Railway Association of Canada

1
Railway Association of Canada

• Trade Challenges Solutions for a Better
  Transportation Future in Canada
• Presentation on the Canadian Railway System to
  the University of New Brunswick
• April 4, 2002

www.railcan.ca
2
OUTLINE

• About the RAC
• The Resurgence of Rail
• Trade, Ports and Rail
• Border Challenges
• What Rail and Truck Offer
• Rail Solutions Intermodal and Border Initiatives
• Rail Can Do More 20/20 Vision
• Conlusion

3
ABOUT THE RAC

• 55 members
• Represents virtually all Railways operating in
  Canada today
• Class 1s (CN and CPR)
• Short lines
• Inter-city Passenger (VIA)
• Commuter
• Tourist
• Together members carry
• 4.2 million carloads annually
• 1.7 million containers and trailers
• 51 million commuters, inter-city and tourist
  train travelers

4
ABOUT THE RAC (contd)

• Formed in 1917 to help the war effort. Mandate
• Promote the benefits of railways in Canada
• Provide input into public policy decisions
  related to the railway sector in Canada
• Provide information for public, government and
  industry
• Coordinate rulemaking and regulatory affairs for
  industry
• Provide safety and operational assistance to
  membership

5
ABOUT THE RAC

• Moved from Montreal to Ottawa in late 2000
• Created policy and advocacy capacity
• Bolstered ongoing Safety and Operations capacity
• Working to create a more rail-friendly
  environment

6
ABOUT THE RAC - ACTIVITIES

• Public communications
• Government relations
• Policy and economic analysis
• Regulatory affairs/safety/dangerous goods
• Operation Lifesaver
• Mechanical Services
• Management of the railway radio spectrum
• Institute of Railway Technology

7
ABOUT THE RAC - CANADA

• The industry operates close to 50,000 kilometres
  of track and employs approx. 41,000 people
• There is also a significant supplier presence in
  many communities 10 B annual contribution to
  the economy
• Over 60 of Canadas goods moving by surface
  (ton-kms) depend on rail to reach their market
• 300 million tonnes of rail freight are originated
  every year equivalent to over 18 million
  truckloads

8
THE RESURGENCE OF RAIL

• Considerable deregulation and policy change since
  1987. The results speak for themselves
• Business has grown 30
• 220 productivity growth since 1981
• Freight rates down by 35 since 1984 and
  subsidies eliminated
• Investment returning to necessary levels for
  future productivity growth
• Excellent new fit between short lines and Class
  1s (about 50 short lines in Canada)
• Revived passenger sector

9
(No Transcript)
10
CANADA - A TRADE DEPENDENT NATION

• Over 40 of GDP comes from exports. Highest in
  G-8. Rail moves about half.
• Over 1.5 billion of goods traded daily with the
  US. Growing at 13 per year
• From 1992 to 1999, exports to the US rose from
  77 to 86 of Canadian total
• NAFTA volumes, already massive, are growing at
  10 per year 67 of Canada U.S. truck traffic
  moves through Ontario
• Ports of Vancouver, Montreal and Halifax key for
  international trade (vital to North American
  economy)

11
Ports and Rail An Integrated Relationship

• Transportation systems are becoming globally
  seamless
• Global logistics and new technologies, including
  internet and e-business, are changing the way
  business and transportation is conducted
• Customers now look at overall efficiency, cost
  and reliability of transparent, integrated supply
  chains
• Significant trend in transportation is the
  increased prevalence of intermodal shipping,
  taking advantage of the strengths of two or more
  modes

12
(No Transcript)
13

• The competitiveness of ports and railways is
  highly linked
• Rail service is frequently the largest cost
  consideration for port customers in routing their
  traffic
• Canadian industry depends on rail to get the
  product to market
• 39 of Canadas rail activity is associated with
  import or export movements through Canadas major
  ports
• Canadian ports and railways are in direct
  competition with U.S.to deliver goods in North
  America once traffic is lost to the U.S., it is
  difficult to win back

14
(No Transcript)
15
(No Transcript)
16
(No Transcript)
17
CANADA-US TRADE BY US REGION
1998
13
23
43
Total 473 billion Over 2.5 times 1988 figure
20
18
CANADA-US TRADE BY CANADIAN REGION
1998
Atlantic 2
6
12
14
66
19
CANADIAN EXPORT CARRIERS
Truck Rail Surface Export Share to the
US Volume 1999
Rail 44
Truck 56
Source Transport Canada
CN AND CPR ARE TRULY NORTH AMERICAN COMPANIES
20
BORDER CHALLENGES

• After September 11th, US became totally focused
  on security while Canada focused on trade they
  because their security is threatened, we because
  out trade is threatened
• Outcomes
• Economic slow-down has been exacerbated
• Careful control and processing of individuals
  crossing borders
• Need for new spending by governments (Federal
  Budget and 30 Point Border Accord)

21
BORDER CHALLENGES

• Population growth is significant
• Truck growing rapidly 61 by 2020
• Congestion is unsustainable costs GTA estimated
  2 Billion annually in goods delay
• Quality of life concerns growing land use,
  air,safety.
• Infrastructure costs to government

22
BORDER CHALLENGES - OTHER

• Long term implications
• Potential for significant tightening of US
  security posture at Canadian border
• Long term Canadian economic performance closely
  tied to border efficiency potential for
  disinvestment from Canada
• Tremendous pressures on key corridors massive
  spending on roads required with commensurate
  increase in land use, gas consumption and air
  emissions
• Business as Usual not sustainable

23
WHAT RAIL OFFERS

• Dedicated, private and controlled corridors, own
  police service
• Small, professional and stable workforce for
  volumes handled
• Mini reliance on publicly funded highways
• Environmental sustainability
• Most cost effective mode over longer
  distance/rail is also moving into shorter haul
  movements
• Safe mode of transport for people and goods
• New scheduled just-in-time service

24
A RAIL NETWORK PARALLEL TO HIGHWAY SYSTEM
25
WHAT TRUCKS OFFER

• Flexibility
• Just in time delivery
• Geared to smaller shipments
• Cost effective over short to medium distances

26
(No Transcript)
27
RAIL SOLUTIONS INTERMODAL

• Railways have made major investments in
  infrastructure and intermodal systems to shift
  over truck traffic (e.g. roll on / roll off
  technology)
• New fuel-efficient locomotives and innovative
  rolling stock (e.g. double stack container cars)
• Constructed the Sarnia tunnel and re-engineered
  the Windsor-Detroit tunnel to increase capacity
• Short line railways have attracted traffic off
  the roads for short hauls and as
  feeders/distributors to the main line and
  transborder rail systems

28
RAIL SOLUTIONS BORDER INTIATIVES

• Electronic commerce
• Significant investment in information technology
• Automated customs transactions and pre-filing
  systems in place for the vast majority of rail
  traffic improved customer service and reduced
  train throughput time
• What else can be done? Better alignment of
  customs policies needed, including
• 1) Customs inspections of shipments at
  destination or
• origin terminals
• 2) Canada U.S. external border for uniform
  
• inspection of containers
• 3) Integrate systems to link Cdn and U.S. customs
  
• computer and data systems
• 4) Pre-qualify low risk customers and their
• commodities

29
RAIL CAN DO MORE 20/20 VISION

• Leaves a small environmental footprint
• Rail is up to five times more fuel efficient than
  inter-city trucking and three or four times more
  fuel efficient than automobiles
• Parallel network can lessen highway congestion
  (truck and auto) and land use consumption for
  highways
• Dedicated corridors into the US which can lessen
  bottlenecks at border crossings and facilitate
  the most efficient moves for mid to long distance
  freight shipments
• Primarily privately funded and maintained network
  (complementary strategic governmentfunded
  infrastructure projects now required on
  partnership basis)

30
RAIL CAN DO MORE 20/20 VISION

• What are other ways for Canada to achieve
  increased modal
• balance? Policy changes include
• Tax harmonization/equity
• Introduce innovative approaches to promote
  environmental sustainability and efficiency
• Incentives to use intermodal
• Commercial road user fees
• Green taxes etc.
• Develop and implement a comprehensive national
  Surface Transportation Policy think
  transportation solutions not just road-building
• Promote passenger rail by providing capital and
  regular operational funding for
  passenger/commuter rail

31
RAIL CAN DO MORE - TAXATION

• Canadian railway taxes are much higher than taxes
  on U.S. railways reducing Canadian
  competitiveness
• Higher taxes reduce competitiveness because of
• -- increased operating costs
• -- decreased earnings available for investment
• Governments tax three major inputs purchased by
  railways
• -- locomotive fuel and sales tax
• -- property taxes
• -- payroll taxes
• High provincial tax rates and large
  interprovincial tax differences add cost
  (pancake effect) to Canadian products

32
(No Transcript)
33
CONCLUSION

• Trade is critical to Canadas economic
  performance especially Canada/U.S.
• Border security must be enhanced yet trade must
  continue to flow, more smoothly if possible
  (increase alignment of customs policies)
• Rail is an important component but can do more
  for tomorrow with some policy change
• Intermodal key to medium/long haul traffic,
  improved border efficiency and congestion, and
  meeting environmental goals
• RAIL CAN HELP CANADA NEEDS 20/20 VISION to
  promote, invest in, and build a competitive
  sustainable transportation system