The benefits and downsides of regulation or deregulation in the sphere of transportation have been discussed for decades. Still, there are quite different views on the matter. Some researchers and practitioners claim that the industry has to be regulated heavily as it is associated with the economic and environmental well-being of people (Mayo & Sappington, 2016). Proponents of deregulation emphasize that it results in competition and innovation, which is beneficial for the development of the transportation system of any country (Mangan & Lalwani, 2016). This paper includes a brief analysis of the way regulation and deregulation affect transportation.
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First of all, it is important to note that deregulation refers to the elimination or change of some regulations. The industry cannot be deregulated completely as there are various environmental, financial, and social norms and laws to abide by (Mayo & Sappington, 2016). Nevertheless, many countries try to impose as many rules as possible as transportation is one of the strategic spheres. Regulations are often imposed when companies introduce unfair fees or the number of safety-related accidents increases.
Governments also introduce new regulations when some environmental concerns become persistent or some serious accidents cause significant damage to the environment or infrastructure. At that, governments often have to come up with deregulation policies to boost the development of the industry as well as their countries’ economies.
For instance, the US transportation system had been highly regulated until the 1970s when the so-called Staggers Act was enacted (Mayo & Sappington, 2016). By the 1970s, the country’s transportation suffered significant losses that could end up in a severe crisis. The policy mentioned above, as well as the entire deregulation policy implemented in the USA, is still regarded as an illustration of the major strengths of the deregulated transportation system.
The US transportation industry is now characterized by a significant degree of liberalization although many rules and norms still exist. The regulations are quite strict in such spheres as environment or safety (Hilmola & Laisi, 2015). Therefore, when speaking about deregulation in the transportation system, only partial liberalization is possible. This liberalization is also closely related to the existing political agenda in the country.
The major benefits of regulation policies include the existence of standards, the control over fees, and the control over the areas mentioned above (safety, environment, etc.). Standards are beneficial and even essential in the sphere of logistics as they enable many stakeholders to interact, especially when it comes to the global market (Mangan & Lalwani, 2016). Companies can save considerable funds using standard vehicles, equipment, measures, strategies, and so on.
Regulations are also vital for safety reasons as heavy competition may induce companies to reduce costs implementing fewer or less effective safety measures. The compliance with these norms is economically justified as accidents, injuries, and similar issues are associated with significant losses for organizations. Nevertheless, too many rules and norms, as well as too strict regulations, tend to have negative effects on the industry.
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As far as the economic benefits of deregulation are concerned, it is necessary to note that companies may allocate their funds more efficiently. Koliousis, Koliousis, and Papadimitriou (2013) claim that deregulation is associated with the development of companies and the entire industry. Organizations can invest in innovations, which enhances competitiveness.
Competition, in its turn, has a positive effect on the development of any sphere as companies try to provide more and better products and services at lower prices or introduce some added-value products. Organizations can enter new markets and make successful acquisitions. At that, the major value of mild regulation is companies’ ability to ignore some standards and use creative ways to achieve some goals.
It is necessary to add that customers can benefit from deregulation if the major rules and norms remain unchanged. For instance, customers also benefit from the introduction of deregulation policies. They often receive services and products at lower prices as the competition increases (Mayo & Sappington, 2016). It is noteworthy that some fees remain high or even gradually grow due to increasing costs or companies’ desire to have more profits. However, the competition created tends to keep fees reasonable.
The range of products and services increases substantially, which is also a positive change for customers. Clearly, regulations are still necessary when it comes to quality and environmental control. People should be protected from companies’ focus on gains and desire to reduce costs at any price. It is also necessary to remember about countries’ peculiarities especially when it comes to such spheres as the culture, geographic location, and so on (Mangan & Lalwani, 2016). For instance, countries having scarce natural resources, tend to impose regulations aimed at encouraging transportation organizations to reduce their use of resources. Countries that are characterized by a high amount of hazardous gas emissions develop laws that make companies use more advanced technologies.
Although the debate concerning the benefits and hazards associated with regulation or deregulation persist, the global trend of deregulation is increasing. Countries try to address financial issues and become more competitive in the global market. Globalization makes countries reduce the number of regulations or rather develop a set of norms consistent with the existing international rules (Mangan & Lalwani, 2016).
Companies want to operate globally, and the existence of different regulations in countries makes many operations more difficult and sometimes impossible to carry out. The use of the international system of standards can positively affect companies and countries since standardized tools and methods can be employed. At that, there is also the focus on environmental issues, which makes governments introduce certain laws. While financial regulations are eliminated or changed, environment-related norms and rules become stricter in many countries. For example, China was famous for its negligence in international environmental laws. However, the country is changing its attitude towards the environment and the government develops new norms and rules.
In conclusion, it is possible to state that deregulation, which has certain limits, is beneficial for the development of the transportation industry of many countries and the global transportation system. Deregulation policies are associated with financial gains of companies, innovation, increased competition, better and cheaper services and products for customers, and so on. Globalization is one of the factors that contributed to the spread of deregulation policies. Other factors include stagnation of the transportation sector and the countries’ governments attempt to facilitate the industry’s development.
Regarding the factors leading to the development of stricter regulations, these are mainly associated with various accidents or unhealthy competition. However, when speaking about the focus on this or that approach, it would be more reasonable to choose deregulation or rather the shift towards international laws and policies. This focus will enable companies to operate successfully in the global market.
Hilmola, O., & Laisi, M. (2015). Shareholder value creation on deregulated transportation sector: Focus on North American railway freight. Expert Systems with Applications, 42(1), 113-124.
Koliousis, I., Koliousis, P., & Papadimitriou, S. (2013). Estimating the impact of road transport deregulation in short sea shipping: Experience from deregulation in the European Union. International Journal of Shipping and Transport Logistics, 5(4/5), 500-511.
Mangan, J., & Lalwani, C. (2016). Global logistics and supply chain management (3rd ed.). West Sussex, England: John Wiley & Sons.
Mayo, J., & Sappington, D. (2016). Regulation in a ‘deregulated’ industry: Railroads in the post-Staggers era. Review of Industrial Organization, 49(2), 203-227.