Proposals

Proposals have been made, from time to time, that Canada should ask the United States for corridors through the Alaska Panhandle to facilitate the economic development of northwestern British Columbia and the Yukon. Interest in these proposals has been revived in the past two years. On February 8, 1954, the Minister of Northern Affairs and National Resources, in reply to a question in the House of Commons, indicated that the Government did not see adequate reason to initiate discussions with the United States and that present and prospective development in the Yukon did not require provision of corridors. On April 12, 1956, the Member for Yukon requested in the House of Commons that the Secretary of State for External Affairs open negotiations with a view to securing four accessways on a 99-year lease or easement basis. There has been widespread public discussion of this proposal including suggestions, both in Canada and in the United States, of the concessions that might be made by Canada in some deal for corridors. It is becoming increasingly desirable that the Government should make clear its position on these proposals.

2. An interdepartmental committee, consisting of representatives of the Department of External Affairs, Northern Affairs and National Resources, Trade and Commerce, Mines and Technical Surveys, Transport, Labour and National Revenue has examined the problems arising from existence of the Panhandle and considered the various proposals for corridors.

Corridor Proposals

3. The various proposals for corridors have not been altogether clear in their details, but they have usually taken one or another of three forms.

(a) True corridors in the European sense. It has been suggested that three or four corridors might be needed through the Panhandle. Each corridor would be a strip of land from the sea to Canadian territory which would be given to Canada either in perpetuity or on a very longterm lease - say, 99 years. The strip would be wide enough to carry a road and/or a railway and at its seaward end would cover a large enough area for a port.

(b) Exterritorial or special Canadian rights in a port or ports in Alaska and free transit for people and merchandise from the port to the Canadian border. What is entailed in these rights has never been precisely defined, but they would clearly include the application of Canadian Customs and Immigration laws for goods and people passing through the port en route to Canada, and also the application of Canadian labour laws and the right to use Canadian labour unions for workers servicing either Canadian ships in the port or transportation services from the port to the Canadian border.

(c) Free ports. These would be established in a case such as Skagway. A free port would presumably be a segregated area within the main port where goods destined for trans shipment to another country would be landed and stored until they were trans shipped. No U.S. customs duties would be charged on any goods disembarked into the free port and trans shipped to Canada from it.

Problems Created by the Panhandle

4. There is no doubt but that the existence of the Panhandle of U.S. territory between the Yukon and Northern B.C. and the coast does create a number of problems. For the most part, however, they do not appear to be as serious as the proponents of the corridor schemes have suggested nor do they appear to be any more likely of solution by any corridor plan than by other and simpler administrative arrangements. The principal problems appear to be the following:

(a) Movement of Goods

Goods now move in bond through the Panhandle by reciprocal arrangement and in accord with the provision for freedom of transit under Article 5 of GATT. Considerable inconvenience is alleged to exist in clearing such goods through the United States Customs at Panhandle ports. The committee found that present arrangements for shipping and clearing goods generally do not present any serious problems in cases where an established traffic exists - such as from Skagway to Whitehorse. The arrangements are similar to those applicable to in-transit border traffic elsewhere in Canada. There is, however, a problem in some areas where there is no established traffic and where Canadian and U.S. Customs offices do not exist on the spot. Individual mining companies are required to pay for the services of special Canadian Customs Officers. A similar situation exists elsewhere, for example, lumber operations on the Quebec-Maine border. However, this particular difficulty would end as development proceeds for, with growth in traffic, the Department of National Revenue would increase the number of Customs offices. Furthermore, air transportation, particularly of prospectors - and their supplies - is assuming increasing importance. Since air transportation permits direct movement between Canadian points, it may be expected to reduce the difficulties in movement of goods (and persons) in cases where customs and other facilities do not exist.

It does not appear that any variant of corridor would help with such problems as exist. Corridors are not required in those areas where there is established traffic since the bonding arrangements present no special problems. A free port would simply add to the complications and the costs, because it would have to be guarded and policed, and goods moved from it to Canadian territory would have to be bonded in any event. Corridors would be of no substantial assistance to areas without established traffic, since presumably they would not be created unless there was, or was expected to be, a substantial traffic. In any such place customs services and bonding arrangements could be made available, and the problems would disappear.

(b) Movement of Persons

There is alleged inconvenience in clearing passengers through United States Immigration but the committee could not find that any special difficulties of serious consequence exist. There have been no difficulties in the case of Canadian and United States citizens. It has been reported that there have been some occasions when residents of Canada who were not Canadian citizens -and who require transit permits - have been refused entry by United States Immigration officials. As in the case of goods, increasing use of air transport will help to remove such difficulties as have arisen.

If there are any problems of consequence (which has not been shown) it seems apparent that they can be met as readily by administrative arrangements as by any corridor plan.

(c) High Wage Costs and Other Problems of United States Labour Unions

The high wage rates - higher than in Canada - and working conditions imposed by the stevedore union at Skagway - and other ports - add to the cost of handling goods. A railway strike at Skagway last fall tied up transportation into and out of the Yukon. It has been suggested that wage costs could be reduced and labour problems minimized if the workers handling the unloading, etc. could be in Canadian unions and subject to Canadian wage rates, etc.

There is some doubt whether United States labour unions do in fact make for a more difficult situation than would Canadian unions. Also there is a tendency toward equalization of wage rates in the two countries and increased mechanization will serve to reduce high labour costs. However, assuming that the problems are valid, they might be solved by a true corridor, because the port would then be Canadian territory and the unions would be Canadian unions. They probably would not be solved, or even alleviated, by exterritoriality, because it seems virtually impossible that a Canadian union could exist and could operate at Canadian wage rates in an American port where American unions might also be operating at American wage rates. A free port would not help the labour problem at all.

(d) Shipping Problems from the Jones Act (U.S. Merchant Marine Act, 1920)

This Act prevents vessels other than American from carrying merchandise or passengers between points in the United States, even via a foreign port such as Vancouver; this prevents Canadian vessel participation in traffic, initiating in the United States, even from a Canadian port to an Alaska port and places other obstacles in the way of Canadian shipping in U.S. territory and the repair of American vessels in Canadian shipyards. This Act is clearly an irritant to Canadian shipping and ship repair interests, but it is not clear that it represents a serious obstacle to the development of those regions in Canada which are served by Panhandle ports. The one instance that has been specifically cited is the shipment of copper concentrates from the Consolidated Mining and Smelting mine at Tulsequah to Tacoma, Washington. Both the zinc and copper concentrates are shipped down the Taku River in shallow draft barges and are transferred to deeper draft barges at Taku Point, which is within the United States. The Straits Towing Company carries these concentrates down the coast in Canadian bottoms. They have had no difficulty with the zinc concentrates, which are landed at Vancouver, but they have had difficulty with their copper concentrates which are shipped directly to Tacoma, Washington. U.S. authorities have ruled that since these concentrates would be carried between two U.S. ports - Taku Point and Tacoma - they must be shipped in U.S. bottoms. The Straits Towing Company have got around this restriction by carrying the concentrates from Taku Point to Vancouver in one barge and there transshipping them to another barge for carriage to Tacoma, but this trans hipment costs an additional 75 cents per ton.

Any one of the three corridor variants might help with this problem. However, it is anything but clear that it is a serious problem. Moreover, if the U.S. were prepared to make special exceptions to the Jones Act for goods shipped from a corridor port in Alaska, it seems highly probable that they would be just as likely to make the exception, as a special arrangement, without the corridor.

(e) Hindrance to General Economic Development.

Existence of the Panhandle may have some general inhibiting effect on economic development because of the psychological deterrent to mining operators who tend to be reluctant to undertake operations through foreign territory. While the Government of Canada has received no official notice from the Government of British Columbia that the Panhandle hinders development of the northwestern part of the province, Premier Bennett, in a speech at Victoria on May 14 to the Pacific Northwest Trade Association, has referred to the province's need of an outlet to the Pacific through the Alaska Panhandle.²¹⁶ As far as prospecting is concerned, however, it can be operated on the basis of air transportation and the Panhandle has no effect for that purpose. It is not at all clear that the Panhandle has had or will have any substantial effect on the pace of economic development. Nor does it appear that the concession of two or three corridors would affect the matter significantly. The country is very rugged and, except in the region tributary to Skagway, each corridor would give access to a somewhat limited area. A few corridors would not open up the whole hinterland, as is sometimes implied.

The Price of Corridors

5. It has been made clear in many of the comments by United States newspapers, and from other sources, that corridors are seen by them as part of an arrangement under which Canada would give in exchange rights of value to the United States. What is most frequently mentioned is some share of Canadian water resources (presumably the diversion of water from the Yukon River to the Skagway area) or the development of the entire northwest as an economic unit. Any price along these lines would be extremely high in the long term. It is the sort of thing that could be contemplated only if it were established that the Panhandle has extremely injurious effects on the region behind it and that the only way of removing those effects would be through the negotiation of some corridor arrangement. Neither seems to be the case. It is, however, quite undesirable, particularly at a time when important discussions are about to be undertaken with the United States on water problems, to allow the impression to continue that Canada has an important interest in securing corridors and that possibly they can be made the means of getting substantial concessions from this country in return.

Possibility of Further Studies

6. If the Cabinet deems it desirable that further study be given to the matter, this study, in the view of the committee, could be carried out either by a Royal Commission or by the Department of Northern Affairs and National Resources, in co-operation with the other interested Government departments. An international committee of local residents, as advocated by the Member for Yukon and others, is not, in the opinion of the committee, a suitable agency for this purpose.

It is recommended, that a statement of policy be made soon on behalf of the Government in terms along the lines of the attached draft.?²¹⁷

L.B. PEARSON
Jean Lesage