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Interstate Commerce

Nonagricultural demands for interstate commerce transportation of people between states. Formerly, carriers
increased dramatically in the last quarter of the twentieth were partially protected from competition in return for
century. Manufacturing employment in nonmetropolitan fulfilling public service obligations. Under this arrange-
areas grew at a rate three times that in metropolitan areas. ment, common carriers were not free to choose customers,
Approximately 20 percent of nonmetropolitan residents nor were they free to eliminate parts of their services with-
were employed by manufacturing firms at the turn of the out the consent of the public. This obligation placed lia-
twenty-first century. bilities for loss and damage with the interstate carriers
As a result of these changes, the amount and type of who were responsible for transportation losses. In addi-
interstate traffic has also changed dramatically. The larger, tion, common carriers had to serve all customers without
heavier vehicles on these roads require major investments discrimination and had to have their rate-change propos-
in bridges and in surfaces of paved roads. A Department als reviewed by regulatory bodies to determine whether
of Transportation survey suggested that more than 50 per- these changes were reasonable.
cent of the local road mileage in the United States was In return for fulfilling these public obligations, com-
structurally inadequate. This problem is one of surface mon carriers were protected from new competition. When
type and condition and even safety deficiencies, such as a company proposed to expand service to another state, an
inadequate lane widths or lack of shoulders. existing transportation company could argue that it cur-
The increased financial responsibility of local govern- rently serviced the traffic adequately and could oppose
ments for construction and maintenance of rural road sys- entry of a new interstate carrier. Often, the opposition of
tems is a special concern for those rural regions dependent existing carriers prevented the entry of new carriers.
on interstate commerce. Transportation deregulation is In the early 1980s, however, Congress passed major
another major federal policy change likely to influence the legislation changing the government’s role. Policy changes
cost and availability of transportation services and facili- essentially replaced the common carrier system with a
ties needed for interstate commerce. Technological and market-transaction system similar to that of any other pri-
organizational innovations have accompanied the new vate business. The new market approach allows shippers
deregulated environment. Railroad mergers, for example, and carriers to actively negotiate for transport services
have resulted in reduced service on many routes, poten- rather than accept one of a few alternatives offered by car-
tially affecting the relative competitiveness of regions as a rier consortiums. Deregulation increased economic effi-
location for business or industry. Developments of unit- ciency in the provision of transportation services because
train facilities and railroad contracts encourage consolida- carriers had new flexibility in adjusting to demand.
tion and growth of processing firms. Highways, railways, and airways are the arteries that
Transportation improvements that result in lower enable shoppers and tourists to travel between states.
operating costs for area enterprises aid rural communities Because of this, passenger transportation plays a key role in
in efforts to attract new business and industry and encour- rural economic development. Many rural industries draw
age the expansion of existing firms. Business surveys con- their workers from surrounding communities up to 50
sistently find that firms rank transportation access, cost, miles (80.5 km) away. For these industries, the interstate
and quality as high-priority considerations in choosing a transportation system is a critical link providing them
business location. The availability of highway transporta- access to the labor force. Policies and investments that
tion is particularly important to a wide variety of rural reduce the cost of interstate commerce in rural regions are
businesses that depend on the ability to deliver their prod- a potential catalyst for rural economic development.
ucts to other states. The urgency of finding workable solutions to inter-
Freight carriers are dependent on the rural road sys- state commerce issues has prompted new ways of think-
tems, which are financed through a combination of local ing. In 1982 the U.S. government appropriated $5
tax revenues. The shared state-highway user taxes and fees million to provide technical assistance to local agencies
vary from state to state. A faltering local economy can through the Rural Technical Assistance Program. The
severely limit a local government’s ability to raise revenue principal delivery system for the program was a network
for road system improvements, and the likely result of this of Technology Transfer Centers. Under the Federal High-
is a cycle of decline in interstate commerce. Without addi- way Administration program, the Technology Transfer
tional revenues, local road systems will continue to deteri- Centers were designed to provide training and other tech-
orate, thus further reducing the attractiveness of the area nology transfer products to local users. One of the pri-
for business and industry and thus further eroding the mary objectives of the program is to serve as a
area’s tax base. communications link among the various sources of new
Interstate commerce involves the transportation of technology and the state and local agencies that can apply
services as well as goods. Of particular importance is the the technology in daily operations. In 1983 there were ten

ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION 431