Valeri can show leadership by removing our ports from their financial straightjacket

Gary LeRoux, head of the Association of Canadian Port Authorities seems to think so. He said as much at the recent transportation outlook conference, hosted by the Chartered Institute of Logistics and Transport in the capital city. And he's not the only industry stakeholder to have high hopes that new transport minister Tony Valeri will finally give transportation its due.

Certainly the right messages are coming out of Ottawa. Consider this admission about Ottawa's past treatment of the transport industry from Valeri's parliamentary secretary Jim Karygiannis: "Despite its importance, the investment and expertise it takes to move goods and people to the right place at the right time are sometimes forgotten."

Nowhere is this taking for granted a system that moves more than $1 trillion worth of goods more evident than in Ottawa's treatment of our ports. It's heartening to now hear Karygiannis and Valeri emphasize that our ports are key generators of economic activity and that, as a trading nation, "our goal should be to unleash the potential" of these assets.

That potential is currently greatly hampered by the financial straightjacket created by the Canada Marine Act, which provides ports with local autonomy but restricts them to borrowing against operating profit. They are not allowed to borrow funds by using port land as collateral. Yet construction of a new port terminal could cost upwards of $1 billion to finance - impossible under the current financing restrictions.

The Canada Marine Act was the result of five years spent reviewing the Canadian port system. But the time during which the review was conducted - 1993 to 1998 - was a period when Ottawa, had its mind on debt reduction and a return to a market-driven policy framework.

While that market-driven policy framework remains one of the four pillars

on which transport minister Valeri believes transportation policy must be built, the threat to the future viability of our major ports under the current legislative restrictions can't be ignored. A few years ago Doug O'Keefe from the transportation division of Statistics Canada published a paper entitled The Future for Canada-US Container Port Rivalries, exploring our ports' potential to meet the evolving ocean container industry environment. Many of its insights still ring true.

The threat, according to O'Keefe, comes from the trend towards fewer operators running larger ships. In 1990 the top 20 liner operators controlled just 40% of the world's cellular containership fleet. A decade later they controlled more than three-quarters. And the ships they are using are getting bigger. Ships in the 8,000 TEU range are already calling on western ports. The combination of these two developments will lead to continued adoption of a hub and spoke port system, O'Keefe predicted, with a handful of super ports handling most of the international containers for North America.

Vancouver and Halifax are two of only a handful of North American ports with natural deep-water channel entrances and berth depths that can accommodate the latest generation of post-Panamax size ships. But to attract such ships, our ports need to fund deep draft terminals and cranes capable of reaching across the larger ships. Ocean liner consolidation will give the remaining players more muscle to demand such productivity improvements from ports. Transferring the cost of such improvements to users is also fraught with danger. Let's not forget that commodities such as iron ore, grain, lumber, coal and aluminium still make up the bulk of Canada's port-bound exports. Yet commodity prices rise much more slowly than inflation, making it difficult for such shippers to absorb price increases. American ports, which can raise funds through property taxes, tax-exempt revenue bonds and assistance from municipal, state and federal governments, definitely have the advantage at the moment.

Valeri stresses that the need for better mechanisms to raise port funds is understood and that his ministry is "investigating possible options."

He would be wise to heed the words of Mike Ircha, a professor at the University of New Brunswick and author of several papers on Canada's marine industry: 'The establishment of a major container terminal for tomorrow's mega-ships goes well beyond the confines of the port authority...There is a need for federal participation and leadership to ensure this major opportunity for Canadian ports is realized."