Yesterday CN Rail president and CEO Claude Mongeau made the railroading and grain transportation business sound quite exciting. Here are some phrases he used:
“This is a transformational innovation;”
“I believe that the supply chain, the grain handling system, is at a crossroads that will take us to a new level in terms of creating value for Canadian farmers . . .”
“We are a world class transportation provider operating in a fiercely competitive industry.”
“We see our role as a supply chain enabled, as a party that can come to the table and find people to collaborate, to innovate, to get to a higher level.” (I wish he’d said ‘Higher Ground” there, because then would have provided this link.)
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Certainly rousing words there, and this is all a good thing if it means cheaper and better grain transportation for prairie farmers. And that indeed is what both Mongeau and the Canadian Wheat Board say CN’s new nice-guy attitude is meaning. So that’s great!!
But Mongeau also warned against re-regulation of the rail business, or the continuation of the present regulatory environment, if farmers wanted to see the sort of bounding advances in rail efficiency he claims is happening. The inference from what he was saying was that if all the regulatory ropes were taken off CN, it could rise as a commercial, cost-saving colossus for farmers.
Hmmmmmmm. Where have I heard that before?
Oh, yes, I remember, it was from Canadian banks in the 1990s and 2000s, who cried about how hamstrung they were by all the federal regulations on their businesses, and how they could never become global colossi like American, British and European banks unless the regs were relaxed, they could merge, and then sally forth onto the field of international financial triumph. Just like the Royal Bank of Scotland.
That chorus became quieter after global banks like RBS went bankrupt in the 2008 meltdown, and has stayed quiet as Canadian banks have gone around gobbling up some of the supposedly freer banks in the U.S. A couple of weeks ago a U.S. economist was excited as he talked to me about the big biz news of the day where he was, which was that a Canadian bank had just bought a local bank. “One of yours just bought one of ours – again,” he said.
So much for hamstringing.
Railways are obviously different than banks, but not in a way that would probably make farmers feel much more relaxed about the idea of much greater deregulation. Railways are semi-monopolies, and not truly part of a no-holds-barred free market. You can’t just go set up a new transcontinental railroad tomorrow and get in the game.
I mentioned the “duopoly” word to Mongeau yesterday, a term he bristled against. He noted many big-asset parts of the grain industry were dominated by very few players, like the few grain companies and the CWB, so it was just sort of natural.
In my fluffy little head I wondered if that wasn’t precisely what many farmers are scared of: even more concentration amongst the big players. I haven’t heard too many farmers singing odes to joy about the greatly shrunk pool of grain companies in the West. And if I remember right, the main justification for the wheat board monopoly is that it supposedly allows the board to squeeze customers for higher prices, something that wouldn’t happen if there were multiple sellers. So why would farmers want a railway to have less regulation hanging over it, if those regs might be holding back from squeezing them like the board says it does to the wheat market?
Mongeau said his company has a good story to tell and he wants to tell it. Part of that appears to be an argument against re-regulation and for more deregulation. He showed some ads the company is running pushing the idea of “Together.” But I think he’s going to have to tell his story pretty convincingly if he wants to convince farmers that his railway can’t do well and excel without being freed from regulatory oversight. After all, lots of we Canadians have made lots of money from owning supposedly-hamstrung bank stocks, while grousing about their fees.
