Tuesday, February 28, 2017

Rusty Spike Award for Dow’s hypocrisy

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Rusty Spike Award for Dow’s hypocrisy

Some three decades ago, the Association of American Railroads bestowed Rusty Spike Awards to recognize hypocritical posturing by those seeking legislative or regulatory advantage at the expense of railroads.

Among the recipients was an electric utility CEO who brazenly announced, in complaint of partial rail economic deregulation, that the only situation worse than captivity to a single railroad is “being captive to two”—a non-competitive state of affairs, he grumbled, that forced him to utilize barges for delivery of coal to his coastal power plants.

Dow Chemical Co. CEO Andrew N. Liveris is an exceptional candidate for a restored Rusty Spike Award, owing to his public exhibition of flagrant hypocrisy. While permitting Dow to lobby for more and tougher railroad economic regulation, Liveris is simultaneously panning economic regulation applied to chemical manufacturers and other non-rail industries.

Among new regulations Dow advocates for railroads, in hopes of manipulating a federal agency to force freight rates downward, is that where only one railroad serves a facility, the Surface Transportation Board (STB) order the railroad—upon shipper request, under certain conditions and at rates set by the STB—to switch the shipper’s loaded freight cars to a competing railroad up to 30 miles distant (and, in one case, recommended by Dow, up to 85 miles). Shippers would not first be required to demonstrate a pattern of railroad market-power abuse.

Liveris would be apoplectic should the government leviathan require Dow to share proprietary production with competitors at regulator-set prices. In contrast to Dow’s attack on railroad market power, Liveris stresses to Dow investors the value of Dow’s more potent market power: patents, which Liveris considers sacrosanct.

Yet unlike patents, which are indissoluble for decades, sole-served rail points may be avoided by transferring manufacture elsewhere or using trucks. Indeed, Dow has alternative manufacturing options worldwide, and even threats to move production or use more trucks—at any or all Dow rail-served domestic facilities—is a potent rate-negotiating strategy.

As Dow schemes to impose more regulation on railroads, Liveris has cultivated a special relationship with President Trump, noteworthy as Trump’s Justice Department is reviewing an application by Dow and DuPont to merge into the world’s largest chemical company, with consequent increased market power.

Curiously, European trustbusters, who also must favor this merger, may not find Liveris’ Trump connection so appealing, but one should hope, perhaps naively, that justice here and abroad is blind to outside influence and personal prejudice.

Now, back to reality.

liveris and trumpIn exchange for Liveris’ loyalty and election support, Trump named him to head a presidential advisory board of manufacturing executives. Subsequently, Liveris stood behind the President in the Oval Office Feb. 24 for the signing of an Executive Order directing federal agencies—drum roll, please—to repeal or simplify regulations. “The regulatory burden is for the people behind me and for the great companies of this country … an impossible situation,” Trump said, as he handed Liveris the pen used to sign the order (pictured, AP photo).

(Note that for the Australian-born Liveris, things went more swimmingly with Trump than they did for Australian Prime Minister Malcolm Turnbull in his phone conversation with Trump.)

As distributed by the White House, here is the Oval Office dialogue between Liveris and Trump:

MR. LIVERIS: Thank you. Thank you, Mr. President.

THE PRESIDENT: Really a fantastic job you’ve done.

MR. LIVERIS: Thank you.

(The executive order is signed.)

THE PRESIDENT: Should I give this pen to Andrew [Liveris]? Dow Chemical. I think maybe, right?

MR LIVERIS: Thank you.

As Liveris accepted the pen from Trump, and congratulations for encouraging substantial elimination of regulation, Dow’s Washington legal counsel was otherwise-occupied lobbying the STB to impose additional regulation on railroads.

Despite Dow’s determination to impose more regulation on railroads, Dow is working Capitol Hill against further congressional intrusion in their own economic affairs. Liveris himself misses no opportunity to boast of the Trump Administration, “[they] really want to get the barriers out of the way.”

Make no mistake that Trump, Liveris and American industry across the board, including railroads, have a robust case that economic regulation discourages capital investment, adversely affecting job creation, customer service and public safety. Not only is this so for Dow, which manufacturers products that can go boom, create infernos and pose deadly inhalation hazards, but also for railroads that must transport Dow’s hazards.

For Andrew N. Liveris, who promotes a rollback of economic regulation while hypocritically allowing his Dow Chemical Co. to advocate increased economic regulation of railroads, we recommend a Rusty Spike Award.


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Frank N. Wilner, Contributing Editor

Frank N. Wilner is author of six books, including, Amtrak: Past, Present, Future; Understanding the Railway Labor Act; and, Railroad Mergers: History, Analysis, Insight. He earned undergraduate and graduate degrees in economics and labor relations from Virginia Tech. He has been assistant vice president, policy, for the Association of American Railroads; a White House appointed chief of staff at the Surface Transportation Board; and director of public relations for the United Transportation Union. He is a past president of the Association of Transportation Law Professionals. Wilner drafted the railroad section of the Heritage Foundation’s Mandate for Change (Volumes I and II), which were policy blueprints for the two Reagan Administrations; and was a guest columnist for the Cato Institute’s Regulation magazine.

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