October 26, 1951

PC

George Clyde Nowlan

Progressive Conservative

Mr. Nowlan:

That is perfectly true. He signed the report, and he also referred to this obsession about equalization. How he reconciled that is not for me to say. Apparently it was not a difficult task, and I do not presume it was. There is one other matter to which I should like to draw attention with respect to equalization, and I think this is the 94699-291

Railway Act

classic statement of the year. If you will look at page 124 of the report you will find this statement half way down the page:

The maritime provinces said that they did not "subscribe to or support so-called equalization of freight rates" and stated "rate equalization is impossible of achievement."

That is on page 124, and on the very next page-

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LIB

Lionel Chevrier (Minister of Transport)

Liberal

Mr. Chevrier:

May I ask the hon. gentleman to keep on quoting because I think the next sentence is very material.

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PC

George Clyde Nowlan

Progressive Conservative

Mr. Nowlan:

Surely. It reads:

Accordingly they opposed an amendment to the Maritime Freight Rates Act submitted by the Canadian Pacific Railway Company as being essential to the bringing into effect of an equalization plan.

If that is material I am very glad to quote it. I think the material thing is that they said they did not subscribe to or support so-called equalization of freight rates. Then on the very next page I should like to refer to the first conclusion of the commission. It reads:

It would appear, from the foregoing and having regard particularly to the terms of order in council No. P.C. 1487, that the broad general principle of equalization throughout the country is now accepted.

There you have the statement on one page that the maritime provinces oppose it and refuse to accept it, and on the next page the bland statement by the commissioners that the country generally accepts it. Apparently the maritimes are no longer a part of this country, if you accept that statement.

I am sure the minister did not do it purposely, but I do not think even he is entirely free from fault on that score because I noticed that the other night when referring to this matter he said, as recorded at page 329 of Hansard:

The provinces asked for equalization, and by these bills the government intends in so far as is possible to implement the recommendations of the royal commission on equalization.

It is true that some of the provinces asked for it, but certainly not all the provinces, and some were definitely opposed to it. It is true, as the hon. gentleman said the other night and as he said to me again a few moments ago, that the bill in itself does not provide specifically for an increase in freight rates. There is no increase spelled out there but the bill does provide for equalization, and it at least can be argued and I think will be argued with some trepidation in many parts of the country until the committee meets and dispels the view that equalization can, and possibly does, involve a substantial increase in freight rates. Therefore indirectly that could flow from it.

Railway Act

As I said a moment ago, we are to have this matter referred to a committee. Perhaps it would have been better if the principle had been referred without the bill itself, but the minister explained why that could not be done. I believe and know that an opportunity will be given to representatives of various parts of the country to appear before the committee, not to rehash all the old arguments of the past but to state the position taken by certain districts in this nation, and I am sure all members of the house on either side will respect and try to meet the views of those areas. I think it can be done; but if it cannot I want no misunderstanding that, in accepting second reading of the bill this afternoon, so far as I am concerned at least I am definitely committed to opposition to the principle of equalization.

After the committee has reported, after they have heard these people, if a solution can be arrived at whereby rights can be safeguarded, or it is shown that they are not prejudiced-and that is a matter on which we certainly are ready to be convinced-then we will all join very happily in supporting a bill which, as has been pointed out, has many interesting and valuable features. Until that can be done, however, I at least reserve the right to take such action on the bill as I think is in the interests of the maritimes after all the facts have been disclosed.

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CCF

Clarence Gillis

Co-operative Commonwealth Federation (C.C.F.)

Mr. Clarence Gillis (Cape Breton South):

Mr. Speaker, ordinarily I would not at this time discuss the bill at all in view of the fact that it is going to a committee, but I think discussion in the house is necessary on this measure. First of all, there are a lot of members in the house who will not be on the committee, and the fact is that the bill represents the government's considered opinion as to what they may do with regard to implementing the report of the royal commission on transportation. The commission was appointed in December, 1948, and reported on February 9, 1951. It was gathering evidence for a period of twenty-five months, and all the government has in mind in implementing the commission's report is the bill now before us.

The bill has many implications. While it does not spell out increased freight rates and so on, by the reorganization of the board and the new powers being granted to the board the government is placing in the hands of the board of transport commissioners the right to do a lot of things on which the hon. member who has just taken his seat elaborated. That is why I think the bill requires considerable discussion on the part of members in the house. If it is the intention of the government to set up another royal commission, through the committee, and if the

IMr. Nowlan.]

committee is going to take the bill and call in all the people whom it took the royal commission on transportation twenty-five months to hear, there will be a few sessions of the house go by before the committee is ready to come to a conclusion on the bill.

Another thing I am rather sceptical about is that many representations with respect to freight rates and the railroads generally that were made to the commission, and upon which the commission at least rendered some judgment, have been ignored in the bill. If the committee takes the bill in its present form and goes into session, the chairman of that committee will hold the members strictly to the terms of the bill. He will not permit a discussion of any matter not covered by the bill. That is why I am going to have a little fun with it at this time rather than wait for the committee.

The first thing I should like to point out is that the only thing the bill definitely does is grant $7 million to the railway companies for the purpose of maintaining that bridge in central Canada. In my opinion the main problem the railways have to contend with, and one which the president of the Canadian National Railways pointed up very strongly in a special submission to the commission, is the reorganization of the capital structure of the Canadian National Railways in particular, and at the same time we should have a good look at the capital structure of the Canadian Pacific Railway. I think that is the basis of all our trouble. You go merrily on with a capital structure on both railroads that is faulty and out of date, and should be changed. Before you can get any sanity in fixing rates on the railroads you have to start at the root cause, which in my opinion is the capital structure of the Canadian National, and at the same time take a good look at the Canadian Pacific Railway.

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LIB

Lionel Chevrier (Minister of Transport)

Liberal

Mr. Chevrier:

Would the hon. member

permit not an interruption but merely an observation?

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CCF

Clarence Gillis

Co-operative Commonwealth Federation (C.C.F.)

Mr. Gillis:

The minister is going to try to rule me out of order.

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LIB

Lionel Chevrier (Minister of Transport)

Liberal

Mr. Chevrier:

No, this bill does not deal with the financial structure of the Canadian National Railways. We may deal with that at a later date. This bill deals with equalization, and I hope the hon. member will speak on that subject.

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CCF

Clarence Gillis

Co-operative Commonwealth Federation (C.C.F.)

Mr. Gillis:

When I started I was careful to point out that we are dealing with the royal commission report.

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LIB

Lionel Chevrier (Minister of Transport)

Liberal

Mr. Chevrier:

No, we are not.

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CCF

Clarence Gillis

Co-operative Commonwealth Federation (C.C.F.)

Mr. Gillis:

Let me read from the explanatory notes.

The bill contains certain proposed amendments to the Railway Act arising out of the royal commission on transportation.

It so happens that the basis of the bill is that commission's report.

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LIB

Lionel Chevrier (Minister of Transport)

Liberal

Mr. Chevrier:

May I remind the hon. gentleman that we do not deal with the explanatory notes of the bill at this juncture. We are dealing with the bill itself, and not with the royal commission report.

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LIB

Joseph-Alfred Dion (Deputy Speaker and Chair of Committees of the Whole of the House of Commons)

Liberal

Mr. Deputy Speaker:

Order. It seems to me that the principle of the bill is the principle of the amendment.

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CCF

Clarence Gillis

Co-operative Commonwealth Federation (C.C.F.)

Mr. Gillis:

Well, Mr. Speaker, you are the boss so far as that is concerned. There is no point of order; it is a matter of a difference of opinion. It is not my opinion; I am taking the bill itself, which sets out that the basis is the report of the commission which sat for twenty-five months. The government is recommending this legislation based on the evidence presented to the commission. The bill was written by the government, but if I had written it I would have said something about the capital structure of the Canadian National. I would have put first things first. I am not going to elaborate on that. I mention it because I sat on the committee on government owned railways and shipping, and listened to the president of the Canadian National Railways state that one of the main difficulties in financing that road was the fact they had inherited the sins of the companies they had taken over. The interest on that debt of around $63 million which the Canadian National has to pay each year is tremendous, and the royal commission recommended a change in the capital structure as one of the first things that should be done to straighten out the financial position of that railroad. Unless we tackle that angle, there is not much use talking about fleecing the public by increasing freight rates in order to pay interest on bonds that either should have been called in years ago or written in as equity capital drawing no interest. Until we tackle that problem I do not think we are going to straighten out this problem of freight rates.

I want to say a word concerning the principle of the bill, which is equalization. I agree with the maritime transportation commission that there is no such thing. It is impossible to equalize freight rates in Canada unless you can change the geography. The senior member for Halifax (Mr. Dickey) seemed to think the Maritime Freight Rates Act was not affected, but it is badly affected. When the act was passed in 1927 that 20 per cent rebate

Railway Act

which was granted was based on the prevailing freight rates. That percentage was considered fair and equitable. It placed the maritimes on a somewhat competitive basis with the rest of the country. Since that time there has been a 47 per cent increase in freight rates. What has happened to the Maritime Freight Rates Act is that we have lost 27 per cent of the value of it. Because of the increased freight rates that tariff has been placed against the products of Nova Scotia that have to go into the central market. The Maritime Freight Rates Act has been affected in that way, and the member knows it. He knows there is a lot of dissatisfaction in Nova Scotia on this very point. I have a clipping in my hand from Saint John, New Brunswick, dated April 13 of this year, in which the mayor is forecasting that certain industries in Nova Scotia would have to close down because of increased freight rates. I believe that is true.

If you are going to retain the benefits of the Maritime Freight Rates Act as they were intended when the act was passed-I may say it is not a handout but a recognition of the difficulties brought about by our geographical position and by confederation, and I hope the minister is paying strict attention to this- the maritime freight rate subsidy has to be increased to 30 or 35 per cent. While theoretically the benefits of the Maritime Freight Rates Act are not going to be interfered with, that 20 per cent granted before the 47 per cent increase in rates is not going to be retained unless the rebate is increased to equal the rate increases.

At the present time it is rather difficult to put the products of Nova Scotia into the central market to compete with manufacturers in Ontario and Quebec. Because of the short haul the freight rates in Ontario and Quebec have not changed very much. These provinces have not been sufficiently affected to appear before the board to make representations. With these increased rates the maritimes cannot compete with central Canadian industry. That is not my opinion; it is the opinion of editorial writers and experts who have considered the matter. The Maritime Freight Rates Act will not be effective unless you grant the same percentage of rebate as the increases which the board grants to the railways.

I said a moment ago that we should take a look at the position of the Canadian Pacific. I believe one of the first steps should be the reorganization of the capital structure of the Canadian National Railways. The president of the Canadian National has made a similar statement in a committee of this house and before public bodies right across this country. It is alleged that in considering the position

Railway Act

of the Canadian Pacific Railway the board of transport commissioners allowed the Canadian Pacific to exclude from the annual income of that road about $27 million from steamships, hotels, and other sources. Why should they? Why should that amount be excluded from the earnings of the railway for the purpose of rate fixing? I think the time has come when the government have to get tough if they are going to protect the general public. You cannot keep on loading freight rates on the back of the public to pay interest on the old bonds of the Canadian National Railways, and you cannot allow the Canadian Pacific Railway to hide that amount of revenue in its balance sheet and say "We are going to keep this to distribute to our shareholders, and you are going to get out and bleed the public in order to market commodities across the country". I am really a little bit afraid of this bill because, after twenty-five months during which that commission sat and with all the evidence it received and all of the recommendations that were made, as far as we know at the present time this bill represents the government's thinking on the implementation of the report of that commission. As I said a moment ago, while it is not definitely stated that the rates are going to be stepped up, as indicated by the hon. member for Annapolis-Kings (Mr. Nowlan) in this bill power is given to the board of transport commissioners to do that very thing, if we agree with the principle of equalization; and to equalize freight rates in this country you have to wipe out the Maritime Freight Rates Act.

Is it meant that there is going to be just a flat rate right across the country? That is what equalization means to me. If that is what it means, then it means there will not be any Maritime Freight Rates Act or any Crowsnest pass rates either. It is all very well to say: oh, the board will never do that kind of thing. In this bill authority is being given to them to do that if they want to. That is why I think a great deal of discussion is necessary in the house. I do not think equalization can be brought about without causing a great deal of upset in the whole structure.

The thing I wanted to impress upon the minister is the failure to do anything about regulating that capital structure of the Canadian National Railways and to take a realistic position about the Canadian Pacific Railway in reporting their income. Unless you can fix a base as to what the revenues of these railroads are from legitimate sources and wipe out all these manipulations that take place

at the present time, you are not in a particularly good position to go to the public and honestly ask them to pay more freight rates across the country.

I am not going to say any more at this time, Mr. Speaker; but when this bill goes to committee, I hope the chairman of that committee will do as the minister thinks he is going to do. I hope he will allow a broad, wide open discussion on this whole question of the equalization of freight rates and that there will be an opportunity to call in witnesses from the various parts of the country. To me the bill means that you are either going to do something about that commission's report or you are not. Judging by the bill in its present form, I would say you are not going to do much about it except to put on more commissioners, raise their salaries, give them the right to equalize freight rates across the country in any way they see fit, and grant that $7 million to northern Ontario in order to continue the operation of the railroads in that area. That is about all it is doing. It is really an extremely anaemic gesture. I will reserve any technical discussion on the rates until that committee meets.

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SC

Charles Edward Johnston

Social Credit

Mr. C. E. Johnston (Bow River):

Mr. Speaker, I think this bill is sufficiently important that everyone in the house should express his views on it. It is a bill which has taken the government a long while to get to this stage. The royal commission have made an extensive study of this problem, and now they have made certain recommendations. I am happy to see that the government is moving along in the direction of putting some of those recommendations into the form of legislation.

I am glad to see that the Minister of Transport (Mr. Chevrier), who has been much concerned with this legislation for some time, is going to make some progress and probably get the bill through the house before he decides to resign his present post for another appointment which I understand is coming. But we should not underestimate the importance of this bill.

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LIB

Lionel Chevrier (Minister of Transport)

Liberal

Mr. Chevrier:

Does my hon. friend want me out?

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SC

Charles Edward Johnston

Social Credit

Mr. Johnston:

No, not at all. I should like to see the minister get this bill through before he leaves for another appointment or promotion that I understand is coming to him.

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LIB

Lionel Chevrier (Minister of Transport)

Liberal

Mr. Chevrier:

I have never heard of it.

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SC

Charles Edward Johnston

Social Credit

Mr. Johnston:

You probably will. The

information comes from a very reliable source, so do not be so greatly surprised.

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LIB

Joseph-Alfred Dion (Deputy Speaker and Chair of Committees of the Whole of the House of Commons)

Liberal

Mr. Deputy Speaker:

Order.

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SC

Charles Edward Johnston

Social Credit

Mr. Johnston:

I hope the minister does not try to make any final decision on the subject of truck transportation because, knowing his present attitude on that subject, I would not want to discuss it on this occasion. But that is another subject.

This bill is exceedingly important, and one which has been long delayed in coming before this house. Almost everyone who has spoken before me has made reference to the suggestion that this bill is going to equalize freight rates. I cannot see anything whatever in the bill to suggest the equalization of freight rates. I do not think it does any such thing. It will probably endeavour to make the freight rate structure more equitable; but it certainly does not propose to equalize freight rates. In the first place, I do not think that could be done. In the next place, I doubt whether it would be advantageous to all Canada if it were done. I do not think we need to worry about that matter at all. But certainly the present freight rate structure which is embodied in the Railway Act has been most detrimental to the beneficial expansion of Canada, both financially and industrially. That fact was mentioned by our leader, the hon. member for Peace River (Mr. Low), when he was discussing this bill. It was also mentioned by one of the commissioners, Dr. H. F. Angus. He expresses the matter clearly at page 286 of the report when he says:

A rate structure, once established, is an important factor in determining the economic location of industry and any change in an established structure is likely in the long run to affect the location of industry by making some enterprises vulnerable to competition. There are, therefore, vested interests opposed to any substantial change and insistent that, as a matter of national policy, it should be avoided or neutralized.

After careful study, after having carefully heard all the submissions made before that commission, Dr. Angus comes to that conclusion. Is it any wonder, then, that those of us in western Canada and those in the maritimes as well have long complained about the unequal rate structure across this country? But until just lately little heed has been paid to our complaints. Certainly the recommendations of the commission and the report itself tend to substantiate all the claims the western provinces have made throughout these many years.

We in Alberta-and the same is true in Saskatchewan-have all the necessary materials to make a great industrial province. The one thing that has held us back has been the freight rate structure in this country. It is something that is long overdue for an overhaul, and I am glad to see that is coming

Railway Act

at this time. Every time that the railway companies have been permitted to raise their freight rates it has been made that much more difficult for those of us in western Canada to improve our economic, financial or industrial position. There has been a great advantage to Ontario and Quebec, which have these long-established low rates. It is no wonder, Mr. Speaker, that Ontario and Quebec did not appear before the commission to make submissions. It was to their advantage to stay away from the investigation so they might maintain their already favoured position. Dr. Angus makes that very clear when he says:

There are, therefore, vested interests opposed to any substantial change and insistent that, as a matter of national policy, it should be avoided or neutralized.

Therefore it has retarded the progress of Canada as a whole. Some mention has been made of competitive rates, and they are mentioned in the bill as well. There again, let me point out that Quebec and Ontario have been in a very favoured position in regard to competitive rates. Every time there was a rise in freight rates, Ontario and Quebec were affected the least of any province in the Dominion of Canada; and those places which had to bear the brunt of the increase were the western provinces and the maritimes, where there was no effective competition to the railways.

Now we see a great effort made, particularly on the part of the railways, to eliminate all forms of competition in an endeavour to get national transportation, particularly as it applies to trucks, under the control of the federal government. A decision was brought down just the other day by the supreme court, stating that the federal government would have control over interprovincial and international trucking. That principle is not embodied in this legislation, but the effect can be there just the same. It would be a great crime if this House of Commons were ever to allow the railways to get into the position that they did not have effective competition from the trucking industry, because mind you, Mr. Speaker, that is the only effective competition we have in western Canada. In Ontario and Quebec they have competition from water transport, and they also have competition from trucks within their own provinces. The areas over which the trucks have to travel are not as great as they are in western Canada; therefore we in that part of the country are very much concerned that this effective competition shall remain there.

We should not consider the railways as being the poor relatives in this set-up, because

Railway Act

not only have they the great advantages already established under the rate structures but they have other means at their disposal to take advantage of any competition, especially as it applies to the agreed charges which enter into competition. Just this morning I received a circular from the Saskatchewan motor dealers' association. In that circular they point out how effective is the agreed charge clause when it is made to apply to the hauling of freight. I will read a short paragraph from this circular so there will be no chance of misrepresentation. They say:

We understand that the railways have offered the oil companies operating west of Fort William a special "agreed charge" on the condition that they use only rail facilities. According to information we have received the following figures furnish the picture: . . .

Then they give three headings as follows: "present rate per hundred pounds; proposed rail rates per hundred pounds; present Saskatchewan truck rates per hundred pounds." At 20 miles the present rail rate is 22 cents. The proposed rail rate under the agreed charges clause is 5 cents and the present truck rate is 13 cents. If that does not make a very effective form of competitive agreement I would like to know what does. Certainly great caution should be taken in setting up any new freight rate structure to see that no company, no matter whether it be trucks, railways, ships or anything else, has the advantage of such a clause as that to practically rid itself of any effective competition.

One of the good things about this proposed legislation is the $7 million which the railways will receive to maintain the road between Sudbury and Fort William on the Canadian Pacific Railway and a similar distance on the Canadian National Railways. That $7 million should put the railways in a position where they will be able to effectively bring about greater equalization in freight rates, and to that extent we are hoping the new legislation will make it a little bit fairer for western Canada and also for the maritimes.

The maritimes have a very strong case and good grounds for being fearful that this new legislation may affect them detrimentally. I do not think any of us want that to happen. Great care should be taken to see that no part of Canada will suffer unduly because of this legislation. I am sure the committee which is to be set up will deal very effectively with it. I think that can be said generally of any committee which is operating in the House of Commons. I trust that the reference to this committee will be sufficiently extensive to permit it to make a thorough investigation.

I am doubtful whether the time which will be at the disposal of this committee during this comparatively short session will be sufficient to enable it to make the thorough investigation that the subject warrants. I hope the minister will not hesitate to extend the time, which will permit them to do their job, even if they have to sit during the 1952 session. No obstacles should be put in the committee's way to prevent it from making a thorough study of the work which is to be given to it.

There should be a change in the board of transport commissioners. I am not so sure that the general public has been satisfied with the operations of that board. I am not blaming individuals; but as the royal commission has recommended, I think they have not had sufficient technical knowledge to do the work that was assigned to them. Perhaps the board should be enlarged and more technical staff added, so they will be able to go into these questions of rate fixing to a degree which would bring about better results than has been the case in the past. When the committee has completed its investigation of this matter there should be, as a result of that work, a better bill brought forward. I shall not say more at this time, because when we are in committee that will be the time to go into the details of this particular bill and carry on a thorough investigation.

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Sub-subtopic:   MAINTENANCE OF TRACKAGE
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October 26, 1951