The Box - Marc Levinson [143]
The railroads were no more aggressive when it came to containers, without the truck chassis and wheels. When Sea-Land and the railroads had discussed a transcontinental container service back in 1967, the railroads asked for three times the price that the ship line was willing to pay, and talks went no further. They tried again in 1972 with a service called “minibridge,” in which a ship line and railroads would join forces to carry a container from, say, Tokyo to New York via the port of Oakland. The carriers would agree on a single rate for the entire trip, file it with both the Interstate Commerce Commission (the rail regulator) and the Federal Maritime Commission (the ship regulator), and decide how to split up the money. Ship lines claimed that minibridge cut costs by eliminating the long, fuel-consuming voyage through the Panama Canal. The real advantage, less publicized, was that loading and unloading ships was much cheaper in Pacific coast ports than on the East Coast: almost no one bothered to export from California to Europe by minibridge through New York. The railroads were so uninterested in the concept that they could not even be bothered to design equipment more efficient than their standard flatcars. Shippers often saw little saving. Sending televisions from Japan to New York by mini-bridge took several days less than by all-water service but was no less expensive. Sending synthetic rubber from Texas to Japan, a U.S. government study found in 1978, cost three times as much by mini-bridge through Los Angeles as when the rubber was trucked to Houston and loaded on a ship.37
Deregulation changed everything. In two separate laws passed in 1980, Congress freed interstate truckers to carry almost anything almost anywhere at whatever rates they could negotiate. The ICC lost its role approving rail rates, except for a few commodities such as coal and chemicals. Trucks and railcars that had often been forced to return empty were able to get cargo for backhauls. Another definitive break from the past proved critical to driving down the cost of international shipping. For the first time, railroads and their customers could negotiate long-term contracts setting rates and terms of service. The long-standing principle that all customers should pay the same price to transport the same product gave way to a system that yielded huge discounts for the biggest customers. Within five years, 41,021 contracts between railroads and shippers were filed with the ICC. Freight transportation within the United States was reshaped dramatically. Costs fell so steeply that by 1988, U.S. shippers—and, ultimately, U.S. consumers—saved nearly one-sixth of their total land freight bill.38
Perhaps no part of the freight industry was altered more than container shipping. The ability to sign long-term contracts gave railroads an incentive to develop a business that had languished for two decades, with assurance that their investment would not go to waste. Equipment manufacturers went back to work on low-slung railcars designed for fast loading of containers stacked two-high, the sort of cars Malcom McLean had tried—and failed—to convince railroads to use back in 1967. Deregulation meant that those