Premier David Eby criticized BC Ferries, a company owned by the province, for awarding a major shipbuilding contract to China.DARRYL DYCK/The Canadian Press
British Columbia Premier David Eby expressed his deep disappointment this week that BC Ferries has awarded a major shipbuilding contract to China.
After all, the province just passed legislation this spring to encourage local procurement of goods or services by the government and “government procurement entities.” This is part of the nation-wide “buy Canada” strategy flowing from the Canada-U.S. trade dispute.
“I’m not happy with the result. I want ferries built here at home in Canada,” Mr. Eby said of BC Ferries. And he maintains that he doesn’t have the authority to tell BC Ferries to buy Canadian.
There’s just one problem: Mr. Eby, or at least the province, owns BC Ferries. A complicated ownership structure means that the ferry service is arms-length from government. But it is a lack of accountability, by design, that allows the premier to denounce BC Ferries’ decision without doing anything about it.
There are good reasons to be critical of the purchase, of course. Canada and China are engaged in a major trade conflict. Canada has imposed 100 per cent tariffs on Chinese-made electric vehicles, and a 25-per-cent tariff on Chinese steel and aluminum. China responded this year with retaliatory tariffs that are hurting Canadian producers of canola, peas and seafood.
BC Ferries is not behaving as a government procurement entity. It is buying four large ferries from the state-owned China Merchants Industry Weihai Shipyards, saying it was the clear business choice. Canadian shipyards didn’t even bid for the contract because, they say, the Chinese government’s heavy subsidies and cheap labour costs made it impossible to compete. To send the contract to another country would have added $1-billion to the purchase price, according to Mr. Eby.
B.C. Premier David Eby in Vancouver in late May.DARRYL DYCK/The Canadian Press
The byzantine, unaccountable structure of BC Ferries was set up more than 20 years ago, when the B.C. Liberal government of the day took the Crown corporation off its books. The move to an “independent” company took a load off the public debt, and shielded the government from public criticism for the ferries system.
The 2003 Coastal Ferry Act promised to create a lean private sector operation. Freed from political interference, it would achieve financial sustainability, and bring a “commercial approach” to the service.
But the government didn’t entirely cut the apron strings. BC Ferries is one of the largest ferry services in the world, a critical transportation link between Vancouver Island and the mainland and many small coastal communities. So the Liberals put rules in place to protect services – there are 25 routes and almost all of them lose money. And it set up a regulator to control ferry fares. It continues to subsidize the service, and BC Ferries can’t even invest in infrastructure – such as new vessels – without approval from its government-appointed oversight body, the BC Ferry Commission.
The NDP has no obligation to maintain this structure. When they were sitting on the opposition benches, they criticized the quasi-privatization of BC Ferries. They warned that it reduced public accountability and transparency. They dined out on controversies about high-paid executives who covertly decided to pay themselves double the rate of their counterparts at comparable B.C. Crown corporations.
The New Democrats also attacked the decision by the ferry corporation to purchase three new vessels from a German shipyard in 2004. They knew then that Canada’s shipyards were not globally competitive.
The experiment with independence has failed to fix the ferry services’ fundamental problems. Chronic underfunding has left BC Ferries with an aging fleet that is barely able to meet peak demand when everything is running smoothly. Operating and capital costs are rising, and so is demand, but revenues are constrained.
Mr. Eby has made “buy Canada” a legislated priority, giving his cabinet broad powers to steer government contracts to domestic suppliers. As the sole shareholder of BC Ferries, the government ought to be able to influence procurement policy in these times.
The B.C. NDP government might have political reasons for leaving things as they are. Perhaps the Chinese contract was too good to pass up. But Mr. Eby and the NDP shouldn’t pretend the government is a bystander in this deal.