Trucking Alliance Tells Commons Committee How Industry Being Hit by Economic Conditions

Presentation

(Ottawa, January 31, 2008) – In an appearance today before the Commons Standing Committee on Industry, Science and Technology, the Canadian Trucking Alliance (CTA) told MPs that the trucking industry is being hit hard by current economic conditions in Canada and the US, by rising fuel prices and by an array of costly, often overlapping security programs.

CTA Senior Vice President Graham Cooper told the committee that, “trucking is a derived demand industry, so economic conditions in domestic and international markets are reflected in the industry’s freight volumes and financial performance. The high value of the Canadian dollar combined with the general weakening of the US economy, the resulting reduction in Canadian exports to the US, and the manufacturing downturn (particularly in central Canada), are all having a profound impact on the trucking industry in most parts of the country.”

It is in the cross-border market that the Canadian trucking industry is being particularly hard hit and as Cooper told the committee, “from November 2006 to November 2007, Canada’s total exports to the US declined by 3.8 percent and imports by 1.9 percent. However, these aggregate figures do not tell the whole story. Trucking specializes in the carriage of relatively lower weight and higher value products when compared with other freight modes. A comparison of export statistics for November 2006 and November 2007 shows year-over-year decreases of 4.4 percent in industrial goods, 3.7 percent in machinery and equipment, 5.9 percent in automotive products and 9.9 percent in other consumer goods.”

Cooper also raised the need for the government to take action to lessen the impact of the federal excise tax on diesel fuel: “The excise tax on motor fuels was introduced in the mid-1980’s, ostensibly as a deficit-fighting measure, but since that time it has clearly outlived its stated purpose. Unlike the GST, the excise tax on commercial diesel fuel is not a flow-through tax and therefore achieves little but to boost the government’s general revenues; but in so doing, it heaps an additional input cost on the trucking industry. We have long argued that this type of tax is both unjustified and regressive; it should therefore be overhauled and treated as a flow-through tax similar to the GST, or preferably abolished altogether.”

The rising price of diesel fuel – up by 49 percent from 2004 to early 2008 – is yet another of the cost pressures being felt by the industry. As Cooper explained to the committee, “while motor carriers have been able to pass some of this increase on to their customers through fuel surcharges, current business conditions in the industry make this increasingly difficult to accomplish. Industry margins, traditionally thin, are being squeezed even more as many carriers find it increasingly difficult to fully offset the rising cost of diesel by way of fuel surcharges.”

Finally, MPs were told how trucking security programs, particularly at the Canada-US border, continue to result in duplication, overlap and ever-increasing costs. “The big picture – an appropriate balance between security and trade efficiency based on an assessment of risk – seems to have been lost,” said Cooper. “The situation is not sustainable.  We can’t go on forever, layering one new program on top of another, further driving up the cost of transportation and harming Canadian competitiveness.”

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