Impact of Regulation Deregulation on Intermodal Transportation

Intermodal Transportation

Intermodal transportation in Europe and the United States has experienced tremendous growth and expansion over the years. One of the major factors that have impacted the growth of intermodal transportation is regulation/deregulation of the industry. The regulation and deregulation of intermodal transportation in Europe and the United States started in the late 19th Century at a time when the industry had relatively no competition from other transportation modes. The regulation and deregulation of the industry can be traced back to 1887 when the Interstate Commerce Commission was established as a regulatory board to handle various issues relating to intermodal transportation (Slack, n.d.). Since then, regulation and deregulation has had both positive and negative impacts on the growth and/or continued growth of intermodal transportation in Europe and the United States.
Impact of Regulation/Deregulation on Intermodal Transportation
As previously indicated, the regulation/deregulation of intermodal transportation has had positive and negative impacts on the growth and continued growth of this sector. Given its positive impacts, deregulation is a good example of how policy changes significantly affect the structure and economic health of an industry (Slack, n.d.).
Positive Impacts of Deregulation
One of the positive impacts of deregulation on the growth and continued growth of intermodal transportation is enhancing competition. Deregulation of intermodal transportation has played a crucial role in enhancing competition in pricing and enhancing the competitive of certain transportation sectors. According to the Bureau of Transportation Statistics (n.d.), deregulation of the motor carrier, rail, aviation, and maritime shipping industries in the past few decades has contributed to the emergence of new competitors. The deregulation has also promoted the development of an environment that is characterized by innovative, affordable, and efficient transportation services. This has in turn increased the numbers of passengers and volumes of freight, which enhances the growth of intermodal transportation (Bureau of Transportation Statistics, n.d.). For instance, in the United States, policy changes in transportation and logistics, especially changes in the policy framework of the trucking industry, enhanced the competitiveness of this industry vis-à-vis other modes of transportation. Through deregulation with the 1980 Motor Carrier Act, the trucking industry in the United States experienced the emergence of new trucking companies, which was an indicator of the increased competition in this sector. As new companies emerge and competition intensified, the trucking industry experienced tremendous growth.
Secondly, deregulation contributed to a reduction of operating costs in intermodal transportation, which played a crucial role in the growth and continued growth of the industry. For example, operation costs in railroad transportation were significantly reduced by staff reductions following the deregulation of the industry. The reduction in operating costs in turn enabled railroads to start charging market rates, which enhanced competition that in turn played a crucial role in the industry’s growth.
The third positive impact of deregulation on the growth of intermodal transportation is revitalization of some sectors. The increased competition as a result of deregulation has contributed to revitalization of transportation sectors that were nearly collapsing. For example, the US rail industry was facing an imminent collapse in 1950s, but was revitalized following deregulation. On the contrary, regulation of intermodal ownership and operation contributed to revitalization of the freight business to an extent that intermodal traffic accounted for a significant portion of rail revenues in the US in 2003 (Slack, n.d.).
Negative Impacts
While deregulation has had positive impacts on the continued growth of intermodal transportation, regulation has had negative impacts through affecting the competitive landscape of certain transportation sectors. The near collapse of the US rail industry was attributable to regulations that made this industry to lose its market share by mid-20th Century. In Europe, regulation affected the competitive landscape of intermodal transportation through generating restrictions on quality requirements, market entry restrictions, and working conditions (Henstra et al., 1999). For example, environment-friendly modes of transportation in Europe have lost market shares whereas road transportation has expanded over the past four decades.
Regulation has also negatively affected the growth of intermodal transportation by giving some transportation sectors unfair advantages over others. The regulatory environment is not balanced, which makes it difficult for some transportation sectors to experience tremendous growth in comparison to others. For example, railroad regulation started in the late 19th Century when this sector faced relatively no competition from other transportation modes. However, these regulations had far-reaching impacts and limited the capability of railroads to develop new rail lines, determine prices, and establish services (Association of American Railroads, 2017). This in turn limited the growth of the railroad industry in comparison to other sectors.
In conclusion, one regulation and deregulation have had significant impacts on intermodal transportation through changing the structure and competitiveness of transportation industries. As shown in this discussion, regulation has had negative impacts on the continued growth of intermodal transportation while deregulation had has positive impacts. Regulation has affected growth through changing the competitive landscape while deregulation has contributed to increased competition, reduction of operating costs, and revitalization of transport sectors.
References
Association of American Railroads. (2017, June 4). How Deregulation Saved the Freight Rail Industry. The Washington Post. Retrieved October 10, 2017, from http://www.washingtonpost.com/sf/brand-connect/wp/enterprise/how-deregulation-saved-the-freight-rail-industry/
Bureau of Transportation Statistics. (n.d.). Chapter 2: Growth, Deregulation, and Intermodalism. Retrieved from U.S. Department of Transportation website: https://www.rita.dot.gov/bts/sites/rita.dot.gov.bts/files/publications/the_changing_face_of_transportation/html/chapter_02.html
Henstra et al. (1999, October). Deregulation and Transport in an Enlarged European Union. Retrieved October 10, 2017, from http://www.europarl.europa.eu/stoa/webdav/shared/3_activities/transport/regulatory/europe/ipts_en.pdf
Slack, B. (n.d.). Rail Deregulation in the United States. Retrieved from Hofstra University website: https://people.hofstra.edu/geotrans/eng/ch9en/appl9en/ch9a1en.html