Things your chamber of commerce, electorate need to know
February 1, 2001
Opponents of the trucking industry, particularly the railway lobby, are taking their brand of reality to local chambers of commerce, boards of trade and municipal politicians.Their version of reality ...
Opponents of the trucking industry, particularly the railway lobby, are taking their brand of reality to local chambers of commerce, boards of trade and municipal politicians.
Their version of reality is that railways are the safest and most environmentally-friendly mode of transport while also being the most over-regulated, over-taxed industry on the face of the planet. Especially, or so they claim, when compared to trucks.
And, they argue, if it weren’t for public policy that supposedly favors trucking, then the railways would reclaim their apparently inalienable right to dominate the freight marketplace – and all would be right with the world. An alarming number of people continue to be hoodwinked by this self-serving tripe. It is imperative that the trucking industry look after its own backyard and that some balance is restored to the debate.
A common, yet fundamental, misunderstanding of the Canadian freight marketplace is at the root of our problem – a misunderstanding that is obviously in the railways’ interest to sustain. Trucks and trains are not – as a casual observer might believe – interchangeable parts. Trucking and railway provide two distinct services and have very different ways of looking at reoccurring issues.
Conservation and Congestion
Railway view: Railways conserve fuel, have less environmental impact and reduce highway congestion.
Reality: Railways rely on one measurement of fuel efficiency: tonne-kilometres. Since they specialize in heavy bulk commodities shipped long distances, that particular measure provides a bias in their favor. Measures based on value of freight would be more supportive of trucking. Conclusion: these modal comparisons are meaningless. Plus there are very few, if any, rail lines leading to your cornerstore, local gas station, or drug store. Only trucks can go door-to-door.
Railway view: Its impact on Canada’s economy is significant, with 47,000 railway jobs.
Reality: Those numbers are significant, but, when it comes to employment, the commercial trucking industry employs more Canadians: a total of about 400,000. The 1996 census found that the leading occupation for males is as truck driver – over 225,000 listed it as their primary occupation.
Railway view: They are taxed more heavily than other industries.
Reality: The most-cited source of this information was a study conducted in the late 1980’s that is now severely out of date. Regardless, both trucking and rail are extremely highly taxed, compared to the goods-producing sectors. The major reason is that the transportation modes do not receive the same tax preferences as other industrial sectors. And, most importantly, virtually all business inputs in freight transportation are subject to tax, whereas manufacturers, agri-producers and others purchase their inputs tax-free. A typical tandem-tandem semi-trailer pays about $40,000 a year in provincial/federal taxes. As for fuel taxation, the railways may enjoy yet another advantage. For example, in Ontario, the provincial diesel fuel-tax rate for trucks is 14.3 cents per litre, while for rail diesel the rate is 4.5 cents per litre. This may not be the case in all provinces, but the railways usually do not mention this.
Capital Cost Allowances
Railway view: Capital cost allowances (CCA) favor trucking, shipping and U.S. railroads compared with Canadian railways’ capital allowances.
Reality: It is not valid to compare CCA rates between locomotives and truck tractors. The economic life of the equipment is very different; a locomotive runs for 30 years or more, whereas a tractor’s life is half that. Even so, the CCA rates for their equipment were accelerated in the 2000 federal budget, whereas the rates for trucks stayed the same. The real issue is the difference between Canadian and U.S. CCA rates for both modes. U.S. carriers get a significant competitive advantage under their rules.
Railway view: They fund their infrastructure; highway infrastructure is funded with tax dollars, which lets trucking companies underprice their service.
Finally, the nub of the issue.
Reality: Do the railways really want our freight? Could they handle it? Truck rates establish the price ceiling for many shipments. While the railways simply can’t do a lot of what trucks can, history has shown that if asked to, trucks can usually do what the railways can’t or won’t. They argue that truckers under-price their service, the logic being that if truck costs could be forced up – either through taxes, fees, regulation or policy – then eventually truck rates would climb. This, in turn, would let the railways raise their rates, generating a greater return on investment for their shareholders. Ultimately, shippers would pay more.
Canadians should be happy that after a century of public handouts, the railways are finally beginning to pay for their infrastructure. Nevertheless, rail still received $29.5 million in federal subsidies, grants, contributions, and another $7.2 million in grade-crossing subsidies, says a 1998 Transport Canada report. Federal subsidies to the trucking industry were nil. (Small amounts are transferred to the provinces for implementation of the National Safety Code).
No evidence suggests Canadian truckers are not funding their fair share of highway infrastructure. Indeed, the provinces and the federal government combined are taking in billions more in road-related taxes than they’re putting into infrastructure.n
– David Bradley is president of the Ontario Trucking Association and chief executive officer of the Canadian Trucking Alliance.