Commentary: Big Tent Ideas

Uncle Sam’s Reindustrialization Needs A Spark From Transcontinental Railroad

Unsplash/Irina Iriser

The U.S. may finally have a coast-to-coast railroad owned by one company. What does it mean for competition and pricing power at a time when American businesses and consumers both could use some deflation, not more inflation?

Union Pacific’s proposed $85 billion merger with Norfolk Southern is the industrial version of the “Trump Corollary” of the Monroe Doctrine 2.0 in action, as described in the White House’s National Security Strategy memo last November. By uniting the two rail networks into one transcontinental railroad, the merger could unleash the power of the American manufacturing base by streamlining logistics and stripping out costs associated with having to unload goods on a train, and load it onto another train, or to multiple trucks that guzzle expensive diesel.

The North American economy is increasingly viewed as a continental manufacturing platform. The Union Pacific-Norfolk Southern merger creates a rail spine connecting Pacific ports, Mexico, the industrial Midwest, Gulf Coast manufacturing and agriculture to – finally – the Eastern Seaboard.  Looking at it that way, a somewhat dull railroad deal becomes a massive geopolitical logistics story instead.

The transcontinental railroad would deliver the strengthened logistical backbone needed to support the return of industry back to the American heartland.

Providing cross-country single-line rail service means American-made goods can reach customers more quickly and at a lower cost, relieving Americans from the pressure of creeping inflation. American manufacturers will have faster and more affordable access to ports, allowing them to compete more effectively in the global market.

If future presidents agree with President Donald Trump’s view on reindustrialization, and recall that Joe Biden agreed with this by passing at least two laws that created huge tax incentives for building renewable energy manufactured goods and semiconductors in the U.S., then future of  manufacturing security rests closer to home. That does not mean the U.S. alone, but more of a controllable regional sphere that includes Canada and Mexico, protected industries, regional trade priorities (North and South America, especially for commodities) and an integrated infrastructure.

That’s a different model than the Asia-centric, transoceanic supply chains model.  Here, Union Pacific and Norfolk railroads are uniquely symbolic because they are literal the physical infrastructure of domestic and regional trade. The merger represents infrastructure adapting to the realities of economic nationalism.

To consummate their marriage, Union Pacific and Norfolk Southern must gain approval from the Surface Transportation Board. Last month, the companies submitted their revised merger application to the Surface Transportation Board (STB), which will now review it to determine whether the merger serves the public interest.

The two companies are not getting into the geopolitics of the deal, but their application spells out how this merger could rebalance the competitive dynamics of the freight sector, bringing down costs for shippers and consumers alike.

The U.S. railroad system was built in pieces during the 1800s by dozens and eventually hundreds of private companies. Over time, those companies merged into regional giants, but regulators eventually decided they did not want two or three railroads controlling the entire nation. So the country ended up with a kind of managed geographic split.

But the freight sector has evolved. Today, this fragmentation of railroads has handed the advantage to long-haul trucking, which has been eating market share from rail for decades. Shippers value the reliability and speed of trucking, which also allows shippers to use one firm for cross-country shipments, simplifying the process.

Today’s fragmented freight rail market has struggled to keep up. Cross-country rail shipments require coordination between two or more railroads, which must go through a time-consuming “interchange” process to hand shipments off from one network to another. That drives up costs and creates delays as union crews switch and paperwork is processed.

In theory, this merger would erase the extra costs of shifting delivery systems, creating rail as another legitimate option alongside trucking. This is what businesses want: lower costs and more options. Still, Union Pacific will have to convince the STB of the competitive benefits.

By establishing single-line cross-country service that doesn’t require interchanges, the transcontinental railroad would provide shippers with a new, truck-competitive option. In addition to the benefits for shippers, the merger would take heavy-duty trucks off our public roads – the companies estimate the merger would remove as many as 2.1 million trucks. That reduces the burden on taxpayers of maintaining highways and makes our roads safer for commuters and families.

Trump, of course, supports it. This is his “big beautiful railroad.”

Why? There will be a new intermodal train connecting Southern California to the Ohio Valley and the Northeast would eliminate the Chicago interchange, shortening the trip by up to 252 miles and reducing transit times by up to 20 hours.

On traffic moving between California and the Southeast — including Georgia, Florida and North Carolina — the combined railroad would save about 70 to 95 hours of transit time.

Routes like these could reshape American manufacturing, giving the industrial economy a boost just as the Trump administration pushes for companies to invest in the U.S. This merger underpins the administration’s national-scale industrial strategy.

But the merger reflects something larger happening in the U.S. economy, too. The government will be more tolerant of concentration when concentration is perceived as strategically useful. That’s economic statecraft. The emerging model assumes that supply chains should be geopolitically secure and regionally controllable. Infrastructure needs to work to achieve those ends. Railroads are a physical manifestation of that shift.

If this merger is viewed through that lens, regulators might give that more weight in their decision making than concerns over consolidation in one corner of a rapidly evolving freight industry.

Kenneth Rapoza is a senior analyst for the Coalition for a Prosperous America. He was a former staff reporter for the WSJ in Brazil and covered the BRIC countries for Forbes up to 2023.

The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.