JANUARY 15, 2001
CTA PANEL INTERIM REPORT RELEASED: "FURTHER STUDY" NEEDED
SASKATOON, Sask.-- "When one reads this report, it is clear there is no sense of urgency on the part of the Panel or government to create effective competition in the grain transportation system," said NFU Transportation Committee member Jim Robbins. Robbins was commenting on the Interim Report of the Canada Transportation Act Review Panel on Competitive Rail Access. The Interim Report was released last week.
"When the government directed the Panel to quickly produce an interim report on railway competition, farmers and others understood that such a report would form the basis of action to implement competition. The collection of questions and ponderings contained in the Panel's report indicates that railway competition, if it actually comes into being, won't arrive any time soon," said Robbins.
While acknowledging its interim nature, Robbins stated: "The report amounts to public head-scratching. The Panel and the Government seem perplexed as to how they might implement railway competition. In contrast, when it came to removing the rate cap and other protections for farmers, the government had no similar uncertainties and moved quickly."
Robbins noted that while the Panel came to few conclusions, there are indications in the Interim Report that its final conclusions may be heavily influenced by the arguments put forward by the railways.
On page 46, in the discussion on expanded interswitching, the Panel seems to approve the railways' right to differentially price. In this context, "differential pricing" means the power of a monopoly or near monopoly to price based on the level of competition: essentially pricing according to what the market will bear in situations where no effective competition exists. The Panel, in fact, worries that expanded interswitching will replace "market determined rates" with "regulated rates," ignoring the lack of a real and functioning market in many geographic areas.
On page 45, the Panel muses over what compensation should be paid to railways if they are required to allow other carriers to use their lines. Significantly, the Panel does not dismiss paying the railways "opportunity costs." Paying railways the actual cost of owning and maintaining their rail lines and also paying them their opportunity costs would be equivalent to giving them the monopoly profits they would have made running their own trains, even though they didn't run their own trains. "If the railways are allowed to charge opportunity costs, we might as well go home and forget about competitive access proposals," said Robbins.
The report also indicates that the Panel may recommend a further weakening of the CWB's transportation role. The Panelists state on page 26: "Mr. Estey recommended a move to a commercial, rather than regulated, GHTS [grain handling and transportation system]. The recent legislative reform constitutes a step towards a commercial system. The Panel's view is that these steps have not gone far enough. The flexibility and reliance on incentives that characterize commercial systems are vitally needed to improve the GHTS."
The report seemed to deliberately evade the question of a potential NAFTA challenge resulting from the imposition of open access. For nearly three years, the NFU has sought an answer from government and others to a basic question: Does NAFTA Chapter 11 require us to pay compensation to railway stockholders if we impose open access? The question is, in effect, is open access possible? Robbins stated: "The potential requirement for multi-billion dollar compensation to U.S. investors makes effective competition highly unlikely. It is possible that farmers are being led down the garden path of rail deregulation only to find, much later, that the promised offsetting benefits of competition are, sadly, unattainable."
"To maintain the capacity and efficiency of the grain transportation and handling system; to provide stable, reasonable rates; and to ensure equitable access and service: all these require a deft mix of market forces and government regulation. The current path of single-minded deregulation is moving us farther away from these goals," concluded Robbins.
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For More Information:
Jim Robbins, NFU Trans. Committee member: (306) 493-2569
Darrin Qualman, Executive Secretary: (306) 652-9465