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Forestry industry to government: fix rail service now -- by Avrim Lazar

Rural communities and resource industries that were emerging from the recent recession have been hoping for light at the end of the tunnel—at least the rail tunnel.
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Rural communities and resource industries that were emerging from the recent recession have been hoping for light at the end of the tunnel—at least the rail tunnel.
To stay alive in these challenging times, sectors such as the forest products industry have been striving hard to trim costs, but found one critical cost—transportation—remained beyond their control. That’s why they were counting on the federally appointed Rail Freight Service Review panel to do what it had been established to do: create conditions to help Canada’s rural economy get the necessary rail service to prosper.

The interim report from the panel correctly recognizes there is “a need for change” and that “improvement in rail services is required.” It goes on to make several positive recommendations that would help address some of the service inadequacies faced by all Canadian shippers. However, the panel seems to believe that we can wait for three years before the government gets engaged and considers the kind of regulatory action that would help save jobs and communities. This is completely unacceptable.

Simply stated, most resource shippers are located in remote regions of the country where they are effectively captive to a single rail company to transport their products. This virtual monopoly has meant excessive freight rates, inadequate service and even suffocating price hikes during the recent economic downturn.

The panel report acknowledged this lack of competition by noting that “the major cause of rail service problems is railway market power, which leads to an imbalance in the commercial relationships between the railways and other stakeholders.” So it makes no sense for the panel to pinpoint the problem as the lack of commercial competition in the railway system and then suggest handing the railways an additional three years to find commercial solutions.

The stakes are high. The panel correctly identified cost-efficient rail service as critical to the rural economy. The government did the right thing in announcing the review panel. The panel did the right thing in identifying the problem, recognizing the importance of fixing it, and suggesting concrete ways to do so. The only thing that is terribly wrong is the notion to defer government action until 2013.

At the outset of the review process, the forest products industry was assured that the panel would act to improve rail service at the earliest opportunity. It took two-and-a-half years of process to get to this point. Rural communities simply can’t wait another three. The onus is now on members of Parliament to insist that the government act now to ensure an effective, competitive, and efficient rail system. For the sake of rural Canada and its economic future, let’s hope they get on with it.


 

Avrim Lazar is the president and CEO of the Forest Products Association of Canada




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