It's a pleasure to be here today to participate in this very important Congress on transportation infrastructure in British Columbia - and especially to discuss the challenges and opportunities facing the ports of British Columbia.

It's my view that the strategic importance of transportation in facilitating trade and economic development is not always sufficiently understood in Canada.

Transportation is not just another sector of the economy. It's an enabler. It's the wheels upon which the provincial and the national economies are able to move.

All sorts of sectors claim to be the 'engine' of an economy and they are right. Forestry and mining in British Columbia, for instance. Or manufacturing in central Canada. However, in the global marketplace of the 21st century, if you can't get your goods to market efficiently and reliably, you just don't have an efficient economy.

I think today's Congress is evidence of this understanding and I'm optimistic that as a province and as a nation, we are prepared to make the investments and policy choices necessary to keep our wheels our transportation networks running smoothly and efficiently.

This forum comes at a very opportune time for your ports. As Minister Collenette said, the BC ports are currently preparing for the federal government's review of the Canada Marine Act. This is the legislation that established Canada's Port Authorities in 1997, and continues to govern our operations.

The mandatory review of this piece of federal legislation may not strike you as high on the priority list of transportation issues on Canada's West Coast. However, if I can impress anything on you in the next few minutes it will be this:
The Canada Marine Act review to be undertaken this fall is the single most important event for the future of BC's ports and specifically the Port of Vancouver.

Either we will continue to be the largest and most successful port on the west coast of North America. Or our competitive position and the vital contribution we make to the economies of British Columbia and Canada will continue to erode to the benefit of the US.

I'm going to return to the Canada Marine Act review in a few minutes. But first I'd like to talk about the economic contribution that the Port of Vancouver makes today, some of the barriers to our growth and competitiveness, and exactly what's at stake during the Canada Marine Act review.

Port of Vancouver Today

The Port of Vancouver today moves a greater volume of goods than any other port on the west coast of North America. More than that, we are BC's and Canada's gateway for international trade throughout the Pacific Rim.

We move wood products from northern B.C. to Japan and China. We ship Prairie grain to Brazil and India. And we move B.C. grown fruits and vegetables to supermarkets throughout the Pacific Rim. In fact cargo from every province passes through our port.

In total, we facilitate $29 billion of trade each year with more than 90 nations. So, the Port of Vancouver is an absolutely critical link to the international marketplace for B.C.'s and western Canada's export industries. But we're more than that.

By ensuring the efficient and cost-effective shipment of goods, we also make an important contribution to the competitiveness of western Canada's transportation and export industries. And, of course, we make a significant socioeconomic contribution in our own right.

In 2002, the economic activities of the Port of Vancouver directly and indirectly supported some 62,000 jobs, paid $2.5 billion in wages and contributed $3.4 billion to GDP. More than half of the jobs, and a similar proportion of the economic activity, was generated right here in British Columbia.

So the Port of Vancouver is an extensive economic engine in its own right. In fact, there are more people employed in the Port of Vancouver today than in the province's mining sector.

Without public investment in transportation infrastructure this position will be lost to ports in the US.

Now I want to talk about the future because there are two distinct and diametrically opposed market forces at work. Both have the potential to determine the future of the Port of Vancouver, depending on the steps we take in the months ahead.

The first of these is the tremendous growth projected for U.S. bound container traffic and other business segments over the next two decades.

The second is the significant and growing competitive pressure that BC's ports are experiencing from their counterparts in the United States.

Allow me fill in the details for you. First, on the growth side.

Vision 2020

In 2001, the Port of Vancouver handled a total of 1.15 million TEUs of container traffic. By 2020, we believe that number could surpass 4 million TEUs a 250 per cent increase in less than 20 years.

I should add that container traffic is the most valuable segment of our business, with each container providing an additional $1100 to the economy.

The Port of Vancouver has already taken a number of steps to ensure that we realize this growth potential including a planned $300 million expansion to our container facility at Deltaport.

But achieving this growth is far from a done deal, as I'll tell you in a moment.

The other segment of the Port of Vancouver's business where we see significant growth is in cruise passengers. For the third consecutive year, more than one million cruise ship passengers passed through the Port of Vancouver.

By the year 2020, we forecast that nearly two million passengers will pass through our port each year. A cruise industry that today supports 4,500 full-time jobs in Vancouver and across Western Canada will increase by some 80 per cent.

And again, we're already making strategic investments in pursuit of this growth. For instance, just this year we opened our third cruise ship berth at Canada Place at a capital cost of $90 million, and we are supporting Prince Rupert in their quest for a cruise berth.

However, future growth in the cruise passenger segment is contingent on the Port of Vancouver maintaining and improving its competitive position. As with the container business, we cannot stand still and expect to grow.

The container traffic and cruise passenger segments have the potential to deliver the greatest growth to the Port of Vancouver between now and 2020. As noted, for containers, it's about 250 per cent; for cruise, it's about 80 per cent.

We are forecasting smaller percentage increases for the other areas of our business. Bulk cargo will increase a projected 17 per cent and breakbulk will increase 28 per cent. Though smaller, these increases are significant, because we are talking about a much larger baseline when we project 17 per cent growth over existing bulk volumes.

The good news is that the container and cruise segments are the most lucrative segments of our business, and their growth will provide the greatest economic stimulus to the B.C. and national economies. The bad news is these business segments are also most prone to competition from subsidized United States ports.

Before I leave the discussion of future potential at the Port of Vancouver, I want to give you an idea of the scope of economic benefits this growth would provide. Assuming that we achieve our growth projections by 2020, the Port of Vancouver will generate a total of:
53,000 new jobs;
an additional $2.2 billion in wages each year; and
an additional $3 billion annually in GDP.

Of course, Port of Vancouver growth will also deliver expanded business opportunities for the transportation sector. It will also contribute to the competitiveness of our export industries, while lowering the cost of imported goods for Canadian industry and consumers.

To achieve this growth, we anticipate capital investment of about $1 billion, with a similar amount being invested by our strategic partners including terminal operators, transportation industries, and public funds.

Competitive Challenges

And on that note, I'd like to turn to the competitive challenges facing the port system, and the constraints to achieving our growth objectives.

Like any industry, there's a long list of competitive threats to our business. But for the purposes of this presentation, and in the context of the federal review of the Canada Marine Act, I would characterize them this way.

Many of BC's ports directly compete with American port authorities on the west coast of North America including Seattle, Tacoma, Portland, Oakland, Los Angeles and Long Beach. In all of these cases, we are competing on an uneven playing field, and that playing field is contributing to an ever-widening competitiveness gap between the Port and our closest competitors.

This uneven playing field is manifest in many areas, including:

access to capital and the cost of capital;
stipend and other payments to government; and,
the coordinated support provided to ports by all three levels of U.S. government.

But the most striking difference in the treatment afforded Canadian versus U.S. ports is this:

The Americans view their ports as fundamental public infrastructure that supports economic development and other broad national interests. That is, they view their ports as economic generators providing jobs, trade and growth.

Here in Canada, we treat our ports as a public investment that must show a direct return to government, and is therefore subject to special payments. That is, we view ports as revenue generators, which limits economic growth.

This issue is at the heart of the growing competitive gap with U.S. ports. And it's at the heart of the Port's advocacy objectives for the Canada Marine Act review.
The fact is, the ports in BC are already experiencing negative consequences from American ports targeting our business. The Port of Seattle's new single-berth cruise ship terminal will attract 80 sailings this season incremental business that otherwise would have come to BC.
When you consider that each sailing contributes $1.3 million to Canada's GDP, you recognize that the Port of Seattle's insurgence into the cruise ship business will cost our province more than $100 million this year. If we don't take immediate action to address our competitiveness issues, such losses will only continue to grow.

More to the point, if we don't take immediate action, the ports will not achieve their 2020 growth targets.
I believe that BC's ports have reached a critical point in their development. Our competitive position versus U.S. ports is clearly being eroded.

Meanwhile, our U.S. competitors are funding massive transportation infrastructure projects to capture future market share in the lucrative container traffic and cruise passenger segments. These include access roads, rail crossings and terminals.

These competitiveness issues must be addressed now. Fortunately, the Canada Marine Act review provides the perfect opportunity to do so.

As a region and as a province we must come to grips with the fact that Canada's ports are strategic assets that serve the broad public interest.

Canada Marine Act Review

We can no longer afford to treat our ports as revenue generators for government, but must begin to treat them as economic generators. The 19 major ports of Canada, six of whom are in BC, believe this view is consistent with the National Marine Policy and with the federal government's position that trade development must lead Canada's economic development strategy.

And what does this shifting view mean from a practical view in terms of changes to the CMA?

It means that Canada Port Authorities should not be required to make payments to government, but instead reinvest their net income in infrastructure.

It means that Port Authorities should be given the tools and the flexibility they need to secure private sector capital for infrastructure expansion, and to lower the cost of capital through preferred borrowing vehicles.

And it means that, from time to time, when Canada Port Authorities cannot finance strategic infrastructure projects on their own and it can be clearly demonstrated that such projects are in the national interest that direct federal and provincial investments in port infrastructure should be possible.

The issue of port security is a prime example of how the current situation is not working for Canada's national ports. After 911, its clear that Canada's port security must be enhanced to both protect the public and ensure that we can continue to enjoy access to the U.S. market.

It's clearly in the public interest and the national interest for Canada's ports to enhance security. And yet there is no legal way under the CMA to provide funds to Port Authorities to enhance their security measures and we're talking about tens of millions of dollars here.

Many ports do not have the means to pay for security enhancements, and may therefore lose their access to the U.S. markets. In other cases, security costs will seriously undermine our competitiveness by diverting funds from infrastructure.

At the end of the day, we're not asking for the world.

We simply believe that the provisions within the Canada Marine Act must reflect its policy mandate.

That is, BC's ports must have the financial means to provide the marine infrastructure that Canada needs, to ensure that we are supporting vital economic and social development, and to promote trade and business competitiveness.

We want to have the financial strength and the flexibility to capitalize on immediate market development opportunities.
We want to ensure that all ports are managed in the public interest, and that narrow commercial interests do not subsume the broader interest in the port system.

Finally, to the degree possible, we want to be financially self-sufficientto operate the nation's largest ports in a way that does not require massive injections of public funds.

On the other hand, we recognize that in the years ahead there will be requirements for major infrastructure projects of national interest that cannot be supported by the ports alone.

What's At Stake

And what's at stake in this process?

I told you earlier that the Vancouver Port Authority will have to invest some $1 billion to achieve our growth targets to the year 2020. If we achieve all of the changes to the Canada Marine Act that we're looking for, we estimate that we'll have the financial resources to raise about half that or $500 million over the next two decades. The rest must necessarily come from strategic infrastructure grants from the federal government.

And what will be the return on that roughly $500 million public investment? Or, to put it another way, what is the foregone opportunity if the Act fails to provide for direct investments of public funds in transportation infrastructure?

The answer is more than 50,000 new jobs, some $2.2 billion in annual compensation and $3 billion in Gross Domestic Product.

Thank you for your attention.

For more information, please contact:

Anne McMullin,
Director, Corporate Communications and Public Affairs
Vancouver Port Authority
(604) 665-9069 (office)
(604) 665-9073 (fax)
(604) 218-1403 (cellular)
anne.mcmullin.com

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