Thank you, Mr. Chair.
Thank you for the invitation to appear before the committee.
Former member of the CTA and Liberal candidate in Manitoba Mary-Jane Bennett said that interswitching was inefficient—that it wouldn’t correct problems with the supply chain, but amplify them.
Each switch adds to transit time. The more switches you do, the bigger the slowdown. The more you handle a car, the longer it takes to get moving. This measure undermines the capacity, the efficiency and the fluidity of Canada’s supply chains and will harm all shippers.
In fact, that measure was tried between 2014 and 2017, and it failed. Extended interswitching adds, on average, one to two days to rail transit times. It was abandoned by this government after an independent statutory review of the Canada Transportation Act. This government’s transport minister at the time, Marc Garneau, acknowledged that the policy was always meant to be temporary. Nothing has changed that would justify going back to extended interswitching.
Let’s review why extended interswitching was sunset. First, is the lack of reciprocity in the U.S. Regulated interswitching does not exist in the United States. Under the government’s proposal, U.S. railways will be able to solicit Canadian traffic at cost-based rates, without any reciprocity for CPKC and CN to do the same in the U.S. That means fewer available car loads for Canadian railroaders to move across Canada.
It may also mean less available work for port workers if shipments end up in Seattle rather than Vancouver, for example. These are good-paying, overwhelmingly union jobs. The combined network of CN and CPKC exceeds 60,000 kilometres of track. CN and CPKC have 27,000 employees based in Canada. U.S. railways’ Canadian presence is mainly incidental, with just a few hundred kilometres of track.
Why should Parliament intentionally disadvantage Canadian railways to directly benefit U.S. railways?
Helena Borges, former associate deputy minister of Transport Canada, told Parliament in 2017 that extended regulated interswitching was “having unintended consequences on the competitiveness of our railways vis-à-vis the U.S. railways.” Long-haul interswitching was the government’s much-consulted response. Now the government wants to resurrect a policy it already recognized as a failure.
The second reason for sunsetting was the non-compensatory rate. Bill C-47 will force Canadian railways to move traffic, sometimes in the wrong direction and always at below-market rates. The 2016 review found that below-market rates were inappropriate because they hurt railways’ ability to reinvest in their networks. Everything we purchase is at market rates, from buying steel to paying salaries. Railways cannot be the only parts of our supply chains that are not operating at market rates.
The transport minister’s office, in the National Post this morning, acknowledged that extended interswitching creates congestion. It admitted that's why they’re not doing it in Ontario, Quebec or British Columbia. The fact that this measure will apply only in the three prairie provinces proves that this is not evidence-based supply chain policy.
The national supply chain task force never consulted railways on interswitching before its final recommendation. Canadian grain shippers already pay some of the lowest freight rates in the world. To move one ton of grain one mile in Canada, it costs on average just 2.97¢ U.S.
Our class I railways both set historical records for grain movements this past year. This was made possible by a combined $1-billion investment in new grain hopper cars, built in Hamilton, Ontario, and by tens of billions of dollars of investment in capacity and technology over the last decade. An independent study conducted this past January by CPCS found that Canadian freight rates are the lowest among market economies. In fact, they are 11% lower than in the U.S. These rates support the competitiveness of Canadian railway shippers.
Extended regulator interswitching is a cure in search of a disease. There is no justification for market intervention, particularly through a policy as egregious and ill-advised as extended regulated interswitching.
The government's decision to eliminate this policy was the right one. It was based on facts and evidence.
Long-haul interswitching was the government's solution to the problems with extended regulated interswitching. The former is based on market rates for comparable traffic, and the latter is the below market regulated rate. Those asking for this policy want a cheaper rate. It is not about improving service, nor is it about improving competitiveness.
Extended interswitching will do the exact opposite. The only winners of extended regulated interswitching are U.S. railways. To limit the harm to Canadians, division 22 must be amended or deleted entirely.
We're asking, at a minimum, that rates be market based and applicable to Canadian origins and destinations. You'll find more details in our brief.
Mr. Chair, it is collaboration and not more economic regulations that move supply chains.
My colleagues and I will be happy to take questions.