Claude Mongeau, the CEO of Canadian National Railway Co., says a new law will subject his business to “unfair poaching.” But it sounds like what he’s really complaining about is, in plain English, more competition.
Mr. Mongeau delivered his words in response to a federal government bill, which would give grain shippers more freedom to choose which railway will carry their grain. The purpose of the bill – called the Fair Rail for Grain Farmers Act – is to help deal with the large backlog of grain from a bumper crop still waiting to be delivered.
In most cases, shippers’ grain elevators have nearby access to only one of the two major Canadian railways. And by law, they may not transfer grain to the other railroad unless the elevator is within 30 kilometres of them. Yes, that’s anti-competitive. The bill would raise that limit to 160 km, giving more choice to growers and shippers.
The origins of these regulations on “interswitching” go back to 1904. It’s a relic of the long history of heavy-handed government power over grain and railroads, which included fixed freight rates.
The duopoly of CN and Canadian Pacific Railway Ltd. is to some extent still built into Canadian public policy. The extension of the interswitching limit to 160 km raises – oh horror! – the spectre of American railways being able to take delivery of Canadian grain, and possibly getting it more quickly to ports and foreign markets, better serving Canadian sellers and overseas buyers.
Encouraging more competition is never a bad thing. In the long run, it’s a much better approach than the penalty regime that the government had no choice but to temporarily impose, and which simply orders the railways to ship more grain, or else. As they say, that ain’t no way to run a railroad.
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