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A ‘farmers first’ policy doesn’t bode well for Canada’s economy

What’s fair for grain farmers is by implication less fair for every other business that uses the rails to move goods

Jim Young/Reuters

Everyone likes farmers.

Politicians, in particular, like happy farmers.

In their eagerness to please, Conservatives and Liberals alike are trying to out-farm one another in the final push to pass Bill C-30, federal legislation that would force railways to haul more grain and tilt the balance of shipping power toward farmers.

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In a country with limited rail capacity and competing demands from shippers, it doesn't take a PhD in logistics to figure out the consequences of the Fair Rail for Grain Farmers Act.

What's fair for grain farmers is by implication less fair for every other business that uses the rails to move goods, including autos, steel, coal, lumber, oil and fertilizer.

The damage is already being felt. Some shippers complain privately that an emergency government order in March forcing railways to ship more grain or face steep fines is already displacing other commodities. Everyone is fighting to get their products to market, as quickly as possible.

"A lot of shippers have been having issues," acknowledged Pierre Gratton, president and chief executive officer of the Mining Association of Canada. "Basically, we're all concerned [about C-30]."

None of this would be a problem if 2013 had not produced Canada's biggest grain harvest in a century. The bumper crop was followed by one of the harshest winters in decades.

Unexpected weather produced some perfectly foreseeable consequences. There were bottlenecks throughout the transportation network – from fields and grain elevators to ice-bound ports and frozen rail equipment. At one point, as much as 30 million tonnes of grain were stuck in grain bins, fields or elevators.

Rather than get all the key players together to find a sensible way out of this once-in-a-lifetime mess, the federal government quickly picked sides with legislation that would have repercussions for years.

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This is policy by Prairie populism, pandering to a powerful voting bloc in a part of the country where hatred of the railways is historic and deeply felt.

Hunter Harrison, Canadian Pacific Railway's colourful boss, has complained that C-30 has "political syrup all over it."

It's worth noting that Agriculture Minister and Bill C-30 champion Gerry Ritz is a farmer. Born on a farm near Rosetown, Sask., Mr. Ritz proudly boasts on his website that he believes in putting "farmers first."

That may be a popular thing for a Saskatchewan MP to say. But "farmers first" is a dubious mantra for a national economic policy. Canada is already suffering badly from a deteriorating competitive trade position in the world, including a dwindling share of global exports. The last thing the economy needs is another impediment to trade.

Grains and oilseeds are important to the Canadian economy. But in the larger scheme of things, agriculture is dwarfed by the combined economic clout of all the other products that railways haul.

Bill C-30 may be well intentioned. Many farmers are stuck with last year's unsold crop, leaving them short of cash to plant for this year.

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Ottawa had other options. It could have offered farmers one-time compensation for spoiled crops, rather than punish railways and shippers. That, at least, wouldn't hurt other industries or impede the ability of railways to move goods efficiently.

Ottawa could also have simply let the market fix the problem. When there is excess demand and short supply of rail capacity, freight rates will naturally go up. That may not be popular with shippers. But it would give the railways more revenue to make badly needed investments, helping to resolve capacity constraints.

For some reason, even Conservative governments can't seem to stick to free market principles when it comes to farmers. With C-30, Ottawa is telling private-sector companies how to run their businesses, harkening back to the days of the "Crow rate" and government grain-shipping subsidies. Bill C-30 sets minimum grain-shipment levels, forces railways to transfer traffic to lines up to 160 kilometres away at regulated rates and allows farms to tap federally ordered reimbursements if their products don't move.

The bill is expected to clear the Senate by the end of the month. Prairie farmers will cheer.

There should be little cause for celebration elsewhere in the country.

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About the Author
National Business Correspondent

Barrie McKenna is correspondent and columnist in The Globe and Mail's Ottawa bureau. From 1997 until 2010, he covered Washington from The Globe's bureau in the U.S. capital. During his U.S. posting, he traveled widely, filing stories from more than 30 states. Mr. McKenna has also been a frequent visitor to Japan and South Korea on reporting assignments. More

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