The Emerson review of the Canadian transportation system as it relates to the grain transportation system emphasizes economic theory and fails to recognize the historical record and realities on the ground.
The review, ordered by the former Conservative government and conducted by former MP David Emerson, makes several recommendations, some with merit.
However, farm groups were quick to note that the report’s guiding principle, that an unfettered commercial system will produce the best results for all players, falls short in situations where competition is weak.
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Liberal transport minister Marc Garneau said he wants to consult with stakeholders before acting on the report recommendations. Farmers’ must be heard in this consultation.
The biggest recommendation in the report is to eliminate the maximum revenue entitlement program, known as the revenue cap, within seven years.
Its reasoning is that the grain marketing system has been deregulated and the handling system has undergone enormous consolidation and investment.
If the rest of the system has changed, why should regulation continue for grain transportation but not for other commodity producers?
This assumes other shippers are happy with railway performance, but we know this to be untrue.
The report recognizes the special situation of Western Canada’s export-oriented crop industry but does not acknowledge that it warrants special consideration.
Prairie grain farmers are more reliant on export markets than their competitors. Their crops must travel by rail three to four times farther than competitors such as the United States and Australia.
Canadian National Railway and Canadian Pacific Railway are the only rail companies linking the western farmer to ports, and each has its own geographic dominance that limits competition.
Lack of real competition in a captive market legitimates government intervention to provide fairness.
The Emerson report rightfully recognizes that the rail grain transportation system must generate enough revenue to increase infrastructure capacity to competitively move a growing amount of product to world markets, including paying for the new fleet of grain hopper cars that will be needed shortly.
The report seems to accept the railways’ argument that the revenue cap and other restrictions mean they are not fully compensated and are discouraged from investing in system improvements.
However, farmers are skeptical and right to demand a full costing review before adjusting the revenue cap.
We are happy that the report recommends a more robust Canadian Transportation Agency with resources to determine how well the system is operating and to mediate and, if needed, arbitrate disagreements.
Overall, while we agree commercially based systems are good at disseminating system information and allocating resources, they rely on equal market power for fairness, and that is lacking in grain transportation.
We hope the Liberal government will lean toward real world fairness rather than faith in economic theory.
