Transportation in the Eighties

BGEN. ANDRUNYK:

Honourable Ministers, distinguished guests, members and friends of The Empire Club of Canada: Today marks the official opening of the seventy-eighth season of this great and historic club, and it is most gratifying to see such a large turnout. To open our new season we are honoured to have as our guest speaker a prominent and distinguished Canadian who is no stranger to the Empire Club.

The Honourable Jean-Luc Pepin first spoke to our membership on January 15, 1970 on the subject of "Bilingualism--A Prescription for National Unity." Those who heard him on that occasion will recall his use of the more popular commercial slogans to promote bilingualism. I quote but two of these: "The man of distinction is bilingual" and "Bilingualism--it takes away the fear of being close."

Six and a half years later, on October 14, 1976, he spoke to the club on the subject of "Canada and the Anti-Inflation Program One Year Later." Knowing what we know today, an appropriate slogan on that occasion might have been "Nobody can do it like the AIB can."

Neither is the Minister a stranger to Canadians from coast to coast. After completing his studies at the University of Ottawa and in Paris, he taught courses in Canadian government, diplomatic history, international law and political theory at the University of Ottawa. At the same time he was a regular commentator on Canadian and international current affairs on radio, television and in the print medium.

It is therefore not surprising for a man with his background to enter politics. He was first elected to Parliament for Drummond-Arthabaska in 1963 where he quickly amassed a wide range of government experience as Parliamentary Secretary to the Minister of Trade and Commerce and later as Minister of Energy, Mines and Resources, Minister of Trade and Commerce and Minister of Industry.

He was not re-elected in 1972 so in April of the following year he contributed to the creation of Interimco Ltd., a consultant group on international trade, becoming its first President. In addition he sat on the boards of several leading Canadian corporations. He resigned from these posts when he was appointed Chairman of the Anti-Inflation Board. He left the Chairmanship of this Board in July 1977 to become the Co-Chairman of the Task Force on Canadian Unity, holding this appointment until April 1979.

In May 1979 Mr. Pepin was elected Member of Parliament for Ottawa-Carleton, and after re-election in 1980 he was appointed to the Cabinet as Minister of Transport.

Ladies and gentlemen, it is my pleasure to invite the Honourable Jean-Luc Pepin, a man who was recently described by a Montreal journalist as "a brilliant academic with working-class practicality, a disarming wit, a master of the media, with a passionate and coherent vision of Canada," to share with us his views on "Transportation in the Eighties."

THE HONOURABLE JEAN-LUC PEPIN: Ladies and gentlemen: During the last eighteen months, I have sat through countless hours of meetings and briefings, read thousands of memoranda, studies and reports, visited scores of communities and sites--ports, airports, railway lines, and made hundreds of decisions.

What strikes me most about it all?

May I say as an aside that I already knew that it is never possible for a politician to please everybody, particularly as Minister of Transport, but I have been impressed by the quality of the insults I have received!

The trains go rumbling along . . . if they moved as slowly as Jean-Luc Pepin, we wouldn't have to worry about another railway accident. (Ottawa Citizen editorial, January 24, 1981)

... the worst thing to happen to railroads since Jesse James.

(Geoff Johnson, Ottawa Citizen, September 26, 1981)

Mr. Pepin is a nice man; but he will never make a Transport Minister.

(Globe and Mail editorial, February 9, 1981)

. . . the entire Ministry of Transport, including the Minister, has jet engines for brains.

(Les Benjamin, M.P., CKCK, Regina, July 27, 1981)

But then remember what was said about my predecessors, Marchand, Jamieson, Lang. Mazankowski was luckier; he did not survive the honeymoon period!

There has been some praise too for my work, which of course I am too humble to quote!

The diversity of appreciation of the Minister tells something about the politics of transportation. It is a field in which most people are concerned, involved ... and expert! It is one in which a politician must convince himself to rely more on the assessment of historians than on the judgement of his immediate contemporaries if he wants to keep his sanity! Before getting into the transportation specifics, I want to share with you an underlying theme of my speech which is that governments (all of them) have to spend money more wisely and that citizens should support those politicians who actively try to implement that objective. We simply have to get better cost effectiveness for our tax dollars, what some call "a better bang for our buck," simply because today there is so much to do that is necessary and not enough bucks to do it all.

Strangely enough that proposition is not an easy one to accept by both the politicians and the citizens. Let's face it: the quest for popularity is the natural occupation of politicians. They want to be loved! On the other hand, citizens support government restraint, in principle, cutting back on deficits, in principle, concentrating on priorities, in principle, but that broad support evaporates when specific hard decisions are made, particularly those that affect them personally. And there seem to be more and more of them!

Keeping that theme in mind (restraint, cost-cutting, tough decisions, public support) I am here to reflect with you on the state of transportation in Canada, to describe what I have done in the last eighteen months, and say what I plan to do in the coming year or two.

Let me describe the state of transportation in Canada rapidly in a number of observations.

First, Canada has a reasonably good transportation system for goods and people. The basic infrastructure is in place. It annually moves 800 million passengers from city to city and 400 million tonnes of freight from region to region and abroad.

Canada's transportation system has grown tremendously over the past thirty years. This growth includes completion of a national highway network so that we now have 170,000 miles of highway, more highways per capita (38 kilometres per person) than any other country; construction of the Seaway and expansion

of major ports (we ship more marine cargo per capita than any other country); the construction of a very modern air system so that we are now the second biggest group of air travellers in the world (the United States is first). One could go on. But the point is clear: we have a big transportation system, and it generally works well.

And all this is at a reasonable cost to the user. As a matter of fact, over the past three decades the cost of transportation in this country has gone up about twenty-five per cent less than all other costs in the economy. As one specific example, it cost $105 in 1960 to fly from Toronto to Vancouver; a one-way economy fare. Today the same trip costs $279, or $87 in 1960 dollars, a sixteen per cent decrease in constant dollars. That is for an economy fare; a charter-class seat or no-frills flight is currently much less.

But for a growing country like Canada, one so dependent on transportation because of its size, "reasonably good" is not good enough. Demands created by an increasing and increasingly mobile population, by an expanding and maturing economy, and by the need to remain competitive internationally, make constant and substantial improvement a necessity.

In the west, a large influx of people and record growth in the resource sectors presses us, in the federal area of transportation jurisdiction, to greatly expand port, airport and rail capacity. For example, potash traffic is forecast to increase by about 123 per cent in the 1980s, grain by 44 per cent, and coal by 205 per cent. And that will be expensive: 75 per cent of $16 billion for the railways only, in the present decade.

In the southern parts of Ontario and Quebec, where the transportation system is highly developed and among the best anywhere in the world, improving efficiency is of paramount importance. That means, still at the federal level, airport improvements, sufficient capacity for Seaway traffic, and improved rail passenger services. And that will be expensive!

In Atlantic Canada, federal transportation expenditures already total about $690 million per year, or more than two and a half times the average per capita across the country. And more funds are and will have to be freed for ferry, airport, port and highway improvements so important to that region's rather unsatisfactory state of economic development.

A second observation: our transport system is propped up by massive federal government assistance. Well over half of Transport Canada's and the Canadian Transport Commission's budget is paid out in some form of federal financial assistance. Expenditures of my department and the CTc are currently about $2 billion annually and more than half of this goes to subsidies. We currently have subsidies in place that encourage Toronto area firms wanting to ship flour to Halifax to ship it to Georgian Bay ports first; like going from Toronto to Vancouver via Montreal. We also spend well over a million in the Maritimes each year to subsidize the movement of scrap steel and empty containers within the region.

I am not against subsidies in principle. A lot of them are justifiable. To speak like the CN, "Transportation is a business and a responsibility." But, going back to my earlier theme, in times of government restraint and in face of increasing demands by Canadians for transportation improvements, the question is, can we--continue expending such sums on transportation subsidies? Will there be enough "new money" to finance the improvements and expansions necessary to address the inadequacies I referred to above? I don't think so. Consequently, while counting on some "new money"--and getting it--we have to recycle some of the old money. That will mean hard, unpopular decisions.

A third observation: the Canadian transportation system is generally quite safe. In all modes, the number of accidents has decreased over the last decade as a percentage of total traffic. In air, for example, even Mr. Justice Dubin's report (first volume) shows that accidents per hours flown decreased from 1970 to 1979. The real major killer remains the car where over five thousand lives were lost in 1979, compared to 247 in the air during the same year.

We all realize that there is plenty of room for improvement. Witness the Mississauga accident, the sinking of oil tankers off Canada's coasts, the Dubin report on air safety. Many steps have been taken--more about that later, but the demand is great and pressing. Giving it satisfaction will be expensive. A fourth observation: in transportation too, there are difficulties in federal-provincial relations. Fortunately, the worn-out expression--"The BNA Act has served us well"--is probably more appropriate in this field than in any other. In transportation, the division of legislative authority is fairly clear and generally respected, and provincial appetites to assume federal responsibilities are tempered by the high cost of their satisfaction! Who would wish to take over rail passenger service when it costs about $500 million per year?

But, here again, there is room for improvement. I was recently shown photographs of a provincial highway construction project next to a federal railway upgrading project. I realize that different modes most often service different markets. But can we build or upgrade highways, railways, ports and airports, in all areas, forever? I don't think we can afford it.

There has to be better planning and co-ordination within and among governments in order to avoid duplication. In some cases, governments must disentangle themselves from joint programs or overlapping jurisdiction. It makes no sense, for example, for the federal government to operate commuter rail lines when provinces are charged with and assume responsibility for overall urban transportation.

I wish I had time to expand on a number of other observations on the Canadian transportation system: for example, on the inadequacy of research and development so necessary to keeping productivity up and costs down; and on the need for deconcentration in the decision-making process so as to involve local communities to a greater extent.

Now let us examine the track record. What have I and my department done in the last eighteen months? In every mode and in every region, we have taken action, rapidly, energetically, at times dramatically, and often controversially. Let me give you an idea of the progress made.

In the area of rail passenger transportation, I seem to have offended a lot of people, including the editorialists of The Globe and Mail. As Paul Hellyer said (The Toronto Sun, July 29, 1981): ". . . the Globe and Mail (attacks) government spending as the cause of inflation. Now it condemns the first serious efforts the Liberals have made in a long time to cut expenditures. Cynicism is a two-way street."

As I said earlier, government payments to VIA Rail are currently running at about $500 million per year, and over seventy per cent is going to subsidize operating losses ($365 million). That means that every time a passenger steps on the train, you as a taxpayer pay seventy per cent of the fare, an average of seventy dollars per ride. On the transcontinental, the subsidy is one hundred and sixty dollars.

The country has gone through four revolutions in transportation since the end of the war: the popularization of the private automobile, the expansion of bus services, the extraordinary growth of air travel, and the advent of telecommunications. Can we expect rail passenger service to remain unchanged in the face of such fundamental changes in the rest of our transportation and communications system?

Before my July announcement, VIA faced an impossible task. It was to increase ridership, improve services, modernize equipment, terminals and onboard services. And yet most of its money was going to pay the operation deficits, which, by the way, were increasing about fifteen to twenty per cent per year.

We had to stop the hemorrhage; we had to operate to save the patient.

We decided to do four things. The first was to remove those services that are losing the most money (such as one western and one eastern transcontinental), services that are least used by travellers (local routes such as Moncton-Edmundston), and those that are not really part Of V IA's business (commuter rail).

The second was to define VIA's primary role as serving the intercity market (five hundred miles or less) while maintaining one transcontinental service across the country and services to remote areas (Churchill, Senneterre, Northern Ontario, etc.) where other modes were not generally available.

The third was to double VIA's capital budget from $90 million in 1981-82 to $182 million in 1983-84, for a three-year total of $446 million. This decision will improve passenger services (LRc service) in those areas where VIA is reasonably competitive against other passenger modes; just as important, we gave VIA a three-year budget.

The fourth decision was to give serious consideration to proposals to provide VIA with a defined mandate through a separate VIA Rail Canada Act, the development of a new operating contract between VIA and CNIcp, and a review of the costing system (under which VIA makes payments to cN and cp).

That set of decisions has been called "short-sighted," "dictatorial," "anti-democratic," "an act of provocation," and "outrageous." Fortunately, it has also been called "the right decision," "sensible," "courageous," even "too modest."

As a contribution to Canadian regional psychology, may I submit the following quotations:

(This is) . . . just part of the Liberal government's whole drive to take punitive action against the west.

(Deputy Mayor Ed Leger, Edmonton)

We (Ontario) probably got hit worse than anyone else . . .

(The Honourable James Snow, Ontario Minister of Transportation)

Le Quebec est le plus touché par les coupures de service.

(Headline in La Presse)

Once more the maritimes are being shafted for the benefit of Ontario and Quebec ... (Fredrick Angus, letter to the Montreal Gazette)

My critics presumably want to wait, study and debate . . . and end up spending even more. I say the solutions we accepted have been recommended over and over again by a long series of studies and inquiries over a period of thirty years. Now is the time to implement them.

Other initiatives undertaken in surface transportation areas are equally important. For example: the passage, after two earlier attempts, of the Transportation of Dangerous Goods Act to ensure, in co-operation with the provinces, a safer handling and transportation of dangerous commodities; the progressive implementation of the Grande Commission Report on Railway Safety. The Canadian Transport Commission yesterday announced its decisions on the first three recommendations (roller bearings and couplers, hotbox detectors, length and speed of trains), and action has been taken on the other twelve; a capital program for the revitalization of the Newfoundland railroad through the containerization of traffic for improved services and lower longer-term costs ($77 million); an increase ($45 million more than the present $70 million a year over three years) in the sums available for branch line rehabilitation in western Canada so that grain can be moved more quickly; funding provided for the relocation of rail lines ($14 million) and for a multimodal terminal ($3 million) for bus and rail passenger services in Regina; a doubling of federal money for rail research and development ($7 million) to investigate and implement new technologies for railway safety, electrification, modern rail cars and locomotives, and communications equipment.

In marine transportation, we certainly haven't been leaving our oars in the water; it's been full steam ahead! When I became Minister in March 1980, there were four port situations on the west coast which necessitated immediate attention. All have been resolved. At Duke Point, Nanaimo, a tripartite agreement ($26 million) was rescued and an important lumber terminal has been built. We inaugurated it two weeks ago. At Prince Rupert, the agreement on a grain terminal ($200 million plus) was concluded with a consortium of grain companies, and the project is proceeding on schedule. Since then, a project for a coal terminal has been added and is presently being negotiated. At Roberts Bank, the provincial government was persuaded not to let a jurisdictional debate on the Straits of Georgia interfere with the quadrupling of coal facilities at a cost of $47 million. Construction is also on schedule. At Vancouver, we went ahead with the completion of Vanterm ($11 million) and Lynnterm ($4 million).

Most major ports elsewhere in Canada are in good shape. Major projects are now underway at Montreal (Racine Container Terminal, Elevator Four), Saint John (potash), and Halifax (Fairview Cove).

Many of the National Harbours Board's ports had one problem in common: how to increase local decision-making. The Prime Minister supported that objective in the last election. I announced last May a new ports policy to be introduced in the fall. It will allow the major National Harbours Board ports to form Local Ports Corporations endowed with fairly wide decision-making authority within a new national ports organization.

In the Seaway we are squeezing more capacity out of the system through a series of administrative and technological changes (for example, improved traffic control, widening of a section of the Welland, redesigning the approach walls to the locks) that should allow forecast traffic to be handled through this decade. The Seaway Authority continues to assess the need for large and very expensive options to improve capacity, such as the "twinning" of the Welland Canal.

Marine search and rescue is a major preoccupation and several new ships have been added on the east and west coasts, and further approvals are expected to augment our capacity in this important area.

Arctic development is coming, and we are preparing for it at Transport Canada. Cabinet has approved in principle the design of a $427 million (1981 dollars) polar icebreaker for arctic service, and has agreed to an increase of fourteen million dollars in arctic marine research and development to ensure that resources and ships can be moved safely and efficiently in due course through ice-covered waters to the south.

Of interest to business-oriented people like you is the fact that all federal government marine corporations in Canada (National Harbours Board, St. Lawrence Seaway Authority, four pilotage authorities) are now in the black when measured on corporate profit and loss concepts.

In air transportation, the eighteen-month track record is equally eloquent. Improvements are being made at many airports (for example, Toronto, Vancouver, Edmonton, Regina, Hamilton, Ottawa, Quebec City, Charlottetown and Gander), and more are being planned (Toronto). Agreement with the Province of Ontario, Metro and the City of Toronto on STOL has been reached. A paper on a new domestic air policy has been released for discussion. It proposes the continued but moderate de-regulation of the Canadian air carrier industry. The implementation of bilingual air traffic control in Quebec is on schedule and being accelerated. I recently announced that I will soon be introducing legislation to create a Canadian Aviation Safety Board. Acknowledging that the air traffic controller situation is far from good, I believe that firm negotiations with their association during the recent problems in the United States were beneficial. I should add that new contract negotiations are now ongoing between the Canadian Air Traffic Controllers Association and the Treasury Board. And faithful to my theme, I want to say that a significant decrease in the amount of subsidization to the aviation system is being achieved. The cost recovered has increased from about thirty-five per cent in 1974 to fifty-one per cent today.

The all-federal modes' eighteen-month track record I have just gone through shows what can be done with hard work, dedication, patience and money. Problems exist, they are strongly debated, but they usually get resolved, which makes this country a great one.

Looking to the future, in the same spirit of realistic optimism my plans are rather ambitious for the next two years or so.

I have three main priorities of equal importance: capital investment; safety; institutional change. Again, please do not forget my theme of the need for restraint, tough decisions and public support. To accomplish what I think is needed in the transportation system in this country will require money, of which we have little. So we will have to make tough decisions among many demands, to cut less effective expenditures, and to recycle money through reducing subsidies and increasing cost recovered. I want you to understand this because I know that only with the support of people like you can I be successful in dealing with my priorities.

One of them, I said, is capital investment. We need a lot of it to maintain our existing infrastructure and to cope with increased demand. The main concern here is in western Canada. In that booming region, especially with the growth in the resource sectors, the existing system is running out of capacity. As we saw, construction has already started on major port expansions at Prince Rupert, Nanaimo, Vancouver and Roberts Bank. The railways need to go ahead with several expansion projects to increase rail capacity, particularly double-tracking the line west of Edmonton, and building the Beaver Tunnel in the Rogers Pass. Yet they do not have all the necessary funds. CN and CP require about sixteen billion dollars this decade; about three-quarters of that is needed for their western region. Yet they have a short-fall of about four billion dollars.

The main culprit is the famous Crow's Nest Pass . rate agreement which has kept grain freight rates at the same level since 1897. It is cheaper now to ship a bushel of wheat from the prairies to Vancouver than to mail a letter; and that's before the mail hike due on January 1, 1982! As a consequence, the railways are currently losing about $250 million per year in moving grain.

For the past year, I have done my best to help develop a consensus in the west to resolve this issue. In my view, both the federal government and farmers will have to share in the costs of hauling grain and reducing railway losses. I believe that a consensus is growing in the west on these facts. An early resolution is essential to make sure that the west has enough mainline rail capacity to market our export products, now that the capacity of the ports has been assured.

Besides western rail capacity, essential capital funds are needed in other important areas: in VIA to improve, intercity rail; for airport expansion for both large and" small airports across the country; for port expansions and improvements, capacity on the Seaway/Great Lakes system, a polar icebreaker, among other things. Another top priority is safety, for all modes. I have already referred to the implementation with the provinces of the Transportation of Dangerous Goods Act, of the recommendations of the Grange Commission on rail safety, and coming legislation to form a Canadian Aviation Safety Board. These are most important steps, and they are far from full implementation. Yet, more is required.

With respect to the air mode, I shall be examining the recommendations of Mr. Justice Dubin's forthcoming second and third volumes of his report with great care, and I will be pursuing their implementation vigorously--more on this subject in a few weeks. In addition, I will continue the forceful educational campaigns, aimed at the various aircraft operators, that we instituted some years ago and which have been markedly successful. As well, I have recently approved the Air Navigation Order requiring certain types of Canadian aircraft to be fitted with Emergency Locator Transmitters in an attempt to improve our search and rescue response.

Among other initiations that are being considered are a still greater effort on the part of the provinces and of the federal government to foster road safety through public awareness campaigns and through increased seat belt usage and other safety measures, and additional resources (person-years, modern equipment) for marine search and rescue.

But what is most needed in safety is an attitude of mind on the part of Canadians in general. So much here has to do with teaching and preaching. If all of us were more safety conscious, especially with cars, we could work miracles.

The last, and equally important priority area for me is institutional change: the size and quality of transportation organizations and how they deal with one another. A major component of this is improvement in decision-making. Historically, decisions have often been made too slowly, too exclusively in Ottawa, and too often held up due to interdepartmental differences or to federal-provincial wrangling. We have improved on that score, but more needs to be done such as the delegation of a greater amount of decision-making to regional and local levels. The Ports Policy is an example of that. I would like to do the same for airports--at least for some of them. We also need improved liaison between my department and the government in general, with the Canadian Transport Commission, Crown transport corporations (CN, Air Canada, VIA, etc.) reporting to me so that we will be moving increasingly in tandem. The fine-tuning of public sector and private sector interests is also one of my preoccupations.

Another aspect of institutional change is increased federal-provincial co-operation and planning. While each will remain responsible for areas under its jurisdiction, the decisions must be mutually compatible. As taxpayers and voters, you have a right to expect us to plan and act together. We have witnessed the work of the Council of Ministers of Transport and the Canadian Conference of Motor Transport Administrators and are accelerating this, for example, through jointplanning and decision-making with Newfoundland and the maritimes on all aspects of transportation and with the west on the future of grain transportation.

To conclude, I am not at all persuaded that the country's transportation system is "in a mess," to quote one of my predecessors, or that we lack transportation policies. Generally, the system is in good shape, although, as you must be convinced by now, continuous improvements are needed.

I have, I hope, demonstrated today that major steps have been made, particularly in the last eighteen months, in that direction. And that more will come!

To make these improvements will take money of which there is as usual, too little. To that extent my vision, and yours, of the ideal transportation system will have to be tempered. Fiscal restraint is a federal priority, and I have to live with it. You can expect more tough decisions from me. And today I am sure I have managed to convince all of you of why these decisions are necessary.

But since I am an optimist I can also point to the bright side of restraint and tough decisions. If you have less money, you are forced to make sure that it is well spent. And that is an objective we can all support.

The thanks of the club were expressed to Mr. Pepin by the Honourable Barnett Danson, a Director of The Empire Club of Canada.