I call this meeting officially to order.
Welcome to meeting number 31 of the House of Commons Standing Committee on Finance, and the first panel. Pursuant to the order of reference from the House of Commons, we are meeting on the government’s response to the COVID-19 pandemic.
Today’s meeting is taking place by video conference, and the proceedings will be made available on the House of Commons website.
I would certainly like to welcome all of our panellists. If you could try to hold your remarks to about five minutes, it will give a little more time for questions. This panel is about public transportation, but we'll likely veer a bit away from that from time to time.
To start with, we'll go with the Air Transport Association of Canada and John McKenna, president and chief executive officer.
The floor is yours, Mr. McKenna.
Good afternoon. My name is John McKenna, and I am the president of the Air Transport Association of Canada. I thank you for inviting me to appear before this committee.
I want to switch to French for one second.
For technical reasons, I will speak in English, but I will be happy to answer your questions in the language of your choice.
ATAC has represented Canada's commercial air transport industry since 1934. We have 180 members engaged in commercial aviation, operating in every region of Canada. Our members range from flight training organizations; local air taxis; and regional carriers that serve remote, northern and indigenous communities to very large carriers servicing Canada, the U.S. and international destinations for both business and leisure travel.
We welcome the opportunity to comment on the devastating impact that this pandemic and its containment measures are having on our industry. Although we support the government in its actions aimed at curbing the spread of COVID-19, containment and restrictions on air travel have had a truly horrendous economic impact on most segments of the air transport industry, with traffic and revenue down to less than 10% of usual levels.
Many of our members have ceased operations altogether. Air operators are counting on a financial aid package from the government, while some operators struggle to continue servicing northern and remote communities that rely on air transport for survival.
I believe that a significant number of air operators will probably not survive, unfortunately, and the quality of air services to Canadians will undoubtedly suffer.
Canada is lagging behind, as most foreign governments acted within weeks to come to the aid of their aviation industries, including the U.S.A., Australia, Brazil, China, Denmark, Finland, Germany, Hong Kong, Italy, New Zealand, Norway, Singapore, Spain and Sweden. Meanwhile, our letters to the , the , the , the and the remain unanswered.
Our industry is capital-intensive, with very high fixed costs. While little or no revenue is generated, operators still have to pay for their aircraft through loans or leases, insurance, basic regulation-required airworthiness upkeep, hangars, and parking fees in addition to all the other normal business overhead costs.
So far, the government has tabled the Canada emergency wage subsidy, which can only help pay for a skeleton staff when operations are all but stopped. Canada's large employer emergency financing facility program is interesting, but its $300-million threshold eliminates the vast majority of air carriers. We estimate that only five or six carriers qualify for this program, while over 30 other carriers—key socio-economic enablers in their regions, and critical to Canada's connectivity—are left out.
The Canadian government must recognize the critical role that aviation plays in Canada. Without immediate government help, many Canadian air operators will not be around to provide their critical service and its enabling role in the economy at the beginning of the long recovery when they will be most desperately needed.
The critical government financial aid package would also avoid greater economic damage by ensuring that operators can rapidly scale up when travel restrictions are lifted and quickly contribute to jump-starting the Canadian economy. However, some airlines may require more than loans if they are to continue providing essential service to Canadian communities.
Our industry is facing two major challenges. The first, of course, is short-term survival. The other is the uncertainty of what our market will look like coming out of this crisis, which is best summarized by the following questions: How long before people are willing and able to travel by air again? When will foreign borders open up and remain open? What health and safety restrictions will the government impose on our operations? Will those restrictions make the cost of flying prohibitive?
We expect that the impact of COVID-19 will last much longer than initially thought and that recovery will be very slow—and, unfortunately, even impossible for a number of us.
A comprehensive government action plan will help the air transport industry save over 55,000 direct skilled jobs, and many times that in indirect jobs; maintain essential connections; transport people who require medical treatment; deliver life-preserving supplies; and overall, be a key enabler for the recovery of the Canadian economy.
I thank you for your attention, and I am happy to answer any questions.
Thank you very much, sir. I apologize.
Thank you for allowing CUTA to appear before the committee today.
Let me start by directly addressing what I know many of you are asking: Why is keeping buses and trains running a federal issue? Why am I not appearing before a provincial committee? Very simply, why is this your problem to fix?
It's because in a time of national crisis, we need national leadership, the kind of national leadership that's been on display in Washington and London, where national governments believe public transit is in the national interest. That's the national leadership we need in Ottawa to bring provinces to the table, and I'm hopeful it will come. I know that the government knows how important cities are to this country and how important transit is to our cities, but the pandemic has hit transit hard.
Let me start by explaining where transit systems are today. Some of my colleagues on the panel can also speak to it in more detail.
Service has been reduced in many cities. Layoffs have been widespread. At the height of the lockdown, many systems saw ridership fall by 90%. In many cases, revenue was down 100% in systems that allowed for rear-door boarding to protect drivers and that did not collect fares. Let's not forget that transit isn't just within cities. For large parts of the country, it's how people in smaller towns and cities can get to larger centres. It's through some of our other providers. Private providers saw ridership and revenue plummet by about 95% in the same time.
None of this is news. None of it's surprising. When we lock down, people don't take transit as much, but let's think about the roughly one million people a day who are continuing to take transit. They're doing essential work on which we all depend. They're disproportionately low-income people. They keep our grocery stores running. They clean our hospitals and nursing homes. They are the most likely to take a bus to work.
When transit systems collapse, here's what will happen: After a day on the front line, a nurse may wait longer to see his or her family. The grocery clerk will have to get up earlier to spend a day in harm's way. Vehicles may remain crowded.
These people don't deserve a lesson on jurisdiction. They deserve better than hearing why airlines can be helped, but not them. What they deserve, and what Canadians deserve, is a recognition that allowing cities to fail because their transit system has failed is no plan at all. It's no plan for the essential workers we transport today. It's no plan for our cities as the economy begins to reopen. It's no plan for a long-term recovery in which transit systems will simply not be able to take part because we can't keep running our buses and trains empty forever.
I know the federal government doesn't want this problem, but I believe it can help solve it. It knows how important transit is to our cities. The government wants transit to keep running for those essential workers who depend on it every day, and because it will need to be there tomorrow, as the economy reopens. As has been said so often during the pandemic, the fact is that we're all in this together, the federal government included.
That is why I'm here: to ask for your urgent help, because time is running out.
Good afternoon, Mr. Chair and members of the committee.
Thank you for the invitation to join you today. The City of Winnipeg appreciates the opportunity to appear before the House of Commons Standing Committee on Finance this afternoon.
I'd like to provide you with a brief overview of our current situation in public transit as well as our broader transportation and utility systems.
In recent years the City of Winnipeg has been working on a number of initiatives to make public transit more effective and affordable. This trend has continued in 2020, with Winnipeg's commissioning of stage 2 of the southwest rapid transitway, which was achieved well under budget and ahead of schedule. Work is also proceeding on the development of Winnipeg's transit master plan.
However, the COVID-19 pandemic has changed the landscape for municipal services, confronting all city programs and services with major challenges. Our city as a whole is anticipating a cumulative shortfall of $73 million in 2020, provided the impacts of the event have subsided by the end of August. Impacts of COVID-19 beyond the end of August could be expected to have even more severe financial implications.
Winnipeg has implemented a COVID-19 management plan to help mitigate the effects that the crisis is having on the City of Winnipeg. This plan includes public transit service reductions and staff layoffs. Still, even with these measures, there will be a drawdown on the city's financial stabilization reserve fund.
The delivery of public transit has proven to be a substantive part of Winnipeg's operational challenges. Ridership has fallen by approximately 72% since the same period last year. As of April 30, Winnipeg Transit's lost revenue has amounted to $7.1 million, and this amount could rise to $28 million by the end of 2020. As a result, Winnipeg Transit has reduced service by introducing an enhanced Saturday schedule on weekdays and has made the extremely difficult decision to lay off 246 bus operators on a temporary basis.
These layoffs are in addition to the 674 staff who were laid off as part of Winnipeg's COVID-related closure of recreation centres, pools, arenas and libraries, for a total of 920 COVID-19-related layoffs to date.
In addition to regular transit operations, the COVID-19 crisis has greatly complicated the opening of stage 2 of the southwest rapid transitway and the launch of other transit programs, such as Winnipeg's low-income bus pass. Furthermore, the impact on customers could extend well into the COVID-19 crisis, and even beyond. How long it will take to rebuild transit ridership is a crucial but open question.
The impact of the crisis on our employees is also a concern for the City of Winnipeg. Following the temporary layoffs, some employees' confidence will undoubtedly be shaken. Some may take early retirement and some may seek employment elsewhere. As such, Winnipeg Transit faces not only the challenges associated with lowered workplace morale and increased workplace stress but also the real, tangible costs associated with workplace turnover and the need for additional overtime, recruitment and training that result from turnover. Underlying and further aggravating all these issues is the unprecedented uncertainty the city is facing going forward.
In response to this challenge, the City of Winnipeg has quickly and effectively adapted the manner in which it provides transportation and utility services.
Some examples of this include the Winnipeg Fleet Management Agency's new protocols to protect staff, including the rental of additional vehicles to ensure safe physical distancing.
The Winnipeg Parking Authority has relaxed parking enforcement in recognition of altered patterns of activity and physical distancing needs—not, however, without further negative financial implications.
To protect staff and the public, Winnipeg's Water and Waste Department has suspended many regular in-home services and has also suspended water turnoffs for nonpayment of bills and late fees.
To ensure proper physical distancing, Winnipeg's public works department has developed new flood control operational protocols for activities such as filling sandbags and building dikes.
Traffic signal timings have been adjusted to accommodate the changing volumes of traffic on city streets, and solid waste and recycling crews have been stretched as the volume of residential garbage and recycling has increased significantly.
In response to the changing operational landscape resulting from the COVID-19 pandemic, Winnipeg Transit, as a front-line service provider, has also implemented comprehensive cleaning and safety protocols.
Winnipeg's transportation and utility staff, and staff across all City of Winnipeg departments, have made exceptional efforts to meet the goals of the Winnipeg pandemic recovery framework.
I would like to take this opportunity to thank the City of Winnipeg staff for their commitment and adaptability, and also the residents of Winnipeg, who are working with us to slow the spread of COVID-19. In an uncertain time, we appreciate the certainty of their goodwill.
Thank you again for the invitation. I would be happy to take any questions you might have.
Good afternoon to the committee, and thanks again for the invitation to speak today.
I'm Stuart Kendrick, the senior vice-president of Greyhound Canada. I've proudly worked for this great company for 33 years. I started as a baggage handler in London, Ontario. Today I'm the person responsible for managing Greyhound's business in Canada.
Almost immediately after the COVID-19 lockdown began, our ridership declined by 95%. Despite our best efforts to reduce costs by gradually reducing service, and our significant outreach efforts to the government, we simply could not continue operations without financial support. We do not receive any government subsidies like some of our competitors, such as VIA Rail and some municipal and provincial transit operations that also provide intercity travel. We're completely reliant on the fare box revenue to survive.
Greyhound is also a member of a coalition of regional intercity bus companies from across Canada whose operations have been similarly impacted. These companies include Wilson's Transportation, which operates in the province of British Columbia; Maritime Bus, which operates in P.E.I., New Brunswick and Nova Scotia; Orléans Express, which operates in Quebec; and Coach Canada, which operates in Ontario and Quebec and into the United States, as does Greyhound Canada.
Before COVID-19, the coalition employed about 1,400 people, serviced hundreds of communities across the country and carried several million Canadians annually, but on May 12, after incurring weeks of significant losses and with no financial support from governments in sight, Greyhound suspended services in Canada. This shutdown has meant that approximately 400 Greyhound employees in Ontario and Quebec have lost their jobs, and our customers were left without service.
I want to spend the rest of my time with you today talking about our customers.
Thirty percent of our riders are students. We help them get to college or university and to visit their families for the holidays. Not everyone in this country has parents who can afford to fly them home for a long weekend or who have a car to drive hours to pick them up. They rely on us, the bus carriers.
Twenty-five percent of our riders are seniors. Often on fixed incomes, seniors ride our buses to get to medical appointments in the city when the care they need isn't available in the small town or rural community. They ride our buses to visit grandchildren. They don't want to drive, or are not interested in driving on a busy highway. They rely on the bus.
Sixty percent of our riders are women. Among them are single moms who need an affordable and safe way to travel with their kids. Our services are how they take their kids to the city to see friends and extended family, or for a special weekend, assuming they can afford some leisure travel. Our buses provide safe and comfortable transportation for women travelling to the next town for a job interview or to Women's College Hospital in Toronto for medical appointments. They rely on Greyhound.
Before the pandemic hit, 15% of our riders were unemployed and 40% of our riders were people with a household income below $25,000 annually. To be sure, these are not folks who are going to benefit from an airline bailout, as important as that may be. They're not Bay Street people. They're Main Street Canadians from small towns, rural communities and inner city neighbourhoods who are just trying to get to where they need to go. Whether it's for work, for family visits, or for some leisure travel when they can afford it again, they rely on the bus. These are the people hardest hit by this crisis: women, students and the working poor.
I'm here to tell you that as people start moving around again and as the economy opens up, these are people who are going to need affordable, reliable intercity busing to help them look for work, go to medical appointments, and finally, see their families again.
We have been asking the Government of Canada and the provinces for help. For the sum total of $26 million, the five members of our coalition could operate on a break-even basis by running at 50% of our pre-COVID capacity for six months.
In that regard, we noted ' recent statement to the CBC that there will be something for intercity busing “quickly”, he said.
We need your help so we can be there for Main Street Canadians. I urge this committee to give intercity busing a lifeline so that we can survive this difficult time and be there to provide transportation services to Canadians when the economy rebounds.
Thank you, committee, for giving me the opportunity to speak. I would be happy to take any questions.
Thank you for having me appear before the Standing Committee on Finance. I am president of Groupe Autocar Jeannois, a company specializing in passenger transportation, specifically tourist charters. I am also president of the Fédération des transporteurs par autobus, which represents all types of passenger transportation in Quebec.
The announcement of the pandemic shook the bus industry in Canada and Quebec. All sectors of the industry's activity have been hard hit, especially tourist charter transportation. That is what I will talk about today.
In contrast to some industries that have remained partially operational, the tourism industry and the charter travel sector had to shut down all of their operations overnight. For us, the carriers, this represents a loss of $21.5 million in revenue per month since the beginning of the pandemic, in Quebec alone. It has never happened before. For your information, in my company specifically, which normally operates 45 vehicles in this industry, everything has shut down. As of June 30, losses will total about $3.1 million.
No one can predict if the recovery will happen soon. In this context, carriers need government support tailored to their reality. Passenger transportation by bus is essential for all Canadians and Quebeckers, as well as for those who come to discover our province or our beautiful country.
In Quebec, the chartered bus travel industry generates annual business of more than $240 million, not counting the associated economic spinoffs. If you include the rest of Canada, you could say the industry is huge. In Quebec alone, approximately 4,000 direct employees in over 160 independent companies operate more than 530 coaches in Quebec and the other Canadian provinces.
Beyond these numbers, all our sports teams travel from city to city to compete in numerous tournaments throughout Quebec and outside the province. Every year, our young students discover the impressive wonders and fast-paced life in major Canadian and U.S. cities. We must not forget our seniors, as well as the people and organizations that visit our museums and frequent the many performance venues. Everything has stopped. All entertainment, in all regions of Quebec, is shut down.
Charter transportation is therefore on full pause. The current crisis is forcing the cancellation of all these activities, which include numerous guided tours in all our major cities and, above all, our many tourist routes travelled by an impressive clientele from every corner of the world.
Since March, in Quebec alone, 18,000 contracts have been cancelled. For the period from March to June, this represents gross losses of $86 million in sales, or approximately 35% of the carriers' annual sales. If the crisis persists beyond the summer season, losses could total an additional $103 million, which would represent another 45% loss of our annual sales by the end of October. Because of the type of services we offer, it is during these periods of the year that our organizations conduct more than 80% of their business. These are colossal losses that jeopardize the survival of our organizations.
Independent carriers have a large structure and significant capital assets to support. Their level of financing, which is already very high, is marked by the purchase, maintenance and storage of a sophisticated and very costly fleet of vehicles.
For my organization and similar businesses in the industry, the catastrophic financial losses and the complete shutdown of operations have resulted in significant damage of another kind: the loss of our specialized workforce. It is difficult to retain professional drivers who must continue to work. Most of them turn to transportation companies of all kinds. In addition, despite capital tax holiday agreements, our financing structure and significant capital assets do not permit us to accumulate new loans.
Government support to meet our current cashflow needs is provided in the form of loans. To resume our operations and adopt all the measures for the safety of our employees and customers, financial and structural accommodations will have to be made.
Our industry has been hit very hard. However, because of the type of business we are in, we cannot reinvent ourselves to offer other types of services, as other industries are currently doing. Our industry will be one of the last to reopen and our financial burden will still be there. At the moment, we are facing a total lack of revenue.
Passenger transportation will be a key sector for the recovery of the Quebec and Canadian tourism industry. If this critical situation persists, hundreds of jobs and dozens of buses will not be there to adequately serve travellers and the general public.
Our industry needs special support so that Quebec's 160 companies can continue to help travellers from here and elsewhere discover not only our province, but also the other Canadian provinces. I include in this number all Quebeckers who visit the rest of the country.
If they receive adequate support to get through this historic crisis, our transportation companies will be ready and able to participate in the recovery of the tourism industry and the Canadian economy as a whole.
Thank you very much. I am ready to answer your questions.
Good afternoon, honourable chairman and members of the Standing Committee on Finance. Thank you for inviting me today to discuss the impacts of the COVID-19 pandemic on public transportation.
My name is Kelly Paleczny, and I'm the general manager of the London Transit Commission in London, Ontario. I also serve as chair of the board of the Ontario Public Transit Association and I am an executive member of the Canadian Urban Transit Association.
I've been invited here today to speak to you on behalf of the London Transit Commission. Based on ridership, we are the 15th-largest transit agency in Canada. In 2019 we moved 24.9 million passengers and collected $34.2 million in revenues.
Our transit service provides Londoners with access to their community, bringing patients and employees to our city's hospitals, students to local high schools or Western University or Fanshawe College, workers to our industrial parks, or shoppers to every corner of our city.
Prior to mid-March of this year, the London Transit Commission was beginning work on an exciting new infrastructure project to bring bus rapid transit to London. The federal government committed to investing $123 million in our rapid transit initiative and supporting projects in 2019. The accessibility, frequency and reliability of public transit were set to improve in our fast-growing city. Our mayor has also recently outlined his intention to transition our fleet to zero-emission buses in the near future.
Then the pandemic hit. In response, in the interests of public health and in an effort to continue moving essential workers to and from their workplaces, our transit agency, like hundreds of others in Canada, moved to rear-door boarding of buses to encourage physical distancing between drivers and passengers. We also heightened cleaning and disinfecting of our fleet and maintenance facilities, among other measures, to ensure that the transit service is offered in a safe and sanitary environment for all.
These measures have been rolled out while our transit agency has forgone the collection of revenues in the interests of public safety. This deprives the London Transit Commission of our largest revenue source, but the service must continue to operate for essential workers as they continue to battle the pandemic.
In an effort to address the budget shortfalls associated with the lost revenue, London Transit has reduced service levels to approximately 70% of what they would normally be and cancelled the service improvements planned for the fall of this year. We have depleted two of our operating reserves in order to cover shortfalls through June and have now put the city on notice that we are out of funding options.
As in other provinces and territories, municipalities in Ontario are prevented from running deficits. This means that there is not much of a local funding backstop available for transit agencies in their hour of need.
It's critical for higher orders of government to support transit, given that they have the fiscal tools at their disposal that city governments lack. We urgently need federal and provincial support for emergency operating funding. This support will avoid doing decades of damage to our transit networks and reinforce our ability to decarbonize the public transit sector.
As our communities slowly begin to reopen and as our economy begins to rebuild, it's critical to have well-functioning public transit systems. We move people to jobs, appointments, attractions, classes and pretty much everything in between. We cannot afford to have our transit agencies on their knees and contemplating service cuts and layoffs while customers continue to return to our service.
Just this past week, as Ontario slowly began to loosen restrictions, we saw ridership increase by 10% over the previous week in London. Service reductions at this time will hamper our local and national recovery efforts and could encourage transit riders to move back to their cars.
I would like to thank members of this committee and members of the House of Commons for coming together to support Canadians during the pandemic. Your work and dedication have been exemplary. So, too, have been the efforts of front-line transit workers. It's time to support those efforts to ensure that our communities have the safe and reliable transit services they deserve.
Thank you for the opportunity to address the committee. I would be pleased to answer any questions.
I wanted to thank you for giving the Canadian Ferry Association a voice at the committee.
Our members transport over 55 million people, 22 million vehicles, and billions of dollars of goods—at least, they did until COVID-19. Ferry operators have seen a dramatic drop in ridership, which is to be expected with the situation we're in. However, as they provide a vital link to the communities they serve, we were asked to continue to provide similar services.
It's a vital link, yes, but who will pay the bill?
Let me first congratulate the elected officials, their political staff and the public service on the impressive effort to support Canadians and the Canadian economy during this crisis. However, when programs are created so quickly, they often need to be tweaked to better reflect the reality on the ground. This is not an exception.
I will raise three specific issues: eligibility under the Canada emergency wage subsidy program, with two examples, BC Ferries and the Ottawa River ferries; a program for vital transportation service; and the financial impact of temporary measures, should they be prolonged.
Let me give you the example of BC Ferries, which represents 35% of our sector. It provides crucial linkages to coastal communities in British Columbia. Some of you are living in those communities right now. It is a private company created by provincial legislation to deliver coastal ferry services in the province. It has one owner and is a not-for-profit corporation, but for tax purposes under the Income Tax Act, it is recognized as being owned by the Province of British Columbia. Eighty per cent of its revenues come from ferry users. With a decline of 80% in traffic, the losses have been staggering for the company, in the range of $1 million to $1.5 million per day.
Due to the unique nature of its ownership, its only path for eligibility under the Canada emergency wage subsidy program is to be declared a “prescribed organization”. Provincial ministers have written to their federal counterparts, and we have raised this issue ourselves numerous times. To date we do not have a response.
If BC Ferries is not designated as a prescribed entity, rest assured that this will have a dramatic impact, not only on the company, but on the whole sector in Canada. BC Ferries is a world leader in its class and is recognized as such internationally. The impact will be felt on the environment, on employment and on the recovery of the communities served.
This committee could recommend that BC Ferries be made a prescribed organization under the act. We hope you will act on this.
Some of our members, mainly located around the Ottawa River in Quebec and Ontario, as another example, are not eligible for the Canada emergency wage subsidy program as they had no revenues in March, April and May of 2019. This is due to the flooding that year from the Ottawa River, which prevented them from operating their ferries until mid-June to late June of 2019. These operators, their employees and the communities they serve see themselves victimized three times: by the flooding in 2019, by COVID-19 in 2020 and now by the inflexibility of the program. Surely we can't turn to them and say that they would have qualified if only one disaster had hit them but not if they have two disasters. Common sense will hopefully prevail.
We also need a program for vital transportation services, especially for those regulated by the federal government, regardless of the technicality of who owns them. They provide a service that is vital for Canadians and they need to be supported. They include private companies such as Oceanex, municipalities, first nations and provincial agencies. We can't ask organizations to keep delivering services for extended periods of time while getting no or almost no revenues from them and receiving no support.
I would like to raise one last issue. We also need to look at the impact of rules put in place by Transport Canada. One of those rules, as an example, asks that operators in some cases limit ridership to 50% of their usual capacity. This rule ends on June 30, but could be extended. If it is, who will compensate ferry operators for the continuing losses they will incur? We need some clarity on this question.
We have raised these issues numerous times. Most senior public servants we've talked to indicate that we're making a compelling case for both BC Ferries and our members affected by the flood to be included in the Canada emergency wage subsidy program. We just need to get it done. There is a clear need for organizations that provide vital links for Canadians. The government needs to urgently provide clarity.
Thank you for the question, Mr. Ste-Marie.
Currently, not many programs help our industry. Provincially, there are loan programs and training assistance programs but no direct support for our industry. We are not covered by any existing Quebec program, from the ministry of tourism, the ministry of transportation or the ministry of the economy and innovation.
Of course, our industry is very much tied to the tourism industry. Group travel contributes to Quebec's economy and the country's economy, and it allows foreigners to invest in our region.
We are looking at possible support measures. Financial assistance will be required for the recovery. We do not yet have any information that will apply to the buses, but there will be a limited capacity in terms of passenger numbers and measures to be observed. A bus that is not filled to its maximum capacity incurs costs, which we cannot pass on to our customers. We must remain competitive. We compete with many organizations around the world that provide the same services we do. We will certainly need help to overcome this challenge.
In addition, we have incurred losses and we are making zero income. If the crisis persists beyond 2020, and even into 2021, many businesses will find it difficult to meet all their financial commitments. Fixed costs also continue to add up.
My questions are for Mr. Buy.
Mr. Buy, thank you very much for your very moving presentation. First, I would like to make a comment on the last case raised, the one from British Columbia. To my knowledge, the Minister of Finance has the authority to change the wage subsidy program, and if the company in question were a purely public company, the government would be able to give it the subsidy.
I would like to come back to the ferry situation on the Ottawa River. I was flabbergasted when you said that, if these companies had been hit by one disaster, they would have been eligible for the subsidy, but because they have been hit by two disasters, the government is letting them down.
Have you asked the government about this, and did you get a response?
Thank you very much, Mr. Chair.
My question is for Mr. Kendrick. I'm picking up on something that Todd Doherty asked.
As you know, because you're the person quoted in all the news stories explaining to British Colombians and Albertans, we are losing Greyhound service. As you know, because you used to run it, there's no service between many of the communities in rural British Columbia and Alberta. If you look right across Canada, Saskatchewan has lost its bus service and the Maritimes have lost their bus service. I'm looking pre-pandemic and wondering whether anyone can make a case that this was a model that was working. As Mr. Doherty suggested, you have monopolies on the lucrative bus lines, particularly the ones in Ontario on Highway 401.
What would work better?
I'm then going to turn to Mr. D'Angelo to ask for more of a public-sector response. However, from the private sector, I really feel that you let us down.
Mr. Kendrick, I'm being honest with you. I'm really angry that you went ahead and cut the services in British Columbia, and you never spoke to the provincial minister, according to her statement. Minister Trevena and the media said Greyhound did not reach out to her first to ask for help before cancelling all those services.
I'll also add to this, that the missing and murdered indigenous women and girls inquiry linked the lack of public transit to why the marginalized, indigenous and vulnerable women were hitchhiking.
In your mind, what would have made that model work?
I'm going to ask the same question to Mr. D'Angelo.
Thank you very much for allowing me the opportunity to speak.
I'll just give you a bit of background on Air Tindi. We have been operating in the Northwest Territories for the last 32 years, based out of Yellowknife. We are one of the larger employers in the city of Yellowknife—prior to COVID-19. We have about 200 employees, and 75% of our employees are Northwest Territories residents.
Our operation consists of basically servicing the north and the vast geography of the north. We have scheduled services, medevac flying, charter flying and specialized operations. Our scheduled services are all to remote communities. Most have no road access, so we're on short, unpaved runways. It's about 18% of our business. We fly scheduled flights from Yellowknife to Fort Simpson, Gamètì, Wekweètì, Whatì and Lutselk'e. For a short term—for Michael there—we also flew to Fort Resolution on a scheduled flight.
We're the dedicated medevac provider for the Northwest Territories. It's about 25% of our business. Medevacs typically go from communities with no road access and only a small nursing station to larger centres such as Inuvik and Yellowknife, as well as Edmonton. Some of the medevacs we do are from extremely remote areas, such as the barren lands and the Arctic Ocean whale camps. We use off-strip aircraft for that, so they're on floats, skis and tundra tires. Right now, believe it or not, they would still be on skis in a lot of the north.
Charter operations—fly-in, fly-out—consist of operating mines, infrastructure requirements for the territory and government flights, and they are 16% of our business.
However, the vast majority is specialty operations. That's 40% of our business. That's operations in to abandoned runways, lakes, eskers and the tundra. That's specialty flight crews and specialty aircraft.
The Northwest Territories is pretty unique, as is Nunavut. There's a small number of airports—27 airports—in the Northwest Territories, but we actually use hundreds of landing spots per year. Those flights are for indigenous support, wildlife surveys, environmental monitoring, exploration and tourism.
Air Tindi has partnerships with indigenous organizations, including joint ventures with equity stake, in the following regions: Inuvialuit in northern NWT, Dehcho in western NWT, Tli?cho in central NWT, Akaitcho in eastern NWT, Kitikmeot in western Nunavut, Kivalliq and the Baffin area.
COVID-19, as everybody is aware, has an extreme impact on aviation. Air Tindi was not immune to that. In mid-March, we took bold, drastic steps to ensure our survival. Come April, we saw an almost immediate impact: a reduction in our revenue by at least 50%. That's played through in May as well, and it looks like our entire summer. Our best guess is June 2021 to see a slight uptick. Our business is highly seasonal due to the 24 hours of daylight in the Northwest Territories and the lack of airports. Usually, you're using the summer season with more light and better weather to do your flying.
Basically, right now, our medevac contract is our only consistent source of revenue. A closed Northwest Territories border does not realistically allow for non-Northwest Territories residents to stay employed while ensuring our social responsibility to reduce spread. We've had to lay off as much as 40% of our staff. We reduced our scheduled flights by 70%, and we had salary and hiring freezes, management salary deferrals, and deferrals or cancellations of other compensation programs.
The industry in the north has seen pretty much the same. There are some airlines—such as North-Wright Air out of Normal Wells, the Sahtu connector—that have shut down all scheduled flights during the containment phase. Others have drastic schedule cuts, and some tourist-based airlines will not survive this, as well as, I hear, some rotary-wing and other companies. There are some airlines that have received the majority of the relief and have not made any cuts.
Relief for us has been very important, very critical. The Northwest Territories government has been working well outside of nine to five to support our business and the important operations that we provide for the north in everything from health and food security to emergency response.
They advanced our medevac contract fees of $1.2 million for a couple of months.
The Canada emergency wage subsidy has been incredible for us. We were able to bring back all of our employees in April, but that's with a sombre warning that it's due to subsidy only and not due to revenue. Our estimation of 2020 and 2021 revenue will likely mean Air Tindi will be 60% of our former size and many positions will be terminated when the emergency wage subsidy ends.
We were able to take advantage of the northern essential air service program. It's for the Northwest Territories, Yukon and Nunavut. That was for scheduled carriers to maintain a minimum amount of service. We received $1.565 million, which allowed us to increase our scheduled flights by 10%.
We've done everything we could, including payment and insurance holidays from our lenders.
The BCAP has also been influential in securing an additional line of credit.
If further relief is not received, Air Tindi will have to go further and further into debt to survive. That model may not be survivable long term. We'll have to continue taking bold, drastic action to survive until next summer, and then continued relief in the form of grants or the emergency wage subsidy.
In 2021 we will be a much smaller company, with 40% fewer employees. We're hoping that will be enough.
With the economic impact of the closed Northwest Territories border, there are severe constraints on mining, infrastructure, exploration and tourism. With the vast geography of the north, the territories in particular, the Northwest Territories and Nunavut, the transportation costs are the largest hindrance to recovery and growth.
Government subsidization of those transportation costs for infrastructure support and development, mining and exploration, remediation, and tourism we think is key for economic stimuli.
In closing, Air Tindi is very thankful for the federal support—the emergency wage subsidy, BCAP and the northern essential air service program. I would like to caution that it should be not just for scheduled service carriers but also for tourism outfitters and the other ad hoc-type contract charter carriers that are very critical to the north and were not applicable.
Without further support, we may not be able to survive the pandemic. Economic stimulus in the form of a transportation subsidy is essential for long-term recovery and economic growth.
Thank you very much, Mr. Chairman and members of the committee. It's a pleasure to be with you this way.
More than any two countries in the world, the U.S. and Canada make things together as integrated economic partners. The U.S. sells more goods to Canada than to any country, more than it sells to China, Japan and the U.K. combined. That is why we believe that both countries must stand for a strong, common cross-border manufacturing response as we tackle the COVID-19 public health crisis and help our shared economies rebuild and recover.
Specifically, we believe that our two countries must continue to work together on a collaborative manufacturing response to COVID-19 to achieve the following basic four objectives: securing the availability of personal protective equipment in both countries; designing Canada-U.S. manufacturing solutions to replenish and maintain strategic stockpiles of medical equipment; continuing to ensure people and goods cross the border efficiently without interrupting our critical supply chains; and expanding market opportunities between our two countries in order to spur recovery and compete globally.
Maintaining an open and efficient supply chain through and beyond COVID-19 will save lives and help us in the fight against this pandemic. It will provide the infrastructure required for jump-starting the economy to compete with other regions of the world in a rapidly changing global economic environment.
We stand with a growing number of businesses, workers and advocacy organizations to urge our governments and all Canadians and Americans to stand together in the global marketplace, push aside those who would divide us and meet our global competition head on. As many may have read or seen, we started a rebound campaign: cabc.co/rebound.
I will just tell you briefly who has signed up so far and who joins us in this effort: AmCham Canada, American Chamber of Commerce in Quebec, Association of Equipment Manufacturers, Association of Oil Pipelines, BIOTECanada, Border Policy Research Institute, Business Council of Canada, Canada-U.S. Business Association, Canadian Food Exporters Association, Canada Arizona Business Council, CanAm Border Trade Alliance, Canadian Manufacturers and Exporters, Canadian Pharmacists Association, Consumer Health Products Canada, Council of the Great Lakes Region, Energy Equipment and Infrastructure Alliance, Food & Consumer Products of Canada, Future Borders Coalition, Government of Ontario, Government of Quebec, Greater Kansas City Chamber of Commerce, International Business Council of the Illinois Chamber of Commerce, Innovative Medicines Canada, Lake Champlain Regional Chamber of Commerce, Lake Placid Regional Office of Sustainable Tourism, MedTech Canada, NASCO, New England-Canada Business Council, New Hampshire-Canadian Trade Council, North Country Chamber of Commerce, Ohio-Canada Business Council, Ontario Chamber of Commerce, Pacific Northwest Transportation Services, Quebec Federation of Chambers of Commerce, the Business Council of New York State, the Canadian Chamber of Commerce, United States Chamber of Commerce, the Vermont Chamber of Commerce, Women in Trucking Association, Woodrow Wilson International Centre for Scholars, and John Hopkins University School of Advanced International Studies.
It's quite a list and the list is growing. We're inviting all citizens and organizations to join on to talk about how Canada and the United States need to address our challenges together and how we're stronger together.
Thank you very much.
Thank you, Mr. Chair and members of the committee.
On behalf of the Canadian Produce Marketing Association and our 850 companies across Canada, from our supply chain, basically farm gate to dinner plate, I am happy to share our comments around certain tools, incentives and tax measures that we feel are necessary to address some of the short-term and long-term issues that are going to happen to our sector due to COVID-19. You can find more information in the brief that has been submitted to the committee.
Since the start of the pandemic we've seen massive shifts within our markets. We will have both winners and losers. With Canadians staying at home and buying patterns shifting in the pandemic, at the end of April we saw retail sales up 8% for vegetables and 5% for fruit. Driving this were the staples, such as potatoes and onions, and that is currently starting to level off. Food service, representing 30% of our value chain, hasn't been so lucky. Catastrophic impact to this sector and those who supply it will be felt for years to come. While meal delivery and curbside pickup has lifted sales to restaurants for produce from zero to 20% and sometimes 30% of traditional volume, it will be a long recovery, as physical distancing and consumer fear will play a role in how restaurants reopen.
Many produce sales rely on volume due to small margins. When restaurants reopen, the physical space cannot accommodate the typical and needed sales within the size of the space and number of patrons. It will be a key decision. Without space and without patrons, restaurants might decide not to reopen, thus further impacting the entire supply chain.
One potential positive is the shift to e-commerce and click and collect. Some small restaurants and storefronts might decide to go online as they've been successful, and by doing so, reduce their lease costs and overhead, but this will mean not hiring the labour force they've traditionally hired.
We've also seen the opportunity for growers and suppliers to increase their e-commerce across the country, but without broadband Internet in rural communities, it's very difficult. It's key that we look at how we can add this access.
Many of our members, particularly those picking, packing and processing, are also being dramatically impacted due to the rising costs of inputs, access to labour, and operational changes. The government's announcement of $77 million set aside for the broader processing industry is appreciated but won't truly support the scope of impact that all processing groups are seeing.
In a post-COVID world, business continuity will be the challenge as we transition. The complexity and seasonality of the industry means that large-scale and small-scale operations across our entire supply chain must have access to the programs and tools developed by government leading into and out of harvest.
We recognize that the government cannot continue to pump money into the system. However, programs such as the Canada emergency wage subsidy should be reviewed and extended beyond September for particularly hard-hit sectors, such as those who supply and operate within food service and the produce supply chain. The Canada emergency response benefit and the Canada emergency student benefit must also be adjusted to support unemployed Canadians without creating a disincentive to work.
Other programs and tools that require consideration include bankruptcy protection for produce sellers; targeted tax credits for essential services now required to change business practices and purchase new equipment, including PPE; and more effective programs to access operating capital for a sector that works within very small margins and limited available capital.
I mentioned the emergency response benefit. It has created unintended consequences, specifically in the short term for many packers, distributors, wholesalers and small retailers, as they're starting to see high levels of absenteeism and challenges in rehiring. With the reality they're now facing, the decision of workers to stay home and potentially not be exposed to COVID and collect the $2,000 a month, many are choosing to pick CERB. The $1,000 cap of allowable monthly income isn't quite enough to influence them to work within the industry. We suggest increasing the allowable income limit or providing targeted exemptions to allow Canadians to collect CERB and work within the produce supply chain over the next 10 months.
The emergency student benefit is another area that is creating a disincentive for students to work. Increasing the allowable income limit or providing a targeted exemption to the income limit could encourage more students to collect the benefit and work for essential providers such as the agriculture sector.
The recent announcement of incentives and the student wage subsidy for new hires was one of our asks, and we appreciate the recent positive move and implementation of the new youth employment program for agriculture.
It is important to note that many grower businesses only begin to generate revenue at the time of harvest, with many revenues for the current season's crop realized at the end of the year, so it's key that they don't necessarily qualify for the emergency wage subsidy and cannot demonstrate that decline of 30%. We need to look at how we can include more growers into that mix.
As well, the bankruptcy protection program does not support the produce industry. We've requested a PACA-like trust model to support fruit and vegetable growers and sellers in Canada. We encourage the government to continue to look at that program, as currently we do not have sufficient bankruptcy protection.
Finally, with the changes to business structure in our supply chain around the purchase of personal protective equipment, as well as other changes in our operations due to COVID, while we appreciate the funding of $77 million, we are encouraging the implementation of a tax credit to support industry in procuring the equipment essential to keep employees safe.
We thank the government for all its work and recognize that it has implemented quite a few extreme measures at a very rapid level to support Canadians, as well as our sector. We're happy to continue to work with you to try to find more solutions as we move forward.
Mr. Chair and members, thank you very much for inviting me to participate today.
As mentioned, I am Diane Gray, president and CEO of CentrePort Canada.
CentrePort, for those of you who don't know, is a 20,000-acre tri-modal inland port project in Winnipeg, Manitoba. It has been planned as a complete community, and it's anchored by rail, truck and air cargo shipments, multiple industrial areas for business, residential and retail components, and educational and training services. With the support of all levels of government, we've put in place the necessary infrastructure, as well as other support services, including fast-tracked land development activities.
The objective ultimately is to attract economic activity based upon an ease of doing business. COVID-19 and the subsequent disruption to our economy has clearly caused some broad-based challenges. While some industrial sectors have been hit harder than others, I want to speak about a few issues that are shared commonly by many of the companies that I connect with either directly or through organizations like the Business Council of Manitoba, the Manitoba Trucking Association, the chambers of commerce in our province, Canadian Manufacturers and Exporters and the World Trade Centre Winnipeg.
I'll briefly highlight three of these issues as they relate to the topic of today's agenda: sustainability of business and supply chains.
The first is—and, Scotty, I'm going to emphasize something you said—the importance of maintaining and enhancing the North American supply chain. Viewing our economy through the continental lens is of critical importance to Canadian business and consumers. Keeping that border open has allowed our highly integrated North American economy to continue to serve business and people.
To give you a sense of how important that is to CentrePort and to the economy of Manitoba, I'll tell you that $22.6 billion in trade moved through the Emerson border crossing south of Winnipeg last year, and that's the busiest point of entry in western Canada. As we seek to help businesses recover, we have to continue to look at how we enhance this regional advantage.
We all have examples to share of the value of our North American supply chain. That's not just Canada and the U.S. It's also french fries moving from the Simplot potato plant in Portage la Prairie, Manitoba, to Mexico City's McDonald's restaurants, with those same containers and trucks returning with avocados and other produce for Canadian consumers.
The point I'm making is that the border is important to trade and to our supply chains, and what we have to do is resist protectionism to keep our largest markets open to our businesses, particularly as they pivot on customers and suppliers. That's a next big component of what I'm going to talk about.
This is a conversation that's happening in many companies, particularly manufacturing companies right now in Canada, both SMEs and larger businesses, around repatriating assembly work and the sourcing of supply to the continent. At CentrePort, we're fielding calls from companies looking for a footprint to do just that to serve their North American customers.
Yesterday, a Quebec company confirmed its decision to open an assembly and logistics facility in CentrePort to serve its U.S. clients. Part of its decision relates to concerns over an American backlash to China, so we need to be cognizant of that. However, some of it relates to the security of its supply chain. Security is an issue that I think is not just COVID-related, but it is certainly one that has currently had a real and noticeable impact on both small and large companies.
New Flyer, a company you may have heard about, North America's largest bus manufacturing company, headquartered in Winnipeg, found that delays in parts that were being shipped out of China had a ripple effect, and that backed up its entire manufacturing process. It's one of those companies currently looking at how it streamlines and pivots on its supply chain activities.
In Canada, we should be concerning ourselves with capturing as many of the repatriated opportunities as possible. The dollar right now is currently an advantage to us, but we have to ensure that we have the infrastructure and the tax rates that allow businesses to invest in our country and not just those south of us. Canada should compete on how goods are produced. Process innovation and technology are the foundation of this approach.
The other point is one that was made in the Economist a few months ago: Visibility is velocity. This speaks to the importance of revolutionizing the tracking of supply chains and it's importance to business.
The second issue I want to flag is certainty of markets and customers. Outside of food processing, most industrial businesses that produce things are being very cautious right now and are waiting to see the recovery in their order books before fully restarting.
Yesterday, Canadian Manufacturers and Exporters released some results of a study they did and it showed that over 70% of the manufacturing and export companies in our country have been impacted by COVID. With global trade challenged for the foreseeable future, certainly for finding new customers, businesses will have to look more locally and likely to potential customers on the continent.
If governments want to support the recovery of the Canadian economy, they need to be serious about Canadian technology and supporting, buying and using that technology even if it isn't the cheapest to be found. There are numerous examples of how we haven't bought from companies in our provinces, let alone our country. This includes electric buses, intelligent health care technologies and many others. Governments should lead the way through investment in and deployment of Canadian technologies wherever possible.
The third point is that e-commerce is here to stay, but does that really change anything? Certainly COVID has accelerated trends such as e-commerce adoption, distribution activity shifts and point-of-sale practices, but these were happening already. It would be good if North America's consumer goods economy isn't completely overtaken by Amazon, Walmart and Alibaba. We need to ask ourselves how we can support smaller retailers with rapid consumer goods distribution to meet market demands. There is no going back on grocery delivery either. All of these shifts will impact what the future hub-and-spoke model of distribution looks like and how localized the warehouses will need to be to meet market demands. The acceleration of technology and rapid market delivery will continue to create winners and losers in our economy.
I'll end on the suggestion that there are three main things the federal government can do to ensure the sustainability of our businesses and increase supply chain efficiencies. The first is to understand that recovery for some sectors is likely to be slow as long as companies' order books aren't full. They need help with access to capital, and in some cases, support in pivoting on markets and source products.
Second, please keep the business environment competitive through tax and other supports, including the adoption and deployment of new technologies.
Finally, continue to fund critical infrastructure to ensure that our Canadian-made, Canadian-grown or Canadian-sourced goods can reach their final destinations.
Thank you. I look forward to your questions.
Thank you, Chairman Easter.
I'm pleased to be with you on behalf of Canada's chemical sector and the plastics manufacturers. For those who don't know us well, we're Canada's third-largest manufacturing industry, with about $60 billion a year of shipments.
To begin, I want to extend our sector's appreciation to Parliament and to the Government of Canada for how quickly you have put in place a number of these measures to support individuals and the economy, businesses broadly. I'll speak to our sector. We haven't relied on those measures, but our customers have. They've been very important and you've really demonstrated leadership in this unprecedented challenge.
I have three brief messages for you with respect to the status of Canada's chemistry sector. It is resilient, responsive and poised to contribute to the economic recovery.
First, our chemistry sector is a highly resilient sector. There have been no material impacts on the sector from COVID-19. In our industry, over half of our members report that they are operating at normal levels of production for this time of year. We do have about 30% who say they're still operational but are operating at lower than normal levels. You can think of folks selling chemicals, paints and coatings to the automotive sector. There were a number of tough weeks there, but they were operational. We have another 20%, however, who are actually producing above normal capacity. Overall, the sector hasn't relied on any economic supports and it has no intention to rely on sector supports. It doesn't need a package and has experienced very few layoffs in any company across the sector. It's highly resilient.
Second, the chemistry sector is highly responsive and responsible. We produce very important water treatment and disinfection chemicals that are essential for public safety in a crisis such as this, and we've certainly seen a steep increase in demand for those products. We'll talk about plastics perhaps during some of the questions, but plastics were a pretty unwelcome product until COVID-19 came along, and all of a sudden, plastic products were in demand. You can think of the packaging of food. We have as members the folks who manufacture for the medical industry. The sanitary value of plastic is now understood in a way that we did, but folks such as yourselves and Canadians did not understand before this crisis. There's a very important role being played by plastics. You can think of all the PPE that is needed. There is so much plastic in there, so there are huge demands for those products.
Our members have also reconfigured their production processes. We have people such as BASF Canada, which makes paints and coatings in Windsor. They pivoted and now they're making hand sanitizer and donating that product. Shell Chemicals and Procter and Gamble Canada have also reconfigured their operations for the first time ever to produce these essential products to help with this response.
I'll give you one other example of how the industry has responded. This again was led by BASF Canada and Trimac, both of which are members of our association. They created a platform called the rapid response platform and it is now matching those that have PPE available with those that need PPE to restart their businesses. In the first week of operations alone, it has made matches between 10,000 organizations in Canada—in the one week it has been online. You go online and say you need 5,000 plastic gowns for your dentist office. Someone will come back online and you will get that. There were 10,000 matches in the first week alone, and we're very proud to have contributed to that.
Third and finally, this industry stands very well poised to assist with Canada's economic recovery. We currently have $7 billion of new capital investment that has continued under construction. Despite this crisis, those projects are continuing. They will come online in late 2021 or early 2022, and you can imagine what a shot of support to the economy that $7 billion of new investment will contribute. There are a few projects that were under way and have been deferred, and a few others that were proposed and are not yet going. Those projects currently total about $11 billion, and we're confident that as we come out of this crisis we're going to hear that some of them are going to move ahead as planned. The conditions will be there for them to continue to invest and to assist in the recovery.
Our large major facilities, though, have also had to defer all major capital investment because of this crisis. These projects, routine maintenance projects, can involve thousands of contractors and hundreds of millions of dollars. You just couldn't bring contractor staff in those numbers on site during COVID and risk contaminating your operators and taking your site down.
That activity is going to have to happen. Hopefully we come out of this recovery soon, in the coming weeks, and that can start to take place late in the summer and fall, or at worst early next year.
When you total that up, that's more than a billion dollars of preplanned maintenance activity also happening in our sector.
When we put that all together again, the three messages are that the sector is highly resilient; it's highly responsive, and we do stand poised to contribute to the economic recovery. Certainly the provinces of Alberta, British Columbia, Ontario and Quebec are looking to the sector to continue to grow and support that economic recovery.
In closing, there are a couple of brief things I'd like to say. I'd like to offer our advice and perspective on what Canada can do to support that future growth and help the sector contribute to the economy.
First, it's essential for the Government of Canada to embrace the investment growth potential of the sector. Mr. Chairman, you've heard me characterize it in the past. It's been somewhat ambivalent. It needs to be enthusiastic. We need to be enthusiastic about the growth prospects of Canada's chemistry sector.
In particular. we would call on the federal government to bring forward the spirit of collaboration. We've seen through this health crisis the way the federal and provincial governments have worked so closely together to define the right roles and to take the right actions in an expeditious manner. We need to do the same thing with the economic recovery. We can't have the provinces rowing in one direction and the federal government in another. We have to see that coordinated response. If we can achieve that, it will be fantastic. That's the key thing we see. We want to see the federal government as enthusiastic as the provinces are about the growth opportunities in this sector.
Second and finally, I think we agree that our industry owns the issue of plastic waste. We have to solve that. We accept the federal government's agenda of what they wish to do, but I will assure you, if you want to convey a message to the global chemistry industry and plastics industry that you are ambivalent about its resilience, its responsibility, its responsiveness, and its investment growth prospects, go ahead and declare plastics toxic under CEPA as the means to regulate those. After what we've seen in this crisis, that will be a message to the sector that you don't really want the investment.
We think there are other tools you could use. We support the entire agenda, the actions the government wishes to take. We just urge you to use a regulatory tool other than declaring these necessary, sanitary and safe products toxic. We don't think Canadians support doing that. We as an association certainly don't support it.
I look forward to your questions.
Thank you again, Mr. Chairman, for the opportunity to speak.
Mr. Chair, thank you so much.
My name is Veso Sobot. I'm a director with the Coalition of Concerned Manufacturers and Businesses of Canada. We're based in Scarborough, Ontario. We have about 300 members, all Canadian companies, all looking to create valuable products and sell them in Canada and around the world.
Today I would like to offer some suggestions from the coalition on self-sufficiency in supply chains.
I'm going to pick it up where Bob Masterson left it. We're going to talk about the plastics sector a little bit. As Bob said, the benefits of plastic have never been as clear as they are today. The COVID epidemic has clearly shown Canada's strategic vulnerability and dependance on these products. We don't make them in this country as much as we used to, and we need to make them here. Plastics are made from natural gas. We have a strategic raw material advantage in this sector. Canada's plentiful natural gas supply gives us a cost advantage over countries like China, which derives its plastics from coal.
China has other advantages, however. China has a fixed currency, and Canada has a floating currency—advantage China. Manufacturers in Canada are subjected to class action law suits, and Chinese manufacturers are not—advantage China. Canadian manufacturers are subjected to strict environmental rules, and Chinese manufacturers are not—advantage China. Canadian manufacturers have to pay a carbon tax, and the Chinese do not—advantage China.
It's our contention that it's time for the federal government to advantage Canada. Here are recommendations for doing so.
Incentivize Canadians to repatriate manufacturing back to Canada, as they're doing in Japan and the United States. This will alleviate a dependancy on unfriendly foreign suppliers and strengthen our national security.
Create an expedited approvals process for Canadian companies, one that takes days, not months, and allow Canadian companies to get expedited approvals. The government of Canada appealed to manufacturers to retool and produce PPE here. Many of our members have done just that, only to find that the approvals process is the bottleneck. A member company has been waiting a month for approval from Health Canada for something as simple as a face shield, while other companies from Wuhan have their approvals. We urge the government to streamline and fast-track the process for Canadian companies.
Environment and Climate Change Canada is working to deem plastic toxic right now. As Bob mentioned, labelling plastic as toxic under CEPA would result in a less safe environment for workers and consumers, and thousands of job losses across Canada, without any benefit. Our members are telling us that they're finding it harder to get private equity for their investments because the government is going down this route. The federal government must drop this misguided initiative immediately.
We urge the government to stop investing in Chinese infrastructure, and instead take that money and invest it in Canadian infrastructure. Investing in Canadian infrastructure that lasts 50 to 100 years at these low interest rates means that future generations will receive that benefit, making it the best return on investment of all stimulus spending options. Let municipal needs and the free market supply the solutions necessary to create world-class infrastructure in Canada. Let's cut off giving money to China for its infrastructure.
I'd like to pass it on to my colleague, David Sword, to add a couple more recommendations.
Thank you, Mr. Chair and committee members, for having us.
My name is David Sword, and I'm in the energy field. I'm also here to support the coalition in its overall position on manufacturing and energy in Canada.
There's a strong relationship between energy projects and the manufacturing sector in Canada. When anything energy-related needs to be built in this country, manufacturing benefits immediately and directly. Canadian manufacturing provides the necessary ingredients to help the energy sector both build and maintain its operations.
That brings us to natural gas. It's a vital fuel, and thankfully Canada has an abundant supply. Natural gas is in demand both within our country and worldwide.
That's where LNG comes into play. LNG is liquid natural gas, of course, natural gas that has been supercooled to form a liquid to enable ease of long-distance transportation. Natural gas is being used to help fuel economic growth and replace coal, and it is also a perfect fuel complement to the intermittent nature of renewable energy.
It's valued because of its cleaner-burning aspects in terms of air particulates, but the fuel also contains a fraction of the GHG content of coal. That's a fuel that's in wide use in Asia, and it continues to grow. For example, in China and India they add new coal plants annually, and now Japan is seeking to do the same.
Canada can and should play a vital role, a global role, in providing that fuel of choice to improve air quality and to be a supplier of choice, and also to get the capital investment and jobs that are in the sector and jobs in manufacturing. Doing that would help Canada's overall contribution to lowering global emissions. What goes up must come down somewhere, and it is truly a global issue.
We have to get more projects going. Just consider a tale of two countries, Canada and the United States. We are both rich in natural gas. We have abundant supplies, but the United States has gone from having virtually no exports and being poised to import to being one of the world's top natural gas exporters in less than a decade.
According to the FERC, the Federal Energy Regulatory Commission in Washington, the United States has seven existing export terminals, eight under construction, and 14 that have been approved for construction and are awaiting final investment decisions. Canada has two, and both are experiencing some form of difficulty. So in the LNG hockey game, the score is 29-2 for the United States.
We're a nation of builders, but we simply can't get big projects going well. The path must be cleared for such valued projects. Approvals have to be strict, but there must be a clear path to yes. If a proponent follows a very strict set of guidelines and strict rules, with public input and participation and with reasonable time frames, there has to be a signal to the proponent that they stand a strong chance of success if they follow the rules and the criteria.
We don't seem to enjoy that in Canada. That applies to all major projects going forward, and not just to the resource sector. Changes to major approvals were significant under Bill , so it is our recommendation that the bill be amended with the series of recommendations that were submitted to the Senate during the debate on the legislation.
Virtually all sectors agree that in the absence of such a change, no large-sized project will be advanced, and certainly none will be undertaken, under this set of conditions. We do not think that stopping major projects and resource developments was the intended end result of Bill , but it appears that that is what it has been.
Together, through effort, we can create jobs, improve air quality, have more successful manufacturing, and create an energy and economic future for Canada. LNG and manufacturing want to play that role. Our organization is going to be releasing a more comprehensive list of recommendations to help restart the economy, but this will be a major centrepiece of it.
Thank you for your time.
Yes, thank you, Mr. Chairman.
Thank you very much for the opportunity to speak to you.
Let me start by saying that I'm not sure I can say a great deal that is useful to the committee about the details of self-sufficiency, or supply chains and how they've challenged our national ability to procure essential equipment and potentially, in due course, to acquire medicines and food. Rather, I'd like to say a few words about why we find ourselves, not just as a federal government but as a country, in not as good a position as we could be in to deal with crises like the one we're dealing with now.
Being able to deal effectively with crises or emergencies requires forethought, planning, coordination and the taking of actual decisions in terms of mitigation and emergency preparedness. What I'm talking about, of course, is emergency preparedness as an important stand-alone activity for all orders of government, for the private sector and indeed for individuals.
To be direct, and I believe accurate, we have not been, for decades, as good as we could have been in dealing with emergency preparedness. I want to stress that this comment is not directed at a particular government. From the time I was made a deputy minister by Mr. Chrétien, I heard virtually every prime minister and minister speak about emergency preparedness, and, to suggest that I'm an equal opportunity critic, I think the same criticism applies to the public servants and to me. We all talked a good line. We all took a few initial steps but, sometimes for good reasons and sometimes for not-so-great reasons, we did not do all we could do on the emergency preparedness front.
Parenthetically, and speaking as a Canadian, we have to find a way to deal with the challenge of democracies with regular elections making it difficult to deal with long-term issues. It's not unique to Canada, but it's a real problem.
First, I mean that in dealing with emergency preparedness, we have to think in an organized way about bad things—geopolitical and climatic issues, natural disasters and, of course, pandemics. The first part happens a fair bit, but it's the second step that we do not do as well as we could, which is to coordinate within and between governments and with the private sector with a view of agreeing on what can be done to prepare for and lessen the effects of the bad things. We need to expend both political capital and real capital to deal with these mitigating measures.
Aside from anything else, it means that decision-makers—and again, I want to stress that I don't just mean politicians—must find the time, the energy and the interest to deal with assessments of future, long-term problems. Let me give you a good example that I think applies to the current situation. A few years ago, the United States National Intelligence Council issued a document entitled “Global Trends 2025”. What did they predict? They predicted the risk of a highly contagious respiratory disease that would likely cost the United States millions of deaths.
My last point is that, as we do this, we must not accept the argument of some that Canada can be an island in and of itself and develop manufacturing and other capabilities to deal with all our supply chain issues. The best way to do this is to work with our close allies. Here, I agree to some degree with Scotty and Ms. Gray. We need to deal effectively with the United States, but it cannot be only with the United States. The United States does not provide Canada with everything we need. This is helped by formal agreements with key allies on the nature of crises that we may face in the future.
One way or the other, we will make our dealing with future crises easier if we plan for them. I say this with not just the belief but the absolute conviction that the way the world is unfolding right now, with political friction, climatic effects and other things, we are going to have other crises.
I would urge you, Mr. Chairman, not to have your committee deal only with the effects of this one pandemic, but with future pandemics and future crises, be they natural disasters or of another nature. We have to do better on emergency preparedness. We have to do so at a federal level and on a national level and, in point of fact, industry needs to do better as well.
Thanks very much for listening, Mr. Chairman. I look forward to any questions.
Since February 2016, I have been president of Sollio Cooperative Group, formerly known as La Coop fédérée.
Supply chains and food self-sufficiency are issues of great concern to us. In operation for nearly 100 years, Sollio Cooperative Group is the only Canada-wide agricultural supply cooperative. We represent more than 122,000 members, agricultural producers and consumers in 50 traditional agricultural and consumer cooperatives.
We have more than 15,000 employees in our three divisions: Sollio Agriculture supplies farms; Olymel specializes in pork and poultry farming and processing; and BMR is one of Quebec's leading retailers of construction materials and hardware.
Last year, our cooperative surpassed $7 billion in consolidated sales, and this year we will surpass $8 billion.
Having said that, I think it is important to bear in mind that our supply chains were under strain even before the pandemic, because of the strike at Canadian National, or CN, and the rail blockades, to say nothing of access to the Chinese market.
Agricultural producers and food processors are feeling the repercussions of the pandemic, which must be limited to protect the supply chain.
At Olymel alone, costs to date amount to more than $20 million, not counting lost market margins. While unforeseen costs mount—costs we assume in their entirety—American processing plants are receiving direct government assistance to stay open.
Recently, we urged governments to create a specific assistance program to ensure the agri-food sector's viability and the food security of Canadians. Measures announced since then by the Canadian government are a step in the right direction, but still clearly not enough. The government must above all not presume that we will be able to withstand a second wave of the pandemic if the dire needs that became obvious during the first wave are ignored.
We have already learned some lessons, and I'd like to take this opportunity to share our thoughts with you. We have defined areas for action that correspond to our vision of the economic recovery to be undertaken. Our aim is to help the agri-food chain face current and future challenges.
First, there is the increase in productivity, which goes hand in hand with infrastructure automation and robotization.
Second, greater food self-sufficiency is necessary, but agri-food exporters must also be supported through investments in food processing.
Developing the vitality of the regions is also an important aspect of the recovery, in particular by stepping up the deployment of adequate telecommunications infrastructure.
Our fourth area for action is support for a more sustainable economy which we believe involves significant support for the digitization and performance of agriculture.
Another avenue to consider is the promotion and support of the cooperative model, which has proven its worth and makes it possible to develop large-scale companies. The cooperative business model also reflects Canadian values.
Promoting the frontline trades represents the last, but not least, area for action. There are still labour shortages despite our current unemployment rates. The last few months remind us how essential the frontline trades are to our businesses and that they need to be supported.
These are the avenues we are proposing to ensure your support is well targeted and our supply chains are protected. They are necessary in order for Canada to increase its food self-sufficiency, but also to protect its capacity and its reputation as a world-class exporter, which have recently suffered.
I thank you again for your invitation. I would be pleased to answer your questions.
Thank you, Chair. I'm happy to be acknowledged as the closer today.
Thank you to the chair and the members of the committee. Thank you for the opportunity to speak to the standing committee during this extraordinary period.
This evening I would like to highlight some reflections, from my perspective, on how the emergence of COVID-19 has heightened some pre-existing risks to Canada's critical supply chains and consequently reinforced the need to deeply rethink not only the self-sufficiency of our supply chain, but also the sources we rely on for such materials.
As my background and expertise focus more on foreign affairs and security, I would like to tailor my remarks around that lens.
First, it is important to reiterate that while we are in an unprecedented time and grappling with a global pandemic, the crisis has also provided a moment of clarity for many countries, Canada included, on the importance of secure supply chains. Indeed, the lockdowns around the world induced by COVID-19 have revealed important weaknesses in supply chains for many multinational companies, including those that are Canadian and that Canadians rely on for critical supplies such as personal protective equipment, or PPE.
Indeed, acquiring PPE and ensuring a stable supply chain has been an enormous challenge for Canada since the pandemic was declared in March of this year. This has been particularly challenging because one of the main source countries for this PPE has been China, where the pandemic originated. Many Chinese companies have been engaged in horse-trading and often disingenuous auctioning of such supplies, in an apparent move to take advantage of an international market for PPE and other medical supplies that cannot be satiated in the near term as a result of the pandemic.
As some have aptly described it, the procurement of supplies in the COVID-19 era has turned into the wild west of procurement practices. Ethics and safety are often pushed to the sidelines in favour of rapid transactions and profit maximization.
Of course, China has not been the only challenge, as was mentioned earlier from other witnesses. There have also been critical strains in our procurement of materials from the United States—a key ally. There will be a time and a place to look back at procurement practices and particular episodes, such as Canadian planes returning from China empty-handed last month.
However, the more essential question that we need to think about, and think about imminently, is how Canada, both our government and our companies, can and should respond in order to emerge from this pandemic with stronger and more reliable supply chains. On this point, I would like to make a few observations and recommend guidance markers going forward.
First, we must prioritize safety in our supplies. This means, as others have mentioned as well, dealing with partners and allies who are committed to transparency, high-quality materials and unimpeded market practices. We can no longer wager bets on supply chain sources that are antithetical to our principles and our interests. More concerning, however, is when this reliance on questionable supply chains endangers our national security.
Second, the COVID-19 era has been instructive, not just as a moment of clarity on these vulnerabilities, but also on the opportunism of many other state actors—and often the state-owned or state-backed enterprises associated with them—that are intent on taking advantage of the economic stress that the pandemic has caused to a range of industries and companies, in Canada as well as our allies. Many such companies have found that their market share and value have plummeted over the past few months.
There are foreign state-backed investors who are voraciously looking at acquiring such companies in Canada and elsewhere at bargain basement prices. One such example would be the recent acquisition by the Chinese gold giant Shandong Gold Mining Co. of the Canadian company TMAC Resources.
Third, the geopolitical lessons from COVID-19—and there will be many that transcend our discussion today on supply chains—necessitate a robust, dynamic, engaged and interests-based rethink of Canada's foreign policy strategy. From my perspective, for example, we can't separate supply chain resiliency from other security risks, be it in the maritime realm, infrastructure building—which has been discussed a bit today—the cyber domain, or the nascent battle over technology, AI and the Internet of things.
As I noted at the onset of my remarks, Canada is not alone in grappling with this challenge, and it will be imperative to work ever more closely with our friends and allies, such as the United States, Australia, New Zealand, Japan, South Korea, the United Kingdom and the European Union. It will also be important to work with emerging partnerships such as India, ASEAN and so on. Moreover, Canada often underestimates its ability to build resiliency away from non-transparent markets. The imperative to diversify to our like-minded friends and allies in the Indo-Pacific, for example, has never been stronger.
In conclusion, this moment of challenge has brought clarity of purpose and should be seen as an awakening to reorient and rethink the nature of our partnerships and priorities overseas and to build an appropriate strategy to underpin this.
Thank you again, Mr. Chair and members.
My question is about the buzzword economy. The buzzword economy is something that has flourished over the last four years, in particular in Canada, where the government announces some buzzwords, and then a whole series of industry groups put those buzzwords in their marketing, PR and government relations materials and turn those materials into generous government subsidies.
We know the buzzwords of the recent past. They have included, for example, “innovation”. If you can put the word “innovation” in your application, you can get a grant from the industry department; you can be part of a supercluster, and you can feast on taxpayer money.
Then we heard the “green energy” buzzword. That was a very lucrative one. In Ontario, it has led to about $100 billion of subsidies for windmills and solar panels, which, ironically, have higher emissions in their entire life cycle than do other, more traditional forms of electricity like hydroelectricity and nuclear, but they had the right buzzwords so they got enormous subsidies.
Now, because, quite rightly, we're concerned about how dependent we are on foreign supplies, the new buzzwords are “supply chain” or “self-sufficiency”, so all kinds of industry groups will plow those buzzwords into their materials in order to get grants and subsidies.
The thing is, grants and subsidies and buzzwords don't make us self-sufficient; they make us more dependent. Anything that has to be subsidized costs more than it makes. Every subsidy the government gives out, it must first take away from productive workers and entrepreneurs.
My question is for Mr. Sword and Mr. Sobot. It sounds to me like the kinds of industrial proposals you're making do not require subsidies and handouts and don't build on buzzwords. Rather, they build on basic free market economics, whereby the businesses are capable of producing something that's worth more than it costs and selling it on the open market without a handout.
Do you agree with my characterization? If so, can you expound on how we can liberate our economy to produce real value rather than just buzzwords and government subsidies?
Thank you for the question.
Out of the $8.7-million total grant that went to Northwest Territories airlines, Air Tindi was one of the five, and we were able to get a grant of $1.5 million because we're a scheduled service operator.
Our biggest competitor, next door to us, is Summit Air. They're not a scheduled service carrier, but they do very important work. They fly food up the Sahtu valley from Yellowknife. Because they weren't a scheduled service carrier, they didn't receive anything. They're hurting, as are the tourist operators, as is the land aviation. North-Wright Airways and Northwestern Air Lease, those operators are very much hurting, and food security is in jeopardy in the long term if another phase of airline relief for the northern operators isn't done properly. Really, it's a matter of survival for them.
In the long term—2020, 2021 and 2022—I see government subsidization of transportation costs as the key to getting the exploration industry and the remediation industry back. There's a lot of industry work in remediation programs. Probably as much as 6% to 7% of our revenue last year was from remediation projects, but they're all cancelled. The tourism industry is badly hurt. The air transportation costs in the north are some of the biggest costs, and subsidies for transportation for northern carriers are quite key.
Attaining food self-sufficiency will require investment in innovation.
It is important to know that operating margins are very slim in the agri-food industry. When something like COVID-19 happens, it is almost a perfect storm because the margins disappear.
We need innovation. To innovate, with robotics and modernized infrastructure, will need significant investments. However, when there is already no leeway, investments like that are more difficult because people cannot afford them. Whatever the situation, it will require innovation.
An agri-food innovation zone could be created. The potential for Canadian agri-food is immense. Canada has 37 million acres under cultivation. The Netherlands, with 2 million acres under cultivation, produces 11.2 times more agri-food value than Canada. An investment in this sector could increase that value and benefit the entire chain.
The potential is huge, and we could be part of the whole agri-food chain. It would have a major impact in all regions of Canada, build confidence in everyone involved and encourage them to invest more. It would have a snowball effect.
It could help to improve Canada's reputation as a supplier of safe and reliable food for its people, and help us continue to expand our reach into export markets.
Thank you for the question.
Sollio Cooperative Group has facilities in nine of the 10 Canadian provinces. So we have a presence practically from coast to coast. The sector we are most concerned about right now, because it is the most affected, is meat processing, and I am thinking particularly of Olymel. We have been fortunate to be recognized as an essential service, but because of this crisis, we have seen things we did not expect. We took things for granted that, in the end, were not. The crisis has had an impact on supply chains. That is coming out now and it is causing us a lot of concern.
One plant in Quebec had to close for two weeks. As a result, we have overcrowding of hogs in farmers' buildings. The entire production chain is affected. In addition, we can no longer honour certain production contracts. Given the staff shortage and the slowdown of the production chains, it is impossible to create added value and redistribute it to our producers in the field.
The agri-food processing sector is the one we are most concerned about. It is vital. It is Canada's most important manufacturing sector. Plants across the country are processing Canadian products, the vast majority of which are destined for Canadian consumers. That is where the impact of COVID-19 is most worrisome.