Why the Tories love Canada Post - Macleans.ca

Why the Tories love Canada Post

Never mind expert advice, Ottawa won’t go after this monopoly

Why the Tories love Canada Post

Photographs by Andrew Tolson

When the Organisation for Economic Co-operation and Development issues a judgment on a country’s economy, governments, businesses and unions often snap to attention. The prestige of the 30-nation, Paris-based club of leading democratic economies is such that its typically pro-competition prescriptions tend to be held up by those who like them as gospel, and denounced by those who don’t as too dangerous to ignore. So when the OECD issued its latest “Going for Growth” report—a yearly compendium of advice for policy-makers in member countries—its provocative call for the Canadian government to sell off the post office seemed bound to ignite another heated round in the on-again, off-again debate over the future of Canada Post.

The OECD couldn’t have been more blunt in calling for decisive change in Canada’s mail business. Under the heading “Reduce barriers to competition in network industries,” the report urged: “Liberalize postal services by eliminating legislated monopoly protections and privatizing Canada Post.” Although that proposal might sound radical, it’s not out of step with international developments. Postal services in Germany and Holland were privatized years ago, and the services in Scandinavian countries and New Zealand opened up to competition. With those examples to guide them, in line with their avowed pro-market bent, the governing Conservatives might have been expected to embrace the OECD recommendation as a chance to advance a smaller-government agenda.

Instead, silence in Ottawa. The OECD’s March 10 report prompted an annoyed response from the Canadian Union of Postal Workers. But from the government and the opposition parties, nothing. And that surprisingly inert reaction suggests the extreme trepidation with which Canadian politicians view the post office. It’s not as if privatization isn’t a live subject: the government plans to sell off the reactor division of Crown-owned Atomic Energy of Canada Ltd., and, in the wake of his budget last month, Finance Minister Jim Flaherty said he expects to announce other privatizations within the next year. Yet the government signalled that Canada Post isn’t going on the auction block. “We’ll continue to ensure that Canada Post remains on a firm financial footing to maintain its universal service,” said an aide to Rob Merrifield, the minister of state responsible for the postal service.

In fact, the Conservative government has proven to be remarkably staunch in its support of Canada Post. Back in the spring of 2008, the Tories appointed an independent advisory panel to study the Crown corporation. But the possibility of selling it wasn’t even allowed on the table. The terms of reference for the panel specified that Canada Post “will not be privatized.” Not only that, the government also stipulated that the service had to remain “universal,” which means high-cost rural service couldn’t be curtailed. As well, rather than pushing Canada Post to behave more like a private company, the government stressed that it must continue to “act as an instrument of public policy.”

The panel was headed by Robert Campbell, president of New Brunswick’s Mount Allison University, and a respected international authority on postal services. “I found it interesting,” Campbell said in an interview, “that a government that’s reasonably oriented to the private sector looked at Canada Post and said, ‘We’re not going to privatize it.’ ” He said that political instinct was borne out by his panel’s research, which uncovered scant popular enthusiasm for eliminating Canada Post’s monopoly on delivering letters. “A lot of it has to do with the fact that ordinary citizens in Canada kind of like their mail being delivered,” Campbell said. Still, he highlighted serious challenges facing Canada Post and urged massive investment in outdated plants and technology.

The government’s main response to his panel’s report so far was last fall’s introduction of a so-called Postal Service Charter. The charter entrenches many elements of Canada Post’s mandate that stand in the way of privatization or even of more limited moves to open it up to competition from private companies. It says Canada Post must maintain “universal service,” and that it must continue to “charge universal postal rates for letters of similar size and weight.” Critics say injecting business-style incentives into the mail market will be hard as long as the post office can’t make the price of a stamp reflect the fact that delivering an envelope from, say, Calgary to Edmonton costs less than shipping one from Port Anson, Nfld., to Port Alberni, B.C.

Given Canadian geography and the policies of successive governments, Campbell argues that Canada Post performs well by world standards. “The service is pretty good for a country with 4½ time zones and a spread-out population,” he said. “The postal prices are very good relative to the world market—you should see what a stamp costs in Germany or Holland.” (In Germany, for instance, posting a regular domestic letter costs 84 cents, compared to 57 cents in Canada.)

The OECD, however, sees an inefficient Canadian postal service as part of a broader pattern of lacklustre performance by Canada’s so-called “network industries,” including telecommunications and electricity. “Canada Post is just an example,” said OECD economist Yvan Guillemette, “of a network industry where some progress has been done in other countries, like New Zealand, Germany and the Netherlands, where they have introduced competition and Canada hasn’t.”

Why the Tories love Canada PostIt was Guillemette who wrote the recommendation to privatize Canada Post into the “Going for Growth” report. He’s a Canadian who happened to be working for the C.D. Howe Institute, the prominent business-oriented think tank in Toronto, back in 2007, when it released a report called “Rerouting the Mail: Why Canada Post is Due for Reform.” And it was that report’s call for selling off the postal service that Guillemette imported unaltered into the OECD’s competitiveness blueprint for Canada. “Here at the OECD,” he told Maclean’s, “we haven’t done a study of the postal sector or Canada Post.”

Still, by having the OECD echo from Paris the case that impressed him back in Toronto, Guillemette at least revived the perspective of critics who see tackling mail delivery as a pressing economic challenge, rather than a political risk. Prominent among them is University of Toronto professor of law and economics Michael Trebilcock, one of the co-authors of the original C.D. Howe Institute study. Trebilcock now views outright privatization as so politically unpalatable that he urges a shift in focus to more gradually opening up Canada Post to competition. The main issue is the so-called “exclusive privilege.” It’s the means by which Canada Post is given a monopoly on delivering letters—in essence, it’s a law that says anyone else who wants to deliver a letter must charge at least three times the cost of a stamp.

The stumbling block for ending that monopoly has always been the expectation that private companies would cream off the post office’s profitable urban business, leaving far-flung rural addresses to be served at a loss by the Crown corporation. The Conservatives in particular, with their heavy concentration of rural seats in the House, are sensitive to any proposal that might lead to service cuts or price hikes beyond cities and suburbs. But Trebilcock contends that doing away with the current murky cross-subsidy—effectively overcharging for urban delivery to keep hinterland service cheap—would be a major improvement. Ottawa would have to openly subsidize rural postal delivery. “Transparency would be a virtue,” Trebilcock said.


Why the Tories love Canada Post

  1. Whenever you see total consensus amongst all political parties for a given policy, be suspicious. This sounds remarkably similar to the ridiculous subsidies that continue for dairy farmers. The government knows full well that supply management is a throwback to failed Soviet-style economic policy, but are too frightened by the dairy farmers' political muscle to act. Of course, lower income Canadians, who pay a disproportionate share of their income for basic groceries, pay the price for this policy, which is supported by all parties in the House.

  2. I don't get what the big win is for the countries that privatized. Short-term balance sheet improvement, pay off debt .. but now the taxpayer pays more for stamps. What is the argument for privatization? Let's see some concrete numbers.

  3. There's no reason to sell off Canada Post….It has been turning a profit EVERY year since 1989, and millions have gone back to the government….
    Go look to the USPS for aan example of a complete basket case money losing bankrupt company…go experiment down there…

  4. Unless I'm mistaken, Canada Post is doing a good job as a public corp.

    "In Germany…84 cents, compared to 57 in Canada."

    Cheaper definitely sounds better…especially if it goes further!

    "…lacklustre performance by Canada's so-called “network industries,” including telecommunications and electricity."

    Why pick on an industry (postal) that is working well vs. other countries and not focus on industries that are doing poorly – i.e. Telecommunications – which have already entered the private domain.

    • Well it's the monopoly held up by the public board that holds back telecommunications arguably.

      That said, i really see no reason why having competing mail services would be a good thing – it's a declining method of communication for the general public. There's already competition in courier services to compete for business needs of getting things there faster. Privatising the general mail service feels to me like introducing competition into a field with not enough demand to sustain it turning a profitable crown corporation into a money-losing venture to provide service to areas others won't.

  5. Canada Post should be privatized but heavily regulated with stiff penalties for failure. Put it for sale under these circumstances and see what happens. If the a deal cannot be made that would see the canadian taxpayer relieved of debt while still maintaining a healthy service why would we not?, or the government could relax rules…perhaps mail delivery every second day? Communal postal boxes instaed of door to door delivery.
    These are currently against the law…why?

    • I guess if you feel like walking up to a kilometer or so just to get your mail and if if you get your mail at all from a private company that pays min. wage do you really think that they would care if they deliver your mail or not as long as they cash in on the original sent mail. canada post work great look at the usa big problems door to door is our right don't let them take that away like everything else

  6. Since 1989 Canada Post HAS been making a profit and paying the federal coffers a yearly dividend of 200-400 MILLION dollars. The days of GOV'T subsidies is history ! ! It is now a CASH COW for gov't. Mechanization has reduced manpower costs substantially. Parcel and Priority delivery costs have increased radically to compete with private companies—UPS-FEDEX-etc. No need to privatize now.

  7. I know the private sector is supposed to deliver business service better, but man oh man does UPS suck. I don't want them going neat my mail.

  8. uh, 'near.' Time to sign up for that intensedebate account I guess…

  9. Who sends letters by mail nowadays? The only stuff Canada Post delivers to me is junk mail and I can do without that entirely.

    • If the junk mail bothers you so much why don't you just put a sign on your mailbox saying that you don't want to receive junk mail. If it bothered you that much you probably would have already figured it out.

      • you are so right. it is because he receives no mail probably because no one likes him

  10. It seems that certain think tanks and others really do not like seeing any Crown Corp. to succeed. Canada Post delivers to every corner of the country at a margin that is razor thin and if it was privatized then the customers would likely be pirotized as for profit mentality would state that it needed more of a margin and that would come from the pockets of everyone who could not use it as a tax deduction. Bravo for the Gov't of Canada no matter who is in charge as I think that all those in Parliament know that the Canadian way is to be fair for all so both rural and urban should have equal access to our postal system.

    • Well said…

  11. The mail operation produces very little profit. 80% of the revenue, but only 40% of the EBT. Purolator – a separate and independently run business – is where most of the profit comes from.

  12. Not a very well researched article.

    CPC has exclusive privelege on lettermail, pubmail, admail, unaddresses (apt's only). volumes are flat and decreasing on a regular and exponential basis. When was the last time you received your monthly bank statement by mail!

    Most of their other products have private sector competitors, including parcel and usa/international mail. Some magazines that used to be delivered through CPC are now included in daily newspaper home delivery and more might follow with the elimination of the PAP subsidy.

    The private sector probably wouldn't want the light mail anyway!

    The real problem facing cpc though is electronic distribution, managment won't admit it and the union is oblivous to the debilitating affects of electronic distribution. Privatizing won't 'fix' the reality of declining mail and in this context who in the private sector would want to through money on a sunset industry.

    • You're correct when you focus on electronic distribution as the real problem , and it became exponentially worse in the last business year. Instead of the 2% decrease in letter mail every year, it exploded to to the 9% percent range this year. Soon Canada Post will be dealing with generations who know nothing other than sending mail electronically, and an already poor business model will have to stop. How CUPW makes this worse? Their union leadership is all old-timers, guys who have tasted victory at the negotiating table every single time because governments have thrown money at the problem in return for labour peace. The difference now is relevance. Does a mail strike hold a country hostage in 2010? Of course not. Large volume mailers like banks and utility companies will send out notices in advance, even giving incentives for customers to switch to on-line billing, further eroding the letter mail numbers a strike ends. All private companies want from Canada Post is a piece of their parcel business, so what happens to mail when nobody born after a certain date has any emotional attachment to it?

      And the "junk mail" somebody mentioned? This is already at least 33% of the companies revenue, but hit a brick wall in growth in the last business year. Recessions will do that. What Canada Post can do is assure you hold it in your hand, at least making you handle it before you throw it away because of the access to locked boxes. Other delivery companies have to "lobby" it, dropping a pile on the floor and hope you care enough to pick it up. But can you really imagine a day this doesn't become electronic too? Think in terms of "smart" homes, new housing and condo developments all wired so communication only comes electronically. Like a kitchen appliance, a screen controlled by using your fingers, and companies pay to run their ads in your kitchen. Can't conceive this in your head? Then you haven't been paying attention in the last 15 years.

      What is Canada Post if not a communications company at its core? Now take a look at what other communication companies do. Mail delivery is a romantic notion but, again, you're facing generations who have no connection to it. And planning is surviving.

  13. Well then: Why did the government insert a sneaky amendment into the Budget Implementation Bill on March 29 that would remove Canada Post's exclusive priviledge for international mailing?

    A step towards deregulation maybe? Maybe privatization? Because the EU wants them to?

    • the bill only reinforces the reality. All large volume mailers truck their mail to a usps boarder station to directly inject their mail and obtain the cheaper rate. For international mail they use re-mailers for the same affect. This has been going on for decades and cpc tried to stop through the legal system. Nothwithstanding their efforts cpc has no way to enforce this measure. the estimated dollar value is in the millions but chump change for a multi billion dollar corp like cpc.

  14. I am very angry with Canada Post's parcel delivery in Hamilton. I had no problem in Mississauga, but since I moved to Hamilton, as a 78 yr old senior, I'm forced to walk "less than a kilometer", that is 0.9 kilometers (as the crow flies?) to pick up my parcels. It always seems they mark the notice "No answer". I received a notice in today's mail again and I WAS home all day yesterday, and I was NOT on the phone, even once. What goes on here? I have phoned Canada Post and they tell me parcel delivery is from a Stoney Creek location.
    I live alone here and I do a lot of shopping on the Internet (books, dvds, music). Even if I was on the phone, if the phone is busy, obviously someone is home!
    Even to take a bus to get to the Jamesville Post Office requires me to walk 4 or 5 blocks to the bus stop, even though I live right downtown.
    Canada Post tells me they cannot drop parcel off at the post office at Jackson Square because that is a franchise?? So is the one at Shoppers Drug Mart in Jamesville.
    They cannot re-delivery under any circumstances. This is one of the only postal services I use as my communication is all Internet based; much easier for a senior.

    • this week I picked up a parcel that was sent to a sub.I tried to deliver it on monday for the second time but
      no answer i put it on hold for tomorrow so I can re atempt delivery on tuesday which was a success all because my supervisor asked me too and because this person I was trying to get the parcel to was a handicap I didn't have do this but I wanted too. oh ya by the way i'm a mailman.

      • My complaint had to do with Hamilton service only. I had no problem in Port Credit. When I picked up parcels, Iwas given a phone no. to call; the lady said there were a lot of problems with Hamilton apts. because the delivery person did not want to take the elevator. Once I had confirmed that, in fact, I had been home I took action by writing to the MP for this region. Speaking to the postal depots, etc. Now they deliver! I'd be happy to go down and pick it up, if they rang. If I am not home, I can appreciate that. The location for parcel pickup has been moved to where I can get a bus if necessary.