Winnipeg / Vancouver: The Frontier Centre for Public Policy released today a study entitled Grain Freight Regulation in Canada. The study examines the effects of grain regulation on rail transport.
Some twenty Royal Commissions have questioned the preferential treatment of grain in light of the serious economic fall-out that protecting this one commodity has had on railways, grain producers and the Canadian economy. In his 2009 publication, Deputy Transportation Minister Kroeger claimed the answer was political and that there existed in Ottawa a belief that the Crow rate was sacred.
Rather than dealing with the Crow Nest Pass rates head-on, the Canadian government chose the route of distancing itself incrementally over time. Thus, the Crow’s Nest Pass rates were replaced with the Western Grain Transportation Act in 1984. The Budget Implementation Act of 1995 removed the subsidized grain rates and replaced them with a cap on grain freight rates. In 1996, the government removed the controls on branch lines, allowing railways to deal with their lines and abandon uneconomic lines. In 2000, the government dropped the rate scale on grain movements in favour of a revenue cap. Study author, Mary-Jane Bennett traces the history and consequences of grain freight regulation over the years.
Each step protecting grain through regulation was proudly heralded as providing the right answer. Yet, each step resulted in a senseless economic fall-out not only with the railways but throughout the grain handling system. At various times in the history of protected grain freight, the initiatives have delayed grain industry advances, inhibited livestock production and secondary processing, affected farm operational effectiveness and efficiency, encouraged export grain production, discouraged value-added processing, lowered grain prices and encouraged excessive freight transportation. In all cases, regulation has ignored the actual cost of transportation and the fact that freight rates in Canada are amongst the lowest in the world.
The Conference Board of Canada examined the consequences of grain freight regulation. It found that regulation protecting one commodity not only kept capital investors at bay, it affected railway productivity and contradicted business discipline of price signals, market forces and shareholder return.
In the new era of grain handling with a voluntary Wheat Board, there is no need to maintain grain freight over-sight. Its maintenance will have further detrimental effects and is at odds with recent findings emphasizing a commercial and contract-based system in rail freight.
“Deregulating grain freight is not only fair” claims author Mary-Jane Bennett, “it is urgently required.”
About the author: Mary-Jane Bennett is a lawyer and consultant in Vancouver. She is a former nine year Board Member with the Canadian Transportation Agency in Ottawa. While with the Canadian Transportation Agency, she participated in the annual exercise setting the revenue cap on western grain shipments and has sat on cases involving grain freight issues.
Download a copy of Grain Freight Regulation in Canada HERE.
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