National transport policy in Canada : the case of rail transport
Creators: name: Semotuk, Verna
Publisher: name: University of British Columbia
Year: 2010

description: National transport policy should be determined by choosing among existing policy and alternatives to it on the basis of national and regional development objectives. This approach to transport policy formulation is explored within one important transport sector: high-bulk, long-haul freight in Western Canada. The implications of national rail policy are most pertinent, and most keenly felt, in economic regions dependent upon the export of primary resources, and it is in these markets which rail displays an enduring natural competitive advantage. The two transcontinental rail carriers are in fact dominant in Western freight movement. The methodology rests upon an analysis of the theoretical literatures, federal legislation, published statistics, empirical studies, regulatory decisions, and various position statements pertaining to rail policy. The analysis is augmented by a case study of "policy in action" with regard to Saskatchewan's potash industry. Four policy options are presented, comprised of existing policy and three recommended changes advocated by various interests. Each policy option represents a cumulatively greater degree of government intervention, and each is evaluated against five criteria, developed out of the facts of Western Canadian economic geography, stated objectives of the 1967 National Transportation Act and Bill C-33 (1977), and basic development objectives on which there is broad national consensus. Application of the evaluative criteria to the four policy options leads to the following conclusions: 1) Integration of the two national railroads is a requisite for achieving maximum economic and operating efficiency within the rail industry itself. Despite increasing competition from trucking, rail continues to constitute a natural monopoly in the markets for which it has an inherent advantage, and these in turn remain a significant proportion of total rail markets. In these bulk commodity markets, intramodal competition is weak or non-existent, and a policy response of encouraging the two national carriers to compete under conditions of commercial freedom results in duplication of capital investment, loss of cost and quality-of-service benefits to users, retardation of technological innovation, skew-ness of industrial location patterns, and an inhibition of rail's ability to compete intermodally in other markets. The history of the CNR is a testimony to the inappropriateness of contrived competition as a policy response in a natural monopoly market. 2) National transportation policy must serve the goals of national and regional policy. The railways' exclusive pursuit of economic efficiency impedes the achievement of allocative efficiency by its inattention to the significant externalities (both positive and negative) attendant the rail industry, and by its potential to thwart existing national policies and programs whose goals go beyond economic efficiency. Second, rationalization of routes and services arising from legislative directives to provide only compensatory rail service is resulting in atrophy of a developed rail network which may later be required to meet increased demand for rail service. 3) The unified national rail system must come under public ownership. Canadian history shows that the two favoured remedies for abuse of rail monopoly power (contrived competition and regulation) have proved in- effective. Alternatively, public ownership provides the best opportunity for ensuring performance of public duties by rail, and for achieving public accountability for the considerable sum of public-sector investment that rail will require within the next decade. 4) Planning for rail must be decentralized, participatory and integrated with planning for other modes. At present, no clear demarcation of policy-making authority exists between the legislative and judicial functions of the federal government with respect to rail transport: in the absence of unambiguous directives from the Ministry (Transport Canada), the Canadian Transport Commission is, in practice, assuming a policy role through its semi-judicial decisions. The Ministry must re-establish its full responsibility for transport policy, and: a) revise the CTC's regulatory mandate to include only the making of regulatory and appeal decisions on a case-by-case basis, according to directives or criteria from the Ministry; b) reorganize the structure of the CTC to permit both regional representation and an intermodal approach to regulation; c) provide clear policy directives to the management of the rail company; and d) provide an institutional mechanism by which provincial governments and labour can participate in the formulation of transport policy affecting them. 5) A unified, publicly-owned national rail system will deliver its full promise only when accompanied by public-sector economic planning. Employing transport as a policy tool re-introduces the opportunity for "political interference" in the rail industry, but future intervention should take place only in the form of formally-adopted economic strategies. To have the railways respond to the demands of regional populism or special-interest lobbies per se invites squander of scarce resources, but to have them respond to public duties required in the service of planned economic development enhances the probability of a rational, economic and politically responsible allocation of those resources.