AMBASSADOR'S LUNCH WITH TRANSPORT MINISTER

UNCLAS SECTION 01 OF 02 OTTAWA 000374

SIPDIS

STATE FOR OES-JULIE KARNER; WHA/CAN-PATRICIA NORMAN AND
ERIC RUNNING
STATE FOR EB/TRA-JOHN BYERLY, SUSAN PARSON AND DEB ELLIOT
USDOT FOR JEFF SHANE AND MARY STREET
OFFICE OF HOMELAND SECURITY FOR CHRIS HORNBARGER

E.O. 12958: N/A
TAGS: EAIR SENV ECON CA
SUBJECT: AMBASSADOR'S LUNCH WITH TRANSPORT MINISTER
COLLENETTE



1. (U) THIS MESSAGE IS SENSITIVE, BUT UNCLASSIFIED. PLEASE
TREAT ACCORDINGLY.

SUMMARY
--------------

2. (SBU) Transport Minister Collenette indicated to
Ambassador on January 31 that the GOC is ready to start
"exploratory talks" on further aviation liberalization with
the United States. Collenette admitted that his government
sees little in cargo co-terminalization for Canada - too many
small cargo jobs would be lost and Hamilton's future as the
cargo hub in Canada would be threatened. He suggested two
longer-range topics: how to deal with the EU and what the
"North American air zone" is likely to be ten years from now.
When pressed, however, Collenette said that there was no
aviation issue that the GOC would preclude from discussion.
In sum, talks should start with no preconditions. After all,
the Deputy Transport Minister added, in the two years leading
up to the current Open Skies agreement, there were
far-ranging talks that helped to lay the groundwork for the
quick successful agreement we did reach. It seems we are
ready to embark on a similar period now, Ranger concluded.


3. (SBU) On other issues, Collenette agreed with the USG that
the European Commission's recommendation to have Galileo use
the same frequencies as those used by the military makes no
sense and the GOC will support our efforts to counter the EC.
There was also a brief discussion of infrastructure issues
at major land border crossings, with Collenette remarking
that more inspectors are needed to help reduce line-ups. End
Summary.


4. (U) Canadian Minister of Transport David Collenette hosted
Ambassador Cellucci over lunch on January 31. His Deputy
Minister Louis Ranger and Chief of Staff Sue Roland joined
Collenette. DCM and Econ MinCouns accompanied the Ambassador.

Galileo
--------------

5. (SBU) Ambassador began the working lunch with a short
explanation of why the USG is deeply concerned with the
European Commission's recommendation that Galileo uses the
same frequencies as those used by the military. The Minister
said he was very familiar with the issue and could not agree
more with the US position. While he does not have the lead
in Cabinet on this, other ministers are aware of the problem
and all are united that the Europeans should abandon it.

Homeland Security
--------------

6. (SBU) Collenette then went on to say that he and other
senior GOC officials are quite anxious to get to know the new
USG Homeland Security team. At various times during the
lunch, the Minister explained the excellent state of working
relations with USG officials over the years and his desire
(along with other Cabinet members) to establish the same with
Homeland Security. Ambassador encouraged Collenette in this
regard, but suggested he wait until after March 1 to allow
DHS time to complete its first organizational tasks.

Aviation
--------------

7. (SBU) Then a long discussion of aviation issues ensued.
The Ambassador started with suggesting that exploratory
discussions of where we might make further steps in
liberalization could start. "We ought to start talking," the
Ambassador said. In response to Collenetee's questions, the
Ambassador acknowledged that cabotage remains a tough issue
for us. The Ambassador then highlighted the benefits to both
sides of cargo co-terminalization. Collenette described the
benefits of the current cargo system - small Canadian
carriers, operating out of the hub in Hamilton - and how if
Canada were to grant co-terminalization, these jobs would be
lost and the Hamilton hub (now the largest cargo hub in
Canada) will cease to exist. The uproar just caused by
Culture Minister Sheila Copps (MP from Hamilton) would be
enough on its own to stop co-terminalization in its tracks.
While later admitting to the Ambassador that real benefits
would accrue to small and medium size Canadian business from
such a liberalization, the polit
ical costs would just outweigh any benefits, he concluded.


8. (SBU) That said, Collenette then went on to describe the
benefits of the open skies agreement of several years ago.
Canadian carriers were the big winners (which they never
thought they would be - at one point they even asked
Transport for a 15 year phase in period, Collenette
chuckled),and while the issues now before us are tough nuts
to crack, both sides should be prepared to talk. Air Canada
is "very competitive" and therefore would benefit from
further liberalization, explained the Minister. However, the
smaller Canadian carriers, such as West Jet, "could go
belly-up." Louis Ranger said that before Open Skies was
successfully negotiated, there were at least two years of
preliminary meetings. Ranger wondered if we were not at the
same starting point right now - while both sides sees little
interest in catering to the other's needs, now is the time to
start "exploratory talks." When pressed by the Ambassador
for advice, the Minister was unable to suggest any Canadian
business group whose endorsement of further liberalization
would give the Liberal Government "political cover." In
fact, Collenette opined, the probable successor to the
current PM - Paul Martin - is probably less likely to support
further liberalization ("more nationalistic") than the
present administration. Two specific agenda suggestions of
the Minister were: how to deal with the EU, and what the
"North American air zone" is likely to look like ten years
from now.

(Note: in a February 5 meeting with senior UPS officials, the
Ambassador asked them about the effects of liberalizing air
cargo on the future of the Hamilton hub. They quickly
replied that UPS had invested quite a bit in Hamilton and it
would continue to be an important part of UPS's cargo
operations. In fact, they said that if liberalization were
reached, Hamilton would likely to grow in investment and
jobs. Toronto Airport has too many flight restrictions and
no room for cargo expansion. End Note)

St. Lawrence Seaway
--------------

9. (SBU) Ranger then switched topics to the St. Lawrence
Seaway. There was a request made to the IJC to investigate
deepening of the Seaway - it was to cost US$20 million - half
paid by each government. Where did it stand? We did not
know, but said we would get back to the Minister. Collenette
said that he recently had meetings with the Georgian Bay
residents who are very concerned about water levels.

Border infrastructure
--------------

10. (SBU) A short discussion of truck and road issues ensued,
with Collenette explaining that Windsor, Ontario is not
really interested in increasing truck traffic - and no
interest in expanding current infrastructure. Rather, said
the Minister, US Customs needs to increase the number of
inspectors in the booths - at present Collenette said the GOC
estimate the U.S. booths run at only 55% of capacity.
Ambassador replied that Customs has, in fact, hired more
inspectors, but those extra folks are now only working their
way through the training cycles. Both agreed we need to keep
our options open regarding use of the Detroit-Windsor
railroad tunnel and more highways.


11. (U) Collenette concluded the luncheon by explaining he
will be at an "inter-modal" conference in Denver in April
during which he will make a keynote speech. He is also on
the board of the International Center at Stanford, and hoped
to travel to Stanford around the time of the Denver meeting.
KELLY