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FM AMEMBASSY OTTAWA
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RUCNCAN/ALL CANADIAN POSTS COLLECTIVE

UNCLAS SECTION 01 OF 03 OTTAWA 001455 
 
SIPDIS 
 
STATE FOR WHA/CAN, EB/TRA 
 
DOT for International Affairs (David Decarme) 
 
DOT for Federal Highway Administration (Roger Petzold) 
 
DHS for International Affairs (Karen Marmaud) 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EAIR ELTN ETRD ECON EINV CA
SUBJ: CANADA: Transportation Sector Happy with Government of 
Canada's May 2 Budget Announcement 
 
 
¶1. Summary: Truckers, airports and railways all professed 
their pleasure with the new Conservative government budget 
of May 2.  The railways applauded the federal government's 
commitment to invest in infrastructure to increase the 
capacity of Canada's west coast ports, commuter rail and 
short line railways; Airports welcomed the $25 million 
expansion plan of the NEXUS air program.  Truckers expressed 
satisfaction that corporate tax relief will be coming for 
"our customers and for carriers." They lauded the new 
highway and borders infrastructure funding, but said the 
budget fell short on reducing taxes on inputs, such as 
fuel.  Truckers hope to see that benefit in future budgets. 
End summary. 
 
Budget Offers Billions for Transportation and Border 
--------------------------------------------- ------- 
 
¶2. The May 2 federal budget contained several significant 
announcements pertinent to the transportation sector.  Over 
the next four years Budget 2006 provides more than C$5.5 
billion in new federal funding for:  the Highways and Border 
Infrastructure Fund (C$1.6 billion); Canada's Pacific 
Gateway Initiative (C$239 million); the Canada Strategic 
Infrastructure Fund (C$1.2 billion); the Municipal Rural 
Infrastructure Fund (C$1.5 billion); and the Public Transit 
Capital Trust (C$900 million).  The budget maintains the 
estimated C$3.9 billion in current funding over the next 
four years under existing infrastructure agreements.  The 
budget also offers a grab bag of smaller investments such as 
C$133 million over two years to assist the Canadian Air 
Transport Security Authority (CATSA) in coping with 
increasing passenger flows and related operating pressures, 
and C$25 million for expansion planning for the NEXUS air 
program. The full array of budget documents are at 
www.fin.gc.ca 
 
Truckers Pleased, but not Ecstatic 
---------------------------------- 
 
¶3. CEO of the Canadian Trucking Alliance (CTA) David Bradley 
noted in his comments on the budget that by offering 
corporate tax relief for trucking customers and for carriers 
and new highway and borders infrastructure funding, the 
government "has definitely tried to cover all the bases with 
regard to their priority areas". 
 
¶4. The budget plan specifically includes an acknowledgement 
that two-thirds of Canada's trade with the U.S. moves by 
truck. While he welcomed this high profile, and the highway 
and border initiatives that come along with it, in his 
comments on the budget Bradley indicated some slight 
anxiety, noting that "he hopes that it will be enough to 
leverage provincial investment and cooperation." 
 
¶5. Comment:  This highway improvement is critical.  In 
recent decades, the capacity and condition of Canada's 
highway infrastructure has deteriorated dramatically. The 
1989 National Highway Study conducted by the Transportation 
Association of Canada showed that 40% of the national 
network was sub-standard.  A later study completed in 1998 
found that it would cost over C$17 billion to bring the 
national highway system up to an acceptable standard. That 
study, conducted for the joint federal and provincial 
"Council of Ministers Responsible for Transportation and 
Highway Safety," identified serious deficiencies in Canada's 
25,000 kilometers of national highways:  5,000 km are below 
the "minimum geometric design standard"; 5,300 km fail to 
Qthe "minimum geometric design standard"; 5,300 km fail to 
allow a minimum operating speeds of 90km/h, or require 
upgrading to increase capacity; 1,600 km are unable to carry 
the national standards for heavy vehicle weight limits; and 
6,900 km are below the acceptable standard for pavement 
roughness.  End comment. 
 
¶6. The CTA argues that although the forecast price tag of 
bringing Canada's highway system up to standard may seem 
intimidating, the forecast benefits are enormous.  CTA 
estimates that improved highway infrastructure would reduce 
vehicle operating costs by C$360 million annually for 25 
years, and that up to 236 million liters of fuel would be 
saved annually.  In the context of just-in-time deliveries, 
travel time savings are estimated at between C$18 and C$26 
billion over 25 years. In terms of highway safety, the CTA 
 
OTTAWA 00001455  002 OF 003 
 
 
argues that widening lanes, adding medians, and paving 
shoulders would also reduce the number of fatal collisions 
by up to 247 per year and personal injuries by up to 16,000 
per year. 
 
¶7. The Highway Fund, part of what Minister of Finance 
Flaherty described as "a long-term commitment of 
unprecedented new investment," will be used to cost share 
improvements to the core national highway system with 
provinces and territories. 
 
¶8. The CTA expressed disappointment that the minister did 
not choose to eliminate the federal excise tax on diesel 
fuel, a key and increasingly costly trucking business 
input.  The tax is, in the opinion of the CTA, an "outdated, 
regressive form of taxation that is especially harmful in 
low margin businesses like trucking."  Bradley noted, 
somewhat archly, that Minister Flaherty did remove the tax 
on jewelry.  Nevertheless, the federal budget plan did state 
that "complete elimination of provincial retail sales tax on 
business inputs by all provinces would significantly improve 
Canada's chances in the international competition for 
investment, resulting in more jobs and growth."  Bradley 
said that this recognition of the need to eliminate taxes on 
business inputs is something to build upon for future 
budgets. 
 
 
Airport Community Applauds NEXUS Expansion 
------------------------------------------ 
 
¶9. The 45-member Canadian Airports Council warmly welcomed 
the federal government's announced C$25 million expansion 
plan of the NEXUS air trusted traveler program.  (Comment: 
CAC's members encompass more than 150 airports, including 
all of the National Airports System (major) airports and 
most significant municipal airports in every province and 
territory.  CAC airports handle virtually all of the 
nation's air cargo and international passenger traffic and 
95% of domestic passenger traffic. End comment.)  CAC 
President and CEO Jim Facette noted that the CAC is looking 
forward to working with the Canada Border Services Agency 
(CBSA) to coordinate an "effective marketing and 
communications campaign to promote the NEXUS air program to 
Canadian travelers."  The CAC has been a booster of NEXUS 
expansion, but its positive remarks were tempered by a 
warning that the federal government cannot forget other CBSA 
budgetary constraints that, the CAC contends, are limiting 
air service and economic growth for many Canadian airports 
and the communities they serve.  The CAC argues that CBSA 
must be properly funded so that airports do not have to 
continue to pay for CBSA services.  Facette said constraints 
on CBSA service expansion, and the requirement for some 
smaller communities to pay for CBSA services, "put an 
inappropriate limit on the ability of Canadian communities 
to offer international air service, and accordingly, to take 
full advantage of the opportunities in the global economy." 
 
¶10. The CAC was also pleased to see the budget contained 
C$133 million over two years ($45 million in '06-'07 and $87 
million in '07-'08) to assist CATSA in coping with 
increasing passenger flows and related operating pressures, 
and C$26 million over two years for the design and pilot 
testing of an air cargo security initiative covering both 
security throughout the supply chain as well as the 
evaluation of enhanced screening technologies. 
 
¶11. The CAC also mentioned positively the C$1 billion in the 
Q11. The CAC also mentioned positively the C$1 billion in the 
budget over five years to further improve Canada's pandemic 
preparedness.  $600 million is to be allocated to 
departments and agencies.  $400 million is to be set aside 
as a contingency fund (to be used to enhance Canada's 
preparedness if an elevated pandemic risk were to occur). 
An additional C$12 million was identified for pandemic 
business resumption planning. 
 
Railways Focus on Ports Improvements 
------------------------------------ 
 
¶12. Cliff Mackay, President and CEO of the Railway 
Association of Canada (RAC), expressed the satisfaction of 
Canada's freight and passenger railways with the commitment 
 
OTTAWA 00001455  003 OF 003 
 
 
to invest more in infrastructure to increase the capacity of 
Canada's west coast ports and commuter rail and short-line 
railways.  (Note:  RAC's 59 members represent Canada's 
freight, tourist, commuter, and intercity railways.  RAC 
member railways carry two-thirds of the freight moved in 
Canada and 60 million commuter and inter-city passengers 
annually.  End note.)  In addition to praising the Strategic 
Infrastructure Fund and Pacific Gateways (which will bolster 
especially Vancouver and Prince Rupert ports), the RAC noted 
specifically C$95 million for new measures to enhance the 
security of passengers on railroads and urban transit 
routes.  RAC also views favorably the $370 million over the 
next two years in tax credit savings for urban transit 
users. 
 
 
WILKINS