Biden's competition push could hurt Canada
OTTAWA • Industry groups are warning that a recent push by President Joe Biden to stoke more competition in the U.S. market could put Canada at a strategic disadvantage, potentially even hampering Canada’s economic recovery coming out of the pandemic.
Biden on July 9 signed a sweeping executive order aimed at limiting corporate dominance and encouraging more competitive policies across a range of industries, including ocean shipping, health care, transportation and technology.
The order didn’t present a specific mandate, but instead calls on U.S. agencies to adopt policies that would limit corporate consolidation and cleave open the more monopolistic corners of the market.
If successful, observers say the policy could go a long way toward creating a more equitable playing field for small businesses and limiting the powers of big companies, including tech giants Google and Apple.
Similar worries about a lack of competition have persisted in Canada in the agriculture, mining, chemicals and retail sectors, including for small businesses more generally. Of particular concern is Canada’s railway duopoly, shared between Canadian National (CN) and Canadian Pacific (CP).
But the issue spans any number of industries from telecoms to agriculture.
The Liberal government under Prime Minister Justin Trudeau has touted its own economic recovery plan, including tens of billions in spending on clean technology supports and a proposed national child-care program. But industry groups warn that those efforts will ultimately go to waste without a more comprehensive plan to make Canada’s transportation and other industries more competitive.
“In light of Biden’s proclamation, I think it’s time for Canada to have a serious discussion and take a deeper dive in looking at our capabilities, our choices for the business community, and efficiencies,” said Diane Brisebois, president and CEO of the Retail Council of Canada.
Brisebois, who represents some 45,000 storefronts across Canada, says her members have seen shipping prices hiked by as much as 400 per cent during the pandemic, made worse by a global shortage of shipping containers. While those increases are due to temporary pandemic-related gaps in the supply chain, they also point to a deeper structural weakness in the country’s infrastructure network that has caused pressure points on Canadian commerce for decades, she said. Her association and others have been calling on Ottawa to address the issue, saying the latest plans to expand social spending in Canada must be coupled with more meaningful economic reforms.
“You can’t talk about social infrastructure without talking about economic infrastructure,” Brisebois said. “What the U.S. does will have an immediate impact on our economy and the country. So to ignore what’s happening south of the border is to ignore the need for us to be competitive,” she said.
Department officials are deeply familiar with the issue, representatives said, but there has been a lack of political will over the years to push back against the more monopolistic aspects of Canada’s economy.
Canadian agricultural producers have been repeatedly pinched by limited shipping options for rail companies and port authorities to move their product, often suffering backlogs during the harvest months as farmers are forced to compete with oil companies and miners for rail capacity. That has in turn crimped output, and in some cases caused losses not just for shippers but for rail companies, which have been forced to prioritize certain commodities during periods of high demand.
“If the government isn’t even prepared to have that conversation, then I don’t know how this country is going to fare with respect to the post-pandemic recovery,” said Erin Gowriluk, executive director of Grain Growers of Canada. “It’s a conversation that we should have been having months ago in preparation for the recovery, and it’s a conversation the government simply hasn’t been prepared to have.”
Mining companies have also struggled with shipping constraints, particularly for so-called “captive” shippers reliant on a single rail provider. The operations of Vancouver-based mining giant Teck Resources, the single-biggest shipper by rail in Canada, is entirely captive to CP, for example.
“If you are reliant on rail to move your product, the success or failure of your business is largely contingent on the fluidity and reliability of that market access,” said Brendan Marshall, vice-president of economy at the Mining Association of Canada.
Marshall said Canadian governments have for years sought to “break the Da Vinci code” of lacking competition in the transportation sector with little success.
Ottawa passed its Transportation and Modernization Act in 2018, which sought to elevate the powers of captive shippers and ease Canada’s railway constraints.
The Mining Association, along with other industries including chemicals and agriculture, had called on government to introduce more transparent data sharing requirements that would give captive shippers stronger footing in dispute settlements with CN and CP, as well as third-party arbitration as a way to better solve disputes between railways and shippers.
But so far movement on efforts to improve data accessibility has been slow, he said, while other measures, included expanded interswitching on rail lines, has been confined to limited areas of Canada’s rail system, which hasn’t given smaller shippers much of a competitive edge.
Interswitching is a longheld railway practice in which one company will carry goods along a shorter route on behalf of a second company as a way to provide more competitive prices to shippers.
While shippers don’t expect deep reforms that would loosen rail companies’ stranglehold on the market, Marshall said, forcing companies to disclose more data about shipping costs or tracking information for rail cars would give smaller firms a better platform to push back against high prices.
“What we want is the remedies that are available to shippers to actually function. And in our view, robust data disclosure is the most expedient and fair way to do that.”