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U.S. Trade Corridors Must Evolve to Keep Pace with the Global Economy

Investment in infrastructure and intermodal facilities is necessary if the United States is to keep pace with the demands of increasing global trade.

July 2011
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Rail Supported Inland Ports
Truck transportation is getting more expensive as the cost of diesel fuel continues to rise; other concerns include traffic congestion and air pollution. Trade corridors that expect to flourish must have strong rail systems that are strategically supported by inland ports. According to the Center for Transportation Research at The University of Texas at Austin, inland ports are "sites located away from traditional land, air, and coastal borders with the vision to facilitate and process international trade through strategic investment in multimodal transportation assets and by promoting value-added services as goods move through the supply chain."

By collaborating with trade corridors, inland ports become efficient economic development engines for their regions, attracting new businesses and industries that benefit from the existing distribution systems and their ability to move products quickly. In order to do this, inland ports must be supported by modern intermodal terminals, where shipments are easily transferred between modes of transportation (road, rail, air, water).

Currently there is intense competition between railroads to build new, expansive high-tech intermodal facilities that add value to their customers' supply chains and keep costs down. In September 2007, the Association of American Railroads advised that $148 billion should be invested to expand the nation's freight rail infrastructure over the next three decades to ensure enough rail capacity to meet future shipping needs. The association's report calls for investment in new tracks, signals, bridges, tunnels, terminals, and service facilities to keep pace with the increasing demand for rail freight transportation; the improvements are also needed to ease highway congestion, reduce stress on highways and bridges, lower fuel consumption, and reduce emissions.

Investing in Intermodal
BNSF expects to invest approximately $3.5 billion in 2011 to upgrade its infrastructure through its Corridors of Commerce initiative. The largest component of the capital plan is spending $2 billion on its core network and related assets. The railroad will also invest about $300 million for federally mandated positive train control (PTC) and $300 million for terminal, line, and intermodal expansion and efficiency projects, primarily focused on the mid-continent and coal routes to improve velocity and throughput capacity.

Part of this work includes building an additional north-south mainline through Tower 55, a vital but heavily congested intersection for the national rail network located southeast of downtown Fort Worth, Texas. More than 100 trains move through Tower 55 during peak days; given the high volume, trains must come to a complete stop prior to passing through the intersection, adding significant time and cost to the run.

Tower 55 is a good example of the kind of partnership funding that is required to make these infrastructure improvements happen - BNSF invested $65 million, with an additional $34 million from the federal government, $1 million from the Texas Department of Transportation, and $1 million from the City of Fort Worth. Improvements include new signaling, bridge upgrades, a third north/south main line, and improved street and pedestrian crossings.

"This could not have happened without the unprecedented collaboration of a number of entities that supported this essential project," says Bill Meadows, a member of the Texas Transportation Commission from Fort Worth. "The financial contributions from the City of Fort Worth, the Regional Transportation Council, the Texas Department of Transportation, BNSF, Union Pacific, and the federal government represent a true partnership that led to this decision. We would not be able to move forward with this project without any one of these partners."

A $2.5 billion upgrade is under way for Norfolk Southern's Crescent Corridor in the eastern United States. This program of independent projects and upgrades will create a high-capacity, 2,500-mile intermodal route running from New Jersey to Louisiana. Improvements include additional passing tracks, double-track projects, improved signaling systems, and track speed enhancements.

Norfolk Southern is also busy constructing intermodal facilities with some of this money, including the new Birmingham Regional Intermodal Facility on a 316-acre site in McCalla, Alabama, that should be operational in late 2012 and be able to process 165,000 containers and trailers annually. The terminal will utilize advanced gate and terminal automation technology, which shortens the waiting time for trucks entering the terminal and improves truck driver productivity as well as air quality. Other intermodal projects are slated for Charlotte, N.C.; Greencastle, Pa.; and Memphis, where the $105 million Memphis Regional Intermodal Facility will use low-emission cranes and the main administration building will meet Leadership in Energy and Environmental Design (LEED) certification standards.

A Future Glimpse
Locally, trade corridors bring the hope of prosperity to the communities through which they pass - prospects for more economic development, more businesses, more jobs, better schools. In 2007 the U.S. Department of Transportation identified Interstate 69 as a "Corridor of the Future." This 2,680-mile international and interstate trade corridor - stretching from Mexico through the United States to Canada - consists of 32 segments, one of which passes through DeSoto County, Iowa.

"This corridor is a potential game changer," comments Greg Dale, a principal with McBride Dale Clarion, a Cincinnati consulting firm working with the DeSoto County Planning Commission to develop a strategic plan for the corridor. Dale indicates that the most important aspect of the plan is "connectivity" with the larger region by effective utilization of 11 interchanges planned for the corridor.

"It's pretty amazing to plan a corridor like this with 11 new interchanges," Dale continues. "We talk about the corridor as a blank slate. This is a tremendous opportunity." Development along the corridor calls for the "creative blending" of industrial, corporate, residential, and other community components. DeSoto County expects to enjoy a robust 21.8 percent growth rate between 2015 and 2020.

Global impacts on U.S. trade corridors include the Panama Canal expansion, which will open a new access path to East Coast ports. "When it is completed in 2014," says Circ, "I think we will see some percentage of container traffic being diverted from the West Coast. The amount may not be as meaningful as some people expect, but a few percentage points of market share still means double-digit growth for some East Coast/Gulf ports. This expansion, however, is also generating a need for infrastructure investment, as most ports on the East Coast do not have the necessary depth to accommodate the larger ships. Therefore it is likely that some federal funding will be allocated to ports for dredging."

Rising oil prices and diesel prices will also change some distribution chains. With higher gas prices, more densely populated areas have an advantage over some trade corridors that are located in the West. "Distributors will want to be closer to the end customer instead of distributing from one large center in an area where land and labor is cheaper," adds Circ. "Transportation costs are higher than labor and real estate costs combined."

Higher labor costs in China, coupled with rising transportation costs, are also starting to change supply-chain configurations, to the point where outsourcing may slow down or transition to near-sourcing locations, such as Mexico. "Of course, Mexico is having issues, especially at the border, but it is still a near-sourcing destination that makes sense," says Circ. Increased near-sourcing will heighten the need for improved U.S.-Mexico trade corridors, such as the Ports-to-Plains Trade Corridor, and perhaps lead to sharper attention by policymakers toward funding vital infrastructure improvements.

A final obstacle to trade corridor improvement is accurate messaging, both to the American public and its government. "While most Americans benefit from trade corridors and freight movement, most are unaware the crucial role goods movement plays in their daily lives," says Ikhrata. "Freight provides enormous regional and national economic benefits in the form of wealth creation, jobs, and taxes. Education for decision-makers and the public will play a key role in ensuring that critically needed freight infrastructure needs garner the support [required] at multiple levels to ensure the maintenance and improvement of our already-constrained transportation system."

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