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Hamberger: Rep. Walz’s Column Is Off-Base on Rail Rates

There’s an old saying, so very appropriate when inside-the-Beltway talk turns to weighty public policy issues: “Saying it doesn’t make it so.”

[IMGCAP(1)]Critics of the U.S. freight rail industry recycle accusations and cling to repetition as their main tactic. They hope that by repeating as often as possible the falsehood that freight rail rates are unfair, that will somehow render the rates, well, unfair and thus provide fuel for lawmakers seeking to regulate rates. But repetition is no substitute for the truth.

Rep. Tim Walz (D-Minn.) in a June 15 Guest Observer opined that freight rail rates were excessive. It is always a tad frustrating when I read these types of statements. Critics of U.S. rail are usually major chemical, utility and agri-business companies with great market power and, often, major investments around the world. One of these companies announced a doubling of its profit for the first quarter of 2010, so apparently rail rates are neither “too high” nor “unfair.”

U.S. rail shipping rates are extremely competitive and allow tremendous benefit for the typical American consumer. According to the American Association of State Highway and Transportation Officials, if all freight were moved by trucks instead of trains, costs to American consumers would jump by almost $70 billion a year.

Why? Because average inflation-adjusted rail rates were 55 percent lower in 2009 than in 1981. That means the average rail shipper can move twice the freight today for the same price it paid almost 30 years ago.

The undisputed fact is U.S. freight rail rates are among the lowest in the world: half of those in China and Japan, and two to four times lower than in most major European countries.

Walz is correct when he writes that rail rates have trended upward at times. But an independent team of consultants commissioned by the federal government’s Surface Transportation Board found that these increases were driven by fluctuating fuel prices and did not reflect a greater exercise of railroad market power over shippers.

Our country and our political leaders have great expectations for our rail system. President Barack Obama wants to double U.S. exports in five years to help create more jobs. This goal won’t be possible without a healthy freight rail network to move American goods to ports and then onto the global market. Today’s rail rates make it possible for American businesses to compete in the global marketplace.

The president and Congress want to build high-speed rail around the country. That also isn’t possible without a healthy freight rail network, on whose tracks many of these higher-speed passenger trains will operate.

For freight railroads to keep delivering on tremendous public benefits and economic recovery, and for freight railroads to meet the president’s laudatory goals, they have to earn revenue to build, maintain and modernize the 140,000-mile U.S. rail network. Freight rail provides thousands of high-paying union jobs and supports thousands more that rely on it to ship goods.

But regulation on the order what Walz advocates would strangle the recovery before it gets off the ground. Tighter economic regulation of freight rail threatens that investment and meeting the great expectations of the president and Congress. Before Congress seriously entertains greater regulation of rail, it should ponder these modern American industrial truisms: Data show that rail rates are reasonable, the economy is turning around and freight rail makes it possible.

Edward R. Hamberger is president and CEO of the Association of American Railroads.

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