COLLEGE STATION — Deregulation of the trucking industry, set to take effect Jan. 1, should boost agriculture and other sectors of the Texas economy, according to a Texas Agricultural Experiment Station researcher.
“Deregulation should help many businesses take advantage of greater efficiencies in the transportation system,” said Dr. Steve Fuller, a professor of agricultural economics at Texas A&M University and an experiment station researcher. “Some may win and some may lose, but overall, it should make Texas more competitive.”
Fuller, an economist with expertise in shipping of agricultural commodities, has conducted several studies relating to Texas carrier rates and service and also has studied trucking in other states with varying levels of regulation.
He said the experience of the 1980s, when shipping of some Texas agricultural commodities was deregulated, shows that other sectors of the economy should benefit from deregulation. Agriculture’s primary benefit from the impending deregulation should be from increased opportunities for value-added producers, such as vendors of processed foods, for example, Fuller said.
Texas has long been considered to be one of the most heavily regulated states for trucking, but that will change on New Year’s Day when new federal legislation takes effect. Intrastate routes have been subject to rate regulation and carrier entry to markets limited. Interstate carriage was not subject to the same regulation.
In August, the Airport Improvement Act was passed by Congress and approved by President Clinton. It included a mandate for states still controlling rates and market entry to deregulate.
That means Texas businesses products should be able to choose from among competing carriers, rather than being forced to use carriers awarded particular service routes at rates approved by the Texas Railroad Commission.
Agricultural commodity producers felt Texas shipping rates were artificially high before successful efforts to deregulate some rates during the 1980s, Fuller said. Studies by Texas A&M and agricultural groups helped convince the state to partially deregulate agricultural shipping, he said.
Texas A&M studies in the 1980s showed that for five of nine agricultural commodities studied, rates were between 2 and 41 percent higher on regulated intrastate routes than on exempt interstate routes. For three of the nine, rates were substantially the same, and only for one commodity — cantaloupes — were regulated intrastate rates lower, Fuller said.
After deregulation of agricultural shipping, Fuller was involved in a 1989 study of its effects. Shipping rates declined from 7.5 to 9 percent in three of four analyzed routes, with inconclusive results in the fourth, he said.
Fuller said agricultural commodity shipping won’t be affected much by deregulation, but shipping of products made from those commodities could be. Other sectors of the state’s economy also should see declines in shipping costs, he predicted.
Deregulation does have its critics, Fuller noted, but he said that the consensus among many carriers, business interests and consumer groups is that rates considered artificially high in Texas will probably come down.
In addition, deregulation should end shipping practices that are considered inefficient, such as converting intrastate shipments into interstate shipments to avoid regulation.
For instance, before deregulation of agricultural shipping, Texas High Plains grain shippers reportedly transported their product to Fort Worth by way of New Mexico to save on transportation costs by using interstate carriers, Fuller said. Other businesses may still use such practices, he added.
Houston rice processors have found it more expensive to ship bran to Texas feed mills than their competitors in Louisiana who use interstate trucks to ship greater distances to the same mills, Fuller also said.
Carriers often have been forbidden to “backhaul,” or transport a commodity on a return trip from a destination they served with a different commodity, he said.
Critics of deregulation contend smaller carriers could be driven out of business by larger companies benefitting from economies of scale. Fuller said little evidence supports those contentions.
“If there were substantial economies to size, we could expect to see only a few large operators in unregulated environments. But in unregulated states, we just don’t see this. Many small carriers are operating where larger ones don’t want to go or can’t go.”
Larger carriers may be able to do more business because they will be able to operate more efficiently in many markets. However, smaller carriers will have the same opportunities, and only free- market competition will determine the success or failure of both large and small carriers, Fuller said.
“Many regulated truckers are against it, because it changes the environment they work in,” he said. “But deregulation will have a favorable impact for a lot of these companies, and it should be a positive development for the Texas economy.”