DC Velocity - October 2011

that would remove the railroad industry’s limited antitrust exemptions has little chance of going anywhere, and many in the Obama administration are quietly opposed to any moves in that direction.

QWhat, in CEI’s view, would pass for “sensible” or “bal- anced” rail reform? AWhile I generally believe the shippers I just mentioned are completely in the wrong on rail regulation, they are correct in noting that railroads suffer from seriously outdated workplace practices due in large part to the various unions representing different classes of railroad workers. Among other things, we support inserting a straightforward decertification provision into the RLA [Railway Labor Act], similar to the one contained in the National Labor Relations Act, which would allow rail employees to hold an election to decertify their bargaining unit if 30 percent of workers show interest.

QThe National Industrial Transportation League has requested changes in existing reciprocal switching agreements. Do you see some change in those rules as a likely outcome at the Surface Transportation Board, and would the railroads be prepared to accept those as the least onerous type of reform?

AI would hope not. The STB and the ICC before it have been quite clear on the reciprocal switching issue. Given present conditions in the industry and the lack of any evidence of anticompetitive acts, I do not see how forcing reciprocal switching agreements on the railroads could be justified on economic or legal grounds. The railroads should absolutely reject any attempts to reregulate their business operations.

QThe railroads argue that virtually all of their traffic is ubject to competition, either from other rails or other modes. Captive shippers argue otherwise. Do shippers have a case?

AThe shippers ignore the economics of network indus- tries and why traditional models of industrial organization and competition policy are inappropriate with respect to railroads. Most are unfamiliar with the special risks posed to sunk-investment-heavy industries such as railroads. It is very difficult to reason with people who have no intention of actually understanding the underlying issues of this dispute. I have half-jokingly called on these shippers to form a consortium in order to purchase and operate their own Class I railroad, like Grupo Mexico and Ferromex, rather than wasting everyone’s time and money with silly political stunts before the STB. ;