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37th PARLIAMENT, 2nd SESSION

Standing Committee on Transport

EVIDENCE

CONTENTS

Wednesday, May 14, 2003

1535

The Chair (Mr. Joe Comuzzi (Thunder Bay—Superior North, Lib.))

Mr. Jim Gouk (Kootenay—Boundary—Okanagan, Canadian Alliance)

The Chair

Mr. Jim Gouk

The Chair

Mr. Jim Gouk

The Chair

1540

Mr. Jim Gouk

The Chair

Mr. Jim Gouk

The Chair

Mr. Roger Gallaway (Sarnia—Lambton, Lib.)

The Chair

Mr. Roger Gallaway

The Chair

1545

The Clerk of the Committee (Mr. Georges Etoka)

The Chair

The Clerk

The Chair

The Clerk

The Chair

The Clerk

The Chair

The Clerk

The Chair

Mr. Jim Gouk

The Chair

Mr. Stan Keyes (Hamilton West, Lib.)

The Chair

Mrs. Bev Desjarlais (Churchill, NDP)

1550

The Chair

Mr. Roger Gallaway

Mr. James Moore (Port Moody—Coquitlam—Port Coquitlam, Canadian Alliance)

The Chair

Mr. John Cannis (Scarborough Centre, Lib.)

The Chair

Mr. John Cannis

The Chair

Mr. Rex Barnes (Gander—Grand Falls, PC)

Mrs. Bev Desjarlais

The Chair

Mrs. Bev Desjarlais

The Chair

1555

Mr. David Church (Director, Transportation, Recycling and Purchasing, Forest Products Association of Canada)

1600

Mr. Jim Quart (General Manager, Transportation, Norampac Inc.; Forest Products Association of Canada)

Mr. David Church

The Chair

Mr. Jim Gouk

Mr. David Church

1605

Mr. Jim Gouk

Mr. David Church

Mr. Jim Gouk

Mr. David Church

Mr. Allan Foran (Partner, Legal Counsel, Aikins, MacAulay & Thorvaldson; Forest Products Association of Canada)

Mr. David Church

Mr. Jim Gouk

Mr. David Church

Mr. Jim Gouk

Mr. David Church

1610

Mr. Jim Gouk

Mr. David Church

Mr. Jim Gouk

The Chair

Mr. Mario Laframboise (Argenteuil—Papineau—Mirabel, BQ)

Mr. David Church

Mr. Mario Laframboise

Mr. David Church

Mr. Mario Laframboise

Mr. David Church

Mr. Mario Laframboise

Mr. Allan Foran

1615

Mr. Mario Laframboise

Mr. David Church

Mr. Mario Laframboise

Mr. David Church

Mr. Mario Laframboise

Mr. David Church

1620

Mr. Allan Foran

The Chair

Mrs. Bev Desjarlais

The Chair

Mrs. Bev Desjarlais

Mr. David Church

Mrs. Bev Desjarlais

Mr. David Church

Mrs. Bev Desjarlais

Mr. David Church

1625

Mrs. Bev Desjarlais

Mr. Allan Foran

Mrs. Bev Desjarlais

Mr. Allan Foran

Mrs. Bev Desjarlais

Mr. Allan Foran

Mrs. Bev Desjarlais

Mr. Allan Foran

The Chair

Mr. Allan Foran

Mr. David Church

The Chair

Mr. Rex Barnes

Mr. David Church

1630

Mr. Jim Quart

Mr. Rex Barnes

Mr. Jim Quart

Mr. Rex Barnes

Mr. David Church

Mr. Rex Barnes

The Chair

Mrs. Bev Desjarlais

1635

Mr. David Church

Mrs. Bev Desjarlais

The Chair

Mr. Roger Gallaway

Mr. David Church

Mr. Roger Gallaway

Mr. David Church

Mr. Roger Gallaway

Mr. David Church

Mr. Roger Gallaway

Mr. David Church

Mr. Roger Gallaway

Mr. David Church

Mr. Roger Gallaway

Mr. David Church

1640

Mr. Roger Gallaway

Mr. David Church

Mr. Roger Gallaway

Mr. David Church

Mr. Roger Gallaway

Mr. David Church

Mr. Roger Gallaway

Mr. David Church

Mr. Roger Gallaway

Mr. David Church

Mr. Roger Gallaway

The Chair

Mr. David Church

The Chair

Mr. David Church

The Chair

Mr. David Church

1645

The Chair

Mr. John Cannis

Mr. David Church

Mr. John Cannis

Mr. David Church

Mr. John Cannis

Mr. David Church

1650

Mr. John Cannis

Mr. Jim Gouk

The Chair

Mr. John Cannis

The Chair

Mr. Jim Gouk

Mr. David Church

Mr. Jim Gouk

The Chair

Mrs. Bev Desjarlais

Mr. Jim Quart

Mrs. Bev Desjarlais

Mr. Jim Quart

The Chair

Mr. David Church

The Chair

Mr. David Church

Mr. Stan Keyes

The Chair

Mr. Stan Keyes

1655

The Chair

Mr. Stan Keyes

The Chair

Mr. Stan Keyes

The Chair

Mr. Mario Laframboise

The Chair

1700

Mr. Stan Keyes

The Chair

Mr. Stan Keyes

The Chair

Mr. Roger Gallaway

Mr. Stan Keyes

Mrs. Bev Desjarlais

Mr. Stan Keyes

The Chair

Mr. Stan Keyes

Mr. Jim Gouk

The Chair

Mr. Jim Gouk

Mr. Stan Keyes

The Chair

Mr. Stan Keyes

The Chair

Mr. Rex Barnes

The Chair

Mrs. Bev Desjarlais

1705

Mr. Stan Keyes

The Chair

Mr. Mario Laframboise

The Chair

Mr. Stan Keyes

The Chair

Mr. Stan Keyes

Mr. Mario Laframboise

The Chair

Mrs. Bev Desjarlais

The Chair

Mr. Rex Barnes

The Chair

Mr. Rex Barnes

The Chair

Mr. Rex Barnes

The Chair

1710

Ms. Tamra Thomson (Director, Legislation and Law Reform, Canadian Bar Association)

The Chair

Mr. Michael Phelan (Secretary-Treasurer, National Air and Space Law Section, Canadian Bar Association)

1715

Mr. John Bodrug (Chair, Reviewable Matters and Private Actions Committee, National Competition Law Section, Canadian Bar Association)

1720

1725

The Chair

Mr. Michael Phelan

Ms. Tamra Thomson

The Chair

Mr. Jim Gouk

Mr. Michael Phelan

Mr. Jim Gouk

Mr. Michael Phelan

Mr. Jim Gouk

Mr. Michael Phelan

Mr. Jim Gouk

Mr. Michael Phelan

Mr. Jim Gouk

The Chair

Mr. Mario Laframboise

1730

Mr. Michael Phelan

Mr. John Bodrug

Mr. Mario Laframboise

1735

Mr. Michael Phelan

Mr. Mario Laframboise

Mr. Michael Phelan

The Chair

Mrs. Bev Desjarlais

1740

Mr. John Bodrug

Mrs. Bev Desjarlais

The Chair

Mrs. Bev Desjarlais

The Chair

Mrs. Bev Desjarlais

The Chair

Mrs. Bev Desjarlais

The Chair

Mrs. Bev Desjarlais

Mr. John Bodrug

Mrs. Bev Desjarlais

Mr. John Bodrug

Mr. Michael Phelan

Mr. John Bodrug

Mrs. Bev Desjarlais

1745

Mr. John Bodrug

Mrs. Bev Desjarlais

Mr. Michael Phelan

Mrs. Bev Desjarlais

Mr. Michael Phelan

Mrs. Bev Desjarlais

Mr. Michael Phelan

Mrs. Bev Desjarlais

Mr. Michael Phelan

Mrs. Bev Desjarlais

Mr. Michael Phelan

Mrs. Bev Desjarlais

The Chair

1750

Mrs. Bev Desjarlais

Mr. Rex Barnes

Mr. John Bodrug

Mr. Rex Barnes

Mr. John Bodrug

Mr. Rex Barnes

Mr. Michael Phelan

Mr. Rex Barnes

1755

Mr. Michael Phelan

Mr. Rex Barnes

Mr. Michael Phelan

Mr. Rex Barnes

Mr. Michael Phelan

Mrs. Bev Desjarlais

Mr. Michael Phelan

Mr. Rex Barnes

The Chair

Ms. Tamra Thomson

The Chair

Ms. Tamra Thomson

The Chair

Mr. Michael Phelan

The Chair

Mr. Michael Phelan

The Chair

Mr. Michael Phelan

1800

The Chair

Mr. Michael Phelan

The Chair

CANADA

Standing Committee on Transport

NUMBER 028

2nd SESSION

37th PARLIAMENT

EVIDENCE

Wednesday, May 14, 2003

[Recorded by Electronic Apparatus]

¹ (1535)

[English]

The Chair (Mr. Joe Comuzzi (Thunder Bay—Superior North, Lib.)): Ladies and gentlemen, I call the meeting to order to consider Bill C-26, an act to amend the Canada Transportation Act and the Railway Safety Act, to enact the VIA Rail Canada Act, and to make amendments to these and other acts affecting this particular piece of legislation.

The witnesses today are from the Forest Products Association of Canada and the Canadian Bar Association. Good gracious! What do they have to do with transportation?

Some hon. members: Oh, oh!

The Chair: I'm sure they'll tell us.

Do you have something you'd like to bring up, Mr. Gouk or Mr. Moore?

Mr. Jim Gouk (Kootenay—Boundary—Okanagan, Canadian Alliance): Yes, I do.

I understand there is a very high-level rumour going around that the travel arrangements in the process of being booked by our clerk, and the schedules we have all made arrangements for, are not going to happen.

Can the chair shed any light on that?

The Chair: This is hearsay, or information that I do not have, nor have I received a directive from any of the House leaders, but as I have been told, the travel budget discussed and approved by this committee went to the Liaison Committee, and....

Mr. Jim Gouk: It was approved there.

The Chair: Yes.

I don't know who attended that committee with me, but I think it was you, Jim, and Mr. Gallaway.

The budget was approved there, and it then had to have final approval from the House leaders. I'm advised that all of the House leaders, with the exception of Mr. Boudria, approved the budget. Since we need unanimous consent, and our House leader did not consent, the matter is in abeyance at this particular point in time.

I have not had the opportunity to attend upon Mr. Boudria, on behalf of the committee, to find out why he withheld his approval.

Mr. Jim Gouk: Can you then give us some idea of what our planning should be in the short term? We can't block out three weeks of our time for a trip that may not take place. We obviously can't hold hotel reservations. So what steps do you plan to take, and what timeline are we looking at?

The Chair: Let's assume there is no travel, or let's assume we can't convince the House leader, Mr. Boudria, to present the motion to the House again to get approval.

We're then going to fill up the time; I think we have lots on our plate. We have the airline industry to consider, which is still in a serious crisis, and is becoming even more serious on almost a daily basis. I think this committee has to address some of those issues, as you know.

¹ (1540)

Mr. Jim Gouk: It's five million times more serious.

The Chair: I wish the member from the NDP were here.

We didn't want to deal with the issues involving HRDC and special retraining for those who didn't want to stay in the airline industry and were going to be forced out.

There was another issue.... And then there is the airport...which is supposed to be coming.

We have the ports issue under Mr. Gallaway and the marine transportation subcommittee, which is looking not only at the viability of the Great Lakes-St. Lawrence Seaway, but also, and more importantly, at security issues with respect to the seaway. We have those to consider.

We have those witnesses who can attend in Ottawa on Bill C-26. There is a substantial number of further witnesses. I don't want to take too much time on this, but to be precise on what we're doing, I think to this point in time all of the witnesses on Bill C-26--with the exception of the people representing the railway industry the other day--were of the opinion that the consultative process held by the Canadian Transportation Agency over the last couple of years, and the recommendations made to that agency, are not reflective of the changes being made in the act.

Since transportation is so vital to this country, our whole purpose in what we were attempting to do is to ensure that people in Canada are consulted. So we're going to have to come to grips with that--and I wish we would--in an in camera session, if that meets with the committee's approval.

Mr. Jim Gouk: That would meet with my approval, Mr. Chairman, provided there's an undertaking by the chair that we are not going to proceed with this bill, other than with those witnesses who have already planned to be here, until we have that meeting and come to some mutual decision.

The Chair: Mr. Gallaway.

Mr. Roger Gallaway (Sarnia—Lambton, Lib.): I'm wondering if perhaps you could speak to the government House leader and report to us at our next meeting--whenever that might be--on his intentions. We can then actually lay some plans about what we're going to deal with and how we're going to deal with it.

If the government House leader is adamant about there being no travel, then--

The Chair: No travel for the purpose of consultation.

Mr. Roger Gallaway: Or no travel for the study of Bill C-26. I'd have to think they're frustrating their consideration of the bill.

I don't know what the committee will decide with respect to that, but in the end--

An hon. member: Or what the minister has to say about it.

Mr. Roger Gallaway: Well, this is in committee, and it's not for the minister to say.

Obviously, the only one who speaks is the House leader, and maybe he could explain to you his intentions. Maybe it's a temporary phenomenon, but if we could find out with some certainty what his intentions are for our next meeting....

Secondly, with respect to the estimates, has a letter been sent to CATSA? From yesterday's subcommittee meeting I understand some phone calls were made. But what I think we need to do now, given that CATSA is now in Europe and doesn't deem it sufficiently important to come before this committee, is to have a paper trail, at least, requesting their attendance here.

Is the end date for the estimates May 30? This casts serious light on their finances. We need to know they're going to appear here as soon as possible before May 30--I'm not suggesting May 29--to answer the questions I'm sure this committee might have.

The Chair: Could you answer that? I know there were conversations when we asked the members of CATSA to attend.

The meeting was adjourned on the Thursday prior, whatever that date was, when there was some dispute as to whether section 32 of that particular act was applicable to the information that members of the committee were asking about, which were non-security issues. They felt they didn't want to answer those questions and we felt there was supposed to be...through the estimates....

Then we extended an invitation to them to come back as soon as possible with their legal counsel, and we would get someone here from the justice department--but there are several lawyers here, so.... We would get down to the bottom of whether or not questions that were being asked by the members were indeed security issues or not, or whether they involved section 32. And if need be, if there were some issues of a security nature, we could perhaps move the committee in camera.

Now, Mr. Clerk, did you extend the invitation to the members of CATSA to appear here yesterday?

¹ (1545)

The Clerk of the Committee (Mr. Georges Etoka): Yes, Mr. Chairman, following my discussion today we've--

The Chair: Well, did you extend the invitation?

The Clerk: Yes, I did.

The Chair: By which means did you extend the invitation?

The Clerk: First of all, on the phone, and I'm to confirm in writing. And they've agreed to appear on May 26, which is the next Monday after the House returns.

The Chair: We asked them to be here Tuesday. We asked them to be here yesterday, did we not? We had time to hear them yesterday.

You extended the invitation for them to be here yesterday?

The Clerk: Yes, and the answer I had was that Mr. Duchesneau was in Europe discussing insurance for CATSA and he couldn't be here this week.

The Chair: And how about the other members of this committee, the other two members who were here?

The Clerk: We didn't talk about it.

The Chair: Yes, Mr. Gouk. Does that answer your question?

Mr. Jim Gouk: Given that originally we were going to be in Vancouver on the 26th, and now we are going to be here, we can schedule a meeting and perhaps have CATSA back. Given that it appears that it's the Liberal House leader who has made some decision that will impede the planned action of this committee, perhaps we could ask the House leader of the Liberal Party to appear before this committee, at that time, to explain why he has made this decision and see if we can deal with it as a committee.

The Chair: I'm not sure that's going to work. We can try, but....

Mr. Stan Keyes (Hamilton West, Lib.): Mr. Chair, could I suggest that either tonight or tomorrow morning you endeavour, with myself, Mr. Gallaway, or Mr. Jackson, to speak with the House leader to determine exactly why it is that he decided not to grant that approval. There might be a reason that we're not aware of, so let's hear what he has to say first. I don't think agitating the situation, bringing him before our committee, etc., serves any useful purpose. So let's find out why first and then....

The Chair: I undertake to do that. And I'll communicate with the chairman of the committee, or the clerk will, prior to noon tomorrow.

So I suspect that we should advise CATSA that we're fully intending to carry on with the agenda that the committee has...I'm not so sure we can entertain CATSA on the 26th, because we're supposed to be in British Columbia.

The other question I'd like the committee to think about is this, and I apologize to our witnesses for just a few minutes. We still have some estimates to go through. We're going to have to figure out how we're going to get through those estimates before now and May 30.

I'm sorry, folks, but you know we had this bill fairly late, considering all we have to do.

Anyway, I leave that with you.

Yes, Mrs. Desjarlais.

Mrs. Bev Desjarlais (Churchill, NDP): I apologize for having to interrupt things. I also apologize to the witnesses that this is being delayed.

With regard to CATSA, as we left on the last day when they were here, CATSA indicated they actually had their legal counsel in the chairs with them, and it was still their impression that we were being rather negligent--that wasn't the word they chose, but that was somehow how I would summarize it. We were being rather negligent in asking them to break the legislation or breach the legislation on the security issue.

Quite frankly, before we bother asking CATSA to reappear, I think what we need to have as well is a formal statement on what exactly is expected of CATSA. Is that information available? I don't know whether we go through the channels of the House or the Auditor General or whoever.

Quite frankly, I'm not wasting another bit of my time unless I know CATSA is going to be responding to us instead of playing games. It's a waste of our time. I don't want them scheduled again until I know we're going to get that information.

¹ (1550)

The Chair: Thank you for that.

Mr. Roger Gallaway: [Inaudible—Editor]...the answer to the question that was asked, was IBM and the other partner's $206,000...there I've breached national security.... This is a lot of nonsense on their part, and I'm trying to find another way of characterizing it.

If one examines, which I've done, the background to the bill, which was then Bill C-49 about 14 or 15 months ago.... In committee, the minister who appeared to speak to the bill avowed that it would be an open and transparent agency. You would know where the money was going; you would know everything about it.

For these people to come and refuse to answer a very simple question, which has nothing to do with national security, I think is an affront to us as members and certainly an affront to this committee. And we cannot accept that.

Mr. James Moore (Port Moody—Coquitlam—Port Coquitlam, Canadian Alliance): When CATSA comes, will it be in camera?

An hon. member: No.

An hon. member: It shouldn't have to be, seriously.

The Chair: We can move in camera.

You have to establish it. It seems to me that the issue of security is a threshold question. If a question is asked that may breach a security issue, then it's up to the chairman to go in camera.

Is there any further discussion on that? I would suspect that we will be doing some work with CATSA before they're allowed to come back.

Yes, Mr. Cannis.

Mr. John Cannis (Scarborough Centre, Lib.): Mr. Chairman, CATSA is a newly formed organization as well--not that I'm here to defend CATSA in any way.

I did agree with the comments that were made back and forth, but they did express that being a new organization, newly set up, they still hadn't gone through a full year of operation.

The Chair: I beg to differ with you, Mr. Cannis. They've been operating now for a full year. They've spent about $300 million, and they're in their second year.

Mr. John Cannis: I stand corrected.

The Chair: I think the figure is correct. It's more than that? It's $331 million. That's a little bit of a change.

Mr. Rex Barnes (Gander—Grand Falls, PC): Mr. Chair, they're spending a lot of money for being in operation for just a year.

Mrs. Bev Desjarlais: They've probably done more travel than all the House and its committees.

The Chair: By the very fact that the Auditor General said we should look at this in our pre-audit mode, we should do it.

So I'm going to end the conversation. We're going to meet with Mr. Boudria as soon as we can, advise the members of the committee, and then we're going to sit down and get an interpretation from legal counsel on section 32.

What did you ask for, Bev? Will you go through it again? That was very relevant.

Mrs. Bev Desjarlais: It is very simply that unless we know CATSA is going to answer, don't let's waste our time setting up a meeting until we have all that information.

The Chair: Mr. Church is the director of transportation and recycling for the Forest Products Association of Canada. Mr. Foran is a partner and legal counsel--and we could have used you last week--for Aikins, MacAulay & Thorvaldson. That firm sounds like it's out of Winnipeg.

A voice: It is.

The Chair: I used to be your agent in one of my other lives.

Jim Quart is the general manager of transportation in Norampac Inc. That's in Red Rock. You have a good mill there. It happens to be in my riding.

Go ahead. You can have as much time as you want today.

Thank you for waiting. I apologize for that.

¹ (1555)

Mr. David Church (Director, Transportation, Recycling and Purchasing, Forest Products Association of Canada): No, that's our pleasure.

Thank you very much for inviting us here today. We appreciate the opportunity you're giving us.

Just so you're aware, Aikins, MacAulay & Thorvaldson has been FPAC's transportation counsel for over 30 years, so Allan Foran knows our industry and the transportation issues affecting our industry as well as our members do. We appreciate him being here today.

The forest products industry, representing 3% of the gross domestic product, is a key contributor to Canadians' wealth and well-being. The sector is unique in its community base, in addition to significant employment for large urban centres like Vancouver, Montreal, and Toronto. This industry also operates in partnership with 1,200 communities across the country, 350 of which are rural communities centred in local forest products operations.

The industry generates one million direct jobs and indirect jobs, and direct employment is represented by highly skilled positions, with wages above the average for the manufacturing sector.

I believe you have copies of our submission in both official languages. We filed them with the clerk earlier this week. I'm not sure whether you've had a chance to read the submission, but I intend on just highlighting some of the key provisions we will talk about.

We have carefully reviewed Bill C-26, and we are exceedingly disappointed. It's distressing to come before you and state that the status quo in the Canada Transportation Act is preferable to Bill C-26. We expected recommendations to enhance competition in the rail sector; instead, the bill significantly diminishes the importance of competition.

FPAC has spent considerable time and resources over the past several years participating in Justice Willard Estey's review of the grain handling and transportation system in western Canada; the review process of Arthur Kroeger, who was the former Deputy Minister of Transport, to implement Justice Estey's recommendations; and then finally, the statutory review of the Canada Transportation Act, which was chaired by Brian Flemming.

I mention these three reviews because each said, in one way or another, that measures to increase competition in the rail sector are necessary and should be implemented. That Bill C-26 unfortunately relegates the primacy of competition in the policy to but one of several considerations is unexpected, unwarranted, and troubling to our members, as is the absence of any effective remedy to stimulate rail competition.

On page 4 of our submission, we express our concerns with the national transportation policy as contained in Bill C-26. The elimination from the preamble of proposed section 5, that intermodal and intramodal competition constitute the basis on which the objectives of the policy are most likely to be achieved, reduces the importance of competition to but one of six conditions under which the policy is likely to be achieved.

The policy in the bill also contains proposed paragraph 5(d), which states that:

the price paid by users for transportation services better reflects the full cost of services chosen;

We understand that this clause was added to reflect the intention of the government to ensure that, in the future, the various modes pay their appropriate share of public infrastructure costs. However, rail freight charges to shippers presently include the infrastructure costs borne by rail carriers. The inclusion of proposed paragraph 5(d) in the policy could have an unintended harmful effect on shippers by allowing a rail carrier to take the position that a rate set by the agency or an arbitrator should be higher than a rate that would be offered to shippers in a marketplace characterized by effective competition.

In that context, the inclusion of proposed paragraph 5(d) is inconsistent with proposed paragraph 5(a), which states:

competition and market forces are, whenever possible, the prime agents in providing viable and effective transportation services;

We believe this will give mixed signals to a regulator in establishing a rate under a shipper relief remedy.

In light of these concerns, we ask the committee to recommend that the existing policy in the Canada Transportation Act be retained and, if necessary, references added that there be a “secure” transportation system that “respects the environment”.

With respect to running rights, the three reviews I referred to before--Justice Estey's in 1998, Mr. Kroeger's in 1999, and Mr. Flemming's in 2001--all recommended in their final reports that a limited running rights provision be included in any new transportation legislation. Furthermore, the western and northern caucus and the rural caucus of the Liberal Party also recommended that a reverse onus running rights provision be included in the Canada Transportation Act.

FPAC's limited running rights provision would be an extension of the existing provision contained in section 138 of the act and would permit a provincial short-line railway or a qualified shipper to apply to the agency for running rights over another railway, with the onus on the latter to show why the application should not be granted. The applicant would have to ensure, of course, that it met the agency's safety and insurance requirements.

º (1600)

In our discussions with the review panel and Transport Canada, we indicated that it was essential that the compensation payable to the host railway be reasonable and pro-competitive; otherwise the cost to the applicant would be prohibitive and the provision would not be used.

It is interesting to note, as we do on page 8 of our submission, that the public passenger service provisions, beginning in proposed section 152.1 of the bill, enable a railway such as VIA Rail, seeking running rights over another railway, to apply to the agency to set the compensation. In doing so, the agency is instructed to have regard to providing “a reasonable contribution towards the railway company's constant costs”.

That is exactly what FPAC sought in its representations to Transport Canada. Unfortunately, the Minister of Transport ignored the findings of Messrs. Estey, Kroeger, and Flemming. We urge the committee to right this wrong and recommend the establishment of a reverse onus running rights provision that's available to any person on payment of reasonable compensation to the host railway company.

With respect to the competitive connection rate provision in the act, we ask the committee to recommend that the competitive connection rate provision in the bill be deleted. Shippers will not use this so-called remedy because of its onerous requirements, the high level of the resulting rate, and the inability of the shipper to participate in its establishment.

In conclusion, as we state in the last page of our submission, Bill C-26 is the result of over five years of consultation. Each of these reviews concluded that for shippers served by one railway, measures were needed to provide them with effective rail competition. Bill C-26 fails to accomplish this.

The shippers referred to in these reviews are forest products mills across Canada. They sell their products in highly competitive domestic and export markets and require that the railways operate in the same competitive environment to ensure our growth and prosperity.

We ask this committee to implement the recommendations contained in our submission, and we would also ask the committee to travel across the country to hear the views and experiences of our members with respect to the services provided by the railways.

Thank you very much.

I'll now ask Mr. Quart to say a few words about his company.

Mr. Jim Quart (General Manager, Transportation, Norampac Inc.; Forest Products Association of Canada): I'm Jim Quart, the general manager of transportation for Norampac. We operate eight mills throughout the company: six in Canada, one in the United States, and one in France. We also operate converting plans, 25 in total: 20 in Canada, four in the U.S., and one in Mexico.

Mr. David Church: Thank you very much.

We'd be pleased to answer any questions you may have.

The Chair: Thank you, Mr. Church.

Mr. Quart, do you want to add anything to that? Thank you.

Mr. Gouk.

Mr. Jim Gouk: Thank you, Mr. Chairman.

I can't help but start by noting the irony that we've heard witnesses from the air industry who said there had been no meaningful consultation, and then we have people coming forward, concerned about the rail side, who say there has been years of consultation, but it has all been ignored. There has to be some irony in there somewhere.

Mr. Church, you talked about reasonable compensation for running rights on a host railway. Could you give us some idea of what you think might be appropriate in terms of interchange and limited short-line operations that you mentioned? Do you have some rate in mind with regard to the fixed costs of the host railway?

Mr. David Church: Yes. In participation in the reviews before the Canada Transportation Act review panel, we were asked by them to give thought to the guidance that will be required to the agency to set that compensation level, so we retained a consultant to provide us with assistance. The number he developed or came up with in terms of fair compensation to the host railway for operating over its lines would be a contribution to its fixed costs of roughly 37%, bearing in mind that the existing contribution to fixed costs for interswitching rates is roughly 7.5%. That was established by the agency in 1999, I think, and the contribution to fixed costs in the grain industry under the Western Grain Transportation Act was, I think, 20%. So we think a 37% contribution to fixed costs is reasonable compensation to the host railway.

º (1605)

Mr. Jim Gouk: Would that 37% include interchange, or is that more for short line, and for interchange you're recommending that it stay at its current rate, or 37% for everything?

Mr. David Church: We're talking a 37% contribution for fixed costs for an applicant to pay. Somebody who's been granted running rights would pay a rate that would include a 37% contribution to fixed costs for running rights.

Interswitching, we believe, should remain as it is. In fact, the agency is doing consultations right now. But certainly we believe that reasonable compensation on the interswitching rates is a 7.5% contribution to fixed costs. The distances are much shorter.

Mr. Jim Gouk: Yes, I can understand that.

Just for the sake of the committee, because we are concerned about consultation ourselves, could you give us a a bit of background as to who did this consultative work for you, their expertise in this field?

Mr. David Church: The consultant we retained was a fellow by the name of John Edsforth, and he's been in the transportation consulting business for many years. I've known Mr. Edsforth for a number of years. I know his background. He's a former railway employee and has knowledge and expertise in railway costing; that's his background.

I don't know, perhaps, Allan, you may be able to--

Mr. Allan Foran (Partner, Legal Counsel, Aikins, MacAulay & Thorvaldson; Forest Products Association of Canada): Mr. Edsforth's business is called Travacon Research, and he's an acknowledged and accepted expert in transportation costing matters.

Mr. David Church: He appeared before the review panel at our request.

Mr. Jim Gouk: I'm trying to remember some of the conversations I've had with people in your organization before, just to draw an example of some of the concerns you might have.

There was one case I'm trying to remember. I know it dealt with a short line operating north of Edmonton. I believe there was a problem because of the distance out of Edmonton the short line came to; it didn't come into Edmonton.

Are you aware of that situation? I believe the problem was that the short line was captive because it was too long, the host railway had retained too long a length to keep them out of the interchange in Edmonton.

Mr. David Church: That's right. I'm not particularly familiar with that example.

But I do know when CN or CP decides to sell off a line, virtually all of those lines are basically captive to that federal railway. In other words, if CN is going to sell a line, it will sell a line in such a way that CN retains all that traffic. So the short line will have to work with CN, and all the negotiations and so on with the shippers on that line are with CN and not with the short-line railway.

Mr. Jim Gouk: In fairness to whatever railway that is, they were the operators of it before, so obviously the shipper would have to deal with them. I don't want to get into the situation we had prior to the passing of the Canada Transportation Act--basically abandonment. If the railway wanted to get out of the operation of a line, they basically had to run it into the ground to show it wasn't viable. It was the only way they could get out of it.

If they want to sell to a company, obviously they want it to be in their interest, but they also want it to keep going. The alternative is either operate it themselves or simply run it into the ground so it's not viable and then shut it right down.

Do you feel it may be reasonable on that type of line--and there might be some other way of dealing with the problem--when it's exclusively one rail line to begin with, and they turn over the operation or sell off part of the operation, to allow them to work under different rules perhaps, a different pay scale, whatever? It's an internal short line; they still technically own it, I guess. But if they sell it off, even to a private operator.... Would it be reasonable, under those circumstances, that they could have some control over that, that there should be some alternative way for the shippers to be protected, rather than simply saying now that you've sold it, we have to turn around and allow you to run over our line, so you can actually go to our competitor, which we had protection from before because it was our line?

Mr. David Church: We've spent a fair amount of time trying to come up with an alternative provision to a limited running rights provision. The difficulty is, shippers on a provincial short-line railway don't have access to the provisions of the Canada Transportation Act because they're on a provincial short-line railway and provincial short-line railways are not under the jurisdiction of the act.

We certainly support, and we did support in 1996 and leading up to the Canada Transportation Act, the streamlining of the sale and abandonment provisions. We said the railways should be able to sell the line if they don't want it, preferably sell it rather than abandoning the track, to ensure shippers have options, ensure they have competitive transportation, or at least have rail service.

What we were looking for in a running rights provision was to provide shippers in the remote areas of the country on provincial short-line railways access to a second railway to stimulate competition. What we want is a competitive environment in which the mills on short-line railways have access to a second carrier. Right now, when they're on a provincial short-line railway, they are beholden to the railway that short line connects with. They'd negotiate with them.

º (1610)

Mr. Jim Gouk: I'm philosophically in support of you, but I don't want to end up in a situation where, with good intentions, we pass something that causes the major rail lines to turn around and say, you know, we're going to shaft ourselves by doing this, so we either keep it and run ourselves--in which case you don't get the competition, nor have the other provisions either--or we're going to shut it down and maybe get a trucking interchange, a reload type of situation, both of which would be harmful to the shippers.

So I just want to be careful we don't, in trying to help you, actually do more harm.

Mr. David Church: What our members are looking for is competition. And the threat of competition is better than no competition at all. So you may not exercise a running rights provision; you may not want the short line to exercise the running rights provision. But the fact that it's there in the legislation will enable a shipper to sit down and negotiate on a more level playing field than he is right now by dealing with one of the two federal railways.

Mr. Jim Gouk: Okay.

The Chair: Thank you, Mr. Gouk.

Mr. Laframboise.

[Translation]

Mr. Mario Laframboise (Argenteuil—Papineau—Mirabel, BQ): Thank you, Mr. Chair.

You are making comments on the competitive connection rate, and you are not the only witnesses who think that what is brought in by the government does not reflect what the industry wants; I refer to clause 40 and the following clauses. You personally recommend to eliminate clauses 40 to 45 of the bill, concerning the competitive connection rate.

You said that you submitted reports but have you been directly consulted while this bill was being developed? Were you consulted or did you just make occasional comments?

[English]

Mr. David Church: I'm sorry, which provisions were you referring to now?

[Translation]

Mr. Mario Laframboise: I am referring to clauses 40 to 45. concerning the competitive connection rate.

[English]

Mr. David Church: If you're referring to the competitive connection rate provisions--

Mr. Mario Laframboise: Yes.

Mr. David Church: We did talk to Transport Canada about that provision. But most of the mills in our industry, most of the forest products mills, are for the most part on provincial short-line railways. The competitive connection rate provision is of greater benefit to those shippers on the lines of CN or CP. So while we did discuss it with Transport Canada with respect to the competitive connecting rate, our view was that what was being proposed in the review panel's final report would not be of benefit to our members.

So we didn't discuss the rates, no.

[Translation]

Mr. Mario Laframboise: Do you have a comment, Mr. Foran?

[English]

Mr. Allan Foran: Yes, I do.

On those specific provisions, we didn't have any input into the setting of the rates, and there's a real concern that when you need to establish a threshold of 75% of revenue of similar traffic, what you're doing is implementing a captivity test or threshold test that's going to have an impact and flavour the entire legislation. That's not something that was discussed.

I can tell you that in the current legislation the formula that's used to establish the competitive line rate ends up with an average rate. And I think, at least from the FPAC members' position, something that's in excess of 75% is certainly not average.

º (1615)

[Translation]

Mr. Mario Laframboise: As I said at the outset, you are not the only businesses which do not agree. In your submission, you recommend to eliminate clauses 40 to 45, and I can understand you. But do you have suggestions on the competitive connection rate or is the only way to deal with this to delete these provisions altogether from the bill and to keep the present legislation as it is without touching this provision?

[English]

Mr. David Church: Certainly our recommendation would be to delete the competitive connection rate, but in its place you could keep the competitive line rate provision that's in the act right now--and delete the requirement to have agreement with the connecting carrier before you go to the agency. That requirement should be deleted. There should be no captivity test at all. You wouldn't have to prove you would suffer substantial commercial harm or anything like that.

So if they took out the requirement to have an agreement with the connecting carrier and made it so there's no captivity test, that would be sufficient. But certainly this provision here, as it's written now in this bill, will not be used by our members. We have canvassed our members and they've indicated that's the case.

[Translation]

Mr. Mario Laframboise: My next question concerns running rights. I would like you to try to sum up for us what you would wish. You would like proposed section 152.1, which is subclause 53(1) of the bill, concerning public transport companies, to include a provision on reverse onus. So, what you are saying, probably, is that the onus is on your industry, and that you would like it to be reversed. Could you explain to me what it can be like in practice?

[English]

Mr. David Church: I guess, in summary, the provision is a limited running rights provision. A short-line railway or a qualified shipper would apply to the agency to run over the lines of another railway, from the interchange to another interchange, or to the destination. The applicant would have to ensure it has adequate safety provisions and meets the government's insurance requirements and so on. The agency would have to consider the public interest. What we are saying is that the onus would be on the federal railway--the host railway--to prove why running rights should not be granted.

We think the legislation should be to promote competition in the railway sector. So the onus would be on CN or the federal railway to prove it's not in the public interest to grant the application. If the applicant and the host railway could not agree on the compensation, the agency would set the compensation, recognizing that this is a pro-competitive remedy. It's not an extraordinary remedy; it's a remedy to promote competition. It should set the rate accordingly, so that the rate is a pro-competitive rate the applicant would pay to the federal railway, the host railway.

[Translation]

Mr. Mario Laframboise: Otherwise, as it is drafted now, the onus is on the industry and it is more expensive. It creates additional costs, delays, and so on.

[English]

Mr. David Church: Right now, the provision in the Canadian Transportation Act under section 138 only applies to federal railways. It does not apply to provincial short-line railways or to qualified shippers. We are just saying, extend that provision; extend it to include any provincial short-line railway or qualified shipper, and reverse the onus so that it would be on the host railway to prove why the application should not be granted.

º (1620)

Mr. Allan Foran: Let me add, if I could, Mr. Chairman, as a supplementary comment, that yes, it would significantly reduce the possible expense of an applicant on the application portion. We would fully expect that the class one carrier would respond by talking about system efficiencies, cost, safety, and all those things, but the onus would rest with the class one carrier to show why it would not be in the public interest. That should certainly speed up the process and make this something that could be used by an applicant.

The Chair: Thank you, Mr. Laframboise.

Ms. Desjarlais.

Just before you begin, you will recall that when we were talking about the airline industry there were two issues you brought forward with respect to HRDC and the retraining program and the older worker adjustment program. We intend to get to those just as soon as we can. You were absent when I reported, but I want you to know that we'll be meeting on the airline industry very shortly.

Mrs. Bev Desjarlais: Thank you for being ever so attentive to my concerns, Mr. Chair.

The Chair: You're such a wonderful member of this committee.

Mrs. Bev Desjarlais: In regard to comments that were made about the consultation process, and noting your comment that the committee should travel to see what's happening, we're given the impression that you haven't seen a consultation process with the Department of Transport or, if there was any kind of consultation, they did not reflect in the bill what the shippers had to say. Following along that line, have you noted that concern to the minister through a letter or a conversation with the minister about your...?

Mr. David Church: We've had conversations with the minister's staff. We actually had a meeting of our transportation people last week. We had staff of Transport Canada there, and we advised them that we were not happy with the bill.

Mrs. Bev Desjarlais: I'm curious. What were their comments when the bill wasn't reflecting what you felt was the....?

Mr. David Church: I guess they were surprised; that's the best way to put it. They seemed surprised at our concerns with the national transportation policy. They believed the policy in fact reflected that competition was still the paramount objective of the legislation. We indicated we didn't think that was the case and we didn't think it was necessary to make the major changes that were made.

In discussions we had with Transport when the review panel handed down its report, we talked about the concerns we had with some of the recommendations in the final report. We were told that no, the thrust of the policy would remain the same; yes, there would be reflections about security and environment.

We said we don't have a problem with that, but maintain the focus that intramodal and intermodal competition are the drivers of the policy, are the drivers of the objective of the act. We were led to believe that would be the case. So we were surprised that the policy had been fundamentally changed, yes.

Mrs. Bev Desjarlais: Have you had any thoughts about why you think they've taken this route and not one of reflecting what they've heard through the consultative process?

Mr. David Church: We've always found in dealings with Transport Canada that they're more concerned with the needs of the railways and the carriers than of the users of the system.

I must say that the consultation process leading up to this bill was very good. We were consulted; they did meet with us. They weren't going to make any promises they couldn't keep. We were listened to, but that just wasn't reflected in the bill.

We've been told in the past that if we want our concerns heard, we need to go to Natural Resources Canada, or Industry Canada, or some of the other departments--which we've done. But at the end of the day, it appears that for transportation legislation it's the Minister of Transport who makes the ultimate decisions.

º (1625)

Mrs. Bev Desjarlais: Mr. Foran, you almost gave yourself whiplash there when he commented on the railroads.

Mr. Allan Foran: From my perspective, I can tell you that Transport Canada certainly has listened to the concerns we're expressing before this committee.

I think I can say this. Transport Canada expects there will be litigation that will ensue as a result of the change in section 5. That's almost a certainty. It's something we have warned about. We have something right now that has gained almost 15 years of experience and litigation already about how competition drives this act. The change in the legislation and the policy, I think it's understood, will certainly create or have to create a new body of law--or at least there'll be a test case.

As to running rights, our understanding was there was going to be something from Transport Canada that would take some valuable resources to implement, and that there might have been some political decisions made with respect to how to reflect that in this legislation. But the proposed changes that have been discussed are not reflected there.

I think Transport Canada is listening. Whether we'll see any changes will perhaps remain with this committee.

Mrs. Bev Desjarlais: I'm a little baffled, then, if you think Transport Canada was listening, from your perspective, but that what you told them or what you wanted to see wasn't reflected in the bill. I always follow “listening along” with “taking into consideration and following through”.

Was this listening that you expected to be reflected in some changes or listening “and we expect to continually be ignored”?

Mr. Allan Foran: I think there are two aspects to this answer, depending on the issue. The first is, I believe Transport Canada was listening and may disagree with the position of FPAC as it relates to the national transportation policy, but it understands the result of the change.

Mrs. Bev Desjarlais: The result of the change is that we will end up in litigation, and Aikins, MacAulay & Thorvaldson will be resting easy for the rest of their time. They can all vacation well.

Mr. Allan Foran: I didn't mean this with disrespect. I can only tell you that I mentioned to them that--

Mrs. Bev Desjarlais: It wasn't intended that way. It seems rather strange that we would go into something fully expecting we're going to end up in litigation, and somehow that becomes an acceptable route to go.

That's fine, Mr. Chair. Thank you.

Mr. Allan Foran: If I may speak to a point, Mr. Chairman, some pieces of legislation are a lawyer's--

The Chair: This is your last defence, Mr. Foran.

Mr. Allan Foran: Thank you. I don't often get a chance to speak.

Some legislation is a classic lawyer's legislation. This will be good for Aikins, MacAulay, and it will be good for my children.

A voice: And your children's children.

Mr. David Church: But having said that, when we looked at this and were developing positions, what we wanted was the status quo with the policy, because it works. We don't need any more litigation and we don't need to make sure his children get through university. We paid for him to get through university, I think. We're satisfied with the legislation in terms of the policy as it is. That's what we wanted.

We recognized there had to be some additions to it with respect to the security environment; that's fine. But Transport believes the policy needed to be amended. I assume that's from the minister. These decisions, we ultimately believe, are made by the minister, in terms of what's ultimately going to be in the bill and how it's going to be reflected.

The Chair: Thank you, Ms. Desjarlais.

Mr. Barnes, I'll recognize you only on the condition that you stop taking liberties with the legal profession.

Mr. Rex Barnes: Well, that's no trouble.

First of all, let me tell you, Transport Canada doesn't listen to you; you're too kind. There's always an agenda. The question is what the agenda is here today.

I get more letters totally opposed to Bill C-26. There are some letters saying they did this and they did that, but there's always an underlying cause. You raised the question--that was one of the questions I was going to move into--of why Transport has done this. I believe your response, to repeat it, was that they listened to, let us say, the owners rather than the users.

Why do you think they haven't listened to the users more than the big guys? I mean, you're the fellow who's going to pay the price.

Mr. David Church: If we knew the answer to that, we'd be doing things a lot differently than we have. I'm not sure. I think we have a compelling argument: we're located in the remote regions of the country; the product we produce should be shipped by rail, lends itself to being shipped by rail; and because of the volumes we produce--1,000 tonnes a day coming out of some of these mills, and you're shipping 1,000 to 2,000 miles by rail into the United States, which is our largest market--it lends itself to move by rail.

If you're served by only one railway at the mill, they know that. We've explained that to them: that the railways know you're served by them. It's the railway, or you aren't moving the tonnage; it's that simple. In negotiations, they have you where they want you, which is, “Here's the rate, and this is the way it's going to be.”

Jim, you're a shipper. Maybe--

º (1630)

Mr. Jim Quart: We're in a unique situation in Red Rock, Ontario, where both CN and CP serve the mill. We can play one off against the other to get the most competitive rate. We have excellent pricing coming out of that mill, going into Canada or into the U.S., whereas for other colleagues of mine who are on a short line or in northern Quebec, the revenue per tonne-mile is nowhere near what we enjoy out of Red Rock, and it's through direct competition between the two railways.

Mr. Rex Barnes: Mr. Chair, this is what I'm saying; we're getting to the agenda now. The agenda could be bigger than most people want to believe. The big agenda I see is that they want to force you to do one of two things: that is, take the price, which increases your product's cost so that eventually you're going to say “I can't afford to do this” and probably go to a different mode, and then they'll close down the railway sector, probably--

Mr. Jim Quart: If we were stuck with a truck mode, the mill in Red Rock would be shut down.

Mr. Rex Barnes: There you go. Do you see? There could be a bigger agenda than most people think. Eventually it all comes out, when the dust settles. I hope that's never the agenda, because the rural areas and the smaller areas of this country are being hit hard all the time.

Of course, competition is the way to go, and if this bill does not reflect competition, then it should be totally thrown out. The question is whether the Liberal government is going to listen, and that's a question that hopefully you can impress on us so that we'll send the message. But if it doesn't happen, this bill will pass like any other bill. And where do you lie then? Where is it putting you in the competition? What are the steps you will have to take to make sure you get reasonable rates?

Mr. David Church: Certainly, in the Canada Transportation Act of 1996 there was a reduction in the competitive provisions available, compared to what we had in 1987. We recognized there had to be some streamlining of the sale and abandonment provisions--which we agreed to. We didn't want any substantial commercial harm tests put in, by which you would have to prove you would suffer substantial commercial harm, if you were trying to seek a CLR or extended interswitching. And we didn't want any provisions in there saying that all rates set by the agency must be commercially fair and reasonable, because the agency gets data from the railways. So if the agency is going to be setting those rates based on railway data, we presume they are commercially fair and reasonable.

But we accepted the changes in 1996--reluctantly. But in this go-round, at least we believed we were listened to in the consultation process. We obviously didn't get what we wanted, but at least we were listened to, and they didn't tell us things and then pull the rug out from under us, as happened prior to 1996. So I can't argue that we didn't have an opportunity to present our views. Obviously, they are not reflected in this bill, so our recommendation is that we prefer the status quo than this bill.

It's as simple as that.

Mr. Rex Barnes: Well, Mr. Chair, my final comment would be that we're listening. But the question is, are the other people, the government, listening?

A voice: We always listen.

Mr. Rex Barnes: You don't do anything; that's the problem.

The Chair: Ms. Desjarlais and then Mr. Gallaway.

Mrs. Bev Desjarlais: On the point that you were listened to but didn't get what you wanted, would you feel at all slighted if we said, “No, let's go ahead with this act”, after listening to you?

º (1635)

Mr. David Church: Yes, we would. We're relying on you and we're relying on this committee to make the changes.

Mrs. Bev Desjarlais: Why don't you get a little more aggressive yourself and say what you think about the bill and about speaking your mind and not really being listened to?

I just thought I'd make that point, because that's the way we go about it.

The Chair: Thank you.

Mr. Gallaway.

Mr. Roger Gallaway: Mr. Church, you and your colleagues used the terms “consultation” and “to consult” a lot. It's an interesting concept, which we've heard from across the sectors affected by this bill, who said they were consulted. There were all of these people out there consulting and flying in all directions.

To consult has become a very elastic concept. It's so elastic that it's being used as a defence mechanism by Transport Canada, so that when they appeared here at the beginning, the minister and his people said they had “consulted”.

I'd like to know what consultation processes you were involved in. Can you give us names and tell us who it was with? And what was it? Was it the CTA review panel, or was it more than that?

Mr. David Church: As indicated in our submission, we participated in Justice Estey's review, in Arthur Kroeger's review, and then in the review panel chaired by Brian Flemming. I think FPAC probably appeared seven, eight, or nine times in front of the review panel to talk about our concerns with the existing legislation and how the terms of reference for that review were to enhance competition. That's what we understood the process would result in--enhanced competition in the rail sector.

Subsequent to the release of the final report, we met with Transport Canada officials on several occasions, over probably the past year and a half or two years, to discuss our concerns with the provisions in the final report of the review panel. We simply didn't believe the provisions were going to work the way they were developed and set out to work. We didn't believe the compensation levels for the competitive connection rate and the running rights provision would make it a pro-competitive remedy--which is what we wanted. We want more competition in the rail sector.

So we had a number of meetings with various individuals over a period of a year and a half or two years, from the time the review panel report was released in 2001.

Mr. Roger Gallaway: Up until the time the....

Mr. David Church: Up until the bill was introduced in the House.

Mr. Roger Gallaway: Now, you may not recollect with whom you met. Could you tell us who you met with in these discussions, in the post panel review?

Mr. David Church: I'd have to go back and check the notes and the minutes of those meetings to see who it was.

Mr. Roger Gallaway: What was the forum?

Mr. David Church: It was informal within Transport Canada's offices. We would meet with them, and they had perhaps four or five people there. We would meet with them for a couple of hours and walk them through some of the provisions that were in the review panel's final report, and we'd say, this one is good and this one we have a problem with. They were listening to us. They recognized that what was in the final report and how it was structured in the final report would not be an effective remedy.

So that was what I meant when I said we were listened to. They at least recognized that the provision, as it was written in the final report, was not going to be an effective remedy, and they believed it was incumbent on them to make the decision or at least make a recommendation, I guess.

Rather than being told that no, that's the way it is and that's the way it's going to be, or that's the recommendation we're going to put forward, they recognized that there were some legitimate concerns that had been raised with some of the provisions in the final report of the review panel.

Mr. Roger Gallaway: In the process of these “consultations” that you were having with them, did you have any reason to believe that provisions such as section 152 would arise in this bill, would be included in this bill? I believe it's section 152. It's the competitive connection.

Mr. David Church: We weren't given any indication, one way or the other, of whether the provision would be in the bill or not.

Mr. Roger Gallaway: Was it discussed?

Mr. David Church: It was discussed.

º (1640)

Mr. Roger Gallaway: As I understand it, then, there was this formalized set of hearings. You talked about Estey, you talked about the review panel, and then there were all these other phone calls and appearances in the offices of Transport Canada. Can you identify, particularly out of the formal hearings, where, for example, the 75th percentile provision in that competition connection came from? Whose idea was that? Was that in fact in a recommendation made to Transport Canada?

Mr. David Church: I don't think it was a recommendation that came out of the review panel's final report. I'd have to go back and check. To be honest, I'm not exactly sure where that 75th....

Mr. Roger Gallaway: What I'm asking you is this. Are you aware that anyone who appeared before the review panel, whether from your side, if I can put it this way, people with your objectives, or from the rail side, insisted upon this? I'm assuming these are public hearings. And these hearings, these meetings, are monitored today.

Where did it come from? That's what I'm looking for.

Mr. David Church: Certainly I'm not aware of any shipper organization that would have ever recommended that the threshold rate be set at the 75th percentile in order to be granted the relief or, at least to get access to the relief. No shipper would have ever recommended that.

Nor would any shipper have recommended that the rate that was established by the agency be between the 75th and 90th percentile. A lot of the meetings that were held were meetings with the review panel, where we would speak to the review panel and say, we would want to talk to you about this issue. They basically invited us to appear on specific issues that we would raise with them.

Mr. Roger Gallaway: So if I understand the mechanism of the review panel, was that an open process, that is, could members of the public or interested parties appear and hear what you had to say? Or whatever your written submission to them might have been, could members of the public access that? Perhaps you can confirm that for me.

Mr. David Church: Yes, certainly the written submissions were definitely available to the public.

Mr. Roger Gallaway: What about the consultation?

Mr. David Church: I believe the consultations were open. I don't think they were specifically closed. To be honest, I don't really recall whether they were specifically closed to them.

Mr. Roger Gallaway: All right.

My final question is, would you undertake to provide us, then, with a list of Transport Canada officials--I'm looking for names--with whom you consulted?

Mr. David Church: Yes, I can do that.

Mr. Roger Gallaway: Okay, thank you.

The Chair: Just to be clear, in chronological order, as a result of your questioning, Estey was first, and then Kroeger came on the back of Estey, right?

Mr. David Church: That's correct.

The Chair: But those reports were done five years ago, prior to the last transportation act.

Mr. David Church: On the Estey process, the final report came out in 1998, I believe, and it was in response to a concern the grain industry had with respect to the grain handling and transportation system, basically from farm gate to port side. He was retained or asked by the Minister of Transport and Mr. Goodale and Mr. Vanclief, I think it was at the time, to conduct that review.

When his final report came out, it was Mr. Kroeger who was asked to develop recommendations to the government on how to implement Justice Estey's recommendations, one of which he believed should be a running rights provision that would apply to any person--

The Chair: And that process--

Mr. David Church: Then, from that, Mr. Kroeger's recommendations came. Bill C-34, I think it was, was finally enacted in 2000 and basically changed the final offer arbitration provision, made some amendments to that, and also changed the revenue cap, I believe, for grain transportation. It went to a revenue cap.

That was deemed at the time to be only part of the process. Mr. Flemming was retained to conduct the statutory review of the Canada Transportation Act, but in his mandate he was asked to develop recommendations to enhance competition in the rail sector. That's what we understood, that from that it would lead to this bill.

º (1645)

The Chair: That clears it up. Thank you.

Mr. Cannis.

Mr. John Cannis: Thank you, Mr. Chairman.

Thank you very much for your presentation.

Every time I hear the word “competition” or “enhanced competition”, which you said repeatedly, I kind of get the jitters, because especially in the last couple of years, there's been a review of the Competition Act as well, as you know.

We've been trying for years to narrow down what's going on with the gasoline industry. Competition--in the view of all of us, I believe, and according to the dictionary--is to be competitive, with lower prices and what have you, but there seems to have been a climate of competition as to who can charge more, at least in that industry.

You've talked about enhancing competition, and you used the word “regulation” as well. We've had other witnesses before the committee as we do the review of the CTA, and some have said “must regulate” or “overregulated”, and so on. Can you give me a comment on the regulation aspect overall?

As you know, we've seen various other witnesses from all modes of transportation.

Mr. David Church: Certainly we don't want regulation. The problem with the Canadian transportation environment is that there are two railways. We would prefer an unregulated, totally deregulated environment. Unfortunately, when you have only two railways, and most of the mills in our industry are served by one of those railways, what you need is regulation that will simulate competition so it will provide the shippers that have access to only one railway at the mill a semblance of competition, or competition, to give them the choice as to which carrier they want to use.

On the products we sell in the markets in which we sell, we don't set the price. The price is set in the marketplace by the customer. So when the railways want to increase the freight rates or add ancillary charges, or whatever, we somehow have to find a way to absorb those costs, because we can't pass them on to the customer. The customer won't accept them.

In all the markets in which we sell our product, we're not the primary supplier. In the United States, U.S. industry is the major competitor for us, but 50% of what we produce, we ship into the United States. So for us to compete in the United States, we need competition in the transportation sector, because it's one of the highest costs the industry has. It's probably second or third highest behind fibre, and perhaps energy, in terms of--

Mr. John Cannis: Competition, but in a very unregulated environment?

Mr. David Church: It's selective competition. It's regulation to simulate competition.

We don't want to go to a regulated environment in which freight rates are set by an agency; we don't want regulated freight rates. We want the ability to sit down and negotiate a contract with the railway, which includes not just rate provisions but also service provisions, because service is just as important as the freight rate. If you don't have the cars, if you don't have the equipment, if you don't have the locomotive power, if you don't have the equipment to move your product out, the freight rate is irrelevant.

So it's only regulation to simulate competition, and only where it's required.

Mr. John Cannis: My last question is predicated on your comment that “we would also ask the committee to travel across the country to hear the views and experiences of our members”. As Mr. Gallaway inquired earlier, you've done your consultations.

Why did you say that, and why do you think it's important that we travel and meet other stakeholders in different parts of the country?

Mr. David Church: I think it's important for you to hear the experiences of shippers located in British Columbia, Nova Scotia, New Brunswick, and so on, who have their own problems in dealing with the railways. Unfortunately, they were not able to be here today. It would have been nice to have had four, five, six, or seven members from across the country to explain to you what it's like dealing with the Canadian railways.

We understood that this committee was likely to be travelling, but based on the conversation we heard this afternoon, that may not be the case.

º (1650)

Mr. John Cannis: I was going to indicate to you that this committee was prepared to travel.

I'd like to put down for the record that it's my understanding that committee members from the opposition chose to stymie this effort.

Mr. Jim Gouk: That's not true.

The Chair: It was your absence, Mr. Cannis, and I don't think you're correct.

Mr. John Cannis: I withdraw my comment, Mr. Chairman.

The Chair: Thank you.

If you have finished your questioning, thank you.

Mr. Gouk, you have one question left, and then we're going to go to Mrs. Desjarlais.

Mr. Jim Gouk: Were the meetings or consultations with Transport Canada you referred to initiated by them or by your association?

Mr. David Church: By ourselves; we initiated them.

Mr. Jim Gouk: So you initiated them.

Thank you.

The Chair: Ms. Desjarlais.

Mrs. Bev Desjarlais: I have one question with a little bit of a comment.

You're all so in love with competition, but you only want to simulate regulation for competition.

Knowing that Vancouver is trying to host the Olympics and that the Olympic motto is, “Stronger, Faster, Higher”, and in the spirit of diversity in Canada, might I suggest to you that part of competition involves two businesses trying to get the highest price they possibly can for a service.

How would you feel, Mr. Quart, if those rail lines said, “Let's see how high we can get it before he really is going to do anything about it”? I would suggest that's what competition is about.

Unless you're willing to really address the issues at hand--the fact that you're not being listened to and that the rail lines are going to control this whole issue--you can forget about competition, because we all know that's what's happening in the gas industry, as John mentioned: “Let's see how high we can get it before people really want to have a good bitch about it and do something about it”. So nothing happens.

Mr. Jim Quart: We are unique in Red Rock in having both railways competing for our business.

But if the rates were going up in concert with each other, wouldn't that be something like price fixing?

Mrs. Bev Desjarlais: We'd have to regulate against it, just to simulate competition.

Mr. Jim Quart: No, we have competition in Red Rock and it's been proven that it works.

The Chair: Thank you, Ms. Desjarlais.

I just have one question, which is for my own information, and perhaps it is a little parochial.

I have a substantial producer who only has access to one rail line. I check with him constantly.

As you know, transportation is very expensive to forestry, but he keeps telling me that he is treated very fairly by that railway. He's one of the top ten customers of that railway, and he's satisfied he's being treated very fairly by the one rail line. He tells me this at least twice a year when I check into the freight rates.

So I'm having difficulty, Mr. Church, reconciling that parochial issue with what you said earlier in your evidence.

Mr. David Church: I can think of a number of members who, when asked the same question, would say exactly the opposite, that they have real problems with the service.

The Chair: I want to thank you, Mr. Church and Mr. Foran.

I apologize again for our delay in getting started. We had some housekeeping matters to deal with.

I can assure you that your evidence today will be listened to and discussed by the committee.

So I thank you.

Mr. David Church: Thank you very much.

Mr. Stan Keyes: Mr. Chairman, may I intervene on two quick issues?

The Chair: Mr. Keyes, by all means.

Mr. Stan Keyes: Colleagues, on the one hand, I've asked the clerk to circulate a suggested resolution I've put forward at the marine transportation subcommittee, but on the other hand, by the time the subcommittee deals with it and hands it back up to the full committee, the full committee will have had to deal with it anyway. So I thought I'd pass this along to you for a quick read.

I want to be clear, Mr. Chairman, that it certainly does not need a decision today. In fact, I would guess there probably might be a question or two within the resolution that we may want to have the representatives of the Canadian Shipowners Association back to the committee just to clear up.

The basis of this resolution is the fact that the industry is in tough times, as we heard from their submission. We can wait to deal with a possible scenario of the shipowners being in the same situation as Air Canada or we can try to prevent that from occurring by dealing with a specific exemption for our compulsory pilotage for Canadian ships and the amendment it would take to the Pilotage Act. Of course, the amendments would not generate any financial costs to the Government of Canada, so we're not going to have to worry about dealing with an issue of expenditure by government. What we're trying to do is to modernize this system.

In a nutshell, I suppose what I'm asking for is that the committee read this resolution, and that we might possibly ask the CSA reps to come back to deal with any specific questions, and then deal with the resolution at that time.

That's my first inquiry.

º (1655)

The Chair: It's unclear to me, Mr. Keyes, if this is a motion or a resolution.

Mr. Stan Keyes: It's a motion.

The Chair: Is it a motion you are presenting today on the 48-hour rule?

Mr. Stan Keyes: I suppose what I should first do is ask for unanimous consent, so that we can consider this in the form of a motion.

But as I said, I'm not holding this committee to any decision today. I'd just like to get moving on it, because we don't have a lot of time left.

The Chair: Mr. Laframboise.

[Translation]

Mr. Mario Laframboise: Mr. Chair, what is the use of having a maritime transportation subcommittee if the Standing committee on Transport does not deal through the subcommittee? The subcommittee is going to make recommendations to us in due time. I cannot see why we are discussing this today. I cannot get over it!

If we do not want the maritime transportation committee, we simply have to abolish it, if you want us to deal with this here. Otherwise, let the subcommittee do its job; it will make its recommendations to us and we will discuss them in due time.

I don't understand why we should discuss this today, tomorrow or the day after tomorrow. Let the maritime transportation subcommittee examine this issue; it falls upon them to make its recommendations to us. Stop submitting to the pressures of the industry and of everybody. The issue of maritime transportation is so serious that a subcommittee has been created. Let them please do their job.

[English]

The Chair: Mr. Keyes.

» (1700)

Mr. Stan Keyes: Mr. Chairman, with your indulgence, I'd like to take two minutes.

The Chair: Feel free, Mr. Keyes.

Mr. Stan Keyes: I understand Mario's frustration, Mr. Chairman, but the marine transportation subcommittee is going to be dealing with a very large picture. It's going to take some time to get through the work on his agenda.

This is a situation that needs to be addressed immediately. We heard about it from the Canadian Shipowners Association, who said they could immediately save about $15 million a year if the compulsory pilotage in the St. Lawrence system were exempted.

The Chair: Mr. Gallaway.

Mr. Roger Gallaway: Maybe we should just discuss the procedural route here.

This motion was put on notice yesterday at the subcommittee meeting, so the subcommittee will have to discuss it. But Mr. Keyes is attempting to move it along.

If I make the assumption--and it's only that--that the subcommittee passes the motion, it has to be confirmed within this committee, as Mr. Laframboise has pointed out. If we can accept this as notice today, we're going to have to deal with it in any case. It's a 48-hour notice, so it really matters not, but it's on the notice paper.

Mr. Stan Keyes: So much for asking for unanimous consent to deal with it today. If that's how my colleagues feel, that's fine.

It's on the paper now, so my notice is given.

Mrs. Bev Desjarlais: Actually, my understanding is that until we see it in writing, notice hasn't been given.

Mr. Stan Keyes: Mr. Clerk, have you got someone who can just photocopy these, so we can put it on the record today for a 48-hour notice?

The Chair: Did you also have something else to discuss?

Mr. Stan Keyes: You had asked me to check with our House leader's office.

Of course, I can't discuss what went on in the confidence of the House leader's meeting--that would be breaking confidence--but what I can say is that the opposition parties might be surprised to learn this, but they might want to have a discussion with their House leaders to ask them to allow the Standing Committee on Transport to travel.

That's as close as I can get to what I can say. So what I'm asking you to do is to talk to your House leaders.

Mr. Jim Gouk: Do you mean that we should just talk to our own House leader?

The Chair: No. In fact, there are many more than just one.

Mr. Jim Gouk: Two?

Mr. Stan Keyes: No, many more.

That's as far as I can go on that, because of confidentiality. What I can tell the opposition and yourself, Mr. Chairman, is that they might want to talk to their House leader, so that we can--

The Chair: Could I ask, Mr. Keyes, will the motion be reintroduced?

Mr. Stan Keyes: That will depend on the discussion the opposition House leaders have with our House leader.

The Chair: Mr. Barnes, do you undertake to talk to your House leader?

Mr. Rex Barnes: Yes.

The Chair: Mrs. Desjarlais, will you undertake to talk to your House leader?

Mrs. Bev Desjarlais: With all due respect, I talk to my House leader on a regular basis, and I can tell you that he did not object to the trip or travel within Canada. I'm not going to say who did, but I do know that he did not object to the trip in Canada. The U.K. trip was another issue.

» (1705)

Mr. Stan Keyes: This is not about the U.K. trip, but the Canada trip.

The Chair: Mr. Laframboise, will you talk to your House leader?

[Translation]

Mr. Mario Laframboise: Mr. Chair, are you referring to this document that you do not have?

[English]

The Chair: Mr. Laframboise, we're talking about the order that was brought into the House yesterday.

And I may have to apologize to you, Mr. Cannis, because at the outset--

Mr. Stan Keyes: My assistant pointed out that he had heard this on the radio.

The Chair: I prefaced my remarks by stating that it was hearsay, so I apologize....

Mr. Laframboise, we're talking about discussions with your House leader, if you would, with respect to the travel arrangements to be presented to the House of Commons tomorrow.

Mr. Keyes, without betraying confidentiality, where do you think we'll go after everybody talks to their House leader?

Mr. Stan Keyes: If they talk to them soon enough tonight, then maybe we can get a motion in the House tomorrow, which would put us back on schedule for a week Sunday.

[Translation]

Mr. Mario Laframboise: Mr. Chair, we cannot discuss such important proposals as the one Mr. Keyes is tabling without discussion with all the witnesses which are concerned. Piloting on the Seaway is not just another money issue, but an environmental security issue.

What we are doing here, is try to save money without a real discussion. This discussion could have been held if all the witnesses before the Subcommittee on Maritime transportation had been called.

I am sorry about this, but I will not agree on discussing this today. I hope the subcommittee will take all the time which is necessary, because this is not only about making maritime transportation companies or shipping companies save money but also about security. We need to ensure the population of the Saint-Lawrence area as a whole that if we amend the legislation, this will be as secure as it is with Saint-Lawrence pilots.

In this regard, this is another attempt to push things down our throats without discussing them. I was personally thinking of the Subcommittee on Maritime transportation; it would have all the time to do it. Don't table it today, it is as simple as this, and let the maritime transportation subcommittee do its work. That's all.

[English]

The Chair: There's been a notice of motion on the floor, and in 48 hours it will be considered.

Thank you for that motion, Mr. Keyes, and thank you for the other information.

I think we've answered your question, Mr. Laframboise. It's not being discussed.

Mrs. Bev Desjarlais: What time would 48 hours put us at?

The Chair: After the break.

Mr. Rex Barnes: Mr. Chairman, just for clarification, in the subcommittee where there are ongoing discussions on these issues, would it be a normal procedure to do what we're doing? Is that normal procedure?

The Chair: Yes. We've been given a notice of motion. There's a 48-hour rule that you can present a motion, but it's not going to be discussed.

Mr. Rex Barnes: I'll speak to Stan.

The Chair: No, that's just the way it is.

Mr. Rex Barnes: That's fine. I don't mind.

The Chair: You speak to Stan personally about it.

We have some witnesses to get to, who are with the Canadian Bar Association.

Welcome, Mr. Bodrug, chair of the reviewable matters and private actions committee of the national competition law section; Mr. Phelan, secretary-treasurer of the national air and space law section; and Ms. Thomson, director of legislation and law reform.

As I understand it, Ms. Thomson, you are going to be the lead.

» (1710)

Ms. Tamra Thomson (Director, Legislation and Law Reform, Canadian Bar Association): Thank you, Mr. Chair. We are pleased to be appearing before the transport committee today on behalf of the Canadian Bar Association on Bill C-26, the Transportation Amendment Act.

The Canadian Bar Association is a national association representing over 38,000 members across Canada.

You have in front of you our written submission on this act. The submission was prepared by the national competition law section and the national air and space law section, which Mr. Bodrug and Mr. Phelan are here representing.

Among the objectives of the Canadian Bar Association are improvement in the law and improvement in the administration of justice. It is in that optic that we have prepared our written submission and make our remarks today.

I am going to ask Mr. Phelan to first address some of the matters in the submission, followed by Mr. Bodrug. We would then be pleased to take your questions.

The Chair: Mr. Cannis, please take the chair.

Mr. Michael Phelan (Secretary-Treasurer, National Air and Space Law Section, Canadian Bar Association): Thank you, Mr. Chairman.

My intention is to give you a very brief outline of some of the concerns, particularly those related to the airline industry. Mr. Bodrug will deal with some of the issues more specific to competition.

Our concern in respect of the merger review, particularly as it relates to airlines, is that it seems to be structured to deal with yesterday's problem. It seems to be structured on the basis of a virtual monopoly by one carrier--one would have assumed a healthy, strong, vibrant monopoly carrier. That doesn't seem to be the case today. So there's some serious question of whether or not the framework regarding the review, and some of the policies behind it, are not in fact,somewhat out of date.

We are also very concerned that the merger review provisions are industry-specific, even mode-of-transport specific. It hearkens back to a time when the National Transportation Act had a provision with respect to transfers, acquisitions, and mergers that required a review on the basis of unduly restricting competition or otherwise being contrary to the public interest.

We seem to be coming back to that kind of review, and to some extent this public interest review hearkens back to a circumstance of reregulating an industry and it injects into the process political aspects. It lacks predictability, consistency, and transparency.

We do ask, what is the impetus for a proposal? Why transport? Why airlines? Why are they different from other businesses in Canada? Other businesses are equally critical to the country, yet the existing regime under the Competition Act seems adequate for those industries. What makes transport and airlines particularly deserving of a more specialized attention? We are concerned the process will become politicized, and so would the role of the commissioner.

With respect to transportation, the merger provisions, I want to address a few related specifically to airlines.

We are concerned about the provisions related to airline advertising, the forms of disclosure, and the question of the Canadian Transportation Agency making price advertising regulations when we already have a regime under the Competition Act that deals with misleading advertising, and it deals with some of the very same issues.

We are also concerned with respect to additional regulation, the changes to the declaration under section 5 of the act, as to its purposes. We're concerned with the removal of the substantial commercial harm test with respect to section 27 complaints. That never seemed to be a problem in the past as a threshold, and we don't quite understand the rationale for removing it now.

We are also concerned that the CTA is now in a position to act on its own motion with respect to a number of areas, including the unreasonableness of fares. There doesn't seem to be any evidence that there has been a lack of rigour on the part of consumers or complainants. Certainly, indications from the air complaints commissioner would suggest they've been busy and there hasn't been a lack of complaints. So we're concerned about why there would be this injection of power now to the CTA to act on its own motion, as opposed to responding to complaints, particularly a body that has to adjudicate those very same issues.

» (1715)

We're also concerned about the power of the agency to impose commercial arrangements. Again, it hearkens back to a time of regulation.

Finally, we are concerned that the review process for the act won't occur until 2010, at which time the minister is to report to Parliament. We suggest that is far too long a period of time for a review of such a significant piece of legislation.

Those are my general comments, and I'll turn it over to Mr. Bodrug.

Mr. John Bodrug (Chair, Reviewable Matters and Private Actions Committee, National Competition Law Section, Canadian Bar Association): Thank you.

Mr. Chair, I would like to focus my remarks on three points dealing specifically with the merger review process contemplated by the bill.

In particular, in our view, the scope of these proposed merger review provisions is unclear and overly broad. Second, they create an inappropriate and unnecessary political role for the commissioner of competition. Third, they create an unnecessarily long period of uncertainty for both parties, and indeed the commissioner, in determining which statutory framework the analysis is going to be conducted under.

On the first point, just to make it clear, the scope of the merger provision being contemplated is that the public interest merger review provisions--these are in clause 11 of the bill--would apply to all transactions that meet certain financial thresholds set out in the Competition Act and involve a transportation undertaking.

I think it's important to understand we're not talking just about railways and airlines. On the face of it, this provision would appear to extend to the full scope of federal jurisdiction over transportation, and it may apply to any business that moves people or things across a provincial border on a continuous and regular basis, even if that's a relatively small percentage of the activity of that business.

I have a couple of examples I think would illustrate the issue. A taxi company that regularly takes passengers from Gatineau to Ottawa, and perhaps the Ottawa airport, is a transportation undertaking. Does this provision apply to a furniture store chain with stores in Ottawa that regularly deliver furniture over the river to Gatineau?

Further, the scope of the federal jurisdiction--this involves dusting off my textbooks from law school on constitutional law--extends also to businesses that are operationally connected to a transportation undertaking, even if they don't move people or things across borders themselves. An example of this is that stevedoreswho load ships have been held by the courts to be federal transportation undertakings because shipping companies are dependent on them.

The concept of involving a transportation undertaking means we're not talking just about mergers to acquire a railway or an airline or a transportation undertaking. Even if only one party to the transaction is a transportation undertaking, they would seem to be caught. So this bill would impose this full public interest review process on a transaction if a railway operator buys a hotel.

These provisions would also, because of incorporating the Competition Act test, apply to pure asset acquisitions. The Competition Bureau has issued guidelines indicating that a purchase of used railway engines would be notifiable under the Competition Act if the financial thresholds were met.

So if they're implemented, these proposals are going to create a lot more work for corporate lawyers, but it's difficult to see how this expansive merger review provision is in the public interest. In our view, a better approach would be to specifically define the types of mergers or transactions for which there is a potential concern, if there is a decision to go ahead with this at all.

My second point is on the commissioner's role. The competition commissioner was created as a position intended to be independent of political influence. The commissioner's typical role is to look at economic issues and try to assess the impact of a merger on prices or whether it creates market power. But Bill C-26, in the merger provisions, would change the role of the commissioner in this broad scope in at least four significant ways.

The first is that it contemplates explicit collaboration with the Minister of Transport in the assessment. Secondly, it uses a completely different test from what the commissioner normally applies in that he's asked to assess a potential impact on competition, as opposed to the usual standard under the Competition Act, which is a substantial lessening of competition. Any merger is going to have some potential impact on competition, so in our view this is a potentially arbitrary and ill-defined standard.

» (1720)

The third point is that it's the federal cabinet, rather than the tribunal, that is actually making the decisions in this case, and there's no right of appeal. In our view, if there is to be a public interest review process, we think the commissioner does have a legitimate role in the process.

But in our view it's not necessary to abandon the processes and procedures in the Competition Act, or to compromise the commissioner's independence in the way that is contemplated here. We go into more detail about this in the submission itself.

The third point I wanted to stress was that there's a long period of uncertainty for merging parties built into this process as currently proposed. The presumption under the bill is that a merger within this wide scope will be subject to this full public interest review unless within 42 days the Minister of Transport decides that no public interest review is required.

Most mergers are cleared by the Competition Bureau in less than 42 days. It seems to us that this is far too long a period for this, and in that 42-day period the commissioner won't know whether he's supposed to be reviewing the merger under the Competition Act or under the Transportation Act. Nor will the parties, or their shareholders, or employees know what process we're looking at.

If this kind of merger review does go ahead, in our view a better mechanism would be that the public interest review would be required only if within a very short period of time the minister determines that a public interest review was required, again with respect to a more narrowly defined category of transportation undertakings.

If there are public interest reviews required it should be an exceptional circumstance where the minister should be able to decide very quickly that this is something that requires public interest review; it should be something about which you know it when you see it.

I won't go into more detail. Our comments do go into some specific details on things like the scope of confidentiality in terms of the information that's required to be provided to the minister and the commission in this process.

» (1725)

The Chair: Thank you, Mr. Bodrug.

Ms. Thomson or Mr. Phelan, did you have something to add?

Mr. Michael Phelan: I have nothing.

Ms. Tamra Thomson: That was our opening statement, Mr. Chair. We're pleased to take questions now.

The Chair: Thank you, Ms. Thomson.

Mr. Gouk.

Mr. Jim Gouk: Thank you, Mr. Chair. I have a couple of questions. We have a group of esteemed legal minds here who have undoubtedly studied the bill in order to make this presentation. I'd be curious on one aspect. With airline advertising, one of the things the airlines have been criticized for is advertising Ottawa to Toronto, $100 one way, and then the small print is that it's based on a round-trip fare.

From your perspective, how does that differ from hotels that regularly advertise packages that say $87.50 and then the small print says it's based on double occupancy? So it's really $175, or whatever it is. How is that different in your mind, or is it?

Mr. Michael Phelan: It actually isn't any different. And the question really is whether you should have a special regime where the CTA deals with that, or whether that isn't just as appropriately dealt with by the competition commissioner and his staff as part of the general provisions with respect to advertising and whether it's misleading or whatever.

Mr. Jim Gouk: Thank you. I feel much the same way. I'm concerned that we're singling one industry out to treat it differently from the others.

I have another question, and I've asked this of other groups that have come before us with numerous concerns about this bill. We've heard your concerns and we're certainly going to review those closely. There are two alternatives other than passing the bill as it is and ignoring all your objections, and these are to amend the bill and deal with all your objections and all of everybody else's objections, or to not pass the bill at all.

So given that you have outlined the things you don't like in the bill, after your extensive review, can you tell us the things the bill specifically does that you think are important that it should do and because of which it would be problematic if the bill were not to pass and bring these other good things that exist in it?

Mr. Michael Phelan: Speaking for myself, I tended to focus on the problems the bill posed rather than the solutions it posed. We looked at it more in terms of whether or not it created problems in certain areas rather than trying to assess whether or not this particular provision or that particular provision was good or could be better. We tried to deal with it more by identifying problems.

Mr. Jim Gouk: I would assume, though, that if you're looking at it from a legal perspective to say what's wrong with this bill, what problems does this bill create for us and consequently our clients, then you would also, at the same time, look at the bill to say what's in this bill that actually helps us and consequently helps our clients. I would assume that there would be some, at least cursory, examination of that side of it as well.

Mr. Michael Phelan: With respect, sir, we don't look at it from the perspective of our clients and whether it improves their lot in life or not. We look at it on behalf of the Canadian Bar as dispassionately as we can, and where it's good we don't see a problem. Those, we suggest, are more matters of public policy left to wiser people than ourselves. But where we see legal problems, where through maybe some tweaking it can keep things back in line, then we focus on that.

Mr. Jim Gouk: So in general terms you don't know of anything specific in the bill that you personally would like to see left in the bill.

Mr. Michael Phelan: Speaking personally, no.

Mr. Jim Gouk: Good. That's all, Mr. Chair. Thanks.

The Chair: Thank you, Mr. Gouk.

Mr. Laframboise.

[Translation]

Mr. Mario Laframboise: Thank you, Mr. Chair.

I was reading your submission, and you seem to be definitely in favour of deregulation all across the board, so you do not want any regulation at all in any industry. This creates difficulties because in such a large country as Canada, deregulation has a very simple effect: there is some competition on the lines where there is some population but in less populated areas, it creates inadequate air transportation, rail transportation or other transportation systems. This is the reality.

You give examples, and I want to question them. You mention bank mergers—and I am mainly speaking of your differences on bank mergers—and in the section on Industry-specific competition regulation, you mention, among other things, bills which are before the House of Commons “to deal specifically with the retail gasoline industry“. You mention a bill, namely Bill C-381, and you say: “These examples raise a concern about where this trend will stop“, which is the trend towards regulation. I would simply say that, as far as gas is concerned, the profits made by oil companies on the back of consumers are not human. At a certain time, it is necessary to ensure that nobody in the system goes too far profit wise to the detriment of consumers.

I find that you use very bad examples. You used bank mergers as an example, then you mention the retail gasoline industry. I want to tell you one thing, namely that banks are making enormous profits on the back of users, on the back of poor people, and the same is true of oil companies. And then, you are telling us, with these examples, that we should not make mergers, that we should not let the industry go. But then, there will be only one left or a few ones which are going to control everything and bleed the population white. I find that your examples concerning deregulation are not very appropriate, among others those of the gasoline retail industry and of bank mergers.

» (1730)

[English]

Mr. Michael Phelan: We're trying to decide who wants to jump into the pool.

Mr. John Bodrug: You raise a number of points that are obviously of concern to many people. I think in our principal points here we're really focusing on some of your examples in the merger provisions.

The Competition Act is designed as framework legislation that addresses issues from an economic perspective. Part of what we're saying in our submission is there should be a separation between economic regulation and an independent officer like the commissioner, who is given that kind of economic mandate, from political regulation or political decisions that might be brought into some decision about whether to regulate a particular industry. The commissioner does investigate a number of these industries regularly. I think just within the last couple of weeks he's made a presentation to the industry committee, I think it was, about the gas industry.

So I don't believe our position is that these industries should be completely deregulated. The point is that it is more objective framework legislation from an economic context that should be applied under the Competition Act.

[Translation]

Mr. Mario Laframboise: But the fact that the competition commissioner, with the act he administrates, could not see what people see, namely that oil companies take advantage of certain circumstances to get richer and richer on the back of consumers, shows that it is quite justified to try to have some independent regulation where we will try to manage competition a little bit through a separate legislation.

But what you are telling us in your submission is that the present legislation and the same power should be maintained, that an industry should not be singled-out or that there should not be some separate rules. You want all industries to be under the same rules. But the examples you gave are just a proof to the contrary. Banks and oil companies among others should be, in my view, under stricter rules than the existing Competition Act. Otherwise, the consumer is always going to be the one who pays; they will never stop. There is the difference.

You say the same thing for transport, that we should not use a separate legislation or the Canada Transportation Act to be able to have a framework for mergers. But again, the examples you give are not good examples. They are examples which prove precisely that we should deal independently in the legislation to try to counter banks mergers, to try to see what can be done to prevent oil companies from exploiting consumers and taking advantage of any event, the war or whatever, to make more and more money. That is where the debate is.

I can understand you, except that the examples you give are not good examples, in my view.

» (1735)

[English]

Mr. Michael Phelan: Sir, perhaps the concern you have with respect to the banks or the gas industry is a form of behaviour that some would argue raises competition issues and that leads to the excessive profits.

In the airline industry we have exactly the opposite problem. We don't have excessive profits, and therefore may I suggest that the concerns you have with respect to those other industries are not concerns that really are applicable to the airline industry where competition has so far fostered a number of new carriers and generally been considered a success.

[Translation]

Mr. Mario Laframboise: Except that in the transport industry, it is probably the contrary. Because the country is so large and because we want to ensure that each of the communities has a decent and reasonable transport system, we have to legislate accordingly. You give us examples. You talked about deregulation in regional sectors. You say in your submission that there are very good examples, that deregulation is a good example in the industry on a regional level.

It is true that it is more regional than national precisely because more money is made on the more lucrative lines where there business, the population, thus the number of passengers, and the number of industries in freight traffic are the highest. Still, just because the situation is not good in the industry, maybe we should, in order to protect other communities, ensure that we have some regulation in place to make sure we have an adequate transportation system covering almost the whole territory. Otherwise, if we let it to the free market, only Montreal, Toronto and other big cities will have some transportation. What are we going to do in the rest of the country? Are we going to shut down towns and limit that to big cities?

[English]

Mr. Michael Phelan: Sir, I take it the thesis is to go back to the former regulation that was in place where routes were controlled and so forth. I think that's much more of a public policy debate as to how to deal with the airlines than we're equipped to deal with today.

We're merely suggesting that in this bill there are industry-specific types of merger reviews and other aspects of the competition, such as the pricing, that don't work as well as might have been thought.

The Chair: Thank you, Mr. Laframboise.

Ms. Desjarlais.

Mrs. Bev Desjarlais: To follow up on Monsieur Laframboise, I can see why he was going in that line of questioning, because I certainly got the impression from your statements that you were promoting a deregulated system. Your comment that it's a public policy issue is noted, because I definitely got the impression from your initial comments you were promoting a deregulated system as an answer to some of the competition issues.

I do want to comment a bit further on the whole issue of why you would have it different for one industry and not the other. I think there's an understanding, certainly among politicians--at least a good number who I know--as well as citizens of Canada, that competition within, say, the banking industry or the airline industry is a whole lot different from competition pricing of a bag of toilet paper that is a loss leader between the Shoppers Drug Mart and the pharmacy.

We're dealing with two very different issues. We're dealing with transportation, the safety issues related to transportation, the fact that people need transportation to travel from one place to the other and consider it very much an essential service in the same way with the opportunity of different banking institutions. So I think they're quite different.

It's also the fact that transportation and banking are federally regulated, and what happens at the hotels and the pricing and how they put things in the paper is provincially regulated. So they are two quite different issues. That's why one would be addressed here by us as federal politicians and why the other wouldn't be. It's pretty basic from that perspective.

This may come out as a comment, but you comment on the competition commissioner and the role he might play as being political, and I would agree with that. My question to you would be, would you consider it even more political if you knew that the competition commissioner had donated $1,000 to someone's political campaign?

» (1740)

Mr. John Bodrug: I'm not sure we can comment on that.

Mrs. Bev Desjarlais: You commented that it was political. So would it be more political if you knew they had donated to a campaign?

The Chair: Is that hypothetical?

Mrs. Bev Desjarlais: No, it's an actuality; it's recorded in the public records. It was in the newspaper last night. We'll let it go, but for those who don't know, yes.

The Chair: I think that's being unfair to the--

Mrs. Bev Desjarlais: Mr. Chair, with all due regard, I wouldn't have brought it up except the comment was made that the position of the competition commissioner could be political and the rulings of the competition commissioner could be political. I agree, it could be political. It was verified today, and I think we need to look at that aspect--

The Chair: Could that donation be construed as a job security issue?

Mrs. Bev Desjarlais: I guess so.

I have one more issue here. I'm trying to get all my little notes that I need here.

The Chair: I'm jesting with you.

Mrs. Bev Desjarlais: I haven't had the opportunity to go through your whole report, so I apologize. Is it reasonable to say, then, that your concern is that you believe anything related to competition should not be industry-specific, that it should be the same rules across the board?

Mr. John Bodrug: From a competition, economic-type of regulation under the Competition Act, that's right. If Parliament determines there is a broader public interest, then that's the policy issue. But if it is decided to go down that road, then we think, from an economic perspective, it's completely appropriate to have competition analyzed under the traditional rules that should apply to all industries, and let the commissioner do his job under those rules. If there's a political decision to say notwithstanding that for some other reasons we want to disallow a merger or allow a merger, then that should be a distinct decision from what the Competition Bureau and what the commissioner does.

Mrs. Bev Desjarlais: Isn't that what happened, actually, if we go back to the merger of the airlines? Certain aspects of the competition law were voided or suspended so the merger discussions could take place outside the realm of the competition law.

Mr. John Bodrug: My understanding is there was an order issued. I think it's under section 47 of the Canada Transportation Act. I'm not exactly sure of the scope of it, but it--

Mr. Michael Phelan: Suspense of the Competition Act.

Mr. John Bodrug: But as to that order in particular, I haven't seen the order, so I'm not sure exactly what it said, but it was related to that. Again, that's an overtly political decision. Nevertheless, I think the way the process went on, the commissioner still completed his evaluation on rules that everybody understands.

Mrs. Bev Desjarlais: Actually, with all due respect, as someone who is on the transportation committee, it wasn't a matter of understanding. He more than just evaluated it. It was a fait accompli by the time it came to the transportation committee. I think anybody who was there would agree. It wasn't a matter of anybody doing any kind of review after. The whole thing was planned out exactly down to every bit that was going to happen by the competition commissioner.

» (1745)

Mr. John Bodrug: Well, you may be more familiar with that particular process than I am, but I think we're talking about the right framework here that we think is the right way to go forward.

First of all, our position is that we really don't see why there's a special need for a public interest review of mergers in this industry as opposed to others, because we already have the framework legislation for the Competition Act. But if you do go that route, we're saying the role of the commissioner should be quite distinct from the political decision-making.

Mrs. Bev Desjarlais: Okay. And I think you've clarified what I was trying get at in a roundabout way. You're here representing the Canadian Bar Association. As the Bar Association, you don't think the public policy or the public interest aspect related to mergers should be part of the legislation, but if it is part of the legislation, all the specifics should be in there. Am I correct? You're making the statement that you don't think it should be there, but if it's there, you want all the rules set out.

Mr. Michael Phelan: What we say is the idea of reregulating in some way special competition rules for airlines isn't applicable or isn't necessary. The existing rules work. But you're quite right, if, as a matter of policy, Parliament decides there is some public interest--something over and above traditional competition rules--then separate those processes so it is clear as to where the divide is between a competition analysis and what might be a public interest analysis.

Mrs. Bev Desjarlais: I also was not wrong in suggesting that you were saying that reregulating is not the answer, because I believe from what you have just said, reregulating is not--

Mr. Michael Phelan: Reregulating and deregulating are different things. We are not saying that you need to deregulate, but we say that some of the aspects of returning some powers to the CTA, for example, to pack on their own motion is in a sense a leap backward to reregulation.

Mrs. Bev Desjarlais: In the scope of law not related necessarily to reregulation, but in the scope of laws that would apply in the area of criminal intent, would you consider it going backward if you put a law or a regulation in place so that someone follows through on something? You would consider that going backward?

Mr. Michael Phelan: No, Ma'am, but--

Mrs. Bev Desjarlais: However, in the case of reregulation for industry you would make the statement that it is going backward if it means that it might provide better service to the public.

Mr. Michael Phelan: Perhaps I could finish. There is a difference between leaving the process to generated complaints--in other words, complaints from the public--and having the regulator go out on their own and going back to that kind of regime. What we say is that the existing regime where the complaints come from the public seems to be working. From what we have been able to determine, there is no demonstrable necessity for giving the regulator the power to self-initiate, because where there are problems, the evidence suggests that the public has been more than forthcoming in bringing those problems to the regulator. We are saying that the system currently is working.

Mrs. Bev Desjarlais: Actually I have to admit that I have heard witnesses who have given an indication that the system is not working and that they thought the competition commissioner should be able to go through on his own.

I have the advantage of having been on this committee for five years and have listened to a number of witnesses on transportation issues. Obviously you would not have had that benefit. There have been numerous complaints from people that they thought there were times when the competition commissioner should be able to make presentations also.

Mr. Michael Phelan: We were addressing not the competition commissioner but the Canadian Transportation Agency.

Mrs. Bev Desjarlais: Okay.

The Chair: Mr. Barnes, I apologize. Because of recent events in the last day or so, you should have been taking third place instead of fourth place.

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Mrs. Bev Desjarlais: No, they're not sworn in yet, so just get your act together, man. They're trying to make it.

Mr. Rex Barnes: Mr. Chair, other people are more sensitive than I am. It doesn't make any difference where you sit as long as when you want to ask a question, you can ask it.

Anyway, I apologize for the lateness. I know you've listened to a lot today. I am just curious. If I have it right, you are saying that what is being recommended with regard to outlining the price tag for the airline industry is wrong. Is that what you're saying? No? Everything is going to be outlined, so you are saying it should be the Competition Bureau. Is that what you're saying?

Mr. John Bodrug: I think what we are saying is that the current Competition Act already has misleading advertising provisions. The Competition Bureau has even issued guidelines about total price disclosure, so there is already existing law in a regime in place that should be able to cover this kind of issue to the extent it's a problem. I'm not sure we need to pass more laws to address this, let alone industry-specific laws, because it is the same conceptual issue in airlines as it would be in any other industry.

Mr. Rex Barnes: I don't necessarily agree with the total concept of this bill, but the general public out there would think that the pricing aspect is probably one of the best things they ever came across with regard to guaranteeing the public better competition when they are purchasing tickets. Would you agree with that?

From what you said, you don't think it's right. Competition is under the Competition Act, and why treat one industry better than the other industry? A hotel chain was used as an example. I am just trying to get a feeling of why you would mention that part of it, because John Doe in the general public thinks that's a great thing. We've heard so many people criticize government and the airline industry because we regulate them and we don't regulate the hotel chains. When you pick up a ticket, as was mentioned, it's $100 for a trip somewhere, and all of a sudden, by the time you go to pick up the ticket, I think it is probably $350. They are saying that's why the government has brought in some of this stuff, and probably it's a good thing. But under the Competition Act, that is more so for all industries--all regular industries--other than the airline industry. Would that be correct?

Mr. John Bodrug: It is hard to speak about this in the abstract, but if there is conduct in the marketplace that is misleading to the public and creating a general impression that is false or misleading, then that is a problem today under the law, under the Competition Act.

There are mechanisms. If consumers are concerned about that, they can pick up the phone and call the Competition Bureau. If that's not being enforced and there are real legitimate concerns, then that is a question for the bureau about why it is not enforcing it. The rules are pretty clear.

Where we are coming from with this comment is, there's already a law in place that applies to the economy generally. We just don't see why we need to start piecemealing different industries and having slightly different rules for suggesting that's not a rule in other parts of the economy.

Mr. Rex Barnes: Okay, well, that's basically what we were trying to get at. I think I know what you are saying. I mean, it is confusing. When you look at it as a legal mind, it is totally different.

Mr. Michael Phelan: That can make it confusing.

Mr. Rex Barnes: But, no, it is totally different, seriously. You look at it from the point of view of what is going to happen from the legal perspective rather than the common person on the street who is looking at it.... The common people on the street, if they don't get satisfaction, have to hire a lawyer. Of course, that is where you come into it.

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Mr. Michael Phelan: Sir, actually, if they have a complaint about the pricing, they merely pick up the phone--I think it's a 1-800 number for the commissioner--to deal with that. They don't need to come to see us.

Mr. Rex Barnes: No, but sometimes people may go to lawyers. I don't know. I am saying they may not be satisfied.

You're opposed to the airline industry and the government basically picking the airline industry and outlining what I think it will cost because you feel there are satisfactory guidelines under the Competition Act. That's what you're saying.

Mr. Michael Phelan: Yes, we're saying that because you have the existing law, which seems to be working, and because this act would propose you would end up with the potential of a conflict between the Competition Act and the regulator, the CTA, the rules start to get blurred, and you're better to have certainty.

Mr. Rex Barnes: Okay. That's what I thought you were saying in a roundabout way. I understand what you are saying now anyway.

If this bill gets passed, is it in the best interests of the public, as you see it, from what you've visited in this bill? I know you didn't look at the good bill. If your concerns just went out the door tomorrow and nothing we said today was important so that we tried to make a change in it, say, is going ahead with this bill in the best interests of the public?

Mr. Michael Phelan: I'm not sure that we, on behalf of the CBA, can say whether the bill is good or not. And since none of us here have run for office or have been elected, I leave that, I suggest, to you people.

Mrs. Bev Desjarlais: If we were cynical, is it good for lawyers?

Mr. Michael Phelan: Not that I can see.

Well, I think as I tried to indicate in my remarks, it is going to create a lot more work for lawyers, but I'm not sure that's a good thing in the public interest.

I can't really comment on the bill as a whole. I focused on certain areas that related to the competition policy. I think we've identified some areas there that raise some real concerns.

We're not with Aikins, MacAuley, so we're not worried about it.

Mr. Rex Barnes: Okay. I understand why you would say that. That's about all. I appreciate your concerns on that. I am sure that when we sit down and listen to it and try to hash it out...I don't know what will come out of it. But there is no doubt there are concerns with the general concept of the bill.

Thank you, Mr. Chair.

The Chair: Thank you, Mr. Barnes

I'll ask a question. I have just one. There is so much confusion....

First, Ms. Thomson, are you with the Law Reform Commission?

Ms. Tamra Thomson: No, the Canadian Bar Association.

The Chair: I was going to ask you where Rod Macdonald has got to because he was the--

Ms. Tamra Thomson: You'll have to direct that question to the law commission.

The Chair: Don't you know?

Ms. Tamra Thomson: There are 60-some thousand lawyers in Canada. I'm not sure where all of them are at any given time.

The Chair: He was chairman of the Law Reform Commission; he wasn't just some lawyer in Canada.

Insofar as fair pricing is concerned, we have a perfect model, I think, within the marketplace that has been developed over a number of years by the automobile industry. When they put a price in the newspaper or on television about the delivery of an automobile, they have to deliver that product at that price. If they have a picture of the car, there has to be a statement that it's not as shown. And if someone comes into the showroom, they have to deliver that car. In the event that they should advertise that car and don't have a car like that in inventory, they can be charged. I know of some who have.

Why are we spending so much time trying to decide whether a navigation tax should be charged on an airline ticket or whether it's a one-way or a two-way? Why don't we follow the models that are working? And for the automobile business products it is working. It took a few years to develop, and there were a lot of problems.

Can you explain why we don't adhere to those principles and not talk about all this other nonsense we're talking about?

Mr. Michael Phelan: I'm not sure of the model you're talking about. Is it that there's a suggested retail price?

The Chair: Absolutely, and there is a caveat that the dealer may sell for less.

Mr. Michael Phelan: As it stands now with airline pricing, there are the normal caveats that some of the prices they advertise may not be available. It's a little like sale prices. The model, to some extent, in the airline industry is similar to the furniture business or any other sort of commodity. You'll have sale prices that come with certain conditions. That's not different from any other sort of pricing.

I'm not sure that pricing for the seat itself is particularly different. The airline industry does have the unique problem of government charges. And I know, from the airline industry, that they're not happy with having those government charges included in their price and they would rather have those more distinctly shown.

The Chair: Mr. Phelan, I hear what you're saying. They don't show this tire tax, the air conditioning tax--there's a host of taxes that are built into that price. When they advertise that price they have to have an all-inclusive price.

I don't know why we're spending a lot of time on this issue. I understand we're going to get out of here in a minute. This committee is hearing a lot of evidence on that subject, and it just seems so simple.

Mr. Michael Phelan: As the CBA, we can't really talk about what the airline pricing should be, but it's much more about the regime for its disclosure and whether or not the existing laws work.

¼ (1800)

The Chair: Well, I'm sure the airline industry has the same problems as any other industry...and the automobile industry, which is our biggest industry, as you know. I don't know why they have to start fooling around on pricing and why we have to spend so much time in this committee on whether you get a $100 ticket for $200 or not.

Ms. Thomson, I thank you very much, Mr. Bodrug, I thank you, and Mr. Phelan, I thank you for coming.

Mr. Michael Phelan: Thank you, sir.

The Chair: The meeting is adjourned.