The Canada-United States transborder trucking industry, regulation, competitiveness and cabotage issues

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Prokop, Darren James.
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The trucking industries in Canada and the United States have been deregulated on national bases for many years now. Transborder deregulation, however, has not yet been achieved; even in the midst of trade agreements designed to allow for greater ease in moving goods across the Canada-U.S. border. The existence of cabotage regulations, which limit the transport activity of a foreign truck driver and his tractor-trailer while on domestic soil, is a major impediment to transborder deregulation. Chapter 1 provides a history of trucking regulation and deregulation in Canada and the United States along with a discussion concerning how the Canada-U.S. Trade Agreement and the North American Free Trade Agreement have brought the issue of transborder trucking to the fore. Cabotage regulations are carefully outlined and evaluated while the recent "reforms" to these regulations are appraised in the light of potential efficiency gains to transborder truckers. Because of the complicated nature of these regulations, a survey of Canadian trucking firms is provided in order to gauge understanding, compliance and attitudes toward reform. The results obtained impact on the economic theory of regulation that, in general, states that firms understand, and even influence, the body of regulations under which they operate. In chapter 2, a model of the for-hire trucking industry is developed in order to establish the welfare gain accruing from deregulation. The model is also used to show the further welfare gain that is expected to arise from cabotage reform. A supply-side approach is developed using the for-hire industry combined with a representaive trucking firm. The demand-side is developed combining the fronthaul and backhaul markets so that inferences with respect to cabotage reform may be had. The combined supply and demand models provide a useful means for comparing the welfare effects of regulatory change. The implications of the complete model are extended, in chapter 3, by use of: (1) rent seeking theory that serves to highlight the strategic behavior of trucking firms operating under regulatory protection; and (2) marginal welfare analysis that will show the marginal welfare gain from cabotage deregulation. Finally, chapter 4 provides concluding remarks with respect to the model and its policy implications for deregulation and cabotage reform in North America.