Two major railways are the core of Canada’s supply chain, and any issues quickly cause massive backlogs across the country. “All of the food production in this enormous area the size of Europe is going through essentially a small number of rail lines and through a couple of passes,” said Evan Fraser, director of the Arrell Food Institute at the University of Guelph. “The system buckles. Every couple of years it buckles.”
Transport Minister Omar Alghabra’s national supply chain task force determined that the country needs a Plan B. In a report published in October, the group gave 21 recommendations to help stabilize and unclog the supply chain, including a call for more investment to build “redundancies” and new backup routes for the most vulnerable choke points in trade corridors and border crossings.
The recommendations came with a stark warning: If the government does nothing, Canada’s reputation as a reliable trading partner on the world stage will falter and that would jeopardize our exports, which make up half of Canada’s gross domestic product. “This report is an urgent call,” Louise Yako, the logistics industry veteran who co-chaired the task force, said at a news conference.
However, this isn’t the only problem. Top grain executive, John Heimbecker believes that the talk of spending billions to protect the supply chain against burned bridges, sinkholes and floods doesn’t make sense. Those things aren’t what’s actually causing clogs and congestion, slowing down his grain shipments on their way to international clients, costing his business “enormous” amounts of money in late charges.
Fixing the system, for Heimbecker, isn’t really about money. Sure, the infrastructure could use some investment. “And I have lots of ideas on how we could do that,” he said. “But I think the problem is complete mismanagement by the government. Our supply chain’s biggest problems emanate from ourselves.”
Shippers have been particularly critical of the government for regulatory red tape that causes backlogs, including a rule on the B.C. coast, rarely observed at other international ports, that essentially prevents most grain ships from loading in the rain, which can waste a lot of time in a place as damp as Vancouver.
One of Heimbecker’s main critiques of the government, one that’s mostly absent from the task force’s recommendation, is that it’s been too soft on the two companies that control the rail system: CN and its long-time rival, Canadian Pacific Railway Ltd.
Grain elevators in rural areas are typically served by CN or CP, not both. Alghabra’s task force noted that those relationships between grain shippers and the big railroads aren’t “balanced by normal market forces.” In other words, grain companies are stuck with whichever railway runs through town, with little choice but to accept whatever train service they’re offered.
“You’ve got two railways that act as a virtual monopoly,” Heimbecker said. “When you’re negotiating with monopolies, it’s just, they become very difficult.”
To read the full story, visit the Financial Post website.
Source: Financial Post