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Free fall

4th April 1975, Page 46
4th April 1975
Page 46
Page 46, 4th April 1975 — Free fall
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Which of the following most accurately describes the problem?

WARNINGS by the Northern Licensing Authority, Mr J. A. T. Hanlon, on the effect of too many operators chasing too little traffic have found a ready response among hauliers. They have already reported not only the necessity to lay off vehicles and drivers, but the fall in rates which inevitably follows an excessive increase in competition for the market.

More appreciation is being expressed of the advantages of the old system of carriers' licensing, which did at least make some attempt to fit the supply of road transport to the demand. Hauliers are also showing greater interest in the EEC concept of tarrification, or the statutory fixing of a band of road haulage rates within which operators. and their customers would be left free to bargain.

Negotiations with the other EEC countries on standard rates for international traffic reached what may be a temporary impasse over the problem of fitting the cost of ferry journeys into a bilateral tariff. During the discussions operators came to appreciate more than before the benefit derived by the foreign haulier from the knowledge that his price for a journey could not be beaten down below a reasonable minimum.

For lack of this safeguard hauliers who have developed the international side of their servides are coming to the opinion that they are the poor men of Europe. They have watched the spread of tarrification without being able to take their share. Some of them have also been remindt4 that operators in the US, or at any rate those on long-distance work, have for many years been protected both by licensing and by fixed rates.

As it happens, regulation of road transport in the US has recently been under more than usually strong attack from a number of directions. The Council of Economic Advisers has reported on changes under consideration by the administration of President Ford, which will give greater tolerance in agreements on rates, more opportunities for carriers to enter or leave the road transport industry, and fewer exemptions from the legislation against monopolies!

The principle behind these changes has the Council's approval. Its report states that it was pressure by the Interstate Commerce Commission and from the railways 40 years ago which imposed regulation of routes and rates on long-distance hauliers, many of whom were not in agreement. The result has been "windfall profits to more efficient operators and higher prices to consumers". Estimates of the annual cost of regulation to the community vary between £2.000m and £4,000m.

The Council makes use of an ingenious Coic h 22 argument to show that, whatever the operator's situation under the present system, he is in the wrong.

Where two or more carriers serve the same market, says the report, competition reduces profits, but only by creating excess capacity, and not through a drop in rates. On the other hand, the operator with a monopoly makes an excessive profit by giving poorer service at the regulated price than would be acceptable if other firms were allowed to compete.

Price competition

Problems of this kind would disappear, the Council continues, if there were no rstrestriction on entry into road haulage and the EEC encouraged "meaningful price competition". The carrier with a monopoly would then have tocope with competitors offering lower rates and better service. Where there was already excess capacity the operators would either have to "suffer lower rates consistent with higher average loads" or face new competition from carriers who would try to force rates down.

This is just what British hauliers are complaining about, and it is hardly an attractive prospect for the American trucker. There is no wonder that his representatives have reacted sharply to the administration's plan and the approving comments which it has stimulated.

A complementary intention of the President is to establish a special commission to study regulatory agencies. A spokesman for the American Trucking Associations has welcomed this. Perhaps somebody should draw his attention to what happened in the UK when a Minister of Transport arranged an investigation into the carriers' licensing system under the chairmanship of Lord Geddes.


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