For decades, a patchwork of regional rail networks across the United States have been forced to grapple with the same headache: Interchanges, where cargo is handed from one rail line to another.
Interchanges are one of the biggest friction points in freight logistics. They slow down the transport of goods that commonly travel on railroads--important products like lumber, food and fuel--while driving up shipping and supply chain costs for important industries like manufacturing, homebuilding, and retail. Ultimately, consumers foot the bill of the higher transport costs, exacerbating inflationary pressures on working-class Americans.
A long-anticipated answer to these problems arrived this week: the formation of America’s first coast-to-coast railroad via the industry-transforming merger of Norfolk Southern and Union Pacific railroads. By connecting over 50,000 miles of rail across 43 states and 100 ports, the transcontinental railroad will transform the U.S. supply chain to the benefit of businesses, manufacturers, consumers, and the American economy.
The railroads’ merger eliminates many of these inefficiencies by integrating their networks into a single continuous corridor that stretches across every corner of America. That means faster shipments for manufacturers and lower prices for end consumers.
These two companies are near perfect companions, as there is almost no overlap between their respective rail networks, with the Union Pacific stretching across the West side of the Mississippi river and Norfolk Southern covering the East, so their combination does not reduce competition in any given market. Instead, it creates new, more competitive options for shippers across the country.
This is the kind of transformative evolution that is needed to keep U.S. rail competitive in the 21st Century freight market. The combined company will better compete with Canadian transcontinental railroads, shoring up the domestic supply chain and offering more opportunities for American workers.
A single-line rail solution will also make rail transport more competitive with trucking. The federal government effectively subsidizes freight trucking by keeping the diesel fuel tax well below what it should be to pay for the road congestion and damage of trucks, leaving drivers--and other taxpayers--paying more than their fare share to maintain the nation’s roads. In contrast, railroads invest in their own infrastructure. The two railroads currently invest about $5.6 billion annually in maintaining and expanding the capacity of their networks.
Critically, the merger will ultimately support the revitalization of the industrial strength of the American interior and expanding opportunities for working people in every region touched by the tracks. By reducing transport costs for goods that are commonly transported via rail, the deal will make U.S. manufacturing more competitive in the global market--especially for those goods manufactured far from the coasts.
The new transcontinental railroad will have particularly profound implications for communities in the Ohio Valley and on either side of the Mississippi River, where the interchange problem has long created traffic jams and headaches. New routes created by the combined rail network will generate new options for shippers in these areas, helping them reach new markets more efficiently.
While some opponents will inevitably object to this consolidation as being anticompetitive, the two railroads operate largely complementary networks with minimal overlap. Their integration will ultimately increase competition by allowing the railroad to become cost-competitive with cross-country trucking and compete with those companies for business, and create a stronger American railroad to go head-to-head with large Canadian carriers that have been aggressively expanding into U.S. markets. For American manufacturers and exporters seeking to bring home much of that capacity, this merger is a strategic win.
At a moment when global supply chains are under stress and American producers face growing pressure to remain competitive, the creation of a transcontinental railroad couldn’t come at a better time.
