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10 THE RURAL VOICE
SOLVING THE WESTERN
"CROW RATE" DEBATE
Robert Mercer is editor of the
Broadwater Market Letter, a weekly
commodity and policy advisory letter
from Goodwood, Ontario LOC 1AO.
Why should farm families in Onta-
rio be concerned over how grain and
oilseed producers in Western Canada
pay for their grain freight costs? If the
present system of paying the total
"Crow freight rate benefits" of $720 -
million directly to the railroad chan-
ges, so too will the structure of agri-
culture and the value added industries
built on it. And that will affect Onta-
rio beef, grain and oilseed producers.
Although there are some strong
vested interests in the west who do not
want to see the method of payment
change, the forces of change are heat-
ing up discussions at national, provin-
cial, and local levels. The first major
indication of the potential for change
in the near sacrosanct freight rate for
western grain came with the report of
the committee of inquiry on the Crow
benefit payment in 1985 under Justice
Gordon Hall. Since then, the western
farm press has carried articles, papers,
reports, commissions, and resolutions
on the debate almost weekly.
The recently failed GATT talks
were also crucial to the debate since
the total cost of the Crow freight rate
subsidy is considered part of Canada's
payments to farmers when calculating
national subsidy levels. If changes
were made in the method of payment
it is hoped that the countervailability
of the subsidy would be reduced.
In 1984, the Western Grain Trans-
portation Act (WGTA) was establish-
ed to replace the Crow rates in effect
since 1897. It is believed, especially
in Alberta, that the current freight rate
structure and method of payment dis-
courages expansion, competitiveness
and diversification of western Cana-
da's agriculture and food industries.
In 1984, the western Canadian rail
transportation system was suffering
from the effects of years of neglect.
The old fixed Crow rates, negotiated
in 1897 and fixed into statute in 1926,
eventually made hauling grain a
money losing proposition for the
railways.
Now, under the WGTA, the cost of
shipping grain is divided into a share
paid by the producer and a share paid
by the government. The price the far-
mer receives for his grain is set by the
world market less transportation and
other costs. On average, an Alberta
producer's share of the cost of trans-
porting export grain in 1989/90 was
about $9 per tonne and the govem-
ment's share about $21 per tonne — a
total of about $30 per tonne.
Because the Crow benefit is paid
only on export grains, the price local
grain users must pay for grain is
artificially distorted by amounts which
could equal the government's share of
export grain transportation costs. The
result? Domestic users pay more than
is reflected in world market prices for
their grain.
The only way to ensure all users
are treated equally is to pay the Crow
benefit on all grain and pay it directly
to the producers, or so the argument
goes in the West.
One other group deeply concerned
with the pay -the -producer proposal is
the Canola Crushers of Western Cana-
da. They say in their policy statement
that they want to see the effective eli-
mination of all elements of the WGTA
which discriminate against processing
and shipment of processed canola pro-
ducts in western Canada and a solu-
tion in a manner consistent with new
international trade rules for agriculture
commodities. Payment of the Crow
subsidy to the railways is negative to
crushing on the prairies. A pay -the -
producer or other similar solution
would eliminate this disadvantage.
Finally, if the method of payment
is changed and therefore the costs of
local feed grains are reduced, the eco-
nomics of producing beef in the west,
compared to the east, improves even
further, hurting Ontario producers.0