Canadian National Says STB's Rail Merger Rules Must be Consistent With NAFTA.

Business Editors

MONTREAL--(BUSINESS WIRE)--Nov. 17, 2000

Canadian National (TSE:CNR.) (NYSE:CNI) today urged the United States Surface Transportation Board (STB) to ensure its proposed rail merger rules are consistent with the North American Free Trade Agreement (NAFTA) and do not arbitrarily discriminate against foreign railroads proposing transnational mergers.

CN also said in its STB filing that the agency should drop proposed rules that would substitute unnecessary regulation for market-driven decisions, and that would greatly increase regulatory risk and uncertainty for merger proponents. Moreover, CN said applicants in major mergers should be able to obtain a Board decision on their merger within a year of filing their notice of intent to combine.

CN agrees the bar should be raised for future rail mergers, based on clear, objective and stringent standards that focus on a transaction's direct effects on competition, efficiency and service. CN said it supports STB rule proposals that would require merger applications to have service assurance and safety integration plans and evidence showing how operational changes would translate into shipper benefits.

"The raised bar must be clearly in sight and no higher than necessary, and it must be the same for everyone," CN said.

"The merger rules should... avoid unnecessary or open-ended regulation; continue to facilitate private initiative; further the public interest in trade and investment flows as envisaged by Congress when it approved NAFTA; and avoid advantaging one group of railroads over another."

CN said NAFTA requires the U.S., Canada and Mexico to accord each other's investors "treatment no less favorable" than they accord, in like circumstances, their own investors with respect to transactions, including acquisitions. Thus, CN said, the STB should not apply different merger standards to Mexican or Canadian railroads proposing transnational mergers than it would apply to domestic U.S. railroad merger partners. Safety, private-sector control, ownership restrictions and U.S. defence needs are issues that should be examined on a case-by-case basis, with the same standards applicable to all North American railroads.

CN emphasized that Congress, in signing NAFTA, committed the U.S. to the full liberalization of the North American railroad industry.

A copy of CN's STB submission is available on the company's Web site, www.cn.ca.

Canadian National Railway Company spans Canada and mid-America, from the Atlantic and Pacific oceans to the Gulf of Mexico, serving the ports of Vancouver, Prince Rupert, B.C., Montreal, Halifax, New Orleans, and Mobile, Ala., and the key cities of Toronto, Buffalo, Chicago, Detroit, Memphis, St. Louis, and Jackson, Miss., with connections to all points in North America.