediate downturn in technology spending. This event will inevitably bring companies to bankruptcy, particularly if they do not have the cash reserves to resist. This impact was very much a North American problem.

On the positive side, we've seen and continue to see a focused attention towards enhanced IT security to protect government and companies against cyber-terrorism.

My last point is that we see the Canadian government online and secure channel program as key initiatives to help the industry through this period while delivering to Canada and its citizens a secure environment to deliver and receive services.

Thank you, Madame.

The Chair: Thank you very much.

We're now going to turn to the Canadian Federation of Agriculture. Ms. Rivard, please.

Ms. Brigitte Rivard (Executive Director, Canadian Federation of Agriculture): Thank you, Madam Chair. Thank you for providing the Canadian Federation of Agriculture with the opportunity to address the committee on the effects of September 11 on the Canadian agriculture industry.

My name is Brigitte Rivard; I'm the executive director with the CFA. I'm joined today by one of my colleagues, Jennifer Fellows, who's a policy analyst at the CFA.

Let me start first by saying that we at CFA watched along with the rest of the world in horror as the events of September 11 unfolded. The terrorist attacks on the United States on September 11 have had a number of real and potential effects on Canada's agriculture industry. But our presence here and the concerns we wish to raise are in no way an attempt to minimize the devastation and tragedy that have been felt first-hand by the people of New York City and Washington. Our intent here is to highlight some of the tangible effects, as well as draw attention to potential long-term effects on the agriculture industry.

The immediate effects were generally limited to the impact of the dramatic slowdown at border crossings. The medium- to long-term effects are less obvious, although farmers are concerned in a number of areas. These include changes in import and export regulations and other trade concerns, increased demands on producers in terms of food safety and security, and the effects of a declining economic climate on the agriculture sector.

Another effect is the shift of emphasis towards security issues. While everyone is more aware of the importance of security, issues that were pressing before September 11 have not gone away. The agrifood sector has been facing a number of challenges, including the effects of this year's drought and the cumulative impact of a number of years of extremely low prices on certain commodities. There is a sense that these issues, which were garnering attention in the public and by government, are now firmly on the back burner, although the need for them to be addressed has not diminished.

In the immediate aftermath of the September 11 attacks, the most dramatic impact on Canadian agriculture was at the border with the United States. In 2000 Canada exported $21.7 billion worth of agrifood products and generated a trade surplus of $5.2 billion. Figures for 1996 show that the equivalent of 70% of the value of Canadian agrifood production was exported, and 51% of that was to the United States. Clearly, the American market is of enormous importance to Canada's agriculture sector, and reliable access to that market is vital to the health of our industry.

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In the days following September 11, security at border crossings was heightened considerably. As most of you are aware, the time required to clear American customs jumped. While this affected all Canadian exporters, Canadian agriculture exporters faced some unique challenges. As well as the worries about the perishable nature of many agrifood products, there were animal welfare concerns as well, as regards shipments of live animals. The border representatives of the Canadian Food Inspection Agency and their American counterparts are to be commended for the actions they took to help reduce the waiting time for live-animal shipments.

Although the slowdown at the border is a concern, of perhaps greater concern in the long run are the possible increased restrictions for imported food products into the United States. The Imported Food Safety Act, for example, would require the development of tests for imported foodstuffs, would authorize limiting the ports of entry into the U.S. through which food may be imported, and would also allow fees to be assessed to defray the cost of inspection procedures. While this bill was proposed prior to September 11, the current situation could lend added impetus to its adoption.

The terrorist attacks in the United States have led to a sense of heightened security for most Canadians, and there has been speculation on the possibility of a tax on the food system. Farmers have already been asked by a number of restaurant chains to tighten security on the farm and to give an accounting of it. While producers are doing their best to comply, the fact remains that Canadian farms are not armed fortresses.

Preventative action is best, and the value of the on-farm food safety program currently being developed by industry in partnership with the federal government is evident now more than ever. However, the need for strong sanctions against those who tamper with the safety of food is clear. Canada also needs to ensure that the resources continue to be in place to address tracking and tracing programs and to be able to deal with a widespread food contamination problem should it arise.

Canadian agrifood products are shipped around the world. Because of the current situation, shipping insurance has become much more expensive and even impossible to obtain in some cases. Shipments passing through or destined for the area around Afghanistan are particularly affected.

The North American economy has been shaken by the events of September 11. It is generally accepted that there will be an economic slowdown, and this could have an enormous impact on farmers in terms of price and demand for agricultural products as well as for agricultural inputs. There will likely be a reduced demand for income-sensitive products such as meat. Indeed, there was a very obvious immediate decline in the price of lamb in Ontario, for instance, in reaction to September 11, although the price has since recovered. The declining Canadian dollar will likely mean an increase in the price of inputs imported from the United States; a great deal of agricultural machinery, for example, is imported from the U.S.

In summary, for the agriculture sector September 11 had a number of immediate impacts, mostly related to border crossings with the U.S. The medium- and long-term effects are more difficult to assess at this point. There are a number of areas where farmers have concerns, including increased risk to food safety, increased costs related to trade, and the effects of an economic downturn. The biggest concern and unknown is looming in the December budget.

In Whitehorse, federal and provincial agricultural ministers signed onto an action plan to lead agriculture out of crisis management and to provide long-term stable funding to safety nets as well as for environmental and food safety initiatives. It is a plan the CFA endorses.

We realize that the events of September 11 were horrific and were in many ways a much-needed wake-up call on security issues, but we cannot lose sight of the ongoing issues and concerns still facing the Canadian industry.

Thank you.

The Chair: Thank you very much, Ms. Rivard.

We're now going to move to questions for about 20 minutes.

Mr. Penson, please.

Mr. Charlie Penson: Yes, thank you.

I just want to say that I'm very happy that the panel is here this morning to address our concerns and try to advise government on how to react to the post-September 11 situation, especially in regard to the Canada-U.S. border.

I think the Canadian Federation of Agriculture has a huge challenge, considering the food safety issue. Food is produced over such a wide area in the country. You've addressed the issue where the restaurant association has already asked you to try to ensure safety. It's something I think most farmers try to do to begin with, but as to guaranteeing the safe supply of a product, how is that going to work? Is the Canadian Food Inspection Agency going to be doing that for you? If so, the cost recovery must be a huge issue for you.

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I notice that over one-third of the agriculture and agrifood production in Canada is exported to the United States now. Given the sheer volume of that, aren't you facing a tremendous challenge if this moves along any further?

The Chair: Ms. Rivard.

Ms. Brigitte Rivard: Yes, I would absolutely say that's a definite huge challenge, and it's a very good question. Right now the CFA, in conjunction with a number of our members and the federal government, is working on what we call COFFS, which is the Canadian on-farm food safety system. It's a system that allows you to be able to trace back to the producer, so it gives the assurance or guarantee to folks at the retail and processing levels to be able to trace back the food to see what sort of...

It's based on HACCP, the hazard analysis critical control point system, which is an internationally accepted system. It shows that you have these measures in place and enabled. It's not completely widespread right now. It's still very much growing, and we need to continue to have those resources in place, to make sure we can have it more widespread across industry.

But you're right that it's a huge challenge. The challenge is also very real, in terms of compensation for farmers to be able to put these systems in place, because they're not inexpensive. That's why we're here today to say we need to continue that support, especially in terms of food security and security issues after September 11, so we can continue with these programs we've already started.

Mr. Charlie Penson: In terms of the bulk commodities such as grains, it would be very difficult to identify where they came from, wouldn't it? They're brought into a gathering system and handled in bulk. Do you have some recommendations on how to handle that, or is that such a difficult problem it would be hard to do?

Ms. Brigitte Rivard: I must be honest, I personally do not have recommendations on that. I could certainly get back to the people who have been dealing very closely with it. I'd be more than happy to provide your office with more details on that program.

Mr. Charlie Penson: Okay, that's fine.

The Chair: Thank you.

[Translation]

Mr. Bergeron, you have the floor.

Mr. Stéphane Bergeron: Thank you, Madam Chair.

I have a quick question for each of the panel members. I want to let you know that you can answer in French if you so wish. My first question is to the Canadian Federation of Agriculture.

One might have thought, after the events of September 11 and our participation in the coalition, that the United States would adopt a more conciliatory stance towards Canada regarding several trade issues. But we have found out over the last couple of days that this is not true in the case of steel and lumber. Do you see any change in the attitudes of Americans regarding the WTO challenge of the Canadian supply management system in the area of dairy products, poultry and eggs or do they still show the same unbending attitude vis-à-vis Canada?

My second question is for the Information Technology Association of Canada. Tuesday morning, Mr. Penson, when the Minister of Industry was here, tried to show a contradiction between trying to implement measures guaranteeing our access to the American market and the minister's plan for speedy implementation of broadband access throughout Canada. Do you see any contradiction between these two objectives or do you think we should put the initiative for broadband access throughout Canada on the back burner?

My third question is for the Canadian Film and Television Production Association. Do you believe the events of September 11 have had an impact on American productions that were to be filmed in Montreal or Toronto, for instance? Do you think there will be a medium or long term impact?

[English]

The Chair: Ms. McDonald.

Ms. Elizabeth McDonald: I'm going to answer in English because it will be less painful for you.

One of our problems right now is to try to quantify that, but I would definitely have to say that all indicators show there will be an impact on the level of production in Montreal, Vancouver, and Toronto. The first part is the reluctance of Americans to travel, although the studios still see Canada as part of their sort of greater... They have a comfort in coming to Canada, but they don't want to go to the airport at all. So that's an intangible that's hard to deal with.

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The second part is the runaway production issue. It has been played up in Hollywood so much it is now being encouraged more, because of added patriotism. As a matter of fact, I had to remind some people who were interviewing me from the Los Angeles Times after the first show with the stars that in fact the headliner was Céline Dion, who was a Canadian, supported by David Foster, who was a Canadian, and Mike Myers, who was a Canadian. We had to go through that. So that is encouraging those people who believe they are losing jobs to Canada.

The reality is that at the moment the dollar is lower. We're probably one of the only industries that benefits when that happens. The other side of it is you have a reluctance to travel, and then a change in the tax system that was appropriate, without a long-term plan to make sure the service tax credit will deliver what it is supposed to.

We need a longer-term plan; otherwise come April people in Vancouver, Montreal, and Toronto will not be disturbed by people shooting movies, particularly. It is the feature film industry—The Score was shot in Montreal, and others—that is threatened. It makes a big difference to the actors and actress, the directors, and the technical crews, and it also keeps them in Canada.

So I apologize that we can't quantify it. To be quite frank, November and December are the months the studios make their decisions. There perhaps could not be a worse time for this to happen, and we have two things at play. One of them is a change in a system that has to be assessed, without a long-term plan to ensure we can deliver. I'm not suggesting we shouldn't make changes in problem areas in the tax system, but we have to figure out how we can deliver the same kind of support to keep those jobs.

One thing we were able to do, as a result, was get a successful agreement with the English-language actors, ACTRA, last Friday, to signal directly to the American studios that Canada is open for business. But it is very difficult, and it will mean a significant loss of economic activity if we can't find an answer.

The Chair: Ms. Oliver.

Ms. Linda Oliver: Perhaps I'll try to answer the question on broadband, and then Pierre can address any cross-border issue you have.

With respect to the broadband discussion, ITAC is in favour of the government supporting the extension of broadband to rural and remote areas of Canada. It is part of the government commitment to have all Canadians connected by 2004.

On the funding of it, which seems to be such a crucial issue, the government could actually save money by extending it in certain areas on a project-by-project basis, particularly in the north. There you could use medical services online for diagnostic purposes and actually cut costs. I don't have those figures with me because I'm not the expert on that file. But there is evidence to show that the government could actually save money on the health delivery system, particularly through diagnostics, over the broadband communications system. So we're very much in favour of that.

When it comes to cash, I think you have to look at it on a project basis, year by year. Everything does not have to be done in the first year. It will take a long time to do it, but the government has committed to it. We're just saying continue your commitment, and maybe you can be a little creative about how you deliver your government services.

It goes to the point my colleague made about government online. It's one of those services government could provide online that would actually cut costs. So we're suggesting you continue that spending. We're very much in favour of it.

I hope that answers your question.

Pierre, do you have anything?

[Translation]

The Chair: Mr. Boucher, would you like to add anything?

Mr. Pierre Boucher: I am sorry, but I am not aware of the comments made regarding the transborder issue.

However, I can tell you that major initiatives are underway, both in Canada and the United States, to ensure secure communications, especially via the Internet. The tools that are being put into place... the renewed interest of the U.S. Government in promoting the development and implementation of these tools is due to the fact that they want to protect their networks against external threats. I think they have now realized that there is a problem, whether or not they have broadband communications beyond the borders, and that they need to put into place measures to protect themselves.

• 1205

The Internet is an international network. I do not think anyone could envision retreating from that.

[English]

The Chair: Ms. Rivard.

Ms. Brigitte Rivard: On the question about the attitude of the U.S. on supply management, it's interesting. The CFA and its members attended the North American EU conference on agriculture, which is an annual conference at the producer level, the week before last in Austria. Then we went on to Geneva to meet with WTO officials. Our members took the opportunity to present supply management again, especially in light of food security.

There was a great deal of interest from the Europeans, but not from the Americans. The same was also true at the negotiators' level in Geneva. So even in light of September 11, it does not seem that anything has changed.

The Chair: Thank you.

Thank you very much, Mr. Bergeron.

Ms. Torsney, please.

Ms. Paddy Torsney: Thank you. First to Ms. McDonald, I certainly hope that Americans who need to shoot offshore will think of Canada first, and think of it as a safe haven.

The Chair: Film.

Ms. Paddy Torsney: Film. What did I say?

The Chair: Shoot. Film.

Ms. Paddy Torsney: Film—oh sorry. Hopefully they will think of Canada as a safe haven, as we did manage to facilitate all the planes arriving in Canada. I think it does present some opportunity for your industry as well.

But my main question is to you, Ms. Rivard. My first thought was food safety. I'm a city girl, and I look at farms and wonder what that crop is. But having said that, it's really important to me to know that the things on my shelf have not been tampered with, all the way through the system. It seems to me that in some ways there would be a lot of possibility for people to tamper with our food supply.

Are you getting the support you need from the Department of Agriculture? Are the systems in place, are the conversations needed taking place, and are the processes that need to be changed being changed in a timely fashion? Should Canadians be concerned?

The Chair: Ms. Rivard.

Ms. Brigitte Rivard: I don't think Canadians should be concerned. I'm certainly not here to sound any alarm bell. It's true, though, that agriculture is vulnerable. After September 11, there was a lot of speculation that crop dusters could be used, or to get to a number of people quickly, it would be through the food chain.

CFA is at the producer level, so we have the processes in place to ensure that the food is being produced safely. At the processing level, they work very closely with the Canadian Food Inspection Agency. Canada has one of the most stringent regulatory systems in place in the world, and it has, and deserves the reputation of having, the safest food supply in the world because of that.

We are in constant communication with CFIA to make sure that continues to be in place, especially after September 11. When we saw what happened in Europe with BSE earlier, those conversations stepped up incredibly to make sure that... It is never 100% guaranteed that it can't happen, but those contingency plans are in place.

So we feel we're getting the support, but it needs to continue. In light of the fact that the agenda is shifting to security issues, to maintain that food security and keep it on the front burner are key issues.

Ms. Paddy Torsney: Absolutely.

The Chair: Thank you. Thank you, Ms. Torsney.

Mr. Proctor.

Mr. Dick Proctor (Palliser, NDP): Thank you very much, Madam Chair. I have three brief questions I'd like to put to the Canadian Federation of Agriculture. I thank them for being here, along with the other presenters.

Some said that post-September 11, the Americans would take billions of dollars out of agricultural support programs and put them into defence, security, and things like that. Yet post-September 11, we've actually seen the House of Representatives in the U.S. pass $171 billion in additional supports for U.S. farmers.

My first question is, how does the Canadian Federation of Agriculture believe the Bush administration will deal with this House of Representatives initiative?

Second, next week is the WTO in Qatar, and agriculture is going to be a major item. Does the CFA believe there will be any meaningful consensus to reduce export subsidies and domestic support, from the European Union and the United States?

• 1210

Third, on the budget you alluded to in December, despite the sharp decline being forecast for next year in realized net farm income, I would be terribly surprised if there were any meaningful additional dollars for agriculture, but more importantly, I'm wondering whether you think there will be any significant help for Canadian farmers.

Thank you.

The Chair: Ms. Rivard.

Ms. Brigitte Rivard: Yes, thank you.

I'll address your last two questions first, if I might, because I'm not sure if I have an opinion yet on the first.

In terms of whether or not we see any sort of meaningful reductions coming out of Qatar, as I mentioned earlier, we were recently in Austria and Geneva, and our meetings in Geneva were a little disconcerting when we were meeting with a number of the European countries and with the U.S. It would seem very much that they are starting to align themselves again, as they have done in the past, and that there is no look at reductions in terms of domestic subsidies.

So there is concern. We've brought those concerns to Minister Vanclief and Minister Pettigrew. Bob Friesen, our president, will be in Qatar and will, we hope, be there to drive home the message in terms of where we need to go with Canadian agriculture. But there is a great deal of concern on our part, and we're not overly hopeful there will be anything meaningful coming out of it in terms of reductions on the part of the U.S. and the EU.

For the budget, we would have been more hopeful had the budget been in February, absolutely. We would like to see the commitments we were hoping were going to be made to help lead agriculture out of crisis management and to build on the action plan that came out of Whitehorse; to be able to deal long term and have the $1.1 billion in place for safety nets long term; to build on environmental and food safety issues; and to look at transition programs to bring the farming community from where it is right now, in terms of the challenges, to being stable in the long term. We're still carrying that message to members of Parliament and to the government and Mr. Martin's office, but I don't have a crystal ball, so we'll all wait and see what happens in December.

Mr. Dick Proctor: Okay, thanks.

The Chair: I'd like to ask a question. I'm not sure if it would be for Mr. Boucher or Ms. Oliver.

With regard to the broadband task force and the recommendations, would you be able to comment on whether there are some things that need to be done immediately and some things that could be put on hold, if we were to have to reprioritize how those dollars come about or are spent? Are there aspects of it that need to be done immediately? Are there certain aspects that can be delayed?

Ms. Linda Oliver: Thank you, Madam Chair. I'm not an expert on it, and I wasn't actually staffing that particular project, but to my recollection, it's very time consuming to roll out to broadband. It's an intensive program, so the approach would be location by location. That's one of the suggestions coming up now. It takes a long time to do the physical work, but there are a lot of fibre optics available, so the supply is not a problem.

Our suggestion is to look at the north first, because it's an obvious winner in terms of government and spending priorities and achieving some objectives for delivery of medical services.

I'm not quite sure how the broadband task force had proposed to roll it out, but I know it can be rolled out regionally. The facilities are available, so it's a question of the physical work being done. It's a question of the government deciding that's the priority they want to work on. But it doesn't all have to be done in the same year.

People have dimensioned it between $1 billion and $2 billion or $3 billion, so our recommendation would be to take it in bite-sized pieces to start, to accomplish something each year, and live up to the commitment the government has made. You can't live up to it if you don't start doing it now. That would be the recommendation. But I can get you some further information, if you'd like.

The Chair: That would be appreciated.

Ms. Linda Oliver: Okay.

The Chair: There was a suggestion earlier that Mr. Boucher provide information. If that could come to the clerk so it could be distributed to the committee, that would be great.

I want to thank you all for being here. In particular, I want to thank Ms. McDonald and Ms. Oliver for the detailed presentations they provided that went to Finance—and I know the CFA also has one that's gone to Finance. They're very thorough, and it's going to take us a bit of time to get through them, so I apologize for the short time we've had today. We may have more questions for you that we will submit to you in writing and ask for a response on.

• 1215

We look forward to meeting with you again in the future as we continue working with industry and continue working through the issue of regulations and interprovincial trade after we finish the hearings on this economic impact. Thank you for being here.

We're going to ask our witnesses to trade places, without moving the rest of our members. I'm not going to suspend.

We have our next group of witnesses. If they would join us at the witness table, we are going to begin.

We are distributing materials, and I want to thank Mr. Bergeron for his agreement to their distribution. The speaking notes are in English and French, but due to the short notice, they were unable to translate all of the documents. But we do appreciate the fact that they have come a long distance, on very short notice, to be with us, and I appreciate the cooperation of committee members.

Everyone should have a package of information in front of them now. I'm going to turn it over.

We have with us the director of public policy, Mr. Daniel Cherrin, from the Detroit Regional Chamber of Commerce, and the director of the Detroit & Canada Tunnel Corporation, Mr. Gordon Jarvis. I'll ask you to present your opening comments, and then we'll move to questions.

Mr. Daniel J. Cherrin (Director, Public Policy, Detroit Regional Chamber of Commerce): Thank you, Madam Chair and members of the committee. I want to thank you for the opportunity to talk with you today about the economic impact of recent events on the Canadian and U.S. economies. It's truly an honour and a privilege to appear before you today.

The Detroit Regional Chamber is the second largest chamber in the United States, with over 15,000 members. We also represent a singular region with multiple choices that reaches into southern Ontario, including the city of Windsor and Essex County.

In the aftermath of the tragic events of September 11, the Detroit Regional Chamber's northern border for economic security and trade task force was formed to advise policy makers on the crisis now unfolding at critical U.S.-Canadian points of entry. It's important to emphasize these crises were many years in the making. For over a decade, our border has been underresourced in terms of staff, technology, and infrastructure.

The importance of our border to our nation's economic health cannot be overstated. From Washington to Maine, Americans are buying billions of dollars worth of goods and services that owe their very existence to trade between the U.S. and Canada. Indeed, the U.S. trade relationship with Canada is the largest in the world, with more than $1.3 billion of goods and services crossing through the U.S. every day. To put that figure in perspective, it's nearly 50% more than U.S. transactions with Japan, our second largest trading partner. The automotive industry alone represents more than $300 million of this daily trade and more than 160,000 jobs in Michigan, and 1.8 million jobs nationwide are tied to the export of manufactured goods to Canada alone.

On a more local level, Canada's number one trading partner in the United States is Michigan. Forty-three percent of all U.S.-Canada trade passes through the Michigan-Ontario corridor. We also have the busiest border crossings for both commercial and passenger vehicles. But the problems at our border extend well beyond the border communities, reaching into the heartland of our two nations. Thirty-eight U.S. states, in addition to Puerto Rico, have Canada as their primary trading partner, and half of U.S. exports to Canada are produced in 14 states.

There's no question that recent terrorist assaults have permanently altered the circumstances under which goods and persons move across the U.S.-Canada border. It also proves that security concerns can have a significant negative impact on trade. Continued delays at the border are causing ripple effects industry-wide. For example, a delivery of parts delayed by as little as 20 minutes can cause assembly line shutdowns, pulling trucks off the highways, and incurring increased transportation costs to reroute trucks and/or ship cargo via rail, barge, or air. The result has been lost production and millions of dollars in losses in businesses across our two nations.

As you can see, we're all affected by the slowdown at the borders. Vital service providers are affected as well. In the Detroit area alone, hospitals report delays and unpredictability at the border have prompted several of the Canadian employees to resign in frustration. Approximately 10,000 people cross the Michigan-Ontario border to work, 1,600 of those as Detroit-area nurses.

• 1220

The tourism and entertainment industries are reeling as well. Thousands of Canadians who might normally come to places like Detroit or Buffalo to shop or attend a professional sporting event are staying at home in droves rather than putting up with the frustration and inconvenience of congestion and long delays at our borders.

Likewise for our Canadian neighbours, casino, restaurant, store, and service operators in Windsor, Toronto, Niagara Falls, and other regions who draw 80% of their customers from the United States report a drastic drop in revenues. The infrastructure at our borders is simply not designed to deal with this problem. The border facilities were not built to handle the sheer volume of traffic in their plazas. Actual delays average 45 minutes, and average traffic volume at the border is down 35%.

There are steps we can and should take to ensure security at the border without inhibiting the flow of commerce and tourism between our nations. Our goal is to implement a strategy for our borders to operate in a smarter and more efficient manner, creating a seamless flow of commerce and passenger traffic across our mutual border. This must be achieved by placing additional inspectors and officers at the border, expanding the technology currently used, and improving existing infrastructure in and around the border region. Security, however, must be paramount in any plan to resolve the problems plaguing our border.

Even with the help from Washington, the picture at our border is not bright. Although the various border agencies will soon receive the funding to hire the much-needed staff, it will take U.S. Immigration 9 to 12 months to hire and train agents and deploy them at the border. In the meantime, Michigan's National Guard and local law enforcement agencies are picking up the slack and bearing the economic costs associated with this staffing shortage.

The bottom line is that both our countries need to work collectively to enhance border security and efficiency by exploiting more intelligent methods to process border examinations and by rethinking the traditional models of border management. We both have much at stake in ensuring that our common border remains secure, while allowing for trade to flow freely and run smoothly. We need to make sure that both our countries have sufficient resources to make this happen and that we use those resources wisely.

Finally, we need to continue to find innovative approaches to make our borders smarter. In keeping with the spirit of our two countries, we need to create partnerships with the public and private sectors, with border communities, and between our governments. After all, we are partners, neighbours, friends, and family.

The U.S. and Canadian tradition of cooperation and coordination has been longstanding and is critical to the security of the northern border. We must increase our security and improve our systems, but in doing so we must not forget what has made both our nations great: our openness to new ideas and to new people and a commitment to individual freedom, shared values, innovation, and the free market. If in response to the events of September 11 we engage in excess and shut out or slow down what has made both our countries great, then we will have given the terrorists a far greater victory than they could have hoped to achieve.

This is not the problem of just one city, state, or province; it is a problem of our two nations. Our mutual national security depends on our economic security, and our economic security depends on how our borders function.

Madam Chair, thank you and the Canadian government for this opportunity to appear before you today. I look forward to your questions.

The Chair: Thank you very much.

Mr. Jarvis, did you have any opening comments?

Mr. Gordon Jarvis (Director, Detroit & Canada Tunnel Corporation; Detroit Regional Chamber of Commerce): Madam Chair and committee members, thank you for this opportunity.

On September 12 I took over as president of the Windsor-Detroit Tunnel. Up to that time, I, like a lot of Canadians, saw our border crossings as a minor inconvenience on holiday weekends. Today, like a lot more Canadians, I see these crossings as critical economic links. On September 12 I found a border crossing that was not working.

I can sit here and tell you how September 11 impacted on the Windsor-Detroit Tunnel. Our traffic is down over 30% during the week and our traffic is down over 50% on weekends. People who have to travel are travelling; those who don't aren't.

But the millions of dollars we're losing as a company is not the message I would like to leave with you. I have two messages: one, we need to work together to protect the critical economic links, and we need to work together to ensure that if we lose one of these links, those that remain can meet the needs of our economy.

Since September 11 I've been struggling with the issue of safety and security in and for our tunnel. I am told on a daily basis that our customers do not feel safe and that they want to know what I am going to do to protect them and ensure they are not in our tunnel if the unspeakable happens.

I went looking for the answers. We hired security firms to help us with the answers. We hired security firms to improve security. We asked for and received assistance from local law enforcement. The end result was that we made things better, but we cannot provide what our customers are asking us for because we do not have what it takes to do that job. It became obvious to me that we cannot address this issue without federal, provincial, state, and municipal cooperation and assistance.

What has really disturbed me in our search for solutions are statements such as, the security and safety of a facility like our tunnel or a bridge are the responsibility of the crossing authority. We also hear, “That's not our responsibility”, or, “It's not my job.” While we recognize we have a huge responsibility, these facilities are far too important to this country for any one of us to ignore. We need to work together to protect these critical assets.

• 1225

I am told that prior to September 11 our border crossings worked—not well, but they worked. After September 11, for a period our border crossings hardly worked at all, this at a time we really needed them to function exceptionally well. Now we're more than a month and a half past September 11, and our borders are working again—not well, but they are working.

The Detroit-Windsor Tunnel is a two-lane facility capable of accommodating over 5,000 vehicles per hour. Because of local infrastructure and resource constraints, we have never even come close to 2,000 vehicles per hour. The Ambassador Bridge is a four-lane facility capable of far more than we are, and they are severely hampered by infrastructure and resource limitations. They in fact are Canada's largest economic link. This story, I'm told, is common at all of our busy border crossings.

I ask you to imagine what would happen if we were to lose one of these important links. Canadians will need the rest of these border crossings to work exceptionally well. I'm here to tell you that we can't. Not only is what we need to be exceptional not in place, but much of it is not even being talked about. Losing one of these facilities as a result of a terrorist act would be a terrible crime. Having that act cripple our economy when the resources to recover are in plain sight but not available would be an unnecessary catastrophe.

What we need for our border crossings is a combination of infrastructure, resources, people, technology, and change. All these cannot be found in one place, and as with security, it will take federal, provincial, state, and municipal cooperation to allow crossing authorities such as that of Windsor-Detroit Tunnel to ensure that they are capable of meeting this country's needs. There is much we can do to improve now and more we can do in the near future, but we will need to work together to ensure that if we lose one of these critical assets, the remaining can keep our economy moving.

Thank you.

The Chair: Thank you very much, Mr. Jarvis.

We're now going to turn to questions. Mr. Rajotte, please.

Mr. James Rajotte (Edmonton Southwest, Canadian Alliance): Thank you, Madam Chair. I'd like to thank our two guests for appearing today. I very much appreciate hearing your perspective on the circumstances since the terrible attacks.

Both of you can certainly answer this, but perhaps it's more for Mr. Cherrin. You talked about some of the suggestions you had, particularly in terms of placing additional inspectors and officers at the border. Then you mentioned that President Bush has signed into law the anti-terrorism legislation, which includes tripling the number of agents there. Then you talked about the expansion of the technology currently used and improvements to the existing infrastructure.

Taking the Detroit-Windsor area as an example, have you estimated the amount of money it would take to improve the infrastructure around that border area to bring it up to speed, particularly with regard to the increased security concerns and the need to keep traffic flowing?

Mr. Daniel Cherrin: I think as a tunnel operator, Mr. Jarvis would be better equipped to answer that question.

I can tell you, though, that with regard to adequately staffing that border, there's another bill that passed yesterday in the House of Representatives. It was a treasury postal authorization bill, an appropriations bill, which provides around $285 million to fund added customs agents in addition to technology at the northern border. But the issue is, where will those resources be allocated? What is the standard? We are the busiest crossing on the U.S.-Canadian border, but the U.S. government doesn't have a valid standard for appropriating those resources. I can't put a financial cost on it, but the resources will be there now. It's a matter of appropriating moneys for the proper area.

Mr. James Rajotte: Mr. Jarvis, would you like to answer the question on the amount of resources?

Mr. Gordon Jarvis: Well, at this time we are struggling to try to determine what some of these costs are. What I can say is, the kinds of costs we're looking at to bring our facilities up to full capacity are a lot less than any expenditures we would be looking at to put in, for instance, a third crossing. A lot of it is the fact that we're sitting on postage-stamp-sized properties, yet at this time we have six lanes in the Detroit area going back and forth between Canada and the States without our having the ability to really use those facilities to their full extent. Over the near term we are working diligently to find out what all those costs are. I'd just like to assure you that there are, we believe, short-term and near-term solutions that are far less expensive than some of the solutions that have been looked at in the past to solve some of these border issues.

• 1230

The Chair: Mr. Rajotte.

Mr. James Rajotte: From the testimony of guests who have appeared before this committee, there are a number of common themes developing, particularly in terms of increased human resources at the border and improving the technology. But there have also been other suggestions from the Canadian exporters and manufacturers about implementing pre-clearance programs for low-risk goods and travellers now. I'm assuming you would certainly favour that. Maybe as a tunnel operator, you could describe in detail how that would work in a practical way.

Mr. Gordon Jarvis: I'll deal with the pre-clearance item. While the tunnel isn't a large commercial provider for facilitating traffic, certainly the bridge is. There the belief is that a lot of the clearance required at the border could be facilitated on properties away from the actual crossing. The traffic would then be facilitated through special lanes or roadways to the bridge, and this would allow us to fully utilize the lanes that are crossing between Canada and the U.S.

A number of other items have been talked about recently by the BTOA, one being that we as operators would require commercial conveyers to have all their documents in order so as to be ready once they got to the border instead of holding up traffic. That could be put in place fairly quickly, and a number of the crossings are doing it already.

The Chair: The BTOA is the Bridge and Tunnel Operators Association.

Mr. James Rajotte: I am a western Canadian representative, so I rely on my central Canadian colleagues here to update me. We just have big fields out there.

The last question I want to ask is a fairly big one. A big debate now will centre on the amount of integration we have between Canada and the U.S., and here in Canada this tends to get tied up in the question of sovereignty. Many of us argue that in fact it would enhance our sovereignty to have more communal integration. In fact, there's an alliance of about 50 business groups that is pushing for a communal perimeter. I would just ask both of you to comment on whether you favour that and, if so, why.

Mr. Gordon Jarvis: I can tell you that for myself and the board of directors I represent we are clearly in favour of that. One of the reasons is that if this moves us to a page where we can provide better security for the facilities and our customers, we're all for it.

The Chair: Perhaps Mr. Cherrin can add to that.

Mr. Daniel Cherrin: Our chamber does not have a specific policy on the issue of establishing a perimeter or a border zone at border regions. We do, however, have a policy of supporting policies on both sides of the border that help secure our border crossings as well as ensure the smooth flow of commerce across the border. At this point it's important for us to be open about any ideas to make our border more secure and more efficient, and we should welcome all ideas to the table.

With regard to sovereignty issues, when you talk about sharing information, as neighbours we should be able to share that information. Our respective technologies should be integrated so U.S. Customs and Canada Customs and U.S. Immigration and Immigration Canada are on the same page when people cross their borders. It's important to have this communication, this integration, and to keep all these issues out on the table.

• 1235

Issues such as reversal of inspections are also being talked about, and this brings up a lot of other issues, whether those of legality, sovereignty, union, or political issues. Again, people are proposing a solution, one we should continue to develop, as with all these other issues.

Our governments do share information. We do talk now, especially on immigration issues, but that needs to be expanded, especially in the realm of technology.

Mr. James Rajotte: Thank you.

The Chair: Mr. Jarvis, do you have something else to add?

Mr. Gordon Jarvis: On the issue of reversal of customs and immigration, while it is a popular concept for the crossing authorities, from our standpoint it is something that is easy for everybody to visualize. If it becomes the pressure in the pipe to make things change so that we do find the right solution to make these borders work properly, then we're all for it.

What's frustrating for me...and you people may be aware that on September 11, at one of the crossings close to us, Blue Water Bridge, the U.S. authorities felt it was important to start doing outbound inspections. This was having an even larger effect on the ability to move traffic over the bridge. We found a way to bring the U.S. authorities across and to cooperate to facilitate traffic on that day.

So it's hard for me to believe that our two great countries can't find a way to make something like this work, potentially in the short-term, to help facilitate and provide the safety and security our citizens are looking for.

The Chair: Thank you.

Mr. Gordon Jarvis: Thank you.

The Chair: Mr. Bagnell, please.

Mr. Larry Bagnell: Thank you. I only have one question, but before I ask it I'd really like to thank you for coming from Detroit. It's fantastic.

When we were getting the panel together I said having the American input would be the most instrumental, because you control the border we ultimately have to get our goods and services across. We really need your help, and it's great you're here...and also because you express so eloquently the benefits you receive from our goods and our interdependence. In our democratic system, your politicians are more likely to listen to you than to us; so we really appreciate what your help can do on this.

Because your system works differently than ours and we're constantly being puzzled by it, maybe you could give us some advice on how we can interact with your political and business system to help. This is a huge issue for us now in Canada. Is there anything we can do working with you, but working in that system, to help solve this border problem? You have a very complex political system, and it would be very helpful for us to get some advice on how we can best work with it.

Mr. Daniel Cherrin: First, I want to thank you. It's indeed my honour to appear before you today.

In terms of working with our system, I should first say that the Canadian government has been instrumental in educating many people in Washington about the importance of bilateral trade between our two countries. For many weeks now various Canadian ministers have been going to Washington. They have been in Detroit. We are meeting with a few tomorrow. It's important to keep this dialogue open.

I would encourage you as members of Parliament to seek out your counterparts and establish a relationship with a member of Congress. Members of Congress, like members of Parliament, are very approachable. They represent the people of their districts much as you do. It's important to find and extend yourselves to these counterparts and educate them on your system of government and your communities.

Although we are two countries, in Detroit at least we don't visualize an international border. There might be a river separating Detroit from Windsor, but it's certainly a region; it's important for that to be known to those members.

In terms of other ways to connect, our government is very fragmented. U.S. Customs does not talk with U.S. Immigration, and even within their own departments there is tremendous disconnect. Many of our laws are very antiquated. Where business changes in real time, government is still using the laws and regulations it made 50 years ago.

• 1240

So it's important that we exchange with each other. Perhaps we should have an exchange between each of our respective governments, between members of Parliament and members of Congress. Members of Congress should come to Ottawa, as some will on Monday, and members of Parliament should be going to Washington as well.

So that's my strategy.

The Chair: Thank you.

Thank you very much, Mr. Cherrin.

[Translation]

Mr. Bergeron, it is your turn.

Mr. Stéphane Bergeron: Thank you, Madam Chair.

I find it absolutely fascinating that in the debate that followed the tragic events of September 11, my fellow Canadian citizens have rediscovered the virtues of sovereignty. This makes me wonder why they try so hard to prevent others from achieving it, but that is an entirely different issue.

I wonder what you make of the rumors we have been hearing in the last little while that the American authorities are considering putting into place a check-in check-out system at the border. The Canadian Trucking Alliance mentioned this this morning and I understand that the effect of this would be to greatly slow down the traffic between the two countries. Since you are living under very special circumstances, Windsor being so close to Detroit, how would you view the introduction of such a mechanism in Detroit and Windsor, for example?

[English]

The Chair: Mr. Cherrin.

Mr. Daniel Cherrin: I can speak for my recent experience in Washington. We were in Washington a few weeks ago meeting with members of Congress, the Canadian embassy, and the White House.

People in Washington don't know what it's like to live in a border community. They don't realize the important role our border plays in our nation's security, both physically and economically. It's important to educate people in Ottawa and Washington and elsewhere on the important role each border has and how important it is to ensure the free flow of people and goods across these borders in a barrier-free way.

But it's also important to remember that we are two nations; we each need to maintain our own security, but we need to work together as well. Security is an issue they talk about in Washington. They don't look at our border as the key to our nation's economy. They see it as a security issue. And it's just a matter of educating those people about the importance of that border.

In terms of immigration issues, I can also tell you that the INS is currently re-looking at changing, evaluating its policies and structure and updating, if you will, its system.

So I hope I've answered the question.

[Translation]

Mr. Stéphane Bergeron: You have very well explained, in a general way, the importance for your area of a smooth flow of trade between our two countries. What would be the impact in your region of the introduction of a check-in check-out system between Detroit and Windsor?

[English]

The Chair: Mr. Jarvis.

Mr. Gordon Jarvis: Yes. If you're referring to the process that has in fact been in place and has been working up until September 11, where companies like DaimlerChrysler actually seal their loads—having dealt with the border prior to getting there—then it is a very simple check-in/check-out process for them at the border. Is this what you're talking about?

The Chair: No. I think Mr. Bergeron is referring to a discussion that took place a few years ago on section 110, which has reared its head again in Washington and which would require entry and exit visas and for everyone to stop and be checked.

• 1245

When section 110 was being discussed it was suggested that there would be tremendous long delays to do this. We experienced these in Windsor and Detroit, for example, on September 12 and 13. The discussion is taking place in the forms of other legislation and from different members of Congress. He's looking for your opinion on this.

Mr. Gordon Jarvis: Clearly, this is one of the reasons why the borders have slowed down. We're not experiencing serious delays right now only because our traffic volumes are so much lower than they were before.

Clearly, Canadian Customs are looking for one or two pieces of ID when you move through to enter our country. Customs and Immigration on the U.S. side have actually found that they've been able to increase their processing capability because now everybody is ready with the documents Canadian Customs and Immigration are looking for.

To a certain extent we're starting to deal with this concept at the border now, but once traffic comes back—and we all hope it will be soon—if we don't have the additional resources at the border, both infrastructure and personnel-wise, then our borders are going to slow right down as a result of this requirement.

The Chair: Mr. Cherrin, could you add to that, please?

Mr. Daniel Cherrin: I can. If section 110 had not been repealed in the United States, you would have seen backups at the border for over 100 miles on the Canadian side. It's because section 110 was repealed that our border does run more efficiently, and that's the message we're sending to Washington.

Immediately after the September 11 attacks the press contacted us about section 110 because our office played such an important role in its repeal. They were blaming this for allowing the terrorists to come through our border, but it simply wasn't the case. It makes the border more secure as well as more efficient.

Before September 11, President Bush was talking with President Fox from Mexico about making the Mexican-U.S. border more free for people crossing it and reforming immigration laws in general. Enhancing the flow of people across the border I don't see happening any time soon, but section 110 will maintain being repealed. I don't see that as an issue in the coming months of debate as they reform the immigration system.

The Chair: Thank you, Mr. Bergeron.

Mr. Volpe, please.

Mr. Joseph Volpe: Thank you, Madam Chair.

Mr. Cherrin and Mr. Jarvis, thank you very much for coming all that distance. I especially appreciate the fact that you have been giving us a perception and perspective on the border crossing that others have not.

I must confess a certain puzzlement, because many of us have been trying to establish relationships with our American counterparts, congressmen and senators, and everybody appears to have a handle on the problem, but it's not translating itself into the kind of action we'd like to see.

I think you were here earlier on in the morning when some other witnesses came before us and gave us an indication of the difficulties to our economies border crossings were presenting. It's heartening to hear you say that of course you want to see from the American side a smooth flow, just as we do. But if everybody recognizes the problems and has the will to resolve them—I have the same frustration as Mr. Jarvis—why do we still have to have an education process? What's holding things up? What can we do?

I know there's a group coming here on Monday, and some of us would like to go back with them to Windsor-Detroit on Monday. Is it because we have to work together? What is holding things up?

The Chair: Mr. Cherrin.

Mr. Daniel Cherrin: Again, members of Congress are so focused on representing their constituents, whether it's in rural Kansas or central Manhattan, that they are not focusing on issues at the border that impact our daily lives. As a result, you need that education process. You need to educate them on the importance the border has, not only to Michigan's economy, but in their own backyard.

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You also have a disconnect between Congress and the federal agencies where they're not communicating with each other. As well, each agency is not communicating with each other. It's like a territory. Everybody wants to maintain their territory. They don't want to be seen as being weak or understaffed or underresourced. As a result, information is not shared, and it's this lack of communication that is causing the problem. Once all the dots are connected, then we could begin acting on the solutions.

I just met this morning with the U.S. embassy, which also shared its frustrations that Customs and Immigration, for example, in the United States don't even talk to each other. It's because they don't talk that we have these problems. It takes the investigating powers of Congress to make sure they talk and that their agencies are investigated as to how to resolve these issues. But it takes people like Mr. Jarvis, like me, like our 15,000 members, to make members of Congress aware of the problem.

Since September 11 we've been on top of this issue. Many members of Congress didn't even know the border was open. They thought the border was still closed a week after September 11. It's sad but it takes a phone call, it takes a visit to the border, to make these people aware of the problem so they can act on it.

The Chair: Mr. Jarvis.

Mr. Gordon Jarvis: I would like to add to what Dan has said. If you're interested in a novice lobbyist's opinion, I've made a few trips to Washington over the last month. What I've noticed—I'll reinforce what Dan has said—is just a lack of knowledge of border issues. My board was upset when a number of congressmen said, “Tunnel what? Tunnel who?” They're not even aware there is a tunnel between our two countries.

The other thing is a real focus on security issues. What I've noticed is if we're down there and we're talking to congressmen and their support staff, if we're talking about security issues, we have their ear. If we start using words like “facilitation”, “speed over the border”, they don't want to hear that at this time. They want to hear security issues.

The Chair: Mr. Cherrin.

Mr. Daniel Cherrin: It's an issue of perception. When people in America hear the word “border”, their first vision is of the Mexican-United States border, of people walking across the border. Even members of Congress and members of various regions don't realize there is a tunnel or a bridge across the border. As a result, they don't realize the real impact. They feel that what's good for the border with Mexico is also applicable to the border with Canada. It's apples and oranges.

Mr. Joseph Volpe: Mr. Cherrin, I thank you very much for that.

This morning I participated in a radio show. One of the participants, a member of Parliament, pointed out to me that 34 of the 50 American states had Ontario as its largest trading partner. With all due respect to my colleague from Quebec, that's not an insignificant fact to keep in mind in terms of where people's interests are. If we're their most important trading partner, it would seem logical that the representatives of 34, or 62%, of the American states would know what's good for their constituents. This is a frustration that I guess we're both sharing.

Mr. Jarvis, you said in your presentation that you're on postage stamp property. Some of your difficulties from the Canadian side won't be resolved until we expand that territory, obviously, even though you're only at 40% capacity.

The Chair: Mr. Jarvis.

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Mr. Gordon Jarvis: That is correct. There are significant infrastructure issues associated with the crossings. For the most part—while I'm new to the game—in speaking to my counterparts, they're all facing similar problems, whether you are at Niagara Falls, Fort Erie, or down in the Detroit-Windsor area.

While there are things, I believe, we can do in the short term to offset some of those infrastructure requirements, if we aren't looking at those infrastructure issues with the communities we're in... For instance, some communities would prefer not to have trucks downtown or would prefer to have lower volumes of traffic. I might be meeting with a group tomorrow that's upset about the fact that our tunnel is backing up onto the streets and affecting their business. That's why I'm saying it's going to take a concerted effort of all levels of government to make these borders work better until we have longer-term solutions.

Mr. Joseph Volpe: I wonder if we can get you to come back here before our committee at another time, because today we're more focused on the aftermath of September 11. Perhaps we could get a broader representation of what would be required to make that border work more effectively.

But in the immediate term, we've had various people give us an indication of what they thought might be one of the seven—I guess there were seven; was it seven, Madam Chair?—ideas, four this morning by a coalition of businesses, about what ought to happen and what ought not to happen in order to free up these log-jams at the border crossings. Are you familiar with those?

The Chair: Mr. Volpe, Mr. Jarvis is a member of the Bridge and Tunnel Operators Association, which also released a seven-point plan on Monday with what they believe should happen at the border. Some of those things parallel what was discussed today but are not identical. I don't believe he was at the breakfast this morning. So I don't know if he's had a chance to see what the coalition has suggested as well.

Mr. Joseph Volpe: Okay. It's unfair, but I guess—

The Chair: Maybe you can elaborate on the seven-point plan you released on Monday.

Mr. Gordon Jarvis: Okay. Basically, most of the points with regard to the seven-point plan... One was an interest in reversing the Customs and Immigration—a need to have pre-processing done prior to the borders. As I mentioned before, it's something that a couple of border crossings are doing already. There is a need to ensure we have adequate staff in the short term to address the added levels of security, to ensure in the long term that these numbers are either kept or we're able to maintain those levels in the future.

Mr. Joseph Volpe: Can I just interrupt you for a second? You said a few moments ago, and now you refer to it again, that you can't get anybody's attention, whether in Canada or the United States—but primarily in the United States—unless you use the word “security” first.

I haven't been to the Windsor-Detroit area at the crossing points, but I was recently at the Fort Erie-Buffalo area. It seems to me, just like Mr. Cherrin said about Detroit-Windsor, that it's the same attitude at Fort Erie-Buffalo. I mean, the border is an inconvenience if people are going back and forth, mostly from the Canadian side, but there's back and forth movement. I'm talking about people and not necessarily truck traffic.

So it would seem to me that the security issue would be much more significant inasmuch as, again, it appears to me that customs officials and Immigration are looking for individuals crossing the border rather than what commerce is crossing.

First of all, is that an accurate reflection of what's going on? And, second, how would you distinguish the one group from the other just in terms of the traffic flow so as not to impede the truck traffic?

Mr. Gordon Jarvis: Are you asking what is the difference between what is happening at the borders now with regard to the security and the security of facilities and the structures?

Mr. Joseph Volpe: Yes, I'm asking that too, I guess.

Mr. Gordon Jarvis: Well, basically, as I understand it, Customs of course is focused on goods and Immigration is supposed to be focused on individuals. If you look at the checks currently happening at the borders, particularly on the U.S. side, vehicles are being stopped and they're being searched. But the searches are not going to provide you with the kind of security our customers are concerned about, which boils down to: if you pay $3.50 Canadian, you can get a bomb into the tunnel. If you're sitting in that tunnel for an hour waiting to get through, our people believe they may be sitting in the tunnel with a bomb. Therefore, nothing is being done, as far as they're concerned, with regard to protecting them from that eventuality, as everybody sees these crossings as critical links and therefore potential targets for terrorism.

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The reversal of Customs and Immigration would not necessarily protect the facilities. For instance, most of the checks they're doing at the border aren't of the detail you might expect if they were looking for drugs or if they're sticking something down the gas tank to make sure something else isn't in there. If you were doing those kinds of checks, the border would never flow. But a combination of intelligence and security... I would rather have them determining whether an individual should be going into Canada before they go through our tunnel than after they've been through the tunnel, and vice versa.

The Chair: Okay.

Thank you very much, Mr. Volpe.

I just want to pick up on the plan that was released earlier this week, Mr. Jarvis. One of the things, I think, that's clear is the need to separate out the low-risk and the high-risk travellers and to try to reactivate and enhance the pre-approval procedures for the travellers, as well as pre-approval for the commercial traffic.

I'm just wondering, in your opinion, how long would it take to implement something at the border points if we were to do some type of enhancement for pre-approval for travellers—for example, with biometrics.

Mr. Gordon Jarvis: I would guess if the technologies and the software required to do all of this are available, you're looking at a six-month implementation—just getting the hardware and the technologies in place and working. Then you're looking at a period of time to actually get the customers using it. So you're probably looking at a one-year implementation.

The Chair: Do you think, in light of September 11, this type of implementation could not be sped up? That is exactly the time period that Amsterdam took to implement their procedure and it's already up and running. So I would have to think that maybe since September 11, and citing the urgency and Amsterdam doing it over an entire year, not knowing that September 11 was coming...

Mr. Gordon Jarvis: What I can assure you is that tunnel operators would find a way to help get the technologies in place in a lot less time than a year. And I believe that's possible.

The Chair: Just on that, when we talk about reversal of inspections, there already is a precedent set for that, if I understand correctly. Is it between Britain and France?

Mr. Gordon Jarvis: Apparently the Channel Tunnel is using the process.

The Chair: Mr. Cherrin, you said earlier that although the funding has made it through the legislative process in the United States for added agents and for technology, there's no valid standard in appropriating where they will end up. That is a concern, I guess, in particular for myself, coming from the Windsor area, knowing how busy the border crossing is. But I also believe there's a perception out there that because the border is working now, we don't have a problem any more.

I know the heightened state of alert we had in the last few days in Windsor prior to the announcement being made yesterday that the National Guard will indeed be there for another 30 days. I'm a bit concerned about the time delays in trying to impress upon both governments the urgency of dealing with the fact that, yes, there have been dollars set aside in the United States for more personnel; however, that will take some time for training. In the meantime, we're dealing with this continued sense of emergency and urgency. At the same time, we know they're there for another 30 days, but then what happens November 30?

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Do you have any ideas or suggestions on how we can alleviate these immediate types of issues that seem to overshadow what we really should be focusing on, which is the longer term?

Mr. Daniel Cherrin: I think first and foremost we should bring back the technology that was suspended shortly after September 11. The CANPASS and NEXUS programs, I think, should be implemented again—not only reinstated but expanded. That should be done immediately. That will help tremendously with security and efficiency issues at the border.

In terms of personnel, again with the National Guard, Michigan is the only state in the nation that has National Guard assisting at the border. Buffalo does not have the National Guard there yet. Even though they're at the border, they're only helping U.S. Customs with moving goods and directing traffic—in other words, being a military presence.

I'm afraid we'll have to continue in the next 30 days to lobby the federal government hard to continue to fund the National Guard. Today, the U.S. government decided to fund the National Guard for an extra 30 days. But we're looking to get that extended to nine to twelve months so that they are there until the new personnel are trained and deployed.

We also have local law enforcement agencies assisting at the border with directing traffic. They are all volunteering their time in Michigan at the Blue Water Bridge Tunnel and at the Ambassador Bridge. We need to see and make sure that those local law enforcement agencies receive funding to reimburse them for the time they have given at the border.

So I think technology, coupled with those band-aid approaches of the added and supplemental staff at the border, is what we need right now on a temporary basis while we work on the long term of getting those people deployed. We're working with the federal government and our congressional delegation to make sure the standard is the level of traffic volume that crosses our border, both passenger and commercial, in order to get those people deployed to the border. We feel that's a fair standard so there's enough staff to handle the added traffic.

But people have to realize that a delay of 40 minutes is a long time. It's not just an inconvenience. When you're talking from a business perspective, as I said in my remarks, a delay of 20 minutes could shut down a plant when a plant is dealing with just-in-time delivery. Where they no longer warehouse goods, they depend on the parts to come off the assembly line in Canada, cross the border with the United States, and in timely fashion get to their plants, whether it's in Michigan, or Tennessee, or somewhere else. So it's important to realize that.

It's also important to realize that companies like the automakers are putting their goods on barges or on rail, rather than shipping it over by truck. This is an added cost, not only to the company but in the end to the consumer. That traffic volume is still down 30% to 35%. People are still staying home and are not travelling as they once were.

The Chair: I also want to tell you, Mr. Cherrin, that it's very refreshing to see an organization as large as yours—that represents so many business interests—that hasn't fallen into the trap of the media to talk about and endorse the perimeter concept, and that recognizes that we need to look at everything that has to be done. We need to recognize it's the enhancement of our security, it's the separation of low and high risk, and it's the movement of goods and people at our border crossings. But working together, I agree with you, I think we can accomplish more.

I'm very optimistic that in the coming days there will be meetings between our officials and our business community to try to resolve some of these issues. I know, as parliamentarians, we hope to work with your members of Congress, and the Senate as well, to try to move some of these issues forward and resolve them.

We're going to adjourn now. We want to thank you very much for being with us and for taking the time, both of you, to come and join us here in Ottawa. We hope to see you again in the future.

Thank you very much.

We're now adjourned.