VANCOUVER - Canada's port operators are scratching their heads at allegations coming from south of the border that they are receiving government subsidies that may contravene international trade rules, calling the complaints yet another U.S. protectionism measure.
Gary Leroux, executive director of the Association of Canadian Port Authorities, accused in turn the U.S. ports of being awash in government money.
"It just boggles the mind that that kind of assertion can be made, under the WTO especially... I think the reverse might be in order," Leroux said in an interview Tuesday.
"It's hogwash. Canadian ports are cash cows and the U.S. ports are recipients."
Leroux was commenting on allegations that surfaced this week from the U.S. ports that Pacific ports in Vancouver, and Prince Rupert, B.C., in particular, are taking business away from their American competitors thanks to allegedly illegal government subsidies which are against World Trade Organization rules.
Leroux said while money has been spent on upgrading road and rail links to the B.C. ports, the U.S. ports receive several types of government funding from infrastructure dollars to low-interest bonds and through the collection of municipal taxes.
"To add insult to injury, some of the ports in the United States will collect a certain amount per head from the municipality that goes towards port funding," he said.
Leroux added that Canadian ports pay much higher municipal taxes when compared to their U.S. counterparts. What's more, he said the current round of U.S. infrastructure money has funds earmarked for ports.
Leroux believes the allegations are another type of protectionism, and wondered why the issue is being raised, given the size of the American ports compared to their Canadian neighbours.
"They are the biggest ports in the world," he said. "What they move in Long Beach in one month is what Prince Rupert moves in one year."
Alex Cherin, managing director trade relations and port operations at the Port of Long Beach in California, argued that Canadian ports are being supported by government funding that in turn allows for cheaper shipping rates.
"If the Canadian government is investing directly into rail improvements and those rail improvements result in a lower cost for shippers to ship their goods, then that might be something worth analysing under the WTO rules," Cherin said.
He said his organization is investigating the issues internally at this stage, but has not filed a legal claim nor taken any action.
"To what extent that support is, we don't know."
He also said the B.C. ports are "aggressively marketing" against using the southern California ports and "going out and telling Asian shippers and other customers around the world that our fees are too high."
Cherin said while shipping rates are down as a result of the recession, what they are seeing is a diversion of cargo.
"That is, shippers that are typically customers of the port of Los Angeles and Long Beach, taking their goods elsewhere because of a number of factors. The recession is one, but competitive pressures is another, rail costs is another as well," he said.
"We don't mind healthy competition, we just want to make sure it's a level playing field."
Cherin would not comment on whether the issue can be considered protectionism.
Some Canadians have been citing increased protectionism measures by the U.S. as a result of the new "Buy American" clause recently added to the U.S. stimulus package. The clause is said to ensure U.S. taxpayer money creates jobs as unemployment hits a 25-year peak south of the border.
A spokeswoman for Trade Minister Stockwell Day said a review of the complaints this week found there are no grounds for a WTO case. She also noted no formal complaint has been filed.
"Everything we've done to improve the efficiency and reliability of the gateway does not violate WTO guarantees," Trade Minister Stockwell Day said in an interview.
He would not say if he felt the complaints were a form of protectionism.
However Day said the fact that it has become an issue for the mighty U.S. ports proves efforts to improve the shipping industry in Canada are working.
Jon Johnson, an international trade lawyer, said even if a complaint was filed, a case would be difficult to make. He said subsidy rules relate largely to goods and what ports provide are services.
"Exactly how one would put together a subsidy complaint is a little puzzling," Johnson said.
Add to that the bailouts being doled out by governments worldwide as a result of the global recession, and the subsidy issue becomes more blurred.
"It would be difficult to launch any coherent challenge, it seems to me," Johnson said.
Port Metro Vancouver chief operating officer Chris Badger reiterated comments that the U.S. receives a lot of government money for their operations.
What's more, Badger said 96 per cent of cargo that comes through the Vancouver port is Canadian-bound.
Prince Rupert port officials could not immediately be reached for comment.
Meantime, CN Rail (TSX:CNR) said Tuesday there has been no direct government investment in its infrastructure.
"Some government funding is targeted at some road works and rail/road grade separations to help neighbouring port communities deal with truck and train volumes," CN stated in an email to The Canadian Press.
CN also noted it spends "substantial company funds" on its rail network every year. That includes about $430 million in 2008 on rail infrastructure projects in Western Canada and $1.5 billion company-wide on capital projects, of which more than C$1.1 billion was focused on track infrastructure.