In Ukraine, discussions on increasing tariffs for freight rail transport have resumed. However, the tariff situation is a symptom of a deeper problem, as the industry, which is vital to the economy, is struggling to survive in the face of excessive centralisation and regulation.
And the way out of this circle can be precisely through the release of market instruments. A good confirmation of this can be the experience of the United States, which I got acquainted with during an internship at the Association of American Railroads.
The American railway is considered one of the largest and most efficient in the world - while being almost entirely private and largely unregulated. Looking ahead, I can confidently say that in many aspects, Ukrainian railway workers can teach American colleagues about digitalisation and optimisation of processes, ensuring traffic safety, not to mention the stability and resilience of functioning in emergency conditions.
However, I would like to focus on one important reform that took place in the United States back in 1980, as this is where the American experience may be most relevant to Ukraine. Today, Ukraine is looking for ways to enhance the competitiveness and sustainability of the transport industry, and deregulation may provide the answer.
Private system in operation
There are six major Class I railway companies and about 620 short-haul carriers operating in the United States. Unlike in most countries, the railway infrastructure there is privately owned: companies own both the track and rolling stock, invest in modernisation, security, and digital technologies. The state does not finance their activities, and its role is limited to basic safety regulation and oversight of fair competition.
This creates a system in which efficiency and development depend on the business, and not on the state budget.
The Staggers Act: A Reform That Changed History
A key turning point for American railways was the Staggers Rail Act, adopted in 1980. Before this reform, the railway sector in the United States was in crisis: tariffs were set by the government, companies were losing profitability, and the network was in decline, there were insufficient funds even to maintain their own infrastructure, in other words, the railways were on the verge of bankruptcy.
The Staggers Act deregulated tariffs and routes, allowing market mechanisms to determine transport prices. As a result:
- average tariffs (adjusted for inflation) have decreased by 44% since 1981;
- freight volumes have increased, and railway productivity has grown significantly;
- companies have begun to invest massively in their own infrastructure - Class I carriers alone spend more than USD 25 billion annually on capital investments and network maintenance.
The Staggers Act proved that deregulation can not only reduce the cost of transport, but also make the industry financially sustainable, competitive, and innovative.
Lessons for Ukraine
While in the United States railways have historically been privately owned, in Ukraine the railway remains state-owned, and the industry is 95% under the management of a monopolist - JSC Ukrzaliznytsia. However, general experience shows that government intervention, excessive regulation, and restrictions on competition prevent industries from developing.
How can the American experience benefit Ukraine? Of course, direct replication of the model is impossible, because the railway also performs a social function. In the United States, unlike in Ukraine, there is significant government support for passenger transport, which, unfortunately, Ukraine cannot afford at the moment. However, a significant boost for the development of the industry could be brought by:
- Railway deregulation;
- Opening of the rail transport market for private companies;
- Deregulation of tariffs;
- Attracting private investment and fostering competition.
The experience of the United States demonstrates that when businesses are given the opportunity to invest, compete and operate under market conditions, everyone wins - the economy, the state and the consumer.
To conclude, it is worth noting that the United States moved from crisis to success in the field of freight transport through bold reforms and trust in business. Ukraine now faces a similar challenge: how to make its railway system efficient, modern, and financially sustainable.
Therefore, deregulation can become not a risk, but a chance for renewal if it is accompanied by a results-oriented approach, transparent rules, and a genuine partnership between the state and business.
