To your first point on reciprocal penalties, I'll speak for a minute on the view of the Coalition of Rail Shippers. We're a member of that coalition. I'm not representing them today, but I want to tell you about some of the core principles that we put forward to the panel.
One was that there needs to be some form of a standard applied to service. They need to be performing according to a certain standard. If you're going to perform against a standard, you have to be measured against your effectiveness at delivering according to that standard. There's really no point in measuring for measurement's sake. We need to hold each other accountable for actually performing, and that comes through the form of a consequence for non-performance. Finally, we must have an agreed-upon, effective, and inexpensive dispute resolution mechanism.
But the key point was to be held accountable for performing at a level of service, by establishing consequences for non-performance, or what you called a penalty or a reciprocal penalty. This is a core principle that we put forward as a coalition. It's something that we as an industry association built into the concept and the solution that we put forward to the panel--absolutely.
The prop I usually have with me is a CP manual that shows 22 pages of what we call “behaviour modification tools”. There's an action that every shipper must take, and if they don't take it, there's a charge associated with it. We're not asking for a reduction or an elimination of those charges; we're simply saying there has to be balance. If you commit to providing 10 cars on Tuesday the week before that Tuesday and you don't, and you don't provide advance notification, what is the consequence for not performing? And yes, there should be a financial consequence for non-performance.
To your second point, we, as well as the panel, have made the point that under current conditions, in an environment that lacks competition, the railways will ultimately focus on asset control or asset utilization and cost control to the detriment of providing good service. That really is the crux of the issue. We are not going to get anywhere until we address this fundamental problem. The panel concluded that the fundamental problem is lack of competition--it's market power--yet it does nothing to address that fundamental problem.
So yes, the panel must recommend and the government must act on that conclusion. If there is a lack of competition and there is no feasible way of increasing competition in rail freight service, we must address it by putting in place a policy framework that compels them to put service on the same plane as cost control and asset utilization.
On your last point about the Forest Products Association's letter to you and the reference to a review in 2013, that is the second part of the panel's conclusions that we take exception to. The first one was that nothing should be done: that they sure hope everybody gets along over the next little while and that at some point in the future someone else should come back and take a look at this. Also, they put forward a fairly ill-defined framework for a review in 2013, which government should look at to try to measure progress towards the objectives that we all have for improvements.
This process bothers us for a couple of reasons. One is that it's a point-in-time review. Anybody in the business community can understand the failures of a point-in-time review of progress. If Gordon told me he was going to appraise my performance next year and that if I did well according to certain criteria, I would never be subject to a performance appraisal again, I can tell you that my performance would suffer the year after. This is the type of thing we're worried about. There's nothing in place that puts forward some certainty for the business community beyond 2013 if you simply measure its ability to improve performance up to that point.
Second, if you're going to establish a review in 2013, it would seem logical that you put in place the system that will measure performance up to that point, yet they've recommended that the railways themselves monitor and measure their own performance and report on it. So we're putting the responsibility for measuring performance into the hands of those who are subjects of the measurement, which is another problem.
