OPINION:
A thriving rail industry is foundational for the American economy. Since the 1800s, railroads have powered the U.S. by hauling grain, chemicals, vehicles, coal and all kinds of critical supplies that Americans rely on across the country.
After decades of decline due to governmental interference through much of the 20th century, deregulation in 1980 allowed railroads to compete, which led to efficiency gains through investment, innovation and consolidation. This has resulted in the U.S. having the strongest freight rail network in the world.
Union Pacific’s recently announced deal to merge with Norfolk Southern marks the long-anticipated arrival of the first American transcontinental railroad, a momentous time for the industry. Even President Abraham Lincoln, more than 150 years ago, envisioned a coast-to-coast railroad that would reduce transportation costs for manufacturers and businesses while streamlining the U.S. supply chain.
Combining Union Pacific and Norfolk Southern — two complementary networks that together will stretch from coast to coast across 43 states and more than 50,000 miles — will allow shippers to reduce costs and transit time.
Today, shippers transporting goods by rail often have to deal with separate networks that make it impossible to get a single price for coast-to-coast shipping. Interchanges, where two rail networks meet and freight cars have to be transferred from one network to another, create delays and headaches for shippers.
With the merger, congestion and handoff delays at rail interchanges such as Chicago, Kansas City, and New Orleans would be alleviated.
The merger would also make American rail a more competitive freight option, and providing a one-stop solution for shippers would make procuring rail transportation simpler. As the new, combined company finds ways to make its network more efficient, shippers and consumers will ultimately benefit from those savings. This will help tamp down the inflationary pressures of the past few years and deliver price relief to key sectors such as housing, energy, autos and more, where inputs (such as wood, coal, and steel) typically travel via rail.
Some will undoubtedly question whether the Trump administration and the Surface Transportation Board (STB) should allow further consolidation in an industry already dominated by just a few players. The STB will have to consider two questions as it reviews the deal: Does the merger enhance competition? And is it consistent with the public interest?
The answer to both is a resounding yes. With Union Pacific operating west of the Mississippi and Norfolk Southern operating east of it, the deal represents an end-to-end merger that unambiguously improves service. In the one area where there is some overlap — Kansas City to St. Louis — there is expected to be expanded rail service as the connection in that area would increase capacity and fluidity for shippers in the region.
A few critics will likely (and mistakenly) argue that consolidation will not enhance competition, but this perspective fails to grasp the state of the broader freight landscape. The proposed merger doesn’t diminish competition; it creates a more competitive and efficient U.S. rail network. The combined company would offer shippers better service, greater leverage in negotiations with trucking companies and access to expanded multimodal connections.
Combining the two networks would result in a freight option that can better compete with both trucking and the Canadian transcontinental rail networks. What’s more, the benefits of it would go beyond shippers: The merger would almost inevitably result in fewer freight trucks on the nation’s highways, thereby reducing congestion and greenhouse gas emissions while improving highway safety, as well as reducing the wear and tear on roads. Plus, fewer vehicles on the roads means increased safety for motorists.
By shifting significant freight volumes from road to rail, the merger would ease road congestion and public infrastructure maintenance costs, saving billions in future maintenance costs. These are savings that flow directly to the taxpayers, who effectively subsidize the trucking industry. The diesel tax, which hasn’t increased in over 30 years, does not come close to paying for the upkeep and expansion of the nation’s roads, and $275 billion has been transferred from the general tax fund to the highway trust fund since 2008.
Manufacturers and exporters stand to benefit from more reliable and timely freight service. The new network could shave several days off key shipping lanes, which would streamline supply chains and reduce overhead costs. For industries that rely on just-in-time delivery, these efficiencies translate into real savings. Ultimately, consumers would feel the impact, too, through lower prices on everything from groceries to household goods.
Reducing freight costs and improving delivery timelines is a competitive necessity for American manufacturing. This merger will help those who make things in the U.S. remain competitive against international rivals, enabling American-made products to reach markets faster and at lower cost.
• Michael F. Gorman, Ph.D., is the Niehaus chair in Operations and Analytics and a professor at the University of Dayton, specializing in freight rail logistics and transportation economics.
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