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Logistics' Need for a World-Class Transportation Infrastructure

How important is the international freight transport system to the U.S. economy? Very.

September 2010
(page 2 of 3)
Consider the Future
How well positioned are we when considering the next 25 years? There's no status quo in the global economy, and there won't be a status quo in transportation. To expect that things won't need to change is probably naïve, and things have already begun to change quite substantially. Consider the following:

• Our infrastructure system was designed in another era, and we are struggling to create patchwork solutions to transform to a fully integrated twenty-first-century system. We do not have the luxury of some newer economies that have been able to design infrastructure that makes sense from a system perspective.

• If "USA Inc." were operating like a company, there are serious business risk factors - the United States has very modest levels of national policy, investment, and strategy for such matters.

• There are relatively few ports moving too many goods. Our existing legacy system has functioned well enough in the past but will create problems into the future.

• The issue of cargo concentration is a significant and growing one for those worrying about homeland security.

• Some of our load-center port regions are experiencing significant challenges with regard to congestion, air pollution, and community push-back.

• We generally do not integrate transportation and economic development very well. Most state transportation planning is separate from economic development strategy, and - as "generalists" - most economic developers have a modest knowledge of the details of global logistics.

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• Though mostly residing in public ownership, ports are owned locally and decisions regarding strategy are made from a community or state perspective guided by local politics, etc.

• Most capital investment in ports and related infrastructure is localized and seen as a public responsibility. There is little federal funding for ports development and related infrastructure.

• There is patchwork private investment in our rail system and intermodal facilities with long-term planning distinct from public policy and public funding.

Among the key issues to be considered in the future are the following:
• Cost of energy - The change in the cost of oil is hugely destabilizing to the logistics industry and expected rises can make or break shipping companies that have cost structures with medium to high transport factors.

• Environment - Increasing environmental awareness and new regulatory pressures will only cause costs to rise as federal, state, and local governments increase their requirements.

• Transport congestion - Per the U.S. DOT, there are substantial problems in some key road and rail transport corridors, and these problems are only expected to worsen and will result in increasing congestion and delay.

• Game-changing infrastructure - The expansion of the Panama Canal is a $5.5 billion investment that will allow for much larger vessels to move from the Pacific to the Gulf of Mexico and the Atlantic. Cargo traffic to and from Asia will have more port-of-entry options. Canada and Mexico are making billions in investments in new ports and supporting infrastructure to take advantage of U.S. cargo inefficiencies.

The objectives of the Canadian Gateway strategies are to intercept U.S.-bound cargo in their territory and deliver to U.S. markets. There are several propositions in Mexico to build new world-class port infrastructure for the sole purpose of serving U.S. markets. Both examples would yield huge opportunities for economic development near to the foreign port region. The objectives for these initiatives are to gain from the U.S. inability to deal with our freight system needs, now and in the future.

Can American manufacturers and importers count on the systems that have shaped and supported their businesses since the early part of the 1900s? If we assume that there will be no significant transportation system enhancements, shippers should expect that there will be an impact on them and that they will suffer negative effects. The status quo business model for some industries/companies will not stand, and negative consequences - including time delays, cost increase issues, and decreasing reliability - will increase. Because of congestion, infrastructure overload, and pollution, it is reasonable to expect that some communities will become less willing to bear the burden of moving throughput cargo.

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