Madam Speaker, we are debating tonight transportation issues in Canada and I would like to deal with the railway issue as it relates to grain transportation in western Canada.
All those involved in the western grain transportation handling system agree that the system is broken and that it needs to be fixed. This includes farmers, grain companies, grain handling terminals and the Canadian Wheat Board, along with the railways which move the grain.
The current system is rigid, unaccountable and does not efficiently serve the needs of these system participants, especially the farmer who pays all of the costs. That is an important part to remember in this debate.
Severe systemic breakdowns in the handling and transportation system which occur every few years are dramatic demonstrations of the need for grain transportation reform. More recently we saw the system fall apart during the winter of 1993-94 and again in the winter of 1996-97. These breakdowns cost millions of dollars in demurrage and operating costs and lost sales. No one in the system, including the grain companies, the railways or the Canadian Wheat Board, can be held accountable for systemic inefficiencies.
The entities are caught up in inefficiencies caused by government legislation, regulation and bureaucracy, including the Canadian Wheat Board Act.
This system does not cost farmers only when problems arise. It costs them money every day that the system remains unchanged. The inefficient use of our grain handling and transportation system means that farmers pay far too much to get their grain from the prairies to port position.
Because of the control which the Canadian Wheat Board exerts over the system, grain companies and railways cannot manage their own facilities and equipment in the most efficient manner.
For example, railways and grain companies have tried to set up regularly scheduled grain trains that would cycle between primary elevators on the prairies and terminal elevators at the ports. These types of dedicated trains would be able to bypass railway switching yards, make more efficient use of railway and grain company staff, allow grain companies to better plan the arrival of ships, and, in effect, save farmers millions of dollars. However, the Canadian Wheat Board, through the car allocation system, would not allow these types of increased efficiencies.
Since the beginning of November the official opposition has held 69 town hall meetings with over 3,000 farmers in B.C., Alberta, Saskatchewan, Manitoba and Ontario. Western grain farmers repeatedly pointed out that freight is one of their major costs; approximately one-third of their expenses in most cases. Over and over again farmers asked why they were the only commodity group in which the producer paid the freight and was responsible for the quality and any added costs for the product throughout the total shipping network; that is, the farmer carries virtually all of the risk from the time he puts the seed in the ground until it is loaded onto the export ship at port.
The Prairie Farm Commodity Coalition estimates that the reforms to the current grain handling and transportation system could save farmers over $300 million annually. Put another way, this would result in a cost reduction of over $15,000 per farm.
Paul Orsak, a Manitoba farmer, recently summarized the opinion of a vast majority of western farmers when he stated: “We are firmly convinced that reforming the grain handling and transportation system will lower transportation costs for Canadian farmers, increase competition and make Canada's grain delivery system more effective for our customers”.
How have the Liberals responded to this issue? The government does what it always does when it does not want to make a decision. It commissioned a study. After the debacle in the winter of 1997, former Justice Willard Estey was asked to review the western grain handling and transportation system and recommend changes to the government. Much to the government's surprise, he did exactly what it asked. He recommended changes which would in fact improve the system.
The underlying theme of Justice Estey's 15 different recommendations was the need for a more open, market based grain handling and transportation system.
I would like to point out for the big government socialists in the House who may not understand this commercial contract based system that it provides for penalties and incentives in the contracting out of any commercial contract between businesses and, in effect, brings about the very efficiencies that regulations cannot do by command structure from, for instance, parliament.
Two of the key recommendations from Justice Estey involved the role of the Canadian Wheat Board and a legislative cap on freight rates. First, Estey recommended that the role of the wheat board in the grain handling and transportation system be eliminated. This recommendation would move the Canadian Wheat Board's interest out to the ports.
If this recommendation were implemented, the Canadian Wheat Board would contract the grain companies to move grain to the port through an auction process and the grain companies would be responsible for arranging freight with the railways. Producers would sign contracts with grain companies for delivery of the grain.
This recommendation is required if we are to replace the current centrally planned system with a contract driven accountable system. This would result in improved efficiencies and reduced producer costs. There does not seem to be too many people who do not agree with that position.
Justice Estey also recommended changes to the legislative cap on freight rates. He recommended that the rate cap be replaced with a revenue cap. The revenue cap would set the total revenue each railway could receive for moving grain, but would not set the individual rate at each delivery point, thereby allowing for individual incentive and pricing which would lower the cost overall.
The cap on railway revenues would allow market signals to flow through to railways, grain companies and producers and would reduce system deficiencies such as the under-utilization of the Port of Prince Rupert. The key to this is allowing market signals to have some influence on our grain transportation system.
Mr. Estey's recommendation would also have seen freight rates fall by approximately $6.6 million per year over the next six years. The report recommends that this reduction be guaranteed through legislation and the setting of this cap.
However, the Liberal government did not like the recommendations that would have softened the wheat board's ironclad hold on western grain farmers so it spent millions more on another study. Once again the government was surprised when its next study person, Mr. Kroeger, upheld Estey's conclusions and recommended that the wheat board's control over the grain handling transportation system be eliminated.
When he appeared before the Standing Committee on Transport, Mr. Kroeger stated “My conclusion was very much along the line of Justice Estey, that unless you went to a more commercial system you couldn't really achieve major improvements”.
Arthur Kroeger gave the federal government a progressive report that if implemented would be a step toward a more efficient commercially accountable system. He proposed a structure for the revenue cap that would ensure producers' freight costs fall. He went one step further and recommended that the initial rate cap be set at 12% below the revenues earned by the railways in 1998.
Implementation of Mr. Kroeger's recommendation for the rate cap meet the major criteria of the official opposition: farmers will benefit from the changes.
When he appeared before the transport committee on February 29, Mr. Kroeger was quick to point out that any reductions to railway revenues must not be excessive. Mr. Kroeger stated “My initial reaction when I wrote the report was be careful, don't overdo it. You cut too deep, it becomes attractive for investment decisions to be shifted to other commodities. Whether people like it or not, rail transportation has to be related to the rest of the economy of Canada, the United States and the world in that it has to operate on a commercial contract basis, and in fact respond to market signals”.
In spite of these two reports, we still have our Minister of Transport dithering. While he does, farmers in western Canada are suffering through one of the worst farm income crises in years. These savings of up to $300 million are not being achieved.
I will quote a couple of our members of parliament from the west, the member for Winnipeg South and certainly the foreign affairs minister, who are drastically fighting every change that is put forward to the cabinet and the Liberal government and hindering our transport minister who has stated publicly in the press that he recognizes the need to move toward a more accountable commercially based system.
In conclusion, I hope our transport minister hears these words, keeps his backbone strong and fights back against the kind of pressure that is against the best interests of farmers in western Canada.