Ot­tawa, On­tario move to make peace with small busi­ness

The Globe and Mail (Alberta Edition) - - REPORT ON BUSINESS - bm­ckenna@globe­and­mail.com OT­TAWA BARRIE McKENNA

The On­tario and fed­eral Liberals are dis­cov­er­ing that, once lost, the love of small-busi­ness own­ers is tough to win back.

But they sure are try­ing. On­tario Fi­nance Min­is­ter Charles Sousa an­nounced Tues­day in his fall fis­cal up­date that the gov­ern­ment will cut the small-busi­ness tax rate by a per­cent­age point, to 3.5 per cent, on Jan. 1. It will also roll out $500-mil­lion in new pro­grams for smaller com­pa­nies.

It’s no co­in­ci­dence that this pack­age of good­ies comes as On­tario is poised to put in place the Fair Work­places, Bet­ter Jobs Act (Bill 148), high­lighted by a hike in the min­i­mum wage to $15 an hour from $11.60, along with ex­ten­sions to va­ca­tion, med­i­cal and parental leave. Busi­ness groups have warned that the leg­is­la­tion will put 185,000 jobs at risk.

On­tario’s olive branch comes just weeks af­ter the fed­eral Liberals back­tracked on ef­forts to close what they char­ac­ter­ized as tax loop­holes ben­e­fit­ing small-busi­ness own­ers. Last month, Fi­nance Min­is­ter Bill Morneau aban­doned or mod­i­fied a se­ries of planned tax changes af­ter in­tense blowback from small-busi­ness groups. And as with On­tario, Ot­tawa re­cently an­nounced it would lower the fed­eral small-busi­ness tax rate to 9 per cent in 2019 from the cur­rent rate of 10.5 per cent.

“We re­main open to the pos­si­bil­ity of reach­ing an agree­ment with the fed­eral gov­ern­ment, should they demon­strate a will­ing­ness to come to the ta­ble and dis­cuss a rea­son­able ar­range­ment for re­pair and trans­fer of the HBR, Port of Churchill and re­lated as­sets,” said Mr. Tweed, a Con­ser­va­tive mem­ber of Par­lia­ment from 2004 to 2013, when he gave up his seat in the gov­ern­ment of Stephen Harper to take the job with Om­ni­trax.

Ot­tawa’s law­suit against Om­ni­trax seeks the re­turn of $19-mil­lion it con­trib­uted to the rail­way’s up­keep, and un­spec­i­fied dam­ages.

Sec­tions of the rail­way, Churchill’s only land link, were heav­ily dam­aged in a May flood and re­main closed. Res­i­dents and busi­nesses are re­ly­ing on air ship­ments for all their needs.

“As the pri­vate owner of the line, Om­ni­trax had the obli­ga­tion to re­pair the rail line when it was dam­aged and it is ir­re­spon­si­ble that they have not com­menced re­pairs,” said Mélany Gau­vin, a spokes­woman for Trans­port Min­is­ter Marc Garneau.

Mr. Garneau was un­avail­able to com­ment on Tues­day, his of­fice said.

Om­ni­trax is re­ly­ing on NAFTA’s Chap­ter 11, in­tended to set­tle dis­putes be­tween in­vestors of a NAFTA coun­try and gov­ern­ment. Om­ni­trax’s no­tice of in­tent is the first step in a com­plaint process that has been un­der­taken by com­pa­nies such as United Par­cel Ser­vice of Amer­ica Corp. and Res­o­lute For­est Prod­ucts Inc.

Un­der NAFTA, a gov­ern­ment is not al­lowed to dis­crim­i­nate against or treat a NAFTA-coun­try in­vestor less favourably than a do­mes­tic party.

Mr. Harper in 2012 ended the wheat board’s mo­nop­oly on buy­ing and sell­ing western wheat and bar­ley for ex­port to al­low farm­ers to sell their crops in the open mar­ket. The wheat board was bought in 2015 by a part­ner­ship be­tween Bunge of the United States and Saudi Ara­bia’s state-owned Saudi Agri­cul­tural and Live­stock In­vest­ment Co.

Re­named CWB, the for­mer wheat board now moves crops through its own net­work of ter­mi­nals and ports on Bri­tish Columbia’s coast and the Great Lakes-St. Lawrence Se­away. Other grain com­pa­nies have also stepped into the mar­ket, buy­ing and sell­ing western crops for ex­port. Vol­umes sent on the HBR to Churchill plunged, a de­cline wors­ened by the loss of fed­eral ship­ping sub­si­dies, Om­ni­trax says.

“When Om­ni­trax ac­quired the HBR and the Port of Churchill, it was led by the gov­ern­ment of Canada to ex­pect that the rail­way would con­tinue to carry historical lev­els of grain, as it had for the past sev­eral decades. This was to form the eco­nomic base for the vi­a­bil­ity of Om­ni­trax’s in­vest­ment, upon which Om­ni­trax could build by di­ver­si­fy­ing and ex­pand­ing the range of goods that were trans­ported through Churchill,” Om­ni­trax said in its no­tice.

“By elim­i­nat­ing the [CWB’s mo­nop­oly] and pri­va­tiz­ing the CWB, the gov­ern­ment of Canada set in mo­tion a se­ries of eco­nomic forces which, pre­dictably and in­evitably, wiped out the eco­nomic foun­da­tions on which the com­mer­cial vi­a­bil­ity of the HBR and the Port of Churchill rested.”

Om­ni­trax bought the HBR from the re­cently pri­va­tized Cana­dian Na­tional Rail­way in 1997 for $11-mil­lion. At the same time, it took over the Port of Churchill from the fed­eral gov­ern­ment for $10. Ot­tawa con­trib­uted $28-mil­lion for dredg­ing and other re­pairs. Other in­vest­ments and sub­si­dies made by Ot­tawa amounted to in­duce­ments for Om­ni­trax to keep spend­ing on the sys­tem in the mis­taken be­lief the gov­ern­ment was com­mit­ted to the ship­ment of grain through the route, the com­pany says.

Since buy­ing the port and rail­way, Om­ni­trax says it has in­vested more than $100-mil­lion but never made a profit.

Churchill is a deep­wa­ter port on Hud­son Bay that can han­dle large ships and is favoured by ship­pers for its fast tran­sit time to for­eign mar­kets. How­ever, the port is iced in for much of the year and open only from July to Oc­to­ber.

Cli­mate change raises the pos­si­bil­ity the port could be­come more vi­able. The same forces, how­ever, ren­der un­sta­ble and flood prone the frozen muskeg over which much of the rail­way trav­els.


Dam­age along the Hud­son Bay Rail­way af­ter flood­ing is seen above. Om­ni­trax said in its no­tice of in­tent to file a claim that it ex­pected to carry ‘historical lev­els’ of grain along the route.

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