Spatial competition and regulatory change in the grain handling and transportation system in western Canada

The grain handling and transportation system (GHTS) has been a defining component of the western Canadian economy since the early part of the last century. Only two major railways serve the grain handling industry, so the potential for the exercise of market power in transportation appears to be significant. In fact, spatially oriented regulations applicable to railways exist in Canada to mitigate this, but to date they have not often been used by shippers. While the reasons for this are not completely clear, we suggest that the regulations are now inadequate for the current state of the GHTS. Using a unique data set from the year 2000, we assess the effect on the grain handling industry of modifications to these regulations, and find that significant gains for shippers from these modifications are possible. These gains are computed to be on the order of C$10–15 million per year for grain shippers alone.