Good afternoon.
Its a pleasure to be here today to speak to you about the Port of Vancouver, and the competitive issues that confront our port at the outset of the 21st century.
Pop quiz for you all.
Who said "I could not operate this port if we had the CMA?"
Who agreed with the statement "Its a business war between the two of you."
Who said of cruise passengers "this year we had over a quarter million, next year over a half million".
Who said "this year were spending $1.5 million per day on infrastructure."
If you answered Mic Dinsmore CEO of the Port of Seattle to all questions, see me afterwards to claim your prize.
Canada is a trading nation. Our national economy and our government's economic development strategy are wholly dependent on our ability to facilitate global trade, to move Canadian goods to international markets effectively and efficiently.
And the Port of Vancouver is a critical link in that transportation network. It's your Canadian gateway to the Pacific Rim. We are the platform from which Canada's export and import industries do business with 90 different nations around the globe.
And so the Port of Vancouver is not just another business sector. I'm not talking about our own narrow business interests that may or may not affect you. I'm here to talk about YOUR portabout YOUR economic future.
The fact of the matter is YOUR port is at a crossroads.
Decisions taken by our federal government over the next 12 14 months will ultimately determine whether the Port of Vancouver continues to be the largest and most successful port on the west coast of North America with all of the attendant benefits for your business and our province.
Or whether our competitive position and the vital contribution we make to the economies of British Columbia and Canada will begin to erode.
This is a fundamental question for the Port of Vancouver today. And one that every business interest in this room, in this province and in this country should be concerned about.
It is 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.
As you may know, our federal government is actively reviewing the Canada Marine Act. This is the federal legislation that established Canadas Port Authorities in 1998, and continues to govern our operations to this day.
A federal Panel is currently travelling the country talking to stakeholder groups and individuals about potential changes to the Act. They have been in Vancouver all week, and will be in Prince Rupert tomorrow.
A wide range of B.C. business interests including the Vancouver Port Authority are taking the opportunity to express their views about the CMA and Canada's marine transportation system to the federal government.
Many of these organizations are here with us today today's sponsors, the Greater Vancouver Gateway Council and the Vancouver Board of Trade. I'd like to extend my sincerest thanks to all of you who have made your views known to the panel and especially those who have concurred with our position in this very important process.
I'd also like to remind you that your opportunity to participate in the CMA review is not past. In fact, you have until November 1 to make a written submission to the Canada Marine Act review panel.
if I can impress anything on you in the next few minutes it will be this:
The Canada Marine Act review is the single most important event for the future of the Port of Vancouver.
In fact, it is one of the most important events for the future of Canada's economy.
Its outcome could lead to some of the most significant investment, economic growth and job creation that our province will see over the next two decades
Or it could lead to a slow deterioration of the competitive position of the Port of Vancouveras well as an erosion of our existing business, employment base and socioeconomic contribution to the province.
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 Canada's gateway for international trade throughout the Pacific Rim.
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. We also generated direct tax payments to all levels of government in excess of $600 million.
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 and years ahead.
Allow me to fill in the details for you. First, on the growth side.
We are forecasting increases for our business. Bulk cargo will increase by a projected 17 per cent and breakbulk will increase by 28 per cent. These increases are significant, because bulk, especially, represents the lion's share of our volume today. 81% of our tonnage is bulk cargo 61 million out of 73 million tones is bulk. And hopefully new markets for our breakbulk products in Asia will mature quickly.
In 2001, the Port of Vancouver handled a total of 1.15 million TEUs (or twenty-foot equivalent units) of container traffic. This year, we expect to handle about 1.3 million TEUs an increase of some 10 per cent.
By 2020, we believe that number could surpass 4 million TEUs a 250 per cent increase in just 20 years.
I should add that container traffic is the most valuable segment of our business. Every container that crosses our docks generates $450 in annual wages and contributes $550 to Canada's GDP.
The Port of Vancouver has already taken a number of steps to ensure that we realize this growth potential including a $54.5 million expansion to our container facility at Deltaport, completed in 2001.
We have also opened a new sales office in Chicago to ensure that we gain a share of the growing U.S. bound container market.
But achieving these growth targets is far from certain. More on this in a moment.
The other segment of the Port of Vancouver's business where we see significant growth potential is in cruise. For the fourth consecutive year, more than 1 million cruise ship passengers passed through the Port of Vancouver in 2002.
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 will grow by some 80 per cent
And again, were 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.
But 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 container, it's about 250 per cent. For cruise, it's about 80 per cent.
Financially, the good news is that container and cruise 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 portable, and most prone to competition from United States ports.
Before I leave a 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 targets 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, growth will also deliver expanded business opportunities for the transportation sector. It will contribute to the competitiveness of our export industries, while lowering the cost of imported goods for Canadian industry and consumers.
To achieve our business targets over the next 10 to 15 years, the Port of Vancouver will require investments in port infrastructure of about $1 billion from ourselves, terminal operators and other transportation industries.
As many of you may have read in today's Vancouver Sun, this amount of growth is possible, but I must reinforce that this will not happen without fundamental changes to the CMA and to the way that our Federal Government view national ports.
The largest single component of this investment some $700 million will be required to expend our container handling facilities at Deltaport. In addition to port lands and terminals, the expansion will also require public investment in road and rail infrastructure.
We see this as the cost of doing businessthe minimum investment necessary for the Port of Vancouver to continue as a significant player in global commerce. As a trading nation, we can afford to do no less.
Id like to turn to the competitive challenges facing the Port of Vancouver, and the constraints to achieving our growth targets over the next 10 to 15 years.
Like any industry, there's a long list of competitive threats to our port. But for the purposes of this presentation, and in the context of the federal review of the Canada Marine Act, they can be summed up this way.
The Vancouver Port Authority directly competes with American ports 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 of Vancouver and our closest competitors.
This uneven playing field is manifest in many areas, including: access to capital and the cost of capital; taxation and other payments to government; and, the coordinated support provided to ports by all three levels of U.S. government.
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."
As such, U.S. governments are willing to invest public monies in their ports, with the understanding that investment in port infrastructure will create economic activity, jobs and ultimately tax revenue.
Here in Canada, we treat our ports as public assets that must show a direct return to government. That is, we view ports as "Revenue Generators", and penalize them by extracting special payments to grant coffers.
What's more, under the Canada Marine Act, the federal government is forbidden from investing in the countrys national port system.
If the Vancouver Port Authority or our counterparts across the country cannot finance strategic investments in land and infrastructure from our operating revenues, then those investments don't get made despite the benefits they might create for the country as a whole.
This issue is at the heart of our growing competitive gap with U.S. ports. And it's at the heart of the VPA's advocacy objectives for the Canada Marine Act review.
The fact is, the Port of Vancouver is already experiencing negative consequences from American ports targetting our business. The Port of Seattle's new single-berth cruise ship terminal attracted 80 sailings this season incremental business that otherwise would have come to the Port of Vancouver.
When you consider that each sailing contributes $1.5 million to Canada's economy, you'll recognize that the Port of Seattle's insurgence into our cruise ship business cost this city and our country more than $120 million this year.
The Port of Seattle expects to attract 100 sailings next year. That's another $150 million from the Canadian economy, and this will continue year after year.
In fact, the Port of Seattle is now assessing a new five-berth cruise ship terminal. If the Federal Government doesn't assist with immediate action to address this competitiveness threat, such losses will only continue to grow.
The significance of this threat is clear if you happened to see the interview with the CEO from the Seattle Port Authority on BCTV this week. He freely admits that targeting Port of Vancouver business is at the heart of the Port of Seattle's business strategy.
And he happily pointed out to the BCTV reporter that investments in port infrastructure at the Port of Seattle over the past five years have been 10 times greater than those at the Port of Vancouver the difference between $200 million and $2 billion. At a conference in Oakland last week he announced he was spending $1.5 million per DAY on infrastructure.
We're still competitive today, in part because of past strategic investments at the Port of Vancouver, as well as greater efficiencies and the low Canadian dollar.
But those advantages are rapidly deteriorating in the face of the kind of investments in infrastructure development being undertaken by the Port of Seattle and other rival ports in the U.S.
You have to understand, the Port of Seattle enjoys a number of important benefits over the Port of Vancouver.
For instance, the Vancouver Port Authority pays property taxes totalling $5.5 million each year, while the Port of Seattle collects property taxes totaling $55 million each year. That's a $60 million annual revenue advantage on property taxes alone money that can be reinvested in strategic infrastructure projects.
At the Vancouver Port Authority, we are expected to pay an annual percentage of our gross revenue about $4 million to the federal government. U.S. ports are not required to make any such payment.
In fact, they regularly receive free land grants from their state and federal governments such as in Oakland and Long Beach, and services such as dredging provided by the U.S. Corps of Army Engineers at no cost to the port.
And U.S. ports have access to a wide range of financing vehicles such as tax-exempt bonds that significantly lower their cost of capital borrowing. On average, U.S. ports enjoy a 2 to 3 per cent advantage in their annual cost of capital over the Port of Vancouver.
Most importantly, however, U.S. port authorities regularly receive direct federal and state grants for infrastructure expansion.
Just to give you an idea of the scale of these investments, there's a strategic federal infrastructure fund in the United States. Established in 1998, it provides a total of $218 billion to cover up to 80 per cent of any qualifying project's capital costs.
More than $600 million in TEA-21 investments have been made in the Seattle-Tacoma corridor since 1998. In addition, another $340 million in other federal investments in Washington State transportation infrastructure were made last year alone.
So how much has our federal government invested in the Port of Vancouver over the same timeframe? The answer is zero. Nothing. Not one single cent.
Theres one very clear reason why we are losing the competitiveness race with rival ports in the United States federal investment in port infrastructure.
This is the principal change we are seeking in the Canada Marine Act the ability for our federal government to invest in port infrastructure when it is clearly in the national interest to do so,
I want to give you one more example of how the Canada Marine Act is currently not working for the Port of Vancouver.
After the events of September 11 last year, demands for port security throughout North America have increased dramatically. It is widely speculated that the U.S. government will eventually enact laws that impose security standards on any international port doing business with the United States.
Its going to cost millions of dollars to enhance security measures at Canada's national ports to ensure that we retain access to the critical U.S. market.
Despite increasing demands to enhance our security, no federal funds have been forthcoming.
On the other hand, the U.S. federal government has already dedicated some $330 million through the U.S. Marine Transportation Act of 2002 to enhance security at American ports.
This is just another example of how the Canada Marine Act is not working for our county's national ports. And how a lack of federal investment in our national transportation infrastructure is putting the competitive position of our ports and our national economy at risk.
As I said before, Canada's national 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 infrastructure projects to capture future market share in the lucrative segments of our business.
We believe it's time that the Government of Canada began viewing its national port system as a strategic national asset and fundamental public infrastructure.
It means that Canada port authorities should not be required to make payments to government, but instead be required to invest these funds in port operations and 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 investments in port infrastructure should be sought.
We recognize that in the years ahead there will be requirements for major infrastructure projects of national interest that cannot be supported by the Vancouver Port Authority alone.
So long as we can prove that these projects will return significant national socioeconomic benefits, we believe they should be financed at least in part through direct investments from the Government of Canada.
The Vancouver Port Authority must finance capital investments of about $1 billion over the next 5 to 15 year to build the infrastructure necessary to meet our growth projections.
Without direct federal investment in Canada's ports, we estimate that we'll only be able to finance about 50 per cent of that total. We'll have a $500 million shortfall, which means we'll be unable to build the required infrastructure.
As a result, we won't meet the projected 250 per cent increase in container traffic at the Port of Vancouver over the next 15 years.
However, we believe that the Government of Canada has a great deal to gain from investing $500 million in the Port of Vancouver over the next 5 15 years.
It's relatively easy to quantify the foregone opportunity if the federal government does NOT see fit to make strategic investments in the Port of Vancouver in the years ahead. These foregone opportunities include: the loss of some 21,000 jobs; the loss of $900 million in wages each year, and the loss of $1.2 billion in annual contributions to Canadas GDP.
With investment, the direct impact on federal tax revenues alone is estimated to be $128 million per year.
And that doesn't include tax revenues derived from indirect activities, sales tax or spinoff activity. Nor does it consider tax payments to other levels of government, which are generally about half those collected by the feds.
That's a pretty impressive rate of return for the federal government full repayment of its $500 million investment in just four years.
Over the 50-year life of a terminal, federal investment of $500 million would generate direct tax revenue of $6.4 billion.
It would also foster new jobs, support regional economic development and make a tremendous contribution to the competitiveness of Canada's transportation sector, and its export and import industries.
I can think of few investments that would better serve the interests of Canada or the economic interests of the federal government.
I believe this is the single greatest investment opportunity in British Columbia today but it requires leadership and vision.
We have a unique opportunity. Either we can continue to grow and competeto maintain our status as the leading port on the west coast of North Americaand continue to serve as Canada's gateway to the Pacific Rim.
Or we will cease to grow, and fight to hang onto the business we have in the face of increasing competition from U.S. ports.
To us, the answer is clear. And we're optimistic that the federal government's support for trade development will predispose them to our point of view.
I thank you for your attention today and for your support of this critical issue. If you haven't yet become involved in the Canada Marine Act review, I would encourage you to do so.
Again, the deadline for submissions is November 1.
Thank you.

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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