Regulation of Michigan's trucking industry costs jobs, raises prices for consumers and puts state firms at a competitive disadvantage with competitors in neighboring states like Indiana.
That may soon change. A move is now underway to make Michigan more competitive with other states by deregulating intrastate trucking. A broadbased coalition of 70 Michigan firms, along with the state Department of Commerce and independent truckers, wants to deregulate trucking within the state. The coalition includes General Motors, Ford and Chrysler--the Big Three automakers--major state employers who show the second highest losses annually from regulation.
Eighty percent of the cargo on Michigan roads is already carried by deregulated trucks. Congress lifted economic restraints on trucking in 1980, leaving trucks entering Michigan from other states deregulated. But the other 20 percent--intrastate trucking within Michigan--remains regulated by the state Public Service Commission.
State regulation has led to some bizarre results: A Michigan-based firm is required to charge more to carry goods from Holland to Grand Rapids--a distance of about 30 miles--than an Illinois-based carrier charges to carry similar freight from Chicago to Grand Rapids, a distance of more than 170 miles.
A Detroit-based firm will send its cargo to Battle Creek or Kalamazoo via Toledo, Ohio or Fort Wayne, Indiana, to take Advantage of lower interstate trucking rates.
Michigan-based firms that ship their own products to stores within the state must return empty. One state grocery firm estimates that its trucks are empty for five million of the twelve million miles they log each year.
Economic research conducted for the Association for Safe and Competitive Transportation, a pro-deregulation group, projects deregulation would create 1,300 new jobs and $36 million in personal income within one year. Deregulation would create 2,700 jobs and $162 million in personal income within a decade.
Trucking deregulation would yield savings of $86.6 million, about 20 percent of the $450 million generated annually within Michigan by state firms, the group's research shows.
Consumers would also benefit from deregulation, notes Frank Berardino, an economist with the Association for Safe and Competitive Transportation.*
"A company in a regulated state pays more for intrastate trucking services than its competitors in a deregulated state. These higher costs are passed on to the customers who either pay the higher prices required or seek less expensive competing products and services elsewhere," Berardino explained.
"As a result," Berardino continues, "goods and services cost more, and fewer of them are produced in states where economic regulation of trucking continues in force. When the goods cross state lines, they take with them the higher costs of intrastate trucking regulations. In this way, intrastate regulations have a direct and substantial effect on companies and consumers in other states."
Trucking deregulation is opposed by the powerful Teamsters union and large trucking firms, which maintain that safety would be compromised by the move. It is worth noting that both opponents have economic reasons for fighting deregulation. The Teamsters fear newer trucking firms will hire non-union drivers; large trucking firms oppose the move because it would create competition. Deregulation opponents ignore that additional safety regulations would take effect under the reform. Trucks, for example, would be required to undergo an annual inspection by a licensed mechanic, a requirement not mandated under current law. Furthermore, Public Sector Consultants, Inc., a Lansing research organization, examined the issue in five other states and found no correlation exists between deregulation and reduced safety.
Since Congress deregulated interstate trucking in 1980, outstate firms have captured 80 percent of the Michigan market. Deregulation of Michigan's trucking industry would create jobs, lower prices for consumers and put state firms on an equal footing with competitors in neighboring states. It's time to deregulate Michigan trucking.