POLITICS

U.S. agency told that Canada is diverting minimal cargo from American ports

06/07/2012 03:14 EDT | Updated 08/07/2012 05:12 EDT
WASHINGTON - A commissioner on a U.S. federal agency probing whether Canadian ports on the West Coast are luring lucrative cargo business away from their American counterparts says the problem may be minimal.

The Canadian government and other officials have told the Federal Maritime Commission that over a period of 10 years, only 2.5 per cent of U.S.-bound cargo was imported via Canadian ports, the agency's Rebecca Dye said Thursday.

Speaking at a Canadian American Business Council conference on China, Dye didn't say when the commission would complete its investigation and deliver its findings to U.S. Congress.

But the matter has been a simmering trade irritant between the U.S. and Canada ever since a pair of senators from Washington state complained that Canadians are unfairly subsidizing the diversion of cargo ships away from their American competitors, particularly in Prince Rupert, B.C.

Andrew Mayer, an official at the Prince Rupert Port Authority also at the conference on Thursday, pointed out that Canadian officials hardly give cargo ships a free ride. While the U.S. taxes shippers, Canada charges them a user fee, he said.

"We charge them to help fund the maintenance of these ports, but we don't have a tax," Mayer said.

He added that cost considerations aren't a "significant component" in why overseas exporters choose a particular port.

"Their primary concerns are speed, reliability and efficiency ... shippers do not choose Prince Rupert because of costs."

The cargo issue was a key topic during a panel discussion at the CAB event on the Canada-U.S. relationship with China that veered into myriad bilateral trade issues.

Two U.S. senators, a congressman and an Obama administration official took part in the event, but a pair of Canadian cabinet ministers — Tony Clement and Joe Oliver — were no-shows, leaving Canada's federal government unrepresented at the conference.

Canadian sources said the ministers cancelled at the last minute because Prime Minister Stephen Harper needed them in Ottawa.

Last fall, U.S. senators Patty Murray and Maria Cantwell urged the Federal Maritime Commission to launch an inquiry into their allegations about Canadian ports. They soon had the support of several lawmakers in the House of Representatives.

In their letter to the agency, the senators pointed out that the U.S. Harbor Maintenance Tax is not collected at border crossings when cargo enters the country on trains from Canada after arriving in North America via Canadian ports. They suggested it should be.

Indeed, their complaints prompted some American lawmakers to mull over a US$140-per-container levy on cargo entering the United States after coming through B.C. ports.

Canadian opponents says such a levy amounts to a punishing tariff on every container entering the United States from B.C. ports.

The Federal Maritime Commission's chairman, Richard Lidinsky, suggested last year that he was sympathetic to the concerns of American port authorities.

While Canadian and Mexican ports are free to compete with their U.S. counterparts for cargo, he said, "they should do so on a playing field that is not artificially tilted by governments' policies."

At the heart of the debate is the growing popularity of Prince Rupert, a $170 million port that opened four years ago with $60 million in subsidies from both the B.C. and federal governments.

The U.S. tax is levied, in part, to cover the cost of dredging port channels on the American West Coast. Dredging isn't necessary in Prince Rupert's deep channels, Mayer noted on Thursday, and Vancouver requires only minimal dredging.

There's another advantage to Prince Rupert — cargo ships travelling from China arrive several days earlier at the port, and Vancouver, than they do to at U.S. ports on the West Coast.

That's especially true of the port of Los Angeles after ships travel what's known as a circular route across the Pacific Ocean and end up far closer to the Canadian destinations at the end of their treks.

Don Krusel, president and CEO of the Prince Rupert Port Authority, has said Prince Rupert was becoming a favoured port not just because it's the closest of any West Coast port to Asia, but also because it has the lowest rail grade to U.S. centres such as Chicago and Memphis, and its terminals are not burdened by urban congestion.

The cargo dispute reared its head just as Canada and the U.S. were about to announce the Beyond the Border initiative, a sweeping agreement aimed at easing trade and bolstering security at the Canada-U.S. boundary.

"I have urged our staff to consider the many reasons, in addition to tax policy, that may motivate a shipper or ocean carrier to use a particular North American port," Dye told the conference.

"In addition, I have urged the staff to keep in mind the progress the United States and Canada have made to implement the Beyond the Border."