Three dozen free market-oriented think-tankers and scholars sent a letter to the Surface Transportation Board on Feb. 9 protesting the agency’s proposed “reciprocal switching rule” for freight rail. The rule would force railroads to open up access to their privately maintained networks to competitors.
“We believe that the proposed regulations will significantly harm the ability of the nation’s freight railroads to continue their strong records of performance and investment since the passage of the Staggers Act in 1980,” the letter said.
Signers of the letter include folks from the Competitive Enterprise Institute, the National Taxpayers Union, Heritage Action, and other advocacy organizations and state think tanks.
The letter raises both principled and practical objections to the rule that the STB is mulling, though the two blend together.
“We consider reciprocal switching to be forced access,” the signers said. “Forced access will needlessly complicate an exchange that is already determined by market negotiation. Railroads’ property rights will be overridden to enforce a regime of below-market rates, which will lead to less investment by railroads, diminished competitive advantage against other modes of transportation, and in the end higher prices for consumers.”
More urgently, they said it is “questionable of the Board to bring up this matter again at a time when the nation’s supply chains are under considerable strain.”
Ted Greener, a spokesman for the Association of American Railroads, which opposes the rule, was happy to see the letter.
“It is encouraging to see so many respected economic and policy minds speak out in opposition to this misguided policy under consideration at the U.S. STB,” he told the Washington Examiner. “The signers are right that forced switching is at odds with broader goals to improve the supply chain.”
Greener added that the “freight rail industry will provide substantive comments to the agency in advance of the March 15-16 hearing, which we hope will make clear why the STB should abandon the proposed regulation.”
The board is pursuing the rule at the urging of President Joe Biden and Chairman Martin Oberman.
Last July, Biden signed a sweeping executive order on competition, calling on the STB to consider the reciprocal switching rule change. Oberman both asserted the board’s “independence” under the law while also “welcom[ing] the nationwide policy contained in this new Executive Order.”
The trade publication Railway Age published an analysis by railway economist Jim Blaze that said a “reciprocal switching” or “forced switching” rule would “in some places … work as a public benefit. But in most locations, it could be very complex and time-consuming.”
Rail policy scholars consulted by the Washington Examiner were likewise not wild about the proposed rule.
“The letter is absolutely correct that no evidence of anti-competitive conduct has materialized since the board last acted on this rule-making several years ago,” said Marc Scribner, a transportation policy analyst at the Reason Foundation.
“It is especially odd for the STB to be pursuing re-regulation that is likely to add multiday switching complications at a time when logistics networks are dealing with unprecedented congestion as part of the broader supply chain crisis. It would be astoundingly reckless to impose new mandates that will needlessly increase delays in this environment,” he added.
Brookings Institution economist Clifford Winston was also skeptical.
“The Biden administration continues to erroneously fight the last battle in transportation and fails to have a vision for the future transportation system,” he told the Washington Examiner.
Winston elaborated on that point by painting a larger picture of competition.
“The Investment Act makes no mention of congestion and pavement-wear pricing and preparing the highways for autonomous trucking and rail,” he said. “At the same time, billions are allocated for electric vehicle charging stations when government should let the private sector construct and operate those stations as consumers adopt EVs. Hence, it is no surprise that the administration’s Surface Transportation Board continues its misguided fixation with reciprocal switching to allegedly increase rail competition when competition in the form of autonomous trucks could potentially threaten freight rail’s financial viability.”
He asked, “Do unintended consequences ring a bell? What happens when a company is told how it must compete with other firms?”
