Good morning.

It's a pleasure to be here today to talk to you about the Port of Vancouver, and the issues and opportunities that confront our business in the years ahead.

The very fact that you've come to hear me talk about the Port of Vancouver a collection of federally-owned lands and privately-owned businesses a thousand kilometers and one mountain range west of here already tells me something about you.

It tells me that you instinctively understand that our country Canada is a trading nation. That all of us, whether we're in Calgary or Vancouver or Toronto, rely on international trade to foster economic growth, wealth creation and jobs.

It tells me that you believe our transportation system our highways, our railways, our ports and airports are fundamental public infrastructure upon which our national economy is built tidewater.

It tells me that you understand the linkages between the competitiveness of the Port of Vancouver and your local economy right here in Calgary.

Many sectors claim to be the engine of an economy and they may be right. Oil, gas and petrochemicals here in Alberta. Forestry in British Columbia. Or manufacturing in central Canada.

But none of these engines of economic growth are worth much if they can't move their products. In the global marketplace of the 21st century, if you can't get your product to market in an efficient and reliable way, you just don't have a competitive business.

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

And so it follows that our elected leaders should be motivated to keep the wheels of Canada's national economy turning.

Governments should be prepared to make the policy decisions and the investments necessary to ensure that our transportation system remains strong, efficient and competitive.

If Canada as a nation is going to base its economic development strategy on trade, we had better have a transportation system that allows us to be a legitimate player in global markets.

Decisions taken by our federal government in 2003 in regards to transportation will ultimately determine whether 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 western Canada as a whole. Or whether our competitive position, and the vital socio-economic contributions that we make to western Canada and indeed all of 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 should be concerned about.

The fact of the matter is the Port of Vancouver is not the only facet of our national transportation system whose competitiveness is being eroded due to government policy. Governments acknowledge that Canada is indeed a trading nation. That our economy and our future prosperity are dependent on international trade, and on an efficient and reliable transportation system.

They agree that our ports matter, and that they must be kept strong and competitive to ensure that Canadian industry can compete in the global marketplace.

Our government leaders in Canada all-too-often espouse the notion that we must have an efficient and competitive national transportation system. But their policies and their priorities effect a very different outcome. And disastrously so.

This fact was reinforced for me recently in a speech that Rob Ritchie, President & CEO of CP Rail, made in Montreal.

The railways, like Canada's ports, are critical components of our national transportation system. They are fundamental infrastructure for economic and trade development. There are few who would dispute this.

And yet, taxes and other regulations imposed on the railways seriously undermine their competitiveness and their ability to reinvest in Canada.

There's the fuel tax that's levied against railways in the same way that fuel taxes are levied on motor carriers. And yet, as Mr. Ritchie so ably points out, not one cent of the fuel tax our rail carriers pay is reinvested in railway infrastructure in the way that fuel taxes are reinvested in highway infrastructure.

We all agree that competitive railways are critical to our economic future. But our government has a tendency to view the railways as well as our ports as revenue generators, rather than as enablers of economic activity.

And so, once more, our nation's economic competitiveness is impaired.

Likewise, the property taxes imposed on railways by provincial and municipal governments. Property taxes significantly affect the competitiveness of Canada's national railways, and limit their ability to reinvest in our country.

Once again, Mr. Ritchie poses some very poignant questions about the services that Canada's railways receive from municipalities for the property taxes they pay. He points out that property taxes in my home province of B.C. are nearly ten times higher than those in Alberta.

There are other gross disparities across the country as well, with no reasonable rationale or differentiation of service.

The question Mr. Ritchie is asking, and rightly so, is: Are these tax policies being driven by principles of fairness and fee-for-service? Do they consider the strategic importance of maintaining a strong and competitive transportation system in Canada?

Or are they symptoms of a government mindset that treats transportation industries as revenue generators, rather than as economic generators as they do in the United States.

Are various levels of government seeking the greatest possible tax revenues in the short-term, without due consideration for the long-term consequences for our national and regional economies?

I'll let each of you answer that question for yourself.

It's a question that the Vancouver Port Authority is asking right now. We're asking Canada's Transportation Minister David Collenette, as well as his Cabinet colleagues:

Does Canada want a national port system that is strong and competitive and capable of facilitating our country's growing involvement in international trade? And if so, are we willing to invest in that port system?

Because I'll tell you, the Port of Vancouver and the rest of Canada's national ports are at a crossroads.

Many of you will know that the federal government initiated a review of the Canada Marine Act in 2002. This is the federal legislation that created Canada's 19 port authorities five years ago, and continues to govern our operations today.

A federal Review Panel traveled the country last fall talking to stakeholders about their perceptions and problems in using the Act. They are expected to issue their report to the Transportation Minister in the first quarter of this year, after which changes to the Act may or may not be developed for the consideration of government.

The Vancouver Port Authority played a significant role in the Canada Marine Act Review Panel's consultation process. In addition to making our own interventions, we asked that our partners and customers and stakeholders across the country made their views know to the Review Panel as well.

I have to say that we were very pleased with the response. In total, the Review Panel received more than 75 presentations and 127 written submissions from Port stakeholders.

Many of those organizations are represented in the room here today, including CP Rail.

I'd like to take this opportunity to publicly thank each of you for your support. It's very satisfying to know that the people who rely on the Port of Vancouver to get their goods to market understand our challenges, and are motivated to contribute to their solution.

Of course, there's a great deal more work to be done as you will soon hear. But the very fact that such a broad coalition has come together to lobby the federal government for critical changes is a very positive first step in my mind.

So what's at issue here? Why is the Canada Marine Act so important? First a little background.

When the Canada Marine Act was originally implemented in the mid 1990s, Canada's national debt as a portion of GDP had risen to more than 70%. We were in a debt crisis, and that crisis drove a tremendous amount of policy-making in Ottawa.

Since that time a series of budget surpluses have allowed the federal government to pay down Canada's national debt by some $47 billion dollars lowering the cost of debt financing by $3 billion annually. Today, public debt as a proportion of GDP is less than 50% for the first time in 20 years.

The federal government are to be congratulated for their accomplishments in this regard.

But why is it important to this discussion? Well, in the mid-1990s, the principle of 'cost-recovery' was central in all federal policy-making. The Canada Marine Act was no exception.

In essence, the Federal Government set up port authorities across the country to run our national ports under the principle of 'user pay.' Port authorities manage federally owned port lands. We lease them to terminal operators and other businesses. And we manage the operation of the port based on fees paid by leaseholders, shipping lines and other port users.

We also pay property taxes to local municipalities. We pay the federal government an annual stipend in our case, about $4 million dollars. And we re-invest all of our net income back into the port.

Now to be perfectly honest with you, this arrangement has worked pretty well for the Port of Vancouver over the past five years. As noted, we are the largest port on the west coast of North America moving more than 70 million tonnes of cargo each year.

We also have an annual operating income of about $25 million money that is reinvested in the port to make us more efficient and more productive.

We are extremely proud of the job we've done over the past five years in managing federal port assets at the Port of Vancouver. There is no doubt that we have been successful, and that the workers and communities and industries of western Canada have been the beneficiary of that success.
But we are quickly reaching the point of diminishing returns. Land and infrastructure at the Port of Vancouver is nearing capacity.
With a vacancy rate of 3%, the Port of Vancouver has simply run out of suitable land for terminal development. Our ability to optimize existing land and infrastructure to enhance productivity and attract new business is virtually exhausted.

We are at a crossroads.

We know that the Port of Vancouver has the potential to grow, to become more competitive, to be a more efficient business partner for Canadian industry, and to generate more jobs and economic activity across the western provinces.

But there is one key obstacle to us achieving that growth. It's 'access to capital' and the problem is rooted in the Canada Marine Act.

I am going to return to that in just a minute. But first I want to tell you about the growth potential that we foresee for the Port of Vancouver.

Assuming that we do gain access to the capital necessary for expansion, the future of the Port of Vancouver looks very rosy indeed. Our market studies indicate significant growth potential in all of our major business segments over the next 18 years, including:
a 280% increase in container traffic;
an 80% increase in cruise; and,
17% and 28% increases in our bulk and breakbulk segments respectively.

I should point out that break and breakbulk represent more than 80% of our cargo by volume today. So lesser growth in these two sectors is no less important than the higher percentage growth projected for container and cruise.

But achieving this growth won't be easy. There is fierce competition from west coast ports in the United States, including the ports of Seattle, Tacoma, Portland, Oakland, Long Beach and Los Angeles.

All of these ports are making massive investments in port infrastructure in pursuit of future business opportunities.

But if the Port of Vancouver can access the capital required to acquire new port lands and build necessary infrastructure, we believe that our growth targets are very achievable.

And if we are successful, the benefits for the people and communities of western Canada are tremendous. They include:
53,000 new jobs;
an additional $2.2 billion in wages paid each year;
an additional $3 billion in annual GDP; and
an additional $6.5 billion in annual economic output.
Of course, a healthy, competitive and growing Port of Vancouver will also enhance the competitiveness of Canadian industry. That's all of you in the room here today.

And let's not forget the economic contribution that the Port of Vancouver makes to the economy of Alberta.

A recent economic impact study commissioned by the Port of Vancouver indicates that our activities employ nearly 9,000 Albertans or about 14% of the employment generated by our port. If we use a similar multiplier to measure the number of Alberta jobs that expansion could deliver, you can expect another 7,400 jobs.
I don't think there's anybody in this room who would argue that maintaining the Port of Vancouver's position as the largest and most successful port on the west coast of North America is not in Alberta or our country's best interests.

And yet, there is a very real possibility that the Port of Vancouver will not gain access the capital necessary to achieve its growth potential.

So the request we have made of the federal government in terms of reforming the Canada Marine Act is pretty straightforward. There are also a number of housekeeping measures that I won't bother to discuss with you here today.

But the principal matter is related to access to capital. We have asked for changes to the Act that would enhance the ability of the Vancouver Port Authority and its counterparts across the country to raise capital from private sources. These changes include:
eliminating arbitrary limits on borrowing;
eliminating the requirement for port authorities to pay an annual stipend to the federal treasury; and
providing port authorities with preferred financing vehicles, such as tax-exempt bonds.

These are important measures, and we're optimistic that they will be supported by the Canada Marine Act Review Panel, and hopefully by the federal government. But, in and of themselves, they are not enough.

The fact of the matter is, the Canada Marine Act as currently written restricts the federal government from making any direct investments in the country's national ports. Put another way, it forbids Canadian port authorities from applying for and/or receiving federal infrastructure grants that are available to other public and private sector ports across the country.

This restriction was born from the 'cost recovery' principle that guided so much federal policy making in the 1990s including the Canada Marine Act.

But times have changed.

Certainly the government's fiscal position has improved, and Ottawa has demonstrated a renewed willingness to make strategic investments in programs and infrastructure that benefit the national interest.
We believe that strategic investment in the Port of Vancouver and other aspects of our national transportation infrastructure are precisely the kind of investment that our government should be making.

Such investments have the potential to rapidly pay for themselves through increased economic activity, job creation and tax revenue. They are clearly in the long-term interests of our country and its people.

And so the Vancouver Port Authority has strongly encouraged government to re-examine the Canada Marine Act restriction on direct federal investment in the country's ports. This point of view was overwhelmingly supported by the more than 250 stakeholders that made submissions to the Canada Marine Act Review Panel on our behalf.

All of the other changes we have asked for are important. But this one is key.

The federal government must acknowledge that Canada's ports are a strategic national asset whose long-term success or failure will have a tremendous impact on our country's economic and trade development.

The federal government must have the ability to make strategic investments in the country's port system when it is clearly in the national interest to do so. And that is the principal change to the Canada Marine Act that we are asking you to support.

Of course, for the Port of Vancouver, this is not just an abstract argument. In principle, we believe that our federal government must have the ability to invest in fundamental public infrastructure like ports in order to keep our national transportation system competitive and efficient.

In practice, we believe that Ottawa must actively consider a significant capital investment in the Port of Vancouver now. This year.

I talked to you earlier about the Port of Vancouver's growth opportunities, as well as the socioeconomic benefits that such growth would deliver.

To finance expansion, the Vancouver Port Authority will have to invest about $1.1 billion in new port land and infrastructure over the next 10 years. This is capital that the private sector is unlikely to invest because it cannot achieve a sufficient return on capital.

Only the Vancouver Port Authority or Ottawa could justify this investment. For us, it's a matter of expanding our business and our revenue streams. For Ottawa, it's a matter of creating jobs and economic activity, and enhancing tax revenues.

There will be considerable private sector investment as well, from terminal operators, railway operators and other businesses. Probably another $1 billion.

And the Government of B.C. is going to have to come to the table too, with significant capital for road system enhancements.
If we're successful, it will be a collaborative effort of public and private sector entities, as well as multiple levels of government. That is my number one business objective. It is why I stand before you today.

We believe that expansion at the Port of Vancouver is one of the brightest economic development and job creation opportunities in western Canada. As I said, it will create more than 50,000 new jobs and create an additional $3 billion in annual GDP.

We've done some number crunching at the Vancouver Port Authority to see just how much of this expansion we could realistically finance on our own, without direct investment from federal treasury.

Without any of the changes to the Canada Marine Act we're talking about, we could finance about 40% of our capital requirements over the next 10 years. Assuming we get all of the changes to the Act that we're asking for, we may be able to finance 50% of our capital needs.

Under either scenario, the VPA will be unable to finance a new container facility planned for Roberts Bank in Delta without direct federal government investment. And the lost opportunity for the citizens and businesses of western Canada will be enormous.

It will mean that some 22,000 jobs will not be created. And some $1.2 billion in annual GDP would be foregone.

It will also means that $128 million in direct federal tax revenues would be lost each year. When you consider indirect and spin-off activities, the direct impact on federal treasury would be even greater.

So, for the cost of a $500 million investment in the Port of Vancouver, the Government of Canada could create thousands of jobs. They could dramatically increase economic activity throughout the western provinces.
They could contribute in a meaningful way to the efficiency and competitiveness of our national transportation sector, with attendant benefits for Canadian industry and international trade.

And the best thing is, their investment and I stress that word investment could be paid off through direct tax revenues in less than four years. In fact, over the 50-year lifetime of a container terminal, their $500 million investment in the Port of Vancouver would generate tax revenues of $6.4 billion.

It's a pretty compelling argument, isn't it. And yet, we are caught in the fight of our lives to win the necessary changes to the Canada Marine Act. If we are lucky enough to achieve those changes, our next chore will be to convince the federal government to commit $500 million in infrastructure funds to our port.

We think the benefits to Canadian industry, to the Canadian economy, and to the workers and communities of western Canada are clear. But we have a lot of work to do to convince the federal Government.

Recently, Canada's Transportation Minister David Collenette spoke to a group of my peers at the Chamber of Maritime Commerce. He was very enthusiastic about the Canada Marine Act, and its success over the years.

Allow me to read you some of his remarks. He said:
"The privatization and commercialization of many of our largest and most important transportation facilities have been rewarded with unprecedented improvements in efficiency and the availability of market capital to expand and upgrade this infrastructure.

"For example, port authorities plan to invest $700 million on capital projects in the coming five years. I want to underscore one important point: not one penny of that planned investment comes from government. Now that's PROGRESS!"
There are a few things I'd like to say about these remarks.

First of all, $700 million spent over five years by 19 port authorities represents about $7 million in annual capital expenditures at each of Canada's ports.

Clearly this level of expenditure will not allow the Port of Vancouver to achieve its growth potential. And believe me when I say that it will lead to the serious erosion of our national transportation system.

The Port of Seattle presents an interesting point of comparison. Today our largest competitor, the Port of Seattle currently spends $1.5 million per day or more than $500 million per year on capital projects.

To believe that Canada's 19 national ports can remain competitive by spending $700 million over five years is unrealistic.
Over the past five years, the Port of Seattle has outspent the Port of Vancouver on capital projects by a factor of 10 to 1 the difference between $200 million and $2 billion.

I should also note that American ports like Seattle enjoy a great many financial advantages that are not available to Canadian ports. These include:
massive infrastructure grants from federal and state governments;
preferred financing vehicles, such as tax-exempt bonds; and,
in some cases, taxing authority.
As a result, U.S. ports have far greater access to capital for infrastructure development than do Canadian ports, as well as a lower cost of capital. Collectively, these inequities are dramatically affecting our ability to compete.

Let me give you another example. The Port of Seattle built a single cruise-ship berth two years ago. Prior to that, the Port of Vancouver hosted all of the Alaska-bound cruise ships in the Pacific Northwest a business that supports 4,500 jobs and generates $228 million in annual GDP.

And by the way, as many as one-third of those jobs are right here in Alberta.

In the 2002 Alaska cruise ship season, the Port of Seattle attracted almost 80 sailings incremental business that would traditionally have gone to the Port of Vancouver. Those 80 sailings represent the loss of $120 million to the local economy in Vancouver.
Now the scary thing is, the Port of Seattle has embarked on a plan to build a new five-berth cruise ship terminal. As a result of this competition, the Port of Vancouver's cruise ship business is expected to decline for the first time ever in 2003.

Even scarier, the Port of Seattle is not the only U.S. port making these kinds of massive investments in port infrastructure.

Similar projects all of them backed by federal and state grants are occurring at major ports in Washington, Oregon and California.
The point I want to make is two-fold.
1.The Port of Vancouver can't afford not to invest in new land and infrastructure if it is to remain competitive with rival U.S. ports; and,
2.It's not just future business opportunities that will be lost if we don't invest.

The Port of Seattle's cruise ship business makes it abundantly clear that we stand to lose existing as well as incremental business if we cannot finance capital expansion at the Port of Vancouver in the years ahead.
The losers will be our workers, our communities, our industries and the national economy.
I am convinced that the Port of Vancouver is one of the brightest economic development opportunities in western Canada today. On the other hand, without adequate investment, the economic benefits that we currently deliver to Canadian citizens and Canadian industry stand to be lost.

We have a unique opportunity. Either we can grow and compete, maintain our status as the leading port on the west coast of North America, and continue to serve as Canada's trade gateway to the Pacific Rim. Or we will cease to grow, and fight to hang on to the business we have in the face of increasing competition from U.S. ports.

To me the answer is clear. I hope it is to you as well. And I hope that I can count on your continued support to convince Minister Collenette and his federal Cabinet colleagues that the changes to the Canada Marine Act we have requested must be made.

If we as a business community believe that Canada's ports and its national transportation system must be kept strong and competitive, we have to make sure that our governments get that message strongly and consistently.

My job is to convince our federal government as well as our private sector partners and the provincial government in B.C. that the Port of Vancouver is one the brightest investment opportunities in western Canada today.

I plan to do that with your help.
Thank you for your time and your support.

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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