(PS136)

In Brief:

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Grain Freight Regulation in Canada

Effects of 1897 Crow’s Nest Pass rates on grain still with us

Executive Summary

The Canadian railways, for their role in building the country, have been described as nation builders, the backbone of the national transportation system and key to the creation of Canada’s renowned grain industry. Regulation of this backbone industry, ongoing since 1879, has been initiated and undertaken with mixed results. Invariably, regulation left the shipper, the railways and the Canadian economy with lost efficiencies, opportunities and effectiveness.

Over the years, some 20 Royal Commissions have outlined the impact of over-regulation on the rail industry. Over-regulation has not been limited to Canada but rather has been a North American issue. The U.S. Congress looked to the poor result of over-regulation on the rail industry, the economy and its minimal effect on shippers. The 1980 Staggers Rail Act deregulated U.S. rail transportation. When Canada and the United States faced an almost bankrupt rail system in the wake of over-regulation, Canada took a middle-of-the-road approach, clinging tenaciously to its right to regulate.

The paper will review the history of grain/rail rate regulation and examine the effect of that regulation on shippers, railways and the Canadian economy. Next, it will study the revenue-cap regime—rate regulation’s last frontier—to assess whether the revenue cap has replicated the marketplace as it had promised to do. The third portion of the paper will outline the relationship between investment and regulation and productivity. The final section of the paper will deal with the deregulated grains industry and the effect of the revenue cap on the major stakeholders. This paper concludes that the continued regulation of freight rates in grain is an ill fit with a deregulated grains supply chain.

In its review of rail-rate regulation, this paper could do no better than return to the analysis provided in “‘The Holy Crow’ (And the Perverse Nature of Good Intentions)”1 by Professor Paul D. Earl of the Asper School of Business.

View entire study as PDF (27 Pages)

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Related Items:

• Media Release

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Mary-Jane Bennett

is a research fellow at the Frontier Centre. She is a lawyer and an established transportation consultant. She began her career with the Ontario Ministry of Justice and has since practised law in Manitoba and British Columbia. In 1997, Bennett received an appointment by the Governor in-Council to the newly formed Canadian Transportation Agency where she was involved in a broad range of transportation issues, including grain freight issues. Mary-Jane Bennett served as a Board Member with the Canadian Transportation Agency from 1998 to 2007. Bennett is author of Grain Freight Regulation in Canada and A New Policy is Required for Airport Transportation published by Frontier.

Click here for hi-res photo

 

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Feedback:

• RE: Grain Freight Regulation in Canada — May 27, 2012
  

  Had a look at the report and first thought was: It's about time.  In the CWB world the farmer paid the freight plus all other costs either deducted off his cash ticker or charged to his CWB pool account. The wheat and barley farmer owned and was responsible for all costs to the end user. In the post CWB monopoly world, the farmer gets an agreed upon grade and cash price, paid in full at delivery.  The grain company is then the owner of the grain and all relevant costs including freight, are a cost of doing business. This, in my opinion, is the key argument for the need to examine the importance of all grain related regulation.  It would seem to me that the need for rail regulation as it applies to protecting the farmers interest, fundamentally changes.

  Mary Jane Bennett and the Frontier Centre are to be commended for the report - E-mail from Keith Lewis, Saskatchewan