Cheap truckin': the deregulation of intrastate trucking will save shippers - and consumers - a bundle

National Review, Nov 7, 1994 by Jonathan Marshall

CONGRESS is deadlocked on health care and stymied over telecommunications reform; it was barely able even to pass new crime legislation this year. Yet, unheralded in news reports, it managed in the doldrums of August to pass one of the most significant pieces of national economic legislation in more than a decade: the total deregulation of trucking within all 50 states.

January 1 will be the start of a happy new year for American consumers. On that date, state and local agencies will be barred from further regulating the "prices, routes, or services" of motor carriers, except movers of household goods. (States will still police truck safety and insurance.) Most federal regulation of interstate trucking ended in 1980, but until now 41 states have continued to limit the business freedom of trucking firms that haul goods within their borders.

"The savings could be staggering," says Cassandra Moore, an adjunct scholar with the Competitive Enterprise Institute in Washington. Estimates by economists suggest that consumers and shippers could quickly be sharing a bounty of $6 billion to $8 billion a year from lower freight charges as truckers are forced to compete. Additional savings of twice that sum could arise from more flexible management of business inventories made possible by more efficient transportation services.

Freed from artificial constraints on the rates they can charge, the routes they can serve, the goods they can haul, and the markets they can enter, carriers will finally be allowed to serve their customers without fear of sanction by meddlesome regulators. "The industry has operated with regulation for over 60 years, and now it's a completely new playing field," says Dave Titus, a spokesman for the California Trucking Association.

State regulators unhappily agree. "This will bring about revolutionary changes in all of the states," says William Schulte, head of the transportation division at the California Public Utilities Commission, which stands to lose a big chunk of its budget.

This must be one of the least publicized revolutions in history, however. It passed Congress with nary a mention from the New York Times, the Washington Post, or broadcast network news. It was a revolution planned mostly behind closed doors--it was drafted at the last minute by a House--Senate conference and buried in a giant airport-spending bill.

To be sure, the idea wasn't new. For several years, a 200-member coalition of trucking firms, shippers, and consumer groups known as Americans for Safe and Competitive Trucking has fought to extend the benefits of trucking deregulation to the states. It noted that shippers had to pay more to send a load 15 miles from San Francisco to Oakland, a regulated state route, than 200 miles from San Francisco to Reno, a deregulated interestate route, and that it was cheaper for Federal Express to fly packages traveling within Indiana all the way to its Memphis hub and back.

While some carriers thrived on rules and regulations that protected them from price competition, others of a more entrepreneurial bent resented the loss of potential business. And nearly all chafed at state requirements that they file reams of paperwork with public-utilities commissions to document tariffs, contracts, and other business relationships. National firms had to keep track of 50 different ways of doing their business.

Edge of the Wedge

THE FIRST big break came in 1991, when Federal Express won a court case freeing it from state regulation in several Western states on the grounds that it was an intermodal carrier relying extensively on air transport, a federal regulatory responsibility. Eager to stay competitive, United Parcel Service sought a similar exemption in California last year by an act of the legislature. UPS pressed its case further this year and in June got Senator Wendell Ford, the Kentucky Democrat who charis the Aviation Subcommittee and whose state houses the company's largest distribution facility, to propose a special-interest measure deregulating large air-package services as part of a $4.9-billion airport-grant bill.

Before long, other major carriers demanded inclusion in the bill. Yellow Freight, based in Kansas, got Senate Minority Leader Bob Dole to champion its cause. Senator Jesse Helms (R., N.C.) lined up behind Carolina Freight Corp. As others followed suit, the bill eventually exempted from state regulation any trucking company that put its freight on its own or someone else's airline at least 15,000 times a year.

In the House, recalls Eric White, chief lobbyist for Americans for Safe and Competitive Trucking, "we made the case that a lot of small trucking fleets weren't covered, and the legislation was so bizarre that when it went to the courts it might be trouble even for those who thought it covered them." At that point, Representative Norman Mineta (D., Calif.), who chairs the Public Works and Transportation Committee, threw up his hands and said that only a level playing field would work.