OTTAWA, Ont.– Foreigners should be allowed to own a greater portion of Canada’s airlines and a revenue cap on railways’ grain shipments should be eliminated, according to a sweeping review of Canada’s transportation industry tabled in Parliament Thursday.
Led by David Emerson, the 283-page review proposes a comprehensive reform of the Canada Transportation Act, which governs the country’s railways, roads, airlines and marine transport.
Transport Minister Marc Garneau said he “will carefully consider” the report’s findings and will begin consultations with stakeholders in the coming weeks, reported the Financial Post.
The most notable recommendations address concerns that have been raised by private transportation companies and, if adopted, could affect Canadian travellers, shippers and farmers.
Key recommendations in the Canada Transportation Act review include the following.
In the airline sector, the review recommends that Ottawa increase foreign ownership limits for commercial airlines to 49 per cent from their current level of 25 per cent to help foster more competition.
“Small, privately held carriers, prospective start-ups, industry analysts, and others report that the 25-per-cent foreign ownership limit is a barrier to entry: in contrast to larger markets like the U.S., there may not be enough capital in Canada to finance 75 per cent of a new national carrier,” the report says.
Emerson’s review also addresses the movement of grain by rail, a topic that has generated significant controversy in recent years. A record harvest in 2013, combined with a nasty winter, resulted in a huge backlog of grain as the railways struggled to keep up. This led to government-mandated minimum quotas and fines against Canadian Pacific Railway Ltd. and Canadian National Railway Co.
The railways have also argued that the existing grain revenue cap, which determines the maximum amount they can earn each year from hauling grain no matter how big the harvest, discourages capital investment.
Emerson proposes phasing out the grain revenue cap — known as the maximum revenue entitlement program — within seven years, and “modernizing” it in the meantime.
Created in 2000, the cap “was assumed to be short-term,” the review says.
“However, the maximum revenue entitlement program remains in place today — this despite the fact that the grain sector has changed considerably since its introduction and a number of issues, both technical and policy-related, have arisen since.”
The Western Canadian Wheat Growers Association said the recommendation raises “red flags,” and argued “some form of rate regulation … will likely still be necessary in seven years, given the lack of competition among railways and the lack of alternative market channels for large segments of the Prairie farm economy.”
CP and CN both declined to comment until they had finished reviewing the report, said FP.
The report also recommends encouraging private investment in Canada’s marine portsby soliciting proposals from institutional and private-equity investors, expanding rules for transporting dangerous goods by railto require shippers of goods like chlorine and ammonia to pay levies and carry extra insurance, separating freight and passenger rail networks through collaboration with provincial and municipal governments, and developing a long-term transportation infrastructure plan with a continuously updated list of high-priority infrastructure needs over the next 20 to 30 years.