The following is an excerpt from the Agricultural Producers Association of Saskatchewan response to the rail service review panel’s interim report, written by policy manager Doug Faller.
In the interim report (October 2010), the Rail Freight Service Review Panel provides a clear, consistent, and convincing analysis of the lack of competition in the rail transportation industry and the preponderance of power possessed by the railways in the marketplace.
Non-railway stakeholders have long-identified lack of competition as the problem behind poor service levels. When the panel applied the Competition Bureau’s methodology to determine if there was competition in the rail transportation industry, it concluded: “An assessment based on these criteria would confirm that CN and CP possess market power over their customers.”
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Indeed, the panel acknowledges that lack of competition in the industry is the problem: “In the panel’s view, the major cause of rail service problems is railway market power, which leads to an imbalance in the commercial relationships between the railways and other stakeholders.
“This, in turn, reduces the railways’ accountability for performance. As a result, railways do not always face the consequences that come from offering poor service that occur in other sectors in which competition is more prevalent.
“If more stakeholders had access to effective competition and/or effective regulatory tools … it is unlikely that the government would have felt the need to undertake the current service review.”
The panel asserts that there are no practical ways to directly increase rail competition. Yet the report lists five competition-creating ideas it received, recommendations that are commercial solutions.
The majority of non-railway stakeholders, especially shippers, are calling for regulatory protection and the railways are basically the only parties saying that no regulatory change is needed.
It is surprising that the panel chose to recommend neither immediate regulatory intervention – clearly called for by the market environment and stakeholder submissions – nor the commercial solutions that are readily identified and available. The question arises: does this service review function only to provide a rationale for a predetermined outcome rather than follow the evidence to more logical conclusions?
If so, it is an unfortunate use of a democratic process in which grain producers had high hopes for results that would improve service to their farms.
Yet, strikingly, this was pretty much predicted by grain shippers in an April 17, 2008,Western Producer,published when the service review was first announced. Citing the terms of reference set for the review, specifically that “commercial solutions are preferable to increased regulation”, the Western Grain Elevator Association asked whether “it seems like a predetermination that the commercial system is the best, but isn’t that what the review is intended to look at, whether the commercial system is working?”
The panel does say there is a chance that regulatory intervention will be needed. It recommends the railways be given three years to improve service. According to the report, if it is determined at the end of those three years that service has not improved, only then should regulations be enacted to require improvements.
But, let us recall that improvements to rail service have been long overdue even though commercial freedom for the railways was a result of deregulation of grain transportation brought about by the Estey Review (1998) and Kroeger Commission (1999).
When the Transportation Service Review Panel Act was changed in February 2008 and the level-of-service review announced,The Western Producer(Feb. 21, 2008) described the review as being “sought by shippers for more than seven years.”
Seven years in the making, the current service review, itself, is taking three years. The result? Recommending the status quo for another three years.
Thirteen years of hurt without action. Thirteen years that farmers and shippers have absorbed the impact of poor service on their bottom lines. Thirteen years with no guarantee that things will change.
The possibility of action sometime after 2013 does not address the needs of shippers and grain producers.
Perhaps the panel isn’t recommending the status quo, since it suggests the federal government begin drafting regulations that could be triggered if service levels are deemed inadequate in three years.
But, given the trajectory toward deregulation in grain transportation over the past several decades, and the inaction on inadequate service during that time, this really isn’t a credible recommendation.
What reason is given by (one dissenting) panel member to oppose simply drafting stronger regulations that might not even be implemented in three years? Because it is the shippers who have been and will be bad actors in the marketplace.
The question is inescapable: why are we spending taxpayers’ money to blame the victims? At least, that’s how it looks from this side of the tracks.
