Authors: Dr. Jean-Paul Rodrigue, Dr. Theo Notteboom and Dr. Brian Slack
Transport policy tries to make decisions concerning the allocation of transport resources while transport planning is their effective implementation.
1. Policy and Planning
The terms policy and planning are used very loosely and are frequently interchangeable. However, substituting one for the other is misleading. Policy and planning represent separate parts of an overall process of intervention. There are circumstances where policy may be developed without any direct planning implications, and planning is frequently undertaken outside any direct policy context. However, precise definitions are not forthcoming, and the following are suggested:
Transport policy deals with developing a set of constructs and propositions that are established to achieve specific objectives relating to social, economic, and environmental conditions, and the functioning and performance of the transport system.
Transport planning deals with the preparation and implementation of actions designed to address specific problems.
The goal of transport policy is to make effective decisions concerning the allocation of transport resources, including the management and regulation of existing transportation activities, while transport planning concerns their effective implementation. Thus, transport policy can be concomitantly a public and private endeavor, since undertaken within an organizational context, strategically allocating resources. Still, governments are often the most involved in the policy process since they either own, manage or regulate many components of the transport system and have levels of jurisdiction over existing transportation modes. Governments also often perceive that it is their role to manage transport systems due to the essential public service they provide, in addition to imposing a regulatory framework.
Yet, many transport systems, such as maritime and air transportation, are privately owned, with firms servicing international markets that are able to set their own policy. However, there are substantial geographical variations in ownership, with the United States having a history of private involvement while Europe, China, India, and Japan have relied more on public ownership and operations. The standard rule is that the public sector usually provides transport infrastructure and the regulatory framework while the private sector assumes the provision and operations of many modes and terminals.
With globalization and deregulation, the private sector has much leverage in the policy process through its asset allocation decisions, reflected in new public transport policy paradigms.
Public policy is the means by which governments attempt to reconcile social, political, economic, and environmental goals and aspirations with reality. These goals and expectations change as the society evolves, and thus a feature of policy is its changing form and character. Policy tends to be dynamic and evolutionary.
A major distinction between planning and policy is that the latter has a much stronger relationship with legislation. Policies are frequently, though not exclusively, incorporated into laws and other legal instruments that serve as a framework for developing planning interventions. Planning does not necessarily involve legislative action and is more focused on the means of achieving a particular goal, often within the existing regulatory framework. Policy dictates while planning implements.
2. The Relevance of Transport Policy
Transport policies arise because of the importance of transport in virtually every aspect of the economic, social, and political activities of nation-states. Transport policy is undertaken by governments of all inclinations, from those that are interventionalist to the most liberal, as a vital factor in economic development. Transportation is seen as a key mechanism in promoting, developing, and shaping the national economy. Many development programs, such as the Appalachia Project in the United States in the 1960s, the Trans-European Networks (TENs) policy in the EU, and China’s Belt and Road Initiative, are transport-based. Governments and international institutions such as the World Bank also seek to promote transportation infrastructure and services where private capital investment or services may not be forthcoming. Paradoxically, the links between transport and economic development are, at times, questionable.
Transport frequently is an issue in national security. Policies are developed to establish sovereignty or to ensure control over national space and borders. The Interstate Highway Act of 1956, which provided the United States with its network of expressways, was formulated on the grounds of national security. Security was at the heart of the more recent impositions regarding passengers or freight clearance taking place at the port of departure in addition to conventional clearance occurring at the port of entry.
Transport raises many questions about public safety and the environment. Issues of public safety have, for a long time, led to the development of policies requiring driving licenses, limiting the working hours of drivers, imposing equipment standards, establishing speed limits, and mandating highway codes, seat belts, and other accident controls. More recently, environmental standards and control measures have been instituted, in response to the growing awareness of the environmental impacts of transport. Examples include banning leaded gasoline and mandating fuel efficiency and emission standards. More recent policy endeavors concern reducing carbon emissions by the transport sector.
Transport policy has been developed to prevent or control the inherent monopolistic tendency of many transport modes. Unrestrained competition commonly leads to market dominance by a company, thereby achieving (close to) monopoly power. Such dominance brings into question many issues affecting the public interest, such as access (smaller actors prevented access to infrastructure), availability (smaller markets being less serviced, or services being discontinued), and price (the monopolist being able to charge high prices).
Other reasons for policy intervention include the desire to limit foreign ownership of such a vital industry for concerns that the system would be sidetracked to service more foreign than national interests. For example, the United States limits the amount of foreign ownership of its domestic airlines to a maximum of 49%, with a maximum of 25% control. Other countries have similar restrictions, at times forbidding foreign ownership of several transport assets altogether. This challenges the growth and expansion of transnational managers and operators of transportation assets and the large financial institutions supporting them, such as sovereign wealth funds.
In recent years, four trends had significant consequences over the context in which the transport policy takes place:
- Globalization increased interactions at the international level, both for freight and passengers. This led to the emergence of large actors managing a portfolio of modes and infrastructures across international jurisdictions and therefore dealing with a variety of transport policies and regulations.
- Deregulation and privatization have been ongoing in many transport markets. This enabled the transfer of ownership and operation of many transport modes to the private sector and favored the entry of new actors. This was particularly the case in the airline industry.
- A broader focus of policies, particularly considering intermodalism and multimodalism, as well as logistics. This has enabled better coordination of investments improving the efficiency of interconnected transportation networks and the related supply chains.
- A move towards social and political issues behind transport projects as opposed to technical and engineering issues. The policy process is becoming more responsive toward public concerns over issues such as environmental externalities and social equity. This has led to the introduction of standards and benchmarking mechanisms such as Environmental, Social and Governance (ESG) criteria. However, this has also been linked with additional costs, delays, and controversy in the development and operation of many large transportation projects.
3. Policy Instruments
Governments have a large number of instruments at their disposal to carry out transport policies. Some are direct, such as public ownership, but the majority are indirect, such as safety standards. The most common are:
- A vital instrument concerns public ownership. The direct control by the state of transportation infrastructure, modes, or terminals is widespread. The most common is the provision by public agencies of transport infrastructure such as roads, ports, airports, and canals. Public ownership, in the form of a state enterprise or agency, also extends to include the operation of transport modes such as airlines, railways, ferries, and urban transit by public agencies.
- Subsidies represent an important instrument used to pursue policy goals. Many transport modes and services are capital intensive, and thus policies seeking to promote services or infrastructure that the private sector is unwilling or unable to provide may be made commercially viable with the aid of subsidies. Private railroad companies in the Nineteenth Century received large land grants and cash payments from governments anxious to promote rail services. In the United States, the Jones Act, which seeks to protect and sustain a US-flagged merchant fleet, subsidizes ship construction in US shipyards. Indirect subsidies were offered to the air carriers of many countries in the early years of commercial aviation through the awarding of mail contracts. Dredging of ship channels and the provision of other marine services such as pilotage and navigation aids are subsidies to facilitate shipping. Most public transit systems are subsidized to provide mobility since full cost recovery would make fares unaffordable to the poorer segments of the population. Both public ownership and subsidies represent instruments that require the financial involvement of governments. Revenue generation is becoming an increasingly important instrument in transport policy.
- Regulatory control represents a means of influencing the shape of transportation that is widely employed. By setting up public agencies to oversee particular sections of the transport industry, governments can influence the entire character and performance of the industry. Agencies may exert control on entry and exit, controlling which firms can offer transportation services, at what prices, and to which markets. Environmental regulations are also important factors shaping the provision, construction, maintenance, and operation of transportation infrastructures. Thus, while private firms may offer the actual services, the regulator plays a determining role. Regulatory agencies in the US, such as the Civil Aeronautics Board, played a critical role in shaping the US airline industry for decades.
- Many governments are major promoters of research and development in transportation. Government research laboratories are direct products of state investments in R&D, and much of university and industry R&D is sustained by government contracts and programs. The outcomes of this research are extremely important to the industry. It is a vital source for innovation and the development of new technologies, including a testbed for technical and commercial feasibility. Besides, educational institutions that are commonly funded by public resources provide operators, managers, and analysts for the private transport sector. With the growing role of information technologies, influencing research and education programs became even more salient.
- Labor regulations pertaining to conditions of employment, training, and certification may not be directed purposefully at influencing transport. Still, as a policy, they may exert a significant effect on the industry since it has an impact on its operating costs.
- Safety and operating standards, such as speed limits, may have a similar effect. The restrictions on limiting the number of hours a truck driver may work may be instituted for safety reasons and to enhance the working conditions of drivers. Still, they shape the economics of truck transport. In the same fashion, speed limits help fix the distance of daily trips that one driver may undertake, thereby shaping the rate structure of the trucking industry.
A common issue concerning policy instruments is that they may have unintended consequences, particularly if they are indirect effects. For instance, taxation and subsidies could influence one mode to the advantage of others, even if they are more efficient. There is a risk that the selection of a proper alternative is the outcome of a policy decision instead of market forces.
4. Policy Development
Public policies reflect the interests of decision-makers and their approaches to solving transport problems. These interests and approaches are both place-specific (they apply to a particular area of jurisdiction) and time-specific (they are established to reflect the conditions of transport and the intended solutions at a point in time). Policies are dynamic. They change and evolve as circumstances change, and as new problems are recognized.
The dynamic nature of policymaking is reflected in the way the policy instruments have been employed over the years. In the 19th Century, when many of the modern transport systems were being developed, the prevailing political economy was one of laissez-faire, in which it was believed that the private sector should be the provider of transport services and infrastructure. Historical examples of private transport provision include:
- Turnpikes. The first British modern roads in the 18th century were the outcome of private trusts aiming a deriving income from tolls on roads they built and maintained. It was likely the first massive private involvement in transport infrastructure provision.
- Canals. Many of the earliest canals were built with private capital. One of the first canals that helped spark the Industrial Revolution in Britain was the Bridgewater Canal.
- Urban transit. In most European and North American cities, public transit was operated by private firms. The earliest examples were horsecars that followed rail lines laid out on city streets. With electrification at the end of the 19th century, the horsecars were converted to streetcars, and the network was greatly expanded. In the 20th century, buses were introduced by private companies operating on very extensive route systems.
- Ships. Most maritime shipping companies were private family-owned enterprises, some of which became large companies, such as the Cunard Line in the UK, MSC in Switzerland, or Maersk in Denmark. The main government involvement concerns military navies and ferries.
- Railways. Railways were developed by private companies during the 19th century. In North America, this has continued to the present day. In Europe, deregulation mainly resulted in the emergence of private carriers, but the infrastructure remained publicly owned.
This situation was not entirely without public policy involvement, however. The massive subsidies that were granted to European and North American railroads are an example of state intervention. In the early 20th century, the overprovision of rail lines (rail manias), competition between carriers, and market failures led to a crisis in many parts of the transport industry, particularly after 1918. This led to a growing degree of government involvement in the transport industry, both to offset market failures, jurisdictional conflicts and to ensure that services could be maintained for the sake of the “public good”:
- In many cities, private bus companies were taken over by municipally controlled transit commissions in the 1930s and 1940s.
- The airline industries in many countries were placed under the control of a national public carrier, for example, Air France, Trans Canada Airlines, and British Overseas Airways Corporation. In the United States, airlines remained private but subject to a high level of regulation in terms of the condition of their service.
- The nationalization of railways in the first half of the 20th century occurred in most of Europe as well as in countries where rail transportation played an important role, such as Canada, Russia, China, Japan, and India. This allowed the consolidation of existing lines into national systems. In the United States, the system remained private but highly regulated. After the collapse of the Penn Central Railroad and several other lines in the 1970s, a publicly funded passenger system (Amtrak) was set up, and a publicly owned freight railroad was established (Conrail, which was sold to private rail companies in 1999).
Governments eventually captured many segments of the private transport sector. In addition to the public ownership of transport modes, a growing amount of regulatory control emerged. The belief in liberal markets with limited public interference was seriously reconsidered after the crash of 1929 and the economic downturn of the early 1930s. From that moment on, governments were incited to extend the scope of their responsibilities. The public sector was an important trigger for the reconstruction of Europe in the aftermath of World War II (e.g. the Marshall plan) for the modernization of the industrial structure and economic growth. Economic and social measures were directed toward the creation of the welfare state.
The period from the 1940s to the 1970s was characterized by nationalization when socialist ideology was put into practice throughout the world. For example, the European transport industry saw the emergence of large national companies in public transport, freight rail, ferry services, deepsea shipping, and the airline industry. These large nationalized companies could mobilize new resources and technologies, thereby contributing to national goals of economic growth and full employment. Nationalization was also a common practice in newly independent nations that emerged with decolonization in the 1950s. Controlling key transportation infrastructure and economic sectors was perceived as central to sovereignty. For instance, Egypt nationalized the Suez Canal in 1956, and its management was put under the responsibility of a state agency.
While centrally planned economic systems (such as the Soviet Union, Eastern Europe, and China) involved complete control by the public sector, governments in Western Europe and North America were also major players in the market through market control systems up to the full nationalization of industries considered to be of strategic importance to economic development and external trade. The airline and the trucking industries saw entry limited by permits, and routes and rates were fixed by regulatory boards that had been set up to control the industries. At the same time, greater safety regulations were being imposed, and working conditions were increasingly being shaped by labor legislation.
By the 1960s, transportation had become under the sway of public policy initiatives that exerted an enormous influence on industries and their spatial structures. At the same time, there was also a growing body of evidence that indicated that public ownership and regulation were not always in the public interest. Transportation costs that were fixed by the regulatory authorities were maintained at higher levels than necessary. Many regulatory boards had been captured by those they were supposedly regulating so that they were frequently acting to protect industries rather than the public. At the same time, there was a public finance crisis in many countries, where the costs of operating the state-owned transportation industry were seen to be unsustainable. The theory of contestability repudiated traditional economic theory concerning monopoly power by arguing that the threat of entry of a new actor was sufficient to thwart a monopolist’s ability to impose monopoly pricing. The key, therefore, was to relax entry thresholds, by allowing new firms to start up, a process that regulatory boards were impeding.
This evidence was brought into the public policy arena by politicians who espoused market-oriented views, notably President Reagan in the US and Prime Minister Thatcher in the UK. Although President Carter had initiated the first steps towards deregulation in the US in the mid-1970s, it was in the 1980s, during the Reagan presidency, that trucking, the airline industry, and the railways were largely deregulated. In the UK, in addition, there has been a massive move to privatize most sectors of the transport industry, including state and most municipally-owned bus companies, the national airline, trucking, the railway, airports, and most seaports.
Deregulation and privatization policies have spread unequally to many other parts of the world. New Zealand has perhaps the most open transport policy, but many others, such as Canada and Australia, have made significant steps in this direction. In the EU, the pace of deregulation and privatization is proceeding unevenly. Subsidies to state-owned transport companies have been terminated, and many airlines have been privatized. Government-owned railroads still exist in France, Germany, Italy, and Spain, but the tracks have been separated from the traction and rail service operations. They have been opened to new service providers. In Latin America, most of the state-owned transport sector has been deregulated. While the former centrally planned states have had to make the furthest adjustments to a more open market economy, several, such as China, have opened large sections of the transport industry to joint ventures with foreign private enterprises. In China, many new highways and most of the major ports have been developed with semi-private capital under the umbrella and quasi-independent state enterprises. Thus, at the beginning of the 21st Century, transportation is under less direct government economic control worldwide than at any period over the last 100 years.
5. Changing Nature of Policy Interventions
The trends in transport policy in recent decades have been toward liberalization and privatization. This has not necessarily weakened the role of governments and their interventions in transportation. Quite the opposite, government regulatory oversight is well established and enforced. Controls over monopoly power are still in place, and even in the most liberal of economies, there is still strong evidence of public policy intervention:
- Ownership of ports and airports. Terminals continue to be largely under State or municipal ownership, but concession agreements to private operators are common.
- Highway provision, upgrade, and maintenance remains one of the most significant and enduring commitments of public funds.
- Urban transit systems remain dominantly publicly owned and operated. Intercity transport is mostly private, which brings the question of if urban transportation would gain to be privatized.
- Mergers and acquisitions between large private or public entities in the transport sector are commonly subject to regulatory approval to prevent monopolistic behavior.
Government policy orientations have changed, however. Governments are exerting greater control over environmental and security concerns, issues that are replacing former preoccupations with economic matters. For instance, because of biofuel policies aiming at ethanol production using corn, the unintended consequence was a surge in global food prices as more agricultural land was devoted to energy production instead of food production. Sustainability and the environment are becoming significant issues for government intervention. Coastal zone legislation has made it increasingly difficult for ports to develop new sites. Air quality is a significant factor influencing the allocation of US federal funds for urban transport infrastructure. In Europe, environmental issues are having an even greater influence on transport policy. The EU Commission is promoting rail and short sea shipping as alternatives to road freight transport. Projects are assessed based on CO2 reduction and carbon neutrality. Stated goals about decarbonization are issued concerning transport modes. All transportation projects are subject to extensive environmental assessments, which may lead to delays and even a rejection of proposals, despite strong economic justification. As a major source of atmospheric pollution and environmental degradation, the transportation industry can anticipate further government environmental policy interventions.
Safety has always been a policy issue. Legislation imposing speed limits, mandating seat belts, and other measures have sought to make travel safer. Screening of people and freight became a major concern after 9/11. Both the US government and international organizations, such as the International Maritime Organization (IMO) and the International Civil Aviation Authority (ICAO), have instituted measures that impact operations and represent additional costs to the transport industry.
While there may have been some reduction of policy involvement involving economic regulations, the influence of public policy on transport overall is still powerful but contentious at times. It must be acknowledged that capital investment by governments in transport infrastructure commonly follows multiple and sometimes conflicting policy goals. For instance, short terms policy goals of job creation are usually incompatible with long term goals such as economic growth and energy efficiency. The usual outcome is that projects with multiple policy goals reduce their economic benefit because of conflicting goals. Like policy in general, transport policy is driven by a value system that reflects aspirations. When the value system changes and evolves, it can generate discrepancies between concrete conventional policy goals of value creation and subjective social values.
- 9.2 – Transport Planning and Governance
- 9.3 – Transport Safety and Security
- B.16 – The Financing of Transportation Infrastructure
- B.17 – Logistics Policies
- B.22 – Rail Deregulation in the United States
- Bailey, E.E. and W.J. Baumol (1984) “Deregulation and the Theory of Contestable Markets”, Yale Journal on Regulation, Vol. 1, pp. 111-137.
- Banister, D. (2002) Transport Planning, Abingdon/Oxford: Routledge.
- Goetz, A.R. (2002) “Deregulation, competition, and antitrust implications in the US airline industry”, Journal of Transport Geography, Vol. 10, pp. 1-19.
- Hogwood B and Gunn L.A (1984) Policy Analysis for the Real World. Oxford: Oxford University Press.
- Notteboom, T. (2013) “Transport Policy Instruments”, in J-P Rodrigue, T. Notteboom and J. Shaw (eds), The Sage Handbook of Transport Studies, London: Sage, pp. 281-292.
- Stopher, P. and J. Stanley (2014) Introduction to Transport Policy, Northampton, MA: Edward Elgar Publishing.
- Tolley, R. and B. Turton (1995) Transport Systems, Policy, and Planning. London: Longman.
- van Wee, B., J.A. Annema and D. Banister (eds) (2013) The Transport System and Transport Policy: An Introduction, Cheltenham, UK: Edward Elgar.