World Trade - January 2009 - (Page 31)

The Congresswoman Who Wants to Undo the U.S. Rail “Monopoly” Rep. Tammy Baldwin didn’t expect to take on the titans of the railroad industry when she was ﬁrst elected to Congress in November 1998. The first Wisconsin woman ever to be elected to the House, her passion was striving to pass legislation for universal health care. But shortly before being elected to her ﬁfth term in 2006, Baldwin told World Trade, constituents began to unburden themselves of their concerns about the rail industry and the effects it was having on her state. By far the most jaw-dropping story came from the Dairyland Power Cooperative, an electric power distributor, in Lacrosse, just outside of her district’s boundary. “They were long time recipients of coal shipments, but were captive to one rail company, and had been told at the end of 2005 that their rates would nearly double,” Baldwin said. “As a result, while they were still shipping $30 million worth of coal annually, it was going to cost them $75 million a year to receive it.” As a consequence of the new rates, the utility was forced to pass along its own rate increase to its half million customers. There was an additional rub to the story, however. On top of exorbitant rates, the utility was also forced to contend with inadequate service from its rail provider, and that led frequently led to its own customers paying more for less reliable electricity. Baldwin’s response was to introduce the Freight Railroad Antitrust Enforcement Act of 2007, which seeks to create more competition and remove anti-trust exemptions granted to in the U.S. Senate—sponsored by Wisconsin Sen. Herb Kohl—would empower the Justice Department and the Federal Trade Commission to review future railroad mergers and take deﬁnitive steps against the paper barriers that shippers say bound them to a single carrier even when a short line rail they utilize gives them theoretical access to another. “If you are a manufacturer or a business with transportation needs and you’re looking at where to locate a new plant or facility, the question of whether or not you’re going to be captive to one rail carrier is obviously something you’ll have to consider,” Baldwin added. “The freight rail companies certainly don’t like the bill and have been a vocal lobby in Washington against it, but what occurred, overtly, has been kind of interesting,” she said. “Instead of focusing on my bill, they’ve invested in a public media campaign talking about how wonderful freight rail is and focused it heavily on the D.C. market, where they know legislators will see it.” “On the one hand, they say that if antitrust laws are applied to them, it will destroy their industry,” she said. “On the other hand, they also ask lawmakers, ‘Why are you doing this? It won’t really change anything.’” Even Baldwin conceded she’s unsure whether her bill will amount to anything or not. “I’d love to see it passed in the remaining time as a stand alone, but given the talk of another economic stimulus bill that might include some infrastructure spending, I might try to attach it as an amendment there.” the railroad industry under the Stagger’s Rail Act of 1980. “As far as I’m concerned, it’s vital to my state that we begin to end the railroad monopolies that are driving consumer prices up and service down,” she said. “After all, when it comes to rail, our companies and utilities don’t have an option of shopping elsewhere down the road.” Since 2005, Baldwin said, the rates consumers pay for electricity in Wisconsin have increased 15 percent to 20 percent, and businesses ranging from restaurants to dry cleaners have been forced to pass the higher rates they’ve been paying along to their customers. Baldwin said her bill and a similar proposal point out that from the mid-1980s through 2000, rail rates actually consistently went down. From their perspective, rates “stabilized” around 2001, and then from about 2003 through 2007 climbed at an annual rate of no less than 6 percent. What set the roller coaster ride in motion? To begin with, there was the federal Stagger’s Act of 1980, which directed the Interstate Commerce Commission to deregulate a then-moribund rail industry—an industry still reeling from the creation of the interstate highway system in the 1950s and the resulting ascendance of interstate trucking. “Remember, we were in pretty bad shape at the time,” said Tom White, spokesman for the Association of American Railroads. “We had to react to competitive forces in the marketplace, which, just as today not only included other railroads, but also the trucking industry, and, in some parts of the country, barge service.” As part of that reaction, the railroads also began to make strides in improving their competitive footing through advances in productivity. One method was through the employment of unit trains—building trains intended to carry a single product, like coal from the Powder River Basin in Wyoming, to a single destination, in this case a coal-ﬁred power plant—another was double-stacking, which quickly took hold as the preferred mode of rail shipment in the western United States and is now beginning to proliferate along the eastern seaboard. The liberalization of federal regulations also simpliﬁed the process of abandoning unproductive rail lines to Class 2 or Class 3 railroads, whose cost structures made the lines more economical than they had been for their original owners. By the time Congress abolished the Interstate Commerce Commission in 1995, replacing it with the Surface Transportation Board, the body that now considers railroad rate and service disputes and reviews proposed railroad mergers, the context for all these changes had dramatically changed. Railroad advocates contend rail rates began to rise appreciably only after the Class 1’s had run through the WWW.WORLDTRADEMAG.COM 31 http://WWW.WORLDTRADEMAG.COM

Table of Contents Feed for the Digital Edition of World Trade - January 2009

World Trade - January 2009 Contents Supply Chain Finance Conference: The Right Stuff at the Right Time! Is the Dollar's 'Exorbitant Privelege' as the Global Standard at Risk? Supply Chain Watch Tradewinds The Rise of the 4PL An Evolving Tech Backbone Makes 4PL Service More Effective The Changing Landscape of U.S. Railroads Intermodal Grows Up Port of Hamburg Grows as Distribution Point to Eastern Europe Outsourcing Without Fear Measuring the Carbon Footprint

World Trade - January 2009

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