Railways should serve all customers — not just one industry – by Pierre Gratton, Roger Larson and Richard Paton (National Post – March 26, 2014)

The National Post is Canada’s second largest national paper.

Pierre Gratton is President and CEO, Mining Association of Canada; Roger Larson is President, Canadian Fertilizer Institute; and Richard Paton is President and CEO, Chemistry Industry Association of Canada.

Rail services do not operate on normal market conditions

On March 18, the Railway Association of Canada defended its members’ service failures this winter to the grain sector (No way to run a railroad). Chemicals, mining and fertilizer have also experienced poor service that go beyond cold weather and are systemic and deliberate in nature.

Canada requires a customer-responsive rail network. The federal government has a key role to play in establishing and ensuring a well-functioning rail system that serves all of its customers’ needs.

While we understand and sympathize with what motivated the federal government to issue an Order-in-Council compelling CN and CP to transport certain volumes of export grain shipments, we are concerned about the effects of meeting one industry’s needs by allocating rail capacity at the expense of other industries.

Railways can do this because the market for their services does not operate on normal market conditions where many service providers compete for customers. Railway companies wield significant market power over their customers, many of whom are captive to either CN or CP.

In the last few years, CP has retired 400 locomotives and 11,000 rail cars, and reduced the company’s staff by 4,800. This is a key point: a railway controls its capital, infrastructure, equipment and labour inputs, and in doing so determines the level of service it can provide. Investment (or non-investment) decisions ultimately establish a service-level baseline. Permitting railway companies to establish service levels to their customers based on investment decisions that assure inadequate service has created an economically inefficient system and is detrimental to individual rail customers’ ability to access world markets.

To move forward together, we require a robust transportation policy that lays out railways companies’ obligations to the customers, who are the producers of goods and job creators. Without addressing this foundational element, the federal government’s key trade, resource development and employment initiatives will not bear their intended fruit.

For the rest of this article, click here: http://business.financialpost.com/2014/03/26/railways-should-serve-all-customers-not-just-one-industry/

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