For competitiveness, Union Pacific-Norfolk Southern merger matters as much as tariffs

OPINION:

Successive U.S. administrations have sought to bolster job creation and enhance the competitiveness of the American economy. Sometimes, reducing tariffs and negotiating free trade agreements seemed the preferred approach; more recently, raising tariffs and designing trade deals that provide stronger government direction have gained ground.

Whatever one makes of various trade policy strategies, the reality is that tariffs, whether lowered or raised, are not enough.

Tariffs may shift with politics, but America’s competitiveness depends on infrastructure, especially rail. For decades, there has been discussion of America’s “crumbling infrastructure,” yet by many measures, the U.S. still lags behind its competitors.

According to the Council on Foreign Relations’ “The State of U.S. Infrastructure” report (2023), the U.S. ranks below several advanced economies in efficiency and reliability. That gap weighs directly on costs, productivity, resilience and, ultimately, job creation. It also underscores the need for radical improvements in transportation connectivity.

Fortunately, one solution is within our reach. The proposed merger between Union Pacific and Norfolk Southern will be a test case of whether the U.S. is prepared to face this challenge. Large mergers and acquisitions are rightly scrutinized to ensure that new entities do not engage in anti-competitive pricing or practices that undermine rivals, consumers and, ultimately, U.S. competitiveness.

At the same time, efficiency gains, resilience in supply chains and modernization benefits should weigh heavily in the balance.

The record of rail deregulation in the 1980s is instructive. The Staggers Rail Act under President Reagan lifted heavy-handed restrictions, enabling rail carriers to thrive. Once struggling, U.S. railroads became profitable, invested in modernization and improved service, all while rates for shippers declined.

Deregulation showed that markets, given room to work while the government provides adequate supervision, can deliver efficiency, innovation and competitiveness.

The proposed merger represents a logical next step in U.S. rail connectivity by eliminating interchange delays, reducing dwell times and lowering costs across the system. These benefits would lower costs systemwide, strengthening supply chain resilience via a unified network that allows rerouting of freight during shocks.

The merger would help job creation by providing efficiency gains to industries for which rail transportation is critical, including agriculture, automobiles and auto parts. The Association of American Railroads says freight rail supports 749,000 total U.S. jobs, including 153,000 direct railway jobs, and is up to four times more fuel-efficient than trucking, reducing emissions by as much as 75%.

Efficiency improvements from a merger could help sustain and increase these numbers.

It is a legal requirement (and the smart thing to do) to ensure that consolidation does not lead to anti-competitive behavior. This concern deserves attention, but solutions need not involve burdensome regulation. Emerging technologies provide tools for smarter oversight. Blockchain can enhance transparency by creating tamper-proof records of rates, contracts and routing, deterring anti-competitive practices.

Artificial intelligence can be deployed to monitor pricing patterns in real time, identifying anomalies that suggest collusion or abuse. Such approaches align with the principle of allowing markets to work while ensuring confidence that scale does not come at the expense of fairness.

The Heritage Foundation’s Project 2025 underscores the importance of streamlined institutions, empowered leadership and disciplined investment, and it emphasizes market-driven solutions for infrastructure. A transcontinental rail network that favors competition, service and safety — and is regulated using technologies not available until recently — embodies this vision.

Beyond U.S. borders, competitiveness is increasingly continental in scope. The 2005 Council on Foreign Relations report “Building a North American Community” and its 2014 update stressed the importance of integrated infrastructure. The Kansas City Southern-Canadian Pacific merger (nicknamed “Margaret”) demonstrated the potential to offer shippers a single-line network from Canada through the U.S. to Mexico, cutting transit times and opening new options for manufacturers and farmers.

The merger’s early results are clear: more reliable service and greater choice for industry and consumers.

The Union Pacific-Norfolk Southern proposal should be assessed in that same spirit. Does it enhance connectivity, reduce bottlenecks and provide value to the U.S. and its top two trade partners (Mexico and Canada) to ensure that North America can compete with China and other regions? If so, it will strengthen American security and prosperity.

Tariffs may wax and wane. What will endure are the networks, physical and digital, that enable production and trade. The rail merger debate is not only about competition among carriers. It is also about whether the U.S. seizes the opportunity to modernize and integrate its economy (and the rest of North America’s) to address the challenges ahead. Rail is as critical to competitiveness as any tariff policy.

• Antonio Ortiz-Mena is CEO of AOM Advisors, an adjunct professor at Georgetown University and chairman of the Mexican Foreign Trade Council’s USMCA Committee. The views expressed are solely the author’s and do not necessarily reflect those of any organization with which he is affiliated.