For Your Information
The Liberals and the Elimination of the Crow Subsidies
The Crow Rate was born in the dying days of the 19th century, a compromise between the Canadian government, prairie farmers and the railway companies. Prairie farmers faced a challenge that was unique to Canada - the vast distances that grain had to travel from the farms where it was produced to the seaports where it could be shipped. Export was a must, as the Canadian domestic market has never been large enough to absorb more than a third of grain produced on the prairies.
In the 1880s, CP Rail needed financing to help construct a rail link through the Crowsnest Pass into south eastern British Columbia. The federal government stepped in, giving CP Rail the equivalent in today's terms of billions of dollars in funding. In return, CP Rail was to guarantee low freight rates for prairie farmers "in perpetuity" - the Crow Rate.
"In perpetuity" lasted until the late 1970s, when the railways complained to the federal government that they were losing millions of dollars in potential revenues by subsidizing freight rates to Western farmers. In 1983, the federal government passed the Western Grain Transportation Act, which ended the Crow Rate but initiated the Crow Benefit, under which the federal government subsidized the railways directly by $656 million a year to maintain low grain freight rates.
However, the railways continued to lobby the federal government for the elimination of any subsidies, because the conditions imposed on them by the Crow Benefit prevented them from maximizing their profits. In the 1980s, the railways were joined in their lobbying efforts by the burgeoning cattle industry, strongest in Alberta, which argued that lower freight rates distorted the market and drove up domestic feed prices. The Mulroney government made a few cautious moves towards eliminating the Crow, but these met by widespread opposition at a time when hanging on to their seats in Western Canada was a political necessity.
It was the Chretien Liberals who finally put an end to the Crow subsidies. The February 1995 budget eliminated the Crow Benefit and instead gave western grain producers a one-time payout of $1.6 billion and a six-year transition fund of $300 million.
The agriculture minister of the day, Ralph Goodale, said ending the Crow would help diversify prairie agriculture, boost the value-added sectors and bring Canada into compliance with international trade obligations. He failed to mention that it would result in soaring transportation costs for western Canadian farmers while the railways posted record profits. Moving grain to port for export is now a cost borne entirely by the farmer, and on average is about 25 per cent of the total cost of the farm operation.Meanwhile, the many advantages that were supposed to accompany the elimination of the Crow have failed to materialize, unless by diversifying prairie agriculture, Goodale was specifically referring to the demise of the family farm and the growth of massive factory farm operations throughout the west. In the seven years since the Crow's elimination, farm incomes have declined sharply and another 15,000 small western Canadian farms have gone under. Ironically, while the federal Liberals have been steadily reducing farm subsidies in response to trade challenges from the United States, the Americans and Europeans have sharply increased subsidies to their farmers.