Canadian National Railway Hypocritical about Competition from the U.S.
It’s mind-boggling lately to listen to Montreal-based Canadian National Railway CEO Claude Mongeau ranting and raving about the proposed new Fair Rail for Grain Farmers Act. This is the legislation introduced last week by the federal government to level the playing field between Canada’s 2 rail giants, CN and CP, and Canadian grain farmers whose crops have been piling up at grain elevators because CN and CP have been making more money hauling crude oil, other petroleum products and other dangerous goods.
One of the many elements of the new legislation that upsets Mongeau has to do with extending interswitching limits. Under current legislation, a shipper who is served by only one railway is entitled to transfer its shipments to another railway at a regulated rate if the shipper’s facility is located within a 30-kilometre radius of where the 2 railways connect. The new legislation would extend that limit to 160 kilometres in an effort to increase competition and give shippers access to additional services from other rail companies. Mongeau has said, “This action could hit Canada’s railways by opening their business to unfair poaching by U.S. railways without any reciprocity. Besides causing financial harm to CN, it could drain traffic away from Canadian ports.” (Calgary Herald)
Wait a minute…is this really what the head of CN said? Isn’t CN characterized by the private sector and stock analysts as one of the shining examples of that good old private sector mantra that the “private sector always does it better than the public sector”? And isn’t “competition is good for the marketplace” part of that mantra? After all, it’s competition that helps ensure customers aren’t held hostage by private sector monopolies. For Mongeau to demonize competition from U.S. railways as “poaching”, appears hypocritical. And besides, why shouldn’t U.S.-based Burlington Northern Santa Fe Railway (BNSF) have an opportunity to offer a competitive (and perhaps superior) service to some Canadian grain farmers and shippers, especially if that means Canadian grain makes it to market faster and grain farmers get a better price (Edmonton Journal)? Canadian National Railway certainly has done its fair share of moving into the U.S. rail market, including buying out or taking over Illinois Central Corporation; Wisconsin Central; Great Lakes Transportation LLC; and Elgin, Joliet & Eastern Railway. “What’s good for the goose is good for the gander”, isn’t it? It should be noted that many Americans are upset about these takeovers by CN because they claim that CN is not as good a corporate neighbour as the companies they took over.
To further add to the discussion and in case readers have forgotten, Canadian National Railway isn’t as Canadian as one might think. After Canadians spent billions of dollars (in taxes) building the public Canadian National Railway into the largest railway that successfully serviced shippers and passengers across our country, the federal Liberals sold CN Rail to American investors in 1995 for a paltry sum of about $2.2 billion. U.S. financial experts saw this sell off as “The Mother of All Deals” and a huge windfall for the private sector. It was characterized as a “gift” to foreign investors. What do you think now about Mongeau’s rants about that nasty U.S. rail industry potentially “poaching” business in Canada? (See this link for more information on the 1995 privatization of CN.)