GOVERNMENT ORDERS

CN COMMERCIALIZATION ACT

(1505 )

Mr. Jim Silye (Calgary Centre, Ref.): Madam Speaker, I am pleased to rise today to discuss at third reading the bill concerning the privatization of the Canadian National Railway. Although Reform supports the government in this endeavour, there are some problems with this legislation that I feel must be addressed.

First, I would like to take a minute to look at the $96 billion that CN has cost the Canadian taxpayer over 70 years in combined losses and public subsidies in contrast to CP Rail which has cost the Canadian taxpayers zero in direct government subsidy.

Canada is $540 billion in debt, yet crown corporations like this one continue to run in the red without repercussions. Where can we find a deal like that in the private sector? We cannot. Companies go bankrupt and it is game over. Therefore, we support the government in getting out of the rail business.

Despite these massive losses, however, CN managed in the past year to earn a $245 million profit which is a drop in the bucket when we consider the overall picture. CN's debt is currently about $2.5 billion. Industry representatives say that the debt must be reduced to $1.5 billion to achieve a triple bond rating and be able to sell it.

I found an interesting article in Alberta Report dated May 29, 1995 which states: ``CN's debt is unacceptable. Even if CN dumped its non-rail assets, its debt to capitalization ratio would be 45 per cent. The U.S. railway average is 30 per cent. In addition, U.S. railways have improved operating cost to revenue ratios from 90 per cent to as little as 75 per cent. CN is still at 90 per cent''.

The transport minister has the power to reduce CN's debt to any amount he chooses which could mean an amount well below the amount for which taxpayers would see a return. How this debt is reduced is of great concern to companies like CP Rail, its main competitor whose president stated before the transport committee that CN would get an unfair advantage if Ottawa paid off some of its debt.

Moody's Investors Service issued a credit watch on CN's large debt in early May. I cannot believe how much we keep hearing the name Moody's these days in relation to finance with respect to this government. As we all know, a downgraded debt rating will make it more difficult and more expensive for CN to borrow the $2.53 billion it wants to buy new equipment by 1999.

I am going to dwell on another issue for a little bit longer than normal. It is an important issue. The bill requires that the headquarters of CN be located in Montreal permanently. I could understand placing a restriction to keep the headquarters in the city of purchase for a period of time, say five years, to see if that is the best place to keep it and the best place to run the business out of, but no, this has to be in perpetuity which is not the way to sell a company. In today's marketplace, the stipulation of the permanent location of a head office is absurd and makes a mockery of a bill that has a serious intent.

I respect the Minister of Transport. He has intestinal fortitude. Only a short year and a half ago the Prime Minister was against deregulation and privatization of the rail system but the minister has convinced him otherwise. Having said that and giving him that compliment, why is he placing this restriction on the sale? It is political.

I was reading an interesting article that represents the view from the west. It was written by Mr. Ted Byfield, the founder of Western Report, Alberta Report and B.C. Report magazines. He submitted the article to Saturday's Financial Post. I will quote from what he wrote. I will use the technique the chief government whip used all the time while in opposition of giving lengthy quotes and testimonials of key and intelligent people who add and shed some light on a subject. That is what Mr. Byfield does. The article states in part:

Why, you have to ask, must the purchaser of Canadian National be required to maintain the head office in Montreal?

Such is one of the conditions the federal government has attached to the sale and the reason is purely political.

Something like 70 per cent of CN's business is done west of the lakehead and the western share has been increasing for the last quarter century. CN is, in other words, essentially a western Canadian company.

I will skip a little piece and go down a couple of paragraphs:

Perhaps true, Ottawa would reply, yet from its inception 75 years ago CN has been headquartered in Montreal, and such historical associations matter more than where most of the business is actually done.

How different is this case to the one made when it was proposed to move Trans-Canada Airlines, ancestor of Air Canada-

-out of its traditional headquarters in Winnipeg.

At that time, westerners argued that by tradition TCA was a Winnipeg based company, which indeed it was. Ah yes, said Ottawa, but we must face the fact that more and more of TCA's business is in eastern Canada. So piece by piece the company's head office operations were moved to Montreal.

When tradition favours the west, tradition does not matter; what counts is where the business is done. But when tradition favours Quebec, where the business is done does not matter; what counts is tradition.

Based on what I just read by Mr. Byfield, is the Liberal government forcing CN to stay in Montreal because it does not want to be seen as promoting the loss of a major Montreal head office on the eve of a vote on separation? Do the Liberals feel that Quebecers and Canadians outside of Quebec are that naive that they do not know it is a political move? Do they feel that Canadians are so ill informed that they would not see what this is?

Do the Liberals not see as a government that the best way to sell a company is to allow the potential owners to do what they want with that company once they make the capital investment to buy it and take the risk to run it, a company that has lost $96 billion since its inception? Does that not make sense?

Why in heaven's name would they impose these restrictions in light of the need to get out from under the continued government subsidy of the crown corporation? What are the Alberta Liberals doing to represent the interests of their constituents on this matter? What are the the Liberal members from Edmonton doing to exert any influence over the Minister of Transport, to try and talk some sense into the minister who, other than in two or three areas of the bill, is missing the boat? He is on the right track but why not do it 100 per cent right? Why jeopardize the potential sale of this asset which is so import to sell. In order to sell it the right factors have to be in play.

Let me get back to another comment made by Mr. Byfield in his article in the Financial Post:

Then, too, you wonder about that select set, the four Liberal MPs from Alberta. All four are from Edmonton. And if the CN head office with maybe a thousand jobs attached were to move out of Montreal, where would it go? Where is the CN's centre of operations in the west? Edmonton, that is where. So why haven't these four, at least within caucus, protested against that provision? Maybe they have.

And what about Edmonton city council members who tirelessly talk of their diligent labours to bring industry into their city and who wail so piteously every time another business departs for Calgary? What have they done? Delegation to Ottawa, maybe? Nope. Pressure on the Liberal MPs, perhaps? Nothing. For every buck CN makes in and around Montreal, it probably makes 20 in the Edmonton region.

(1515)

There will be no restrictions on foreign ownership of CN shares, but no individual shareholder either domestic or foreign will be able to own more than 15 per cent of the shares outstanding. Personally I think that is ridiculous.

I was in the business sector for about 25 years before I became a politician. I have purchased a lot of companies and I have looked at the assets of a lot of companies. One of the things that business people look at, the people who want to run successful corporations, is control. If they do not have control they cannot run a successful company. A corporation run by people who do not have a vested interest, a significant interest, and who do not have a lot at risk, at times do not care enough to pay attention to all the details to make proper decisions in the best interest of the corporation.

I have a suggestion rather than limiting ownership to 15 per cent. There are ways to help the Minister of Transport whom I truly respect. I am trying to make it a better bill or a better way to sell the company. This is serious. The corporation is for sale and we need to raise $2 billion. We must have the right ingredients at work or at play to achieve a quick and effective sale. The longer it drags out the worse it gets and the more it hinders the government and hurts Canadians, because we will have to continue to subsidize the rail line.

Why not offer the shares to Canadians first? Why not set a time limit of 60 days for an unlimited number of shares? Then we could put them on the global market. If the majority of shares are not picked up by Canadians or people from Canada, if less than 60 per cent are sold, Canadians have no right to come back on the government to complain.

I am giving the government a suggestion to satisfy Canadians, Canadian content, the right to buy Canadian, and the right to participate as Canadians. If Canadians do not step up to the plate, if they do not want to take the risk and if they do not want to invest, so be it. However they should be at least given the first opportunity in return for the $96 billion they have subsidized the company for over the last 70 years. They deserve at least that much. Wherever the percentage falls it should then be offered to the global market. If only 30 per cent or 40 per cent have been sold to Canadians, we should let other people buy control or control it. Canadians cannot then hold the government responsible or accountable for doing that.

We need to have many people available to purchase the corporation. We need to make it available to as many people as possible, but I maintain Canadians first and a lifting of the 15 per cent limit.

In all cases sell or make control available. However, by making the shares available and control available the government can still impose restrictions on the competition for making the shares available to the competition so a monopoly cannot be achieved. That can be done through government regulation.

That is what the purpose of government should be. It should pass good regulations to ensure fairness and competitiveness in the marketplace, to create an open and competitive marketplace, to have regulations in place that do not allow monopolies to exist in the business sector, and to allow the private sector to operate openly, freely and competitively but not in a family compact way where one corporation is allowed to buy up everything and there is no competition.

Any government on that side of the House must always protect the interest of all Canadians. It must always have competition as its first priority.

(1520 )

I should like to touch upon the Official Languages Act as well. It says in the bill that CN will remain subject to the Official Languages Act as if it were still a government agency. Will the people who want to buy the company, the eventual directors of the company, not know where to advertise in two languages, where to advertise in one language, or where to have people on the rail lines who are bilingual or unilingual? These people have enough intelligence, if they put that much money at risk, to know what is in the best interest of the corporation and how to increase sales and service.

To impose rules like these make it negative. The owners should be given the option. They will not be people who have never made a dollar before. They will not be people who do not know how to market. Obviously they will be people who know how to make a dollar and what it takes to make a dollar. They will satisfy the needs of the people they serve. Be they francophone or anglophone or a combination, they will be able to project and present their rates, their trips and their packages in the language they feel is necessary to offer the services. A rule like this one is a restriction. It is not something that helps, aids

and facilitates the sale. It restricts, hinders and hurts the potential sale.

Reform Party policy on privatization and corporations is that we support placing ownership and control in corporations in the private or public sector that can perform their functions most cost effectively with the greatest accountability to the owners and the least likelihood of incurring public debt.

If it is a public corporation the taxpayers own it and they entrust the government, the people they elect, to look after it. But it does not. Most of the crown corporations we have end up being arm's length, quasi-judicial or whatever claptrap they talk about where ministers will not take responsibility.

The minister of heritage will not take responsibility for the CRTC. The minister of immigration will not take responsibility for the IRB. I will find something the Minister of Justice will not take responsibility for; I have not thought of it yet. However I am sure there is something on which he can stand and say that it is not his fault because it is an arm's length body, and the taxpayers are the ones who are paying for it.

We have a situation where we believe the sector that can look after taxpayers' dollars the best and the sector that can achieve the highest profit and run the business the best could be the private sector. We believe 85 per cent to 90 per cent of the time it will be the private sector but not necessarily. Therefore we need some rules for crown corporations and some elements that ensure taxpayers' dollars are looked after.

The Reform Party compliments the Minister of Transport for recommending and convincing cabinet to go forward with Bill C-89 and the privatization of CN Rail. However, as I have outlined in my speech today, we would like to see some of the roadblocks removed from the legislation, just as was wanted with the bill of the Minister of Justice on gun control. We gave him innumerable recommendations. He could have been the most popular justice minister in the country if he had split the bill. It was a very simple recommendation. There could have been the bill on gun control, punishment for the criminal misuse of firearms, and a discussion on a national registration system. The Liberals never promised registration in their red book; they promised gun control. The minister delivered on half of his promise and introduced a completely brand new element.

I do not know how the minister drafted Bill C-89. Our transport critic has already mentioned that when the Prime Minister was on this side of the House he said that he was astonished at the Conservative recommendation of deregulation in the rail industry. How quickly they change colours. How quickly red becomes blue. How quickly the little fish in the bowl that are blue and red get together and suddenly become one colour when they are on that side of the House. It does not matter what they say on this side; they change when they go on that side. Unfortunately it will come back to haunt the government.

(1525)

I wrap up by saying I compliment the government on its attempt to privatize. I hope it listens to the abolishment of the headquarters in Montreal and the 15 per cent rule. It should open it up to real business people and entrepreneurs.

Mr. Robert D. Nault (Kenora-Rainy River, Lib.): Madam Speaker, I should like to make a couple of quick comments and then ask the member some questions.

I have one comment about the Prime Minister's decision to allow CN to be privatized. It is pretty well known in this place, and the Prime Minister has said it publicly many times, that he does not always get his way. If cabinet makes a decision, like the rest of us who believe in the party process he will support the majority of opinion. That is difficult on that side over there where they try to play the smoke and mirrors game of their leader letting them do what they like when we all know he is probably the most draconian person in the place when it comes to not letting his members do what they want.

From a railroader's perspective and being the only railroader in the House, I have a bit of an advantage over my colleague from Calgary. He talked about the fact that there was problem with having Montreal designated as the place to keep CN headquarters.

Reformers continually tell us that they use the age old ability to find out what people think by going out and consulting. I was on the transport committee. My colleague opposite was also on the committee. We listened to many people talk about the effects of Montreal being the headquarters. We asked the investment bankers what they thought. The gentleman opposite being a business person would know that bankers are important people to ask. What did they say? They said that there would be no effect.

Let me tell the House why. What is in Montreal at head office? There is a central calling bureau for railroaders. For people out there who do not know, it is a huge enterprise where every railroader who works for CN is called. It is a major undertaking that cost CN some $30 million to put into place in the last few years. To have that completely changed and transferred to another system would cost millions of dollars. Also, at CN or CP there is a central power bureau where every locomotive in the country is designated for a particular train or a particular piece of track. One would think it was outer space with all the technology involved there. To move the whole process to Edmonton or Calgary would cost the corporation literally millions of dollars.

It would not cost a cent of the sale of CN to maintain the headquarters in Montreal. Quite frankly it is good business practice to do so. Therefore the investment bankers have said to us that there is no problem.

On the 15 per cent retention I want to comment that CP, a privately owned company, does not have a restriction. In fact the most of CP owned by an individual is 11 per cent.

Investment bankers are saying on the one hand that there is no cost effect to having Montreal designated as the headquarters. In fact it would be worse if we tried to leave it open and someone suggested for political reasons because of the sovereignist and separatist problems in Montreal that we should move it. It would hurt the company if someone suggested it for political reasons. Leaving it there for stability reasons is a much more appropriate process.

CP is a private corporation. It has never had anyone purchase more than 11 per cent of the company. Investment bankers do not believe the 15 per cent limitation will have any effect on the sale.

Why would the Reform Party be so adamant that they are impediments to the sale and getting a good price for CN when they are not by reason of sound investment bankers, consultations the government has made and what we have heard as a committee from witnesses? Is that not what the Reform Party says it is all about: if people tell us it makes good sense then do it? We have been told it makes good sense. Why is the Reform Party not supporting that when everyone we have talked to says that it makes good sense and it will not affect the sale price?

(1530)

Mr. Silye: Madam Speaker, I appreciate the hon. member's intervention and I respect what he said, because a lot of what he says has a lot of merit. Possibly even there could be two directors around the same table just having a difference of opinion on how to approach a problem.

I heard another comment. I promised I would never have rabbit ears, but there is a certain individual whose voice is so loud that I just have to say that when they tell me I do not understand, let me tell that hon. member that I do understand. I have been in business for a long time. I know what it takes to buy and sell businesses and how to make a profit and how to achieve a bottom line.

We have a railroader here debating with a businessman. Maybe he is the only railroader. I know I am not the only businessman, but along with the Minister of Finance and the member for Edmonton South I may be one of the few successful businessmen here whose comments are made in sincerity, not partisan politics. We are talking business here. We are talking privatization and how it should be done. I submit these suggestions on the basis that I feel that the government and the Minister of Transport should reconsider these issues.

On the question of Montreal, I did agree that there was some sense to keeping the headquarters in Montreal for the sake of stability. I would agree with that member that stability is important, that to allow a new purchaser to lift up, pull out, and do what they wanted initially would be a mistake. But that stability should have a time factor on it. It should not be in perpetuity. It should be long enough that the people who are running the company, the board of directors, can have five years. It could be three, it could be eight, it could be ten. I do not care about the number, but eliminate that forever clause.

They can try it and see whether leaving Montreal is in the best interests of the corporation. They can choose then where to move the corporation. Anybody who buys a company should have that freedom and flexibility. I believe that will attract and help those people who would be bothered by that and handicapped by that. It would eliminate that, which in the long run would be negative. In the short run it is a positive, but if you really want to attract investors you have to look at the long term, not the short term.

On the issue of control and the 15 per cent, I do not care what CP did. It does not matter to me whether there is 11 per cent or 10 per cent or 9 per cent. It does not matter. What I am suggesting here is that we have a quick and effective sale. The way to do that is to give Canadians the first opportunity. We know that the market is hot. The marketplace is hot right now. There are people willing to part with billions of dollars. There are investment funds, mutual funds, investors and dealers looking for places to place pension moneys. There is lots of money out there.

If there are individuals with an expertise in this area and they feel they could buy control and that 16 per cent would give them that control, let that sophisticated purchaser buy that 16 per cent, or whatever amount would be control.

By the very nature of how CP operates, nobody is going to buy 51 per cent. Nobody is going to buy that much. If they can figure out that by buying this amount they could get control, great. But let us give it first to Canadian corporations and give them an opportunity for a certain period of time and after that open it up. I will submit that at the end, if these suggestions were at least addressed and looked at, the sale would be quicker. The sale would come about. It would not be a bastardized deal like some of the other crown corporations we have tried to sell, where we only end up selling off half of it and not all of it. We end up in trouble and it lags there.

These are the things I am trying to recommend to the government. With respect, I tried to answer this as a businessman to a railroader who is also a businessman, businessman to businessman, to try to achieve a consensus. I still think we

should go after the Minister of Transport and get him to change his mind on a few of these issues.

Mr. Joe Fontana (Parliamentary Secretary to Minister of Transport, Lib.): Madam Speaker, I have a short question if I could.

(1535 )

I respect this member as a business person too, but the effect of what he is suggesting would cause the exact reverse. His colleague put forward an amendment indicating that we should offer it to Canadians first. We agree that in order to effectively get the value of shares for Canadian taxpayers for CN we need to have a broadly based offer in North America. We know there is not enough capital in Canada. To suggest that Canadians are lining up to buy 15 per cent, which is worth at least $200 million, I do not know of many pension funds and individuals who can afford to pay 15 per cent.

The second thing is that if in fact we want to achieve a 100 per cent sale and maximum value for Canadians, we cannot impose restrictions to say let us sell it to Canadians first and then let somebody else buy the rest. It is impossible to achieve that. We agree. And we want to achieve the maximum value.

The board of directors for CP, a private corporation, have decided that Montreal should be its headquarters and 70 per cent of its business is also out west. How does he rationalize that?

Mr. Silye: Madam Speaker, the only comment I would make to the parliamentary secretary is that he underestimates the wealth in Canada. He underestimates the willingness of Canadians to take a risk and to invest. There is a lot of money in Canadian pocketbooks. The oil and gas industry has seen that in the past two years. Petro-Canada should be the next one on their plate. It should be done quickly. It should not be waited upon. The $1 billion or $2 billion that could get is all there-

The Acting Speaker (Mrs. Maheu): I am sorry, the time has expired.

[Translation]

Mr. Antoine Dubé (Lévis, BQ): Madam Speaker, since I represent the riding of Lévis, where 500 people work for CN in Charny, and since one of the main assets to be privatized under Bill C-89 is the Pont de Québec, one of whose supporting structures is located in my riding, it is quite easy to understand why I wish to participate in the third reading debate on this bill to privatize CN.

When this bill was tabled in the House, my first reaction was to consult with my constituents, with workers and their families, with the people who live with CN workers in Charny, to find out what they thought. The first comment I heard took me by surprise. These people were not against privatizing CN for the following reason: They thought it could not be any worse than the way CN has been managed in the last 10 years. Although they were not enthusiastic about privatization, they almost preferred this option to the way CN has been managed, especially in recent months.

In this context, the House will remember Bill C-77, which forced CN, VIA Rail and CP employees back to work, and the three unprecedented steps taken to cut off debate on this bill in the House, while Ogilvie workers have been waiting for two years for an anti-scab law that could speed up settlement of their dispute.

The reason why workers faced with a bludgeon law, with several years of mismanagement at CN, with CN management's failure to listen to them, are not against privatization is obviously because they figure that purgatory is better than hell.

(1540)

I would also like to recall a point which was not emphasized much here. After the unprecedented promotional effort by CN's president, Paul Tellier, during the last election campaign, which took him to the U.S. for the World Congress of Railway Companies held in Louisiana, a colour picture was published in Le Soleil. I will never forget this, for Tellier had been advocating selling CN at reduced price and at any cost. He was telling everyone that the company was for sale because-what a great selling feature-of lack of productivity and the fact that the business was not doing well. It was so terrible; CN was unprofitable. He said it carried losses of about $80 million a year, adding that it was unacceptable and that CN should be sold as soon as possible.

That was during the election campaign and, at the time, the Liberals never said a word about privatizing CN. There is no mention of this in their red book.

In this context, a few weeks after Bill C-77 was passed ``full steam ahead''-I am using this expression deliberately since we are dealing with railways-Bill C-89 was introduced. And this morning, as we get ready to vote in third reading on Bill C-89, there is a transport bill, whose number I do not know because I think it has not been given one yet.

What does this piece of legislation say in essence? Having attended the briefing session the officials delegated by the minister gave while he was tabling his bill in this House, I can tell you what it says. It says basically one thing: deregulation. In the neo-Liberal mind, this means eliminate as many regulations as possible and make things as easy as possible for the public sector.

However, my review of the history of Canada and Quebec shows that Canadian railways were almost at the origin of the Canadian Confederation. We all recall the fine speeches made by key political figures of the time, by Sir John A. Macdonald in particular, who insisted that the vast country of Canada should

have a public railway system linking every region and that railways were almost sacrosanct to this country.

So what is Bill C-89 doing? It is taking away this sacred value by privatizing the railway system. CN will become a private company like any other. However, the purpose of Bill C-89, and particularly that of the new transport legislation which was before the House this morning, is to make life for private companies even easier than was the case for Crown corporations. Let me relate something quite pertinent.

When CN was a public corporation, under the 1987 and 1902 acts, all agreed that the legislation was limiting, that it was harsh. However, we had a crown corporation under the control of the Minister of Transport, and we had some influence in that we could democratically express our dissatisfaction whenever an election was held.

But now, at the same time as the decision to sell CN is made, the government tables a bill to deregulate. Why? It is to be able to face U.S. competition by allowing CN's new shareholders and managers to compete with Americans.

(1545)

At first glance, that decision may seem to make sense, but there is a danger. Indeed, the Bloc Quebecois feels, as the Reform Party pointed out, that Bill C-89 is dangerous because, while the government is deregulating in American fashion, in a free trade context, it leaves a former public corporation totally in the hands of the private sector. Moreover, the government gives Americans an opportunity to control that corporation. If the Americans have that possibility, they will look after their own interests, which is perfectly normal. This concerns us.

This is why, even using the approach proposed by the Reform Party, Canadians from all regions, including Quebecers, should have been given priority in terms of buying at least a majority of the shares. But no, the Liberal argues that there is not enough money, not enough assets, not enough people in the Canadian private sector who are interested in buying the corporation and that, consequently, it has to open the door to foreign investors.

We are told that the assets total some $2.5 billion. We are also told by a company hired by CN to evaluate these assets that Canadians represent a potential of only $750 million. So, the government privatizes, but admits from the outset that the former public corporation, which was set up to serve Canada's economic interests from east to west at the time the Canadian confederation was established, will now be under foreign control.

Quite frankly, I find it very hard to get enthusiastic about this change. Although I am a sovereignist, I cannot stand by and let the rest of Canada be dispossessed of one of its main legacies, the railways.

I cannot help but notice that Liberal members across the way are giving up their turns and becoming strangely silent on the subject of Canada's main railway company, which they want to privatize and risk leaving in American or foreign hands.

Although their silence may be due to discomfort, I get the impression that it is more likely caused by their desire to go on holiday as soon as possible and by this government's carelessness and lack of vision.

As I said at the beginning and as I reminded the House, the Bloc Quebecois is not necessarily against the principle of privatizing CN, but not under these conditions, which may lead to possible majority control by foreigners. We were against this. We expressed our position by tabling our amendment.

We also said that CN is evading its responsibilities by not giving adequate guarantees to CN employees, who have faced repeated cuts in recent years. These employees live in a climate of insecurity in which the top manager, Paul Tellier, was paid a huge salary-$345,000 per year, a home for which he received a no-interest loan, and handsome perks-to travel around the world promoting CN, although ``depromoting'' or demoting-if I may use these words-would be more adequate terms since he explained how terrible this company was.

(1550)

As far as Bill C-77 is concerned, we listen to and watch the advertising, we read the CN report with its nice colours, and everything seems to be fine. Although we cannot show it, it is red but has nothing to do with the red book. It refers to a shift in policy.

The 1994 CN report, which I saw this morning at the briefing, says that everything is hunky-dory at CN. In a few months, we made $279 million in profits. That is quite something. Yet, CN must be sold as quickly as possible.

Can you imagine the effect of such an announcement on employees, on Canadians, on Quebecers? It took the incredible Mr. Tellier a year to accomplish the feat of making this supposedly money-losing company profitable. But he wants to sell it any way. I am trying to draw a parallel, in order to understand.

When the Liberals came to office, the Conservatives had decided to privatize Pearson airport in Toronto. The Liberals, with the Prime Minister in the lead, said that they would not stand for that. Why? For one thing, Pearson airport was said to be one of the only, if not the only airport in Canada to turn a profit. Not only was the main airport in terms of traffic, but it was also profitable. Why privatize this airport then if it can bring in revenue for the government?

In his report, Mr. Tellier says that CN is now a profitable business. After four or five years of making losses, now that the company is making a profit, it should be sold. Let us look to the future. This company must be sold at all costs as soon as possible; so, let us pass a bludgeon bill.

Under the terms of the mediator's report released on June 14 or 15, CN employees have to accept the conditions set, indirectly, by the government. There is this urgent need to sell CN before the fall regardless of the profits that can be made. I must confess that the Liberal government's logic eludes me at times. It is hard to see.

At the same time, we must look at something else. Small airports like the one in Sainte-Foy, Quebec, which while being called international apparently are not profitable, are also to be privatized. Unless the municipalities and regions take it over-I took this example and, in this particular case, activities would be commercialized without ownership being affected-but there is also Rimouski, Mont-Joli, Baie Comeau, all those are not turning profits.

The Minister of Transport is asking local communities to take over the operation of these airports, otherwise, after a while, they will be closed down. Where is the logic in that? You do not turn a profit, we close you down. CN is turning a profit, yet it is being sold. Why? It does not make any sense to me.

I am no expert in transport, but people ask me why this change in policy, why sell CN now that business is good after several bad years. They cannot understand this change, especially after the Chrétien government prevented the privatization of Pearson airport.

I do not know if I have much time remaining. Two minutes. That is just enough time to tell you about the two pillars of the Pont de Québec.

(1555)

The other night, between 1.30 and 2 a.m., the hon. member for Louis-Hébert and myself raised the issue of the Pont de Québec to try to influence the government regarding the privatization of CN's assets. After all, this is a majority government and it can make any decision it wants. We mentioned the fact that Canadian railway companies are true symbols. The old Pont de Québec is also a symbol of federalism in our region.

However, the bridge is falling into decay, just like federalism, at least in the Quebec City region. The bridge is falling into ruins. On a more serious note, Madam Speaker, do you think that a private company will be interested in investing $40 million to restore the old bridge? Or will that company say: the federal government built the bridge, so it is its responsibility; if it wants us to repair it in the medium term, then it has to give us the $40 million required.

We tabled in this House an amendment which essentially said: we will support privatization, but will the government guarantee that the $40 million will be paid to CN, so that work on the bridge can start within a year? The government never gave us an answer. No answer. In that context, and given the social conditions of the employees, as well as the lack of respect shown for Canada's railway heritage, the official opposition will oppose this bill.

[English]

Mr. Joe Fontana (Parliamentary Secretary to Minister of Transport, Lib.): Madam Speaker, the hon. member indicated a number of employees live in his riding. As well, in London, Ontario there are a number of CN employees.

We have through the CN privatization bill encouraged them to be involved in the ownership. We believe that will be good for the new corporation. Each employee will be able to buy shares in the company which will give them a more meaningful role in the affairs of Canadian National.

We wanted to ensure the employees knew their pensions would be protected in a number of ways. The Pensions Act and a number of safeguards Parliament has passed over the years will ensure each one of those pensioners and the people who work for CN now and in the future will have guaranteed pensions.

The hon. member is right, the privatization of Canadian National was not in our red book. What was in our red book was to build an efficient, affordable and integrated transportation system, be it in air, in marine or in rail.

We believe CN does not have to serve the public policy role. That is for governments to deal with in terms of regional economic development and so on. A railroad is a railroad and should be allowed to function as a railroad so it can provide the services it must to its customers.

We believe a privatized CN will be better for the country, better for its employees and better obviously for its clients. It will be stronger and able to manage a number of things without the encumbrances of government.

Therefore the deregulation package we put forward in the House today will ensure a viable rail industry for CP, CN and the creation of short line industries. Unless the country can move its goods and services in the most efficient and cost effective manner, we will not be able to deliver or export our goods and nobody will have a job. We need an efficient and affordable transportation system. That is what CN privatization is all about and that is what the deregulatory process is all about.

The member spent some time talking about the Quebec bridge. If he had spoken to his colleague he would have known CN has an obligation to maintain that bridge. A letter from Mr.

Tellier to the Quebec transport minister indicates the bridge is in need of repair, but there are studies which indicate it is safe.

It also has indicated that perhaps the province of Quebec ought to pay its fair share for the maintenance of the bridge. While it is very important for rail traffic, 75 per cent of the traffic on the bridge is vehicular, which comes under the jurisdiction of the provincial government.

(1600 )

We heard from people in committee who talked about the historical significance of the Quebec bridge. We believe in that as well. They are prepared to raise money. They are prepared to look at ways of restoring its historical significance.

I wonder if the member has heard from the minister of transport in Quebec as to whether Quebec is prepared to pay its fair share for the bridge to ensure it is safe and properly maintained for historical and transportation purposes. Has he heard from the minister or will he undertake to the House that he can use his good offices to talk to the PQ about paying its fair share?

[Translation]

Mr. Dubé: Madam Speaker, it will be a pleasure to answer the question put by the hon. member for London East.

First of all, regarding the Pont de Québec, since that is the main thrust of his question, I think that basically, it all boils down to the federal government's habit, inspired by Minister Martin himself, of offloading its responsibilities onto the provinces.

The bridge was built by the federal government and used by CN. The Government of Quebec already pays an annual fee for use of the paved section, but the bridge was built for Canadian National. Quebec has already done its share under an agreement which, I believe, was for forty years.

Quebec pays this fee under the agreement. However, the federal government now claims that because of inflation, although it certainly is not excessive these days, the Quebec government should help the federal government meet its obligations. This is fantastic.

I think that in Quebec like anywhere else, when you have a tenant-landlord relationship, the tenant-and the Quebec Minister of Transport made this quite clear-may be willing to renegotiate the lease and pay more. This was in fact suggested in a letter. The Quebec Minister of Transport said that once the repairs had been made, he was prepared to pay for annual maintenance, but because the federal government has been cutting its maintenance budget for the past ten years, the bridge is in a sorry state.

In his preamble, the hon. member said that employees in his riding were interested in buying shares. Madam Speaker, I want the hon. member to listen very carefully. In February of last year, at the invitation of the minister, CN employees across Canada submitted a purchase offer. A year later, they got together with the actuaries and, using their pension fund, they made the same offer, and the response they got from Mr. Tellier, president of CN, and from the government, was the back-to-work legislation passed in February. That was their answer. ``No way''. That was the answer they got.

On June 1, the union made the same offer. It is an interesting proposition because of the excellent working environment this could create. Since the employees would run the company, they would not want it to show a deficit. And they would save their own jobs. All this was dismissed out of hand. No, they prefer grandiose gestures; they prefer to call upon the international community while ignoring two or three dimensions that I wanted to stress in closing.

The railway companies in all of the big European countries, France, Germany, etc, are public. Yes, in all of them. Why? Because they feel that this public infrastructure is a building block which is necessary for regional development. And what are we doing in Canada? In addition to the things I said earlier, the government is cutting transport subsidies for the regions. The hon. member for Ontario and people from the Maritimes know this. And why is the government doing this? It wants to replace them with new road infrastructures. Some gift. While the federal government would contribute to the cost of building new roads, the provincial governments will end up having to maintain them.

We know that during the spring thaw, a single tractor-trailor wears down highways as much as more than 17,000 cars, according to engineers.

(1605)

We know that all of our highway maintenance problems in Quebec and Ontario, in Toronto where it is obvious, are caused by trucking. And the upkeep of roads is the responsibility of the provinces. The hon. member would like to see me encourage the Liberal government to reply that, at a time when the federal government is trying to offload its deficit to the provinces, the Government of Quebec should help the federal government meet these responsibilities, which it is no longer able to do alone. No, Madam Speaker.

[English]

Mr. Ian McClelland (Edmonton Southwest, Ref.): Madam Speaker, it is a pleasure to participate in this debate. It is important for me, representing Edmonton Southwest, to ensure some views are put on the table that would reflect the views of Canadians with regard to the privatization of CN.

The Reform Party is generally speaking in support of the bill. We think the privatization of Canadian National makes a good

deal of sense. If we think it is such a good idea and if the government thinks it is such a good idea to privatize CN, perhaps the next bill to be discussed will be the establishment of another crown corporation, the Federal Business Development Bank, which will be continued and greatly enlarged to compete in the financial services sector.

The debate today concerns the privatization of Canadian National. Whenever the name of a railroad is invoked sooner or later taxpayers will have their hands in their pockets. That has been the case ever since day one in the railroad industry in Canada and nothing will likely change that.

Canadian National is the result of an amalgamation of a number of smaller money losing operations which about 30 or 40 years ago were combined into Canadian National. The wisdom of the day was a lot of small money losing operations could be combined into one big money losing operation, and that is exactly what happened.

Canadians have been throwing money at Canadian National hand over fist ever since it was put together to compete with Canadians Pacific. Canadian Pacific was established with a great deal of government largesse. It received copious quantities of land in return for building the railroad. It promptly sold off the land and came cap in hand to the people of Canada saying it needed subsidies or it will close this or that.

Thus is the story of big business in Canada. An hon. member from the New Democratic Party many years ago coined the phrase corporate welfare bums, and he is quite right. The larger the business in Canada, the closer the tentacles of that business are to the coffers of the country.

It is Mr. and Mrs. Taxpayer, people struggling to get buy, who seem always to be dipping into their pockets to subsidize somebody else. At least with this legislation there is half a chance the subsidization to CN will come to an end, which begs the question of who in their right mind would buy anything that has been losing money since time began.

It was an amalgamation of money losing railroads turned into one big money losing railroad and now carries a debt of about $2.5 billion. Why would anyone in their right mind buy this railroad? Privatizing will not make it profitable. If one takes a historically unprofitable entity and privatizes it, that in itself will not make it profitable.

(1610 )

Canadian National will have to be privatized in a manner which will remove the shackles that have prevented it from being profitable. That means whoever will be buying this railroad, whether it is a zillion individuals or a half a dozen large organizations and a lot of other individuals, these people will need the ability to make the decisions necessary to turn this railroad which has historically lost money into a profit making venture.

That was the purpose and rationale behind some of the amendments we offered to the bill. The Reform Party is by and large in support of the bill. We think it is a good idea and we respect the government for taking this initiative. It has not been an easy chore over the last year or so for the Liberals to reverse direction, as they have in many of the bits of legislation which have come to the table. Who would have thought there would ever be in this day a Liberal government bringing in legislation to privatize a crown corporation? That has not been the Liberal way over the past 30 or 40 years.

When the prodigal son comes home we should welcome him and say: ``Well done. We are glad you are seeing the light. What can we do to help?'' To dump all over the government because there are some things about the bill we do not like would be counterproductive.

As my colleague from Calgary Centre mentioned, when a private corporation is looking at any venture, granted this is a big venture, business principles are business principles. It is really a question of adding a number of zeros once we get started; it is a question of how many zeros are behind the decimal point.

Canadian National in order to be palatable to future investors must reduce some of its debt load. The debt load is $2.5 billion and people have said it should be reduced to something in the order of $1.5 billion.

A truism in the business world is the first hit you take is always the easiest. Therefore if we are to sell this off we are far better off taking the hit by reducing the the debt CN carries the first time around rather than trying to drag it out. We are far better off getting the price and the debt to a level attractive to purchasers at one time than we are trying three or four different levels.

There are a couple of ways this could be achieved. One is to sell assets CN presently has. That is the way it should be done. CN should not come to the public coffers of Canada, individual taxpayers, and say: ``Dip into your pockets and pull out $5 or $10. This is your contribution to getting this white elephant off our backs, this albatross of our necks. Your contribution is $100''.

We should be saying CN is in the transportation business, the rail business, and had better sell off a whole lot of these assets. This is exactly what we would do in the private sector; get down to the bare bones, the core business. Once that is done and the assets are sold we could look at how much we have to write down on this debt in order to make it saleable.

CN is a national company. I believe I am accurate in saying that something in the region of 70 per cent of the revenues of CN are generated west of the lakehead. It is a national company but the majority of the revenues of Canadian National are generated

in the transport of raw materials such as coal, sulphur, grain and parts of the resource industry.

(1615 )

That is why this is a reasonable question to ask. If the bulk of the revenues are generated in western Canada and the company is to be privatized, does it not necessarily follow that the privatized Canadian National in order to become profitable will accelerate in closing parts of the operation which are losing money which would then inevitably be that part of the operation probably east of the golden triangle or golden horseshoe of central Canada? In order to be a viable entity CN must have access to the country's industrial heartland. It may not have the wherewithal to continue to operate money losing parts of its operation elsewhere in Canada.

This brings into the debate where the head office should be. We are not talking about where the various repair shops should be. Earlier a member mentioned that a high tech operation in Montreal keeps track of the locomotives and the trains. I always wondered how on earth railroads kept track of their rolling stock. That can stay in Montreal. We are talking about the head office. The head office could be wherever the majority owners of the new privatized Canadian National would want it to be.

There is quite a disparity in the number of employees working across the country. Today, 29,541 people work for Canadian National. Of those 29,541 individuals 2,526 live in British Columbia; 3,567 live in Alberta; Saskatchewan has 1,380; Manitoba has 4,498. Alberta has the western regional headquarters. In Manitoba there is a major repair facility. It is a major yard. Ontario has 7,165 employees and Quebec has 7,795 employees.

Perhaps the head office should be somewhere in Ontario. There are the same number of employees. Perhaps the head office should be in Prince Edward Island. There are five employees in Prince Edward Island; Newfoundland, 167; Nova Scotia, 393; New Brunswick, 1,903; and I mentioned that Quebec has 7,795. With the exception of the maritimes where there is not much of a presence of Canadian National, outside of New Brunswick which did have a repair facility, most of the employees of Canadian National are spread out pretty evenly across the country.

The Liberals dictate that the head office should be permanently in Montreal is because of the delicate nature of the relationship between some people who live in Quebec and the rest of Canada. The government just does not want to ruffle any feathers right now. It does not want to add another ingredient that could possibly be disturbing. It does not want to risk the enmity and the ire of the Bloc Quebecois by saying that the head office can be wherever the owners want it to be.

There are issues of principle that go beyond whether or not members of the Bloc Quebecois get upset. Let them get upset. Who cares? We are running a business here. We make business decisions for business decisions. We could have the Holy Mother here and the Bloc would find some reason for getting upset. Let us just assume that the Bloc is going to be upset no matter what we do.

The next thing then, when we are looking at some of the suggestions that we have made, is the restriction of 15 per cent. Earlier someone said it is not a big deal because the maximum number of shares that anyone has of CP is 11 per cent. What difference does that make? Who cares what the share structure of CP is? What we are trying to do is sell CN provided that the debt reduction on CN is not so much that it makes it an unfair competitor to CP, which is, of course, the private entity enterprise. We do not want to repeat the mistake we made with Air Canada, which was to write off all the debt, throw a competitor that has lots of cash into the marketplace to compete with the private sector, which at the time was Canadian Airlines or whatever its precursor was, and start a price war. That almost put both of them out of business.

(1620)

In any event the situation is that no one owner may own more than 15 per cent of the shares of the privatized CN. People representing the government have said that it is a non-issue because the maximum share ownership of CP is 11 per cent. Surely it would not be a problem to take this restriction out of the legislation. The government has said it is not a problem, so why have it there?

It is important with Canadian National that if a group comes to the table and is prepared to invest enough money to own more than 15 per cent, then why on earth should it not? It may need to have that control in order to make Canadian National a competitive, profitable enterprise.

I have no reason to believe that this is the case but I am thinking aloud that it could be because so much of the Canadian National business is resource based, it is possible that a number of resource based companies will come to the table in a consortium wanting to buy Canadian National. Perhaps that consortium will want to have more than 15 per cent. The restriction of 15 per cent is artificial. It is not necessary and it does nothing to move the legislation ahead.

Another sop to Canadianism in the legislation is the requirement that Canadian National must remain bilingual just as it is as a crown corporation or as a federal government entity. There are institutions in Canada that are rightfully bilingual, such as the House of Commons and law. Many of the institutions across Canada that are bilingual should be bilingual because we are a bilingual country. When those of us who have lived most of our lives in other parts of Canada come to central Canada we see just how bilingual the country is. Being bilingual, trilingual or multilingual is to our benefit.

What we are talking about now is privatizing an operation that has been losing money for many years. There should be as few strings attached as humanly possible. If the corporation is to become a private corporation, then let it become a private corporation without the strings attached. If it is in the interests of the corporation to be bilingual or multilingual, we can be sure it will remain so, as it should. It may well become multilingual because there are parts of this country where the second language is not English or French, but may well be Mandarin.

Another point I raise is if we are going to privatize CN, let us honestly privatize it without all the strings attached in order to make it more palatable to the people. I do not want ascribe motive here, but it would seem to me that one aspect of the bill is nothing more or less than a sop to the Bloc Quebecois so that it will not get upset about it. If we are going to privatize it, let us do it.

(1625 )

Another point has to do with the marine strategy, the railroads in Canada and the fact that everything in Canada is interconnected. There is not much point developing a port in Halifax if there is no facility to move products from that port to the rest of the country. To do that we will require rail lines.

As this is privatized it is wholly appropriate there be certain restrictions on the new ownership to ensure that any transition is done carefully and in the public interest.

Mr. Jim Jordan (Leeds-Grenville, Lib.): Madam Speaker, I enjoyed my colleague's comments. I could agree with a fair number of his concerns. I think all Canadians have concerns.

This is a massive move. He says that he could not imagine Liberals taking this move but the ideologies are pretty fuzzy these days. I would agree that 20 years ago to say that Liberals were going to privatize CN would certainly be out of the question. Privatization has been brought upon us because we have not been able to make this thing work. We are in a new league now. We are involved in world competition and we have to forget about those old standbys we thought we could live with.

The railroad has been doing much better recently than the past 50 or 75 years would indicate, which might make it somewhat attractive to a new buyer. The member categorized three things which I can see fitting together.

One was having the location of the head office dictated and I agree with that. If I am going to own something I should be left with that decision. That would make sense. As someone once said, if you are going to do it, do it right. If we were privatizing something else we would tell the owners that they owned it and were free to put the head office where they wanted to.

The fact we have said CN should be bilingual fits in there too. It was done for the same reason and Canadians realize that. It is only being honest with Canadians. I could add the 15 per cent ownership limit to the list. This is such a massive move and nobody really knows where it is going to shake out. We avoided destabilizing the company as much as possible. This affects all Canadians, so we had to keep those things in mind.

This case is bigger than when TCA was privatized to become Air Canada if we are just talking dollars and cents. With that in mind and all of the uncertainties, what is the price going to be of a share? I do not know but we have to depend on those we trust to tell us. That would be the rationale for not moving any further with it by throwing it completely open and saying: ``Have the headquarters where you like. Do not be too concerned about whether it should remain bilingual as it is now. Do not have any limit on the 15 per cent share but let people buy whatever portion they would like''.

I suppose it is not really privatization in a sense if we are going to have those restrictions. On the other hand this has been a Canadian owned company which is moving into the private sector. The government was trying to avoid all kinds of pitfalls by putting those riders on for now. There may be pitfalls even with those riders.

Mr. McClelland: Madam Speaker, the central point I was trying to make was that CN has had a record of losing money ever since its incorporation. The fact that it is losing money at a slower rate today is a blessing but it is like dying by inches, you are still going to die sooner or later.

If this deal is going to be palatable in a private market, if it is going to be saleable and if it can be privatized, it will only be privatized because those who will invest in it see the opportunity of making a dollar. That is the way our system works. That is the way it should work.

(1630)

Concerning the restriction of 15 per cent, if a potential purchaser had the resources to take 20 per cent of the shares, it would ensure there would be a very strong hand at the helm. The other 80 per cent of CN would be widely dispersed in pension funds, in RRSPs, with people all over the country.

However, we had better make damn sure when we are doing something like this that this business is not being run by a committee. It had better be run by somebody who knows exactly what he or she is doing, exactly how he or she is going to do it and has one overriding ambition, to make a profit. There is no other reason for CN to be purchased by any potential investor anywhere.

That person must purchase it with the intent of making a profit. It has nothing to do with the Canadian identity. It has nothing to do with being a good Canadian. It has nothing to do with how much money has already been lost. It is strictly whether there will be a return on the investment when those shares are purchased.

That is the only consideration that anyone who buys a share in this should have. If Bobby Gimby decides he is going to be the head of Canadian National and this becomes part of the national dream then we are sunk. We will end up with another B.C. Resources Investment Corporation where thousands of widows and orphans are going to buy shares in this creature. They are going to see the share value plummet and be resentful beyond words.

It is our responsibility to ensure that whoever buys this baby has the opportunity to turn it into a profitable venture. Otherwise we are going to wear that can around our necks and we will deserve it.

Mr. Ronald J. Duhamel (Parliamentary Secretary to President of the Treasury Board, Lib.): Madam Speaker, I get rather disillusioned when I hear my Reform colleagues, particularly one who is considered more insightful than most of his brothers and sisters in his party, make comments such as the following: ``Bilingualism was given as a sop to the Bloc''.

Does my hon. colleague from the Reform Party who has just spoken understand that the Bloc members do not believe in bilingualism? They want unilingualism, they want French. I cannot understand the lack of sensitivity and insight displayed by such a comment. It shows the Reform Party in spite of its attempts, does not understand the country.

A second comment: ``We have in this country, two official languages''. To suggest that a business can ignore official languages, in spite of the fact that it is une des pierres angulaires de de pays, shows incredible lack of sensitivity.

They can ignore to run trains where it does not pay. They can ignore to do anything except run them where there is the greatest profit.

Is my hon. colleagues suggesting to heck with the city of Montreal? To heck with responding in English or French, the official languages of this country. To heck with everything else that is going to cost money because we, the business community, are going to skim off the richest of the cream. Is that what is being suggested?

Mr. McClelland: Madam Speaker, my colleague from Winnipeg has a good point and he is absolutely right. I cannot believe that I said that language was a sop to the Bloc. Obviously it is not a sop to the Bloc and my hon. colleague opposite is quite right.

It is a sop to Quebec perhaps in general terms but it is certainly not a sop to the Bloc. Whatever it might be to the Bloc, for sure it is not that.

The other point is about bilingualism and this needs to be absolutely clear. I did not say that CN should not be bilingual. I did not infer that it should not be bilingual. I said that it may be multilingual.

(1635)

What I said was as CN is going to be privatized, take the shackles off and let the management of the company make the decision for themselves. That is a decision that rightfully belongs to the new owners of CN. It is a not a decision which should be made by the legislature of the country.

If we are going to sell it, then sell it with no strings attached. The first hit we take will be the worst hit, so let us take the it, get it off the books and get on with life. Good for the Liberals for bringing the legislation to the table in the first place.

Mr. Garry Breitkreuz (Yorkton-Melville, Ref.): Madam Speaker, what is the point of this debate? Why are we here? I have been sitting here day after day. Are we wasting our time?

I have listened to the debate and the speeches which have been made on both sides of the House. I know a heat wave is hitting the country. I wonder if it has been caused by the intense debate we have heard over the last week or so. I am not sure. Is the only thing we are accomplishing the generation of a lot of hot air?

Last week I took a break and went down the hall to the other place which is known as the Senate. I sat in there for a while and listened to the debate. I heard some very good speeches on euthanasia and other topics. I thought to myself, nobody is listening to these speeches. Nobody in the country is looking at what is happening here. These people have gone to a lot of work and nobody is listening. Suggestions are being made and nobody is listening.

Then I came back to this place. I thought to myself, it is no different here. Nobody is listening. Nobody is paying attention.

The Reform Party has made suggestions. It has worked with the government to fine tune the legislation to ensure it is acceptable to all Canadians. We find that, by and large, our efforts are useless. The speeches we make are falling on deaf ears. Nobody is listening. What is the point of the debate?

During the election campaign my strongest opponent was the NDP candidate who is now running for the leadership of that party. He made a big point of the Senate being unelected and unaccountable. He said that because it is appointed, the people in the other place are not very effective, the balance which it should provide between the regions is not there.

However, my hon. opponent in the election forgot to mention that this place could really use some fixing. This place is not democratic. This place is not doing what it should be doing. The debate here is often very meaningless. The suggestions which are made in good faith are completely disregarded. My feelings about the other place are also the feelings I have toward this place.

People are frustrated because Parliament is not doing its job. I want to use this bill to illustrate what I mean.

I have been here for almost two years now and that time has shown me that this place is guilty of many of the same problems of which we accuse the Senate. What is changing because of the debate we are having here? This debate is coming to a close. In fact, this session of Parliament will soon be over. We have been debating day after day. I wonder if it is accomplishing anything and whether the work we put into our speeches is really effective.

For those who are watching on the parliamentary channel and may not be aware of how legislation is created, very simply the legislation is introduced in the House, generally by the government, but there are private members' bills. It is introduced and receives first reading. It goes through second reading, goes to committee, is reported back to the House and then goes through third reading. That does not mean it becomes law. Then it goes to the Senate and it goes through the same process. Then if the legislation has passed, it becomes law.

(1640)

As we go through all of these processes, as we work in committees, there should be amendments proposed. There should be open and free discussion. That has frustrated me. A lot of what we do is hidden. It is behind the scenes. It is in the committees. A lot of the work, the research, that is done and the proposals that are made, Canadians are not aware of.

In order for democracy to work that process should be open. Every member of Parliament should have input. By and large that is not happening. The agenda is driven by only a few elected people in the House of Commons. That is unfortunate.

When the debate on Bill C-89 first began, I suggested four things. I was one of the first speakers on the bill. If we are going to produce good laws these suggestions should have been dealt with but by and large they have not. I have heard several reasons why they have not.

If we look at the reasons we begin to realize that they do not hold water. They are not acceptable. First I said that prohibiting the government from arbitrarily cancelling all or part of CN's debts prior to privatization should not take place. I also mentioned that removing the requirement to leave CN's headquarters in Montreal is something that the government should take a serious second look at. We proposed amendments for that. We thought perhaps a lot of politics was involved. What I have seen today probably underscores that fact. I do not think it is a wise business decision.

Another suggestion I made was to remove the requirement that CN comply with the government's policy on official bilingualism. It was pure politics. My hon. colleague has pointed that out very well. I also said remove the 15 per cent ownership restriction.

I heard the members arguing that we do not want to destabilize the company. Any owners who would take over would not want to do that. The arguments which have been presented on the other side are superficial. They do not hold water.

That is why we have to do more in this place than simply generate a lot of hot air. We have to begin to listen to each other and do the fine tuning of legislation that would make it good legislation.

We agree with the privatization of CN. It is a good thing. The government has an opportunity to make it a great thing. I want to suggest that the government use this, its first major attempt at privatization, as a testing ground for the privatization of other crown corporations.

Reformers do not want a lot of unnecessary regulations that restrict companies in keeping down their costs. We do not want that. Yet the government is tying their hands somewhat.

When Reformers ask why tie the hands of the new owners of CN by stipulating that the headquarters remain in Montreal, the Liberals answered and that they wanted to provide a level of certainty that potential costs from relocation of the headquarters will not ensue. Think about the absurdity of that answer. A company would not relocate its headquarters if it would result in some financial disadvantage.

On the other hand, what if there was an advantage financially to moving the headquarters to Winnipeg or some other western place or to the east? What if there was an advantage in doing that because it might be more central to the bulk of the business? Why should they not be allowed to do that? Would they make decisions that were not wise for the company? They would not. That is why the answer that I have heard to to this question is absurd. Seventy per cent of CN's business is done in western Canada. Why put in the stipulation that the CN headquarters must stay in Montreal?

The Bloc says that we are Quebec bashing. We are not Quebec bashing. Where is the consistency in the government's reasoning? When the ancestor to Air Canada moved its headquarters from Winnipeg to the east, westerners argued that this was a Winnipeg based company. The government in its big bubble here in Ottawa said ``Oh, no, most of the airline's business is in the east, so we should move the headquarters to Montreal''. When the shoe is on the other foot and CN's business is mostly in the west, it has a completely different argument. There is no consistency in what the government is saying. By using the government's own reasoning, it should allow the company, if it wishes, to move the headquarters out of Montreal.

(1645)

When history and tradition fail the west the Liberals say it does not matter. However, when history and tradition favour the east they write it into the law. Something is wrong. Why run a company 2,000 miles away from its main operation?

In 1987 Madsen Pirie, who was president of the Adam Smith Institution in London and a world renowned expert on privatization, spoke at a Canadian symposium on privatization organized by the Fraser Institute. He had this to say about the fundamentals of privatizing a crown corporation:

When government engages in an activity such as privatization, it is speaking to several audiences. Among the audiences the government speaks to are the managers of the Crown corporations, the workers who are employed in them, the members of the general public who are customers of the Crown corporations, the general public who are taxpayers and who pay the subsidies to support the losses of those corporations, potential investors who might buy shares in those corporations, the financial and business community which takes an interest in their performance, and the media commentators who observe this process and comment on the results and declare it to be a success or a failure. Every act of privatization speaks to all of these audiences and every act should be tailor-made to maximize the support of each of these different groups.

This is what frustrates me as we come to the end of this debate. I do not think one thing we have said here today is going to change the government's mind. We are generating a lot of hot air in the midst of a Canadian heat wave and it is doing us no good.

Dr. Pirie also outlined three key principles of privatization. His first principle was never cancel a benefit. If people are deriving a benefit from the public activity of a crown corporation, never cancel it, no matter how unjust it is. In his second principle he said to make friends out of your enemies: ``Find out who the people are who might lose on the privatization process and structure the policy to make sure they gain instead''. The third principle he gave was disarm the opposition: ``Identify all possible objections to privatization and tailor the policies so that every single one of those objections are dealt with in advance''.

Has the government done this? I brought this up months ago, and nothing has been done. That is why I still maintain that a lot of the debate here is not really effective. Has the government done this? I doubt it. The government should ensure that it has considered each of Dr. Pirie's three principles in planning for this privatization.

Has the government explored the idea that came from one of my constituents and which I presented to this government that we could have two or more government objectives rolled into one? For example, the government is giving landowners in the west a one-time payout for the elimination of the WGTA subsidy for the railways, which is commonly known as the Crow rate. Would it be possible, I asked, to give western farmers the choice to have their Crow rate buyout in the form of shares rather than cash? It could be made fairly attractive and then farmers would have a direct financial interest in the economic performance of CN.

I heard one of the Liberal members opposite several hours ago argue that we could never raise the capital in Canada to even have someone grab hold of the major amount of shares in CN. That is ridiculous. Does the member not realize that the crown payout of approximately $1.6 billion is equal to the price the government is asking for CN? What does he mean the capital is not available? Right there is the capital. The main users of the railway are the grain producers in this country, and they could use it. It would give them the benefit. It would meet some of the negative aspects that often come with privatization.

(1650)

That is why I am saying the government should have been listening. As this idea is being picked up they could have floated the idea. Maybe this is a bad idea, but they should have looked at it. This idea comes from some of the constituents in my area, and it should be dealt with.

Look at the recommendations of previous studies. The government spends million and millions of dollars on royal commissions and studies. One of the recommendations made was that rolling stock could be privatized but the government could continue to maintain the rail beds, maybe as a private corporation eventually. They could maintain the rail beds just as they do the highways in the country. It would allow small entrepreneurs that do not have the capital resources to buy a huge railroad to at least use the efficiency of the rail beds in transporting their products.

The Economic Council of Canada published a report called ``Minding the Public's Business''. In chapter five, entitled ``Government Enterprise and Business'', the Economic Council made the following recommendation: ``Entry into rail carriage could be promoted in different ways. The provisions of the proposed legislation could be expanded to make running rights more easily available and to open entry into rail carriage to anyone who can meet the basic requirements related to safety and liability coverage. Instead of regulating the activities of CN and CP in their capacity as providers of the rail bed, the management of all track could be assigned to a new publicly

owned track authority. This would require the nationalization of CP's roadbed and the separation of CN's track from the other components of its operation. Alternatively, a public track authority could be created based exclusively on the infrastructure of CN.''

We have put this to the government. It seems to ignore it. I do not know why. Why does the government spend all these millions on commission and studies? They come forth with some sensible recommendations and the government promptly dismisses them. This is an idea whose time has finally come and the government should give serious consideration to establishing a public track authority that would operate similarly to our highway system. This would eliminate the tax disadvantage placed on rail companies.

Rail companies are at a tax disadvantage. They pay fuel taxes and they also have to maintain their rail beds. That is not fair. On the other hand, trucks pay fuel taxes, but the highways, their road bed, are maintained at public expense.

A public track authority could charge user fees to rail companies based on the use they make of the tracks. As a result, they would be self-financing. At some point in the future the public track authority could even be privatized.

The Chamber of Commerce supports a fully user pay rail infrastructure and had this to say in their 1994 submission to the special joint committee reviewing Canada's foreign policy: ``Canadian businesses are increasingly pointing to an unlevel playing field between the Canadian and U.S. commercial environments. One tangible example among many can be found in the Canadian transportation industry. Rail, for example, provides the most economic mode of transportation for a large part of Canada's freight and for many shippers is the only cost effective mode. It is fundamental to Canada's trade, moving 40 per cent of Canada's exports, and provides a fully user pay infrastructure not liable to ongoing public funding.''

Finally, I want to return to a point I have made repeatedly in speeches before the House for the last couple of years. I would like to comment on the importance of the port of Churchill to the farmers of Saskatchewan and Manitoba. When I said that the government should be looking at more than one initiative, this is another thing it should have looked at.

The privatization of CN should be seen as an opportunity to privatize, expand markets, modernize, increase exports and imports through the port of Churchill. This will take more than just the privatization of CN. It would take the cooperation and likely the privatization of both VIA Rail and Ports Canada at Churchill. It will take the cooperation of the federal government, the government of the province of Manitoba, the cooperation and support of every community and producer whose future will be improved by taking advantage of the most cost effective shipping route for bulk commodities to our customers in Europe, Africa, and South America.

(1655)

I respectfully ask the government not to look at the Churchill line and the port of Churchill as a liability but as an opportunity requiring creative thinking and a cooperative and creative privatization strategy. I have worked on this quite a bit, and that is why I say one government department must work together with the other one.

One of the main obstacles to making the Hudson Bay route and the port of Churchill viable is the Canadian Wheat Board. Unless the Canadian Wheat Board becomes more open and accountable to grain producers, prairie producers will continue to be routed through costly eastern ports.

Yoy cannot just look at the railroad in isolation. You have to see how it all connects. Why is it that we have this problem? Because the railroads and eastern interests benefit in having the grain go through the traditional route rather than through the port of Churchill.

Farmers are asking important questions that will not be answered until the process of grain sales in routing is opened up.

The Acting Speaker (Mrs. Maheu): I am sorry, the time has totally expired. Questions and comments.

Ms. Marlene Catterall (Ottawa West, Lib.): Madam Speaker, I really do not want to address the issue of the bill that is currently before us. However, I did want to ask the member about some comments he made.

He criticized the quality of the debate and suggested that somehow government members were responsible for that quality of debate. Throughout this day and throughout a good part of last week the majority of speakers on any bill, by a margin of four to one, sometimes nine to one, ten to one, have been Reform Party members. If 90 per cent of the speakers on the bill are Reform Party members and only 10 per cent are government members, would this not suggest that it is the Reform Party members who are responsible for the inadequacy of the quality of debate?

Mr. Breitkreuz (Yorkton-Melville): Madam Speaker, I wish the hon. member had been listening carefully to what I said. The point of what I am saying is that those members are not listening carefully to what we are saying.

We have made suggestions to the government. We were not complaining about the quality of debate. We are coming up with speeches, coming up with amendments, working on committees. We are doing all of these things that a good parliamentarian should be doing, but it is useless.

It is no different from what is happening in the Senate. These people make these wonderful speeches and it is to no avail. We come to this House and it is still to no avail because we do not

have democracy built into the system. We debated gun control, and when it came down to it we were not even allowed to vote freely on the issue. Liberal members were told how to vote.

We made suggestions as to how to improve some of the legislation in this House. My point was very clearly made that the speeches we made and the work we did was by and large ignored by the government.

I would like to conclude some of the other remarks I made in regard to the Churchill route because they may be misconstrued if I do not. Suspicion grows that the grain companies, the government bureaucrats, the railroads, and the eastern interests drive the agenda while the western farmer continues to be ripped off, not realizing the full benefits of his labour and his enterprise.

The Acting Speaker (Mrs. Maheu): Point of order.

Ms. Catterall: Madam Speaker, I will be delighted to ask the member a question and to drop the point of order. The point was to have been in fact that the member was entering into debate. If I can continue with questions and comments, which is the time-

The Acting Speaker (Mrs. Maheu): We have questions and comments. Point of order?

Mr. Stephen Harper (Calgary West, Ref.): Madam Speaker, I was rising on questions and comments.

The Acting Speaker (Mrs. Maheu): I think the member is well aware that when the opposition parties are speaking we normally allow government to question the party.

(1700 )

Ms. Catterall: Madam Speaker, contrary to the statement just made by the member, I was listening very carefully. It was the quality of debate he was criticizing. If he reviews his blues in Hansard he will find out those were the words he used.

I can only say again that 90 per cent of the debate has come from the Reform Party compared with government members and therefore I know who to blame for the quality of debate.

On the point of listening, the member is well aware, and I am surprised he has not said this in the House, there has been a great deal of listening. There were over 40 amendments to the gun control bill in committee. There were dozens more amendments debated-

Mr. Breitkreuz (Yorkton-Melville): Madam Speaker, I rise on a point of order. Did the member not rise on a point of order?

The Acting Speaker (Mrs. Maheu): She retracted and went back to questions and comments.

Mr. Breitkreuz (Yorkton-Melville): Would I not have a chance to finish the remarks I was making? Is she allowed to interrupt me?

The Acting Speaker (Mrs. Maheu): I am afraid the hon. member was back on debate.

Ms. Catterall: Madam Speaker, would the member not concede there were over 40 amendments in committee, that there were dozens of amendments debated in the House last night on the bill? We voted on over 30 motions last night. Clearly amendments have been put forward with debate.

If the member were to be totally honest with the public he would concede even some points brought forward by members of the Reform Party in committee on the gun control legislation, which he referred to, were incorporated in the gun control legislation and that we have been listening. Listening is not the same as agreeing with everything the Reform Party says; otherwise we would both be on the same side of the House.

Mr. Breitkreuz (Yorkton-Melville): Madam Speaker, I was involved with C-68, the gun control measure, and if the she wants to debate that, I would be very willing to. I think that is not what is-

The Acting Speaker (Mrs. Maheu): I ask the hon. member not to refer to other members in the House as ``she''. The hon. member is the deputy government whip.

Mr. Breitkreuz (Yorkton-Melville): In relation to Bill C-68, the changes the government made that responded to Reform suggestions were simply changes where a word may have been clarified. Virtually no other changes were made by the government. They were so minuscule as to be almost useless, very small wording changes.

With regard to Bill C-89 when we asked about allowing a company to move the headquarters from Montreal, the government did virtually nothing to act on that. When we questioned the government's official bilingualism policy being applied to a private company, it remained virtually unanswered, as did the question of the 15 per cent ownership restriction. All of these things we raised were not properly addressed. The answers we were given were superficial. They were not effective answers.

We are talking about Bill C-89, not Bill C-68, a whole different matter. I would gladly address that if we were debating it. What about the cancelling of CN's debts prior to privatization? In all fairness to the government, it addressed that question somewhat. By and large a lot of the suggestions we made fell on deaf ears. That is the problem with this place; that is the problem with much of the debate that takes place here.

We can speak 90 per cent of the time but it makes no difference. I wonder if Canadians realize we are acting as the

official opposition, that we are examining this legislation in minute detail. This is our job but by and large the government is not responding to the positive suggestions we have.

Mr. John Duncan (North Island-Powell River, Ref.): Madam Speaker, I am happy to talk on third reading of the CN privatization bill.

(1705 )

Railway politics in Canada take a prominent place in our history. I know from growing up in this country and working on the railways part time I have a great sense of history. The member for Kenora-Rainy River is another part time railroader. The ra ilways are very important historically to the country.

I am reminded of the railway on Vancouver Island, E&N Railway, very important in the development of the west coast. There is an ongoing contractual commitment in this country to keep that railway going despite some pressures the other way. Those contractual commitments date back to prior to the turn of the century.

In terms of our contemporary history, we are seeing great changes, the stability of our railways, or the instability in the beginning. It is a whole new ball game now. Why is it a whole new ball game now? Government operations and crown corporations can no longer function in the way they functioned for the last several decades.

This is unavoidable because of our fiscal situation and I am reminded of this every day. Two-thirds of government revenues are derived from personal federal income taxes. One-third of federal revenues are to service our national debt. It does not take much of a mathematician to figure out 50 per cent of people's personal federal income tax is going to service our debt.

This situation despite the last budget is getting worse because part of our revenue dedicated to servicing debt is increasing over the next couple of years. We are treading water and sinking slowly. This message is slowly being accumulated by the population at large. It is being expressed in a lot of different programs of government and it is being expressed in how we unavoidably must deal with our crown corporations.

The transport committee, the task force appointed by the minister in September of 1994 which put its finding forth in January of 1995, identified a number of things which I think were largely known to most.

CN and CP are both facing very strong competition from other industries and from the U.S., particularly on the north-south routes, north-south markets. The railways are losing market share to trucking. Deregulation of the U.S. railways is obviously impacting a great deal on the Canadian railways. The eastern routes are losing money and the western routes are declining in profitability.

This same task force also identified that all major North American railways were privately owned with the exception of CN. One wonders why Canada would have such a different contemporary situation. This bill is quite predictable. The privatization was to occur. All the market pressures were there and governments around the world are privatizing crown corporations.

The task force also identified that as a crown corporation CN had been subject to many politically motivated moves and that much of this results from the president and the board basically being patronage appointments. There is a message in all of this for other crown corporations of government.

(1710)

The standard provisions of any privatization bill are essentially the same no matter what crown corporation is being privatized. What is different are the bells and whistles which deal with investor attractiveness, some of the social ramifications, how it deals with existing employees, how it deals with the public interest and those kinds of things. Essentially that is what most of the debate in the House and in committee has been about. The amendments proposed by the Bloc and by the Reform Party have largely been about the bells and whistles of the bill.

In terms of investor attractiveness, the bells and whistles are a very strong signal of what kind of regulatory environment the new owner is to face when they try to run the railroad. The signals we are sending out with this bill are all wrong. Most of the amendments deal with the signals we are sending to potential purchasers of the railway.

One amendment is the requirement that CN's headquarters remains in Montreal. We have heard several times in the debate that this requirement is absurd because the marketplace can make that decision better than anyone else.

That it exists in Montreal today may have some social and employment ramifications which is why a sunset clause is not a bad idea. We have seen in the history of Canada that different jurisdictions over time have different natural advantages. There are population shifts and differences in trading patterns and all kinds of rationale for which private investors would want to retain the option to move their office to a different location.

Before I get into further amendments I will talk about the way the bill was handled in the House. The bill went to committee after first reading, which was a new process. Normally a bill goes through first reading when the legislation is tabled and through second reading debate and then the bill goes to committee.

Conceptually there are some very nice things about sending legislation to committee after first reading when in a non-partisan way people can get all their points in before the legislation becomes set in any way and then a better bill can come before the House. The concern with respect to this bill was that if the environment was not there after first reading when it went to committee, to take all the best of everything people had to say about the bill to make it the best legislation possible we have really missed the opportunity of second reading debate. We want to have a very close look at the process before we commit

ourselves to a continuation of it whereby we essentially eliminate debate at second reading.

(1715)

The next point I would like to speak to is about restricting the percentage of shares that any one individual, corporation or association may own. This has a very negative impact on bringing in the kind of investor that would like to purchase a major portion of the new company and bring in a management style that would revitalize the whole company.

The chair of the transport committee, the member for Kenora-Rainy River, said that this had been looked at. The 15 per cent restriction was quite plausible because CP had never had more than 11 per cent single ownership. Surely our view of the world extends beyond the gaze of Canadian Pacific. We have to look at this on a global scale. We have to look at it from a totally different perspective. Government once again is talking about privatization yet government still wants to retain control. There is an irony about this and it is inappropriate.

One investor said that the 15 per cent restriction circumscribes the deal. It certainly does. It dampens investor confidence. It freezes out many investors who would otherwise look at this. It sends out all the wrong signals.

With respect to CN's debt, this is repetitive but CN currently owes about $2.5 billion. It has been established by experts that CN will never sell this debt level. It must be reduced to a level which would allow access to a BBB credit rating. The general concurrence is that amount would be about $1.5 billion.

CN currently has $300 million to $400 million on hand through recent company sales such as CN Exploration, and excess capital reserves. The market value of CN's non-rail estate assets are $400 million to $600 million. In a perfect world this alone would be sufficient to attain a BBB credit rating.

Clause 12 of the proposed legislation gives the minister the power to reduce CN's debt to any amount he chooses. This is a major problem. This is something the other place should look at very closely if we cannot change anyone's mind in this place because there are two major risks in this.

The minister may choose to reduce the CN debt well below the amount at which the taxpayers can receive a return on the sale. This would raise the cost of shares making it appear more attractive but producing a lower yield for taxpayers. As well, excessive reduction in the debt of CN would put CP at a disadvantage which is all too familiar. This was done during the privatization of Air Canada. The intent of the Reform amendment was to limit the minister's power in reducing the debt of CN.

(1720 )

Clause 15 provides for a permanent requirement that CN retain the official languages policy and operates under both official languages. Once again, this is another signal of a regulatory atmosphere that is inappropriate when one is trying to attract investors.

The government does not have official languages control over the private sector. Privatization of CN removes the mandatory compliance of the Official Languages Act. The Reform amendment was to include a five year sunset clause on the mandatory retention of operating under both official languages. Unfortunately this was voted down.

Then we have the Canada clause. The bill does not provide any restrictions of foreign ownership, nor should it. However, the Reform amendment would have allowed a 90 day sale period open to Canadian individuals and corporations before opening it up to foreign markets. This provision would have allowed all Canadians first crack at investing in a Canadian institution. What could be more appropriate? This would have allowed a win-win situation but once again it was voted down.

The marine strategy report proposes that all national ports must become self-sustaining and that all loans must be obtained from the private sector without government backing. Reform agrees with that proposal.

The Sarnia tunnel is a viable access from Atlantic Canada to the American midwest. The Halifax Port Corporation believes that through upgrading the port facilities in Halifax it will secure the handling of the new high capacity deep draft freighters and thus the economic future of marine operations in Atlantic Canada. In order to secure the financing, it needs to ensure that CN connections will be there to connect the ports to the rest of Canada.

The Reform amendment would have included a clause ensuring rail service to the port of Halifax for a period of 10 years, thereby ensuring the development of the port facilities allowing them to compete with U.S. ports on the eastern seaboard and ensuring investor confidence once again. This amendment was not allowed. We call that the Atlantic clause.

The Reform Party supports the bill although the provisions laid out in it are too restrictive and involve too much government interference in what should be a much more complete move to the private sector.

The Acting Speaker (Mrs. Maheu): It is my duty, pursuant to Standing Order 38, to inform the House that the question to be raised tonight at the time of adjournment is as follows: the hon. member for Leeds-Grenville-Gun control.

Questions and comments. Is the House ready for the question?

Some hon. members: Question.

The Acting Speaker (Mrs. Maheu): The question is on the motion for third reading of Bill C-89. Is it the pleasure of the House to adopt the motion?

Some hon. members: Agreed.

Some hon. members: No.

The Acting Speaker (Mrs. Maheu): All those in favour of the motion will please say yea.

Some hon. members: Yea.

The Acting Speaker (Mrs. Maheu): All those opposed will please say nay.

Some hon. members: Nay.

The Acting Speaker (Mrs. Maheu): In my opinion the yeas have it.

And more than five members having risen:

The Acting Speaker (Mrs. Maheu): Pursuant to a request made by the deputy government whip, the division on the motion is deferred until tonight at 11.15 p.m.

(1725 )

Mr. Hermanson: Madam Speaker, I was watching the House proceedings on television. I heard you ask: ``Is there further debate'' and saying, ``no further debate'' you grabbed your papers before a member had a chance to stand. I think that is unfair.

The Acting Speaker (Mrs. Maheu): I am very sorry but no one in the House stood up when I asked for questions and comments. That was prior to calling for debate.

Mr. Hermanson: Madam Speaker, if no one stood for questions or comments, then you call for debate and you have to recognize someone when they are prepared to stand for debate.

The Acting Speaker (Mrs. Maheu): I repeat, no one stood at all.

Ms. Catterall: Madam Speaker, clearly a debate about a ruling after it has been made is entirely out of order and a little contemptuous of the role of the Speaker.

In addition, however, you very clearly said: ``Is the House ready for the question?'' Nobody said no. You then asked as you normally do for those in favour and those against.

Mr. Gagliano: Madam Speaker, it is almost 5.30 p.m. If the members are here we could go into private members' hour right away.

The Acting Speaker (Mrs. Maheu): Shall I call it 5.30 p.m.?

Some hon. members: Agreed.

The Acting Speaker (Mrs. Maheu): It being 5.30 p.m., the House will now proceed to the consideration of Private Members' Business as listed on today's Order Paper.

_____________________________________________