TRAN Committee Report

Supplementary Opinion of the New Democratic Party

While we support the majority report, we would like to provide a supplementary opinion in order to highlight the points raised by grain producers that are not clearly reflected in the recommendations.

While the report’s first recommendation underscores the importance of interswitching to fostering competition, it leaves the door open to a reduction in the distance allowed. Moreover, the 160‑km interswitching limit expires on 1 August 2017. The New Democrats therefore recommend that the government make the current 160‑km interswitching limit permanent. Grain shippers need a more competitive business environment in order to more efficiently get their products to foreign markets. The NDP also suggests exploring the possibility of extending the current interswitching provision to other provinces and other sectors of the economy.

Another issue is the ability to enhance the performance of the rail system by improving the quality of the data that can be gathered by the Canadian Transportation Agency (CTA). The majority report could have told the government that the CTA can collect confidential commercial data without hurting stakeholders. An analysis of these data would have prevented problems with grain shipping performance and benefitted the entire supply chain.

We also fear that the Department of Transport will interfere with the CTA in its rail system monitoring work. Politicizing the duties performed by the CTA could result in the Minister making arbitrary decisions that would not necessarily benefit grain shippers.

As for the Committee’s proposal to clarify the definition of “adequate and suitable accommodation,” the New Democrats believe that the current definition indeed favours Canadian National (CN) and Canadian Pacific (CP), who enjoy a dominant position in the market. Accordingly, the recommendation could have identified demand rather than supply as the factor that should determine service levels in the grain shipping market.

1.  160‑km interswitching limit

Recommendation 1: That the federal government make the 160‑km interswitching limit permanent and explore the possibility of extending it to other provinces and other sectors of the economy.

Currently, 50% of grain freight is destined for international markets. The vast majority of these export products are shipped by rail. The economies of the Western provinces are heavily dependent on the strength of their agriculture sectors and on high-quality rail service. Yet the great majority of grain shippers are captives of the services provided by the same carrier. As a result, grain shippers are forced to pay excessive rates to CN or CP because of the lack of competition. That is why the federal government must reassure grain shippers by making the 160‑km interswitching regulatory provision permanent. The representatives of Pulse Canada told the Committee the following:

“Our members who have used the provision report freight rate savings of between $500 and $1,500 per car, which are significant cost savings over current rate offerings and significant savings for the small and medium-sized shippers we represent.”

2.  Collection of reliable rail system data

Recommendation 2: That the Canadian Transportation Agency have access to all data related to transportation logistics from all participants in the grain supply chain, from producers to transportation service providers, including proprietary and confidential commercial data.

Data collection is essential for the CTA to be able to predict problems that could affect the rail system. Unfortunately, it was decided that the majority report’s recommendation would not state that the CTA should be given the power to collect confidential and commercial data from the rail companies.

As Pulse Canada stated:

“The Agency, as an independent quasi-judicial body is best positioned to act as the trustee of a comprehensive database of highly confidential and commercially sensitive operational and financial data.”

3.  Independence of Canadian Transportation Agency

Recommendation 3: That the Canadian Transportation Agency independently monitor commodity movements and respond to system performance issues.

As a quasi-judicial tribunal, the CTA must remain independent, particularly in carrying out its mandates to monitor commodity movements and resolve rail system performance issues. However, the majority report recommendation states that Transport Canada must become involved in the CTA’s work. This proposal could impair the independence of the CTA’s mandates and opens the door to political interference in the rail system monitoring process.

The CTA’s independence is vital to ensuring it can launch proactive investigations into problems with the rail system. In this regard, Cereals Canada noted the following:

“This power would relieve shippers of carrying the sole burden for challenging railways in circumstances in which service is inadequate, by empowering the agency to investigate systemic issues and to take action where necessary.“

4.  Rail service levels determined by demand, not supply

Recommendation 4: That the federal government amend the Canada Transportation Act to provide that rail grain shipping services be determined by demand, not supply.

Because CN and CP dominate the grain shipping market, grain producers have very little leverage when negotiating service contracts. The current legislation provides that rail companies must provide “adequate and suitable accommodation.” A number of stakeholders believe that this definition is vague.

Moreover, some witnesses pointed out that this lack of clarity leads rail companies and grain shippers to have differing interpretations of what constitutes “adequate and suitable accommodation.”

That is why we believe the federal government should amend the Canada Transportation Act to provide that rail service levels must adequately meet the production capacity of grain producers. As the Vice-Chair of Cereals Canada explained:

“The nation's economy cannot be expected to fully capitalize on global marketing opportunities when the ability to provide the goods to international customers is governed by one's domestic rail service provider.”