The need for freight efficiency

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Inefficiency [is a] slow-moving pandemic that cripples financial position, operational flexibility and innovation over time.” –Shelton Moynahan

Nearly five years ago, Jeffrey Shane, then under secretary for policy at the U.S. Department of Transportation, gave an interesting speech at the 15th Annual Breakbulk Conference & Exhibition in New Orleans concerning the vital importance of improving freight efficiency in the U.S. in order to beef up our nation’s economic competitiveness in global markets.

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Sure, you might say; here’s a topic we’ve covered before ad infinitem and ad nausem. What’s interesting, though, are the parallels between the issues Shane, then-Transportation Secretary Norm Mineta, and the DOT faced at that time and those facing Secretary Ray LaHood and the DOT now.

One of the taxing issues Shane addressed five years ago dealt with how the reauthorization of surface transportation programs dovetailed with efforts to enhance the efficiency of freight movements in the U.S.

“Earlier this month we marked the first anniversary of the expiration of the Transportation Equity Act for the 21st Century – TEA-21 – which provides funding and authorization for the whole array of federal highway, highway safety and transit programs, but this anniversary is no cause for celebration,” Shane said in his October 2004 speech. “Because Congress was not able to pass a six year bill, DOT now has to work within the constraints of an eight-month extension of old programs It is highly regrettable that Congress hasn’t finished its work on that legislation [because] there are important innovations … that we want to see passed, and we will continue to urge Congress to adopt those changes in a six-year bill.”

That complaint sounds very familiar as we head towards an almost eerily similar extension effort of current surface transportation needs – this one with a longer, 18-month delay envisioned – putting off debate on U.S. House Transportation Chairman James Oberstar’s (D-Minn.) ambitious effort to hammer out a $450 billion, six-year surface transportation authorization act by Sept. 30.

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Five years ago, DOT’s Shane felt such delays in surface transportation legislation would hold up efforts to make freight transport more efficient in the U.S. “For example, we would focus more resources on the intermodal connections between our roads, ports, railways, and airports,” he said back then. “We have also proposed a number of new financing tools to better support infrastructure investments, including making highway and freight transfer facilities eligible for private activity bond financing for the first time, and broadening TEA-21’s successful ‘TIFIA’ innovative financing program.”

Interestingly, DOT also proposed five years ago to require each state to appoint a “Freight Coordinator” to help ensure that freight projects receive the proper measure of attention in local and regional planning processes. “Realizing the considerable benefits of … these proposals can only come with final congressional action, however,” Shane stressed. “It is important, therefore, that Congress pass a six-year surface transportation reauthorization as soon as possible.”

The thrust of Shane’s comments, though, addressed the need for not only more efficient but much more highly integrated freight networks in order to handle a higher flow of commerce into and out of the U.S. As we sit now, mired in a global economic recession, these words may seem out of touch with reality … but I don’t think so. In fact, the downturn may give us, as a nation, a chance to improve our freight infrastructure “competitiveness” so we can hit the ground running when better times return.

“The global economy in which we now find ourselves profoundly impacts each and every one of us, often in ways that we do not even realize,” Shane explained five years ago. “This ineluctable transition to a globally driven economy presents special challenges, particularly when it comes to having the port, highway and rail capacity necessary to keep these goods moving. While … trade … brings enormous economic benefits to consumers and economies both here and abroad, it forces us – especially those of us at DOT – to remain focused on the need for transportation infrastructure sufficient to handle the increased flow of commerce that.”

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Perhaps most importantly from the DOT’s perspective, he said, the U.S. economy relies increasingly on seamless connections between all modes of transportation, with port facilities and the highway and rail networks that serve them critical elements in that system. “Unfortunately, in many cases they are being stretched to their limits as they deal with steadily mounting cargo volumes, larger ships, and increased land side congestion,” Shane noted. “Those of us in government with responsibility for national transportation policy have to be cognizant of [this} as increasing capacity or improving operational flows in one mode won’t help much if we don’t address bottlenecks in another.”

Does all this sound familiar? It should, because we’re dealing the exact same problems when it comes to smoothing out freight flows as we did five years ago, even 10 years ago. And it’s a problem that’s not going away.

“Just to give you a sense for what I’m talking about, let me highlight a couple of statistics,” said Shane. He noted that in 1970, overseas trade accounted for only 13% of U.S. gross domestic product (GDP) and that by 2004, the year he gave his speech, it accounted for nearly 30%. Five years ago, the U.S. transportation system carried more than 15 billion tons of freight annually, valued at over nine trillion dollars, with even the most conservative forecasts suggesting that overall freight volumes would grow by another 60% by 2020.

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Of course, the global recession we’re going through now has more than likely knocked that tonnage forecast down a ways. But one thing is for certain – despite the near-term falloff in freight, volumes will grow again – and, again, we’re going to be stuck trying to manage them with an at-times disconnected network of modes, rather than a more unified freight transport system.

“That is why it is not too much to say that America’s place in the global economy of the future will be determined in large part by the efficiency of our transportation system,” Shane stressed. “So we must determined to do all we can to enhance that efficiency.”

We’ll see if we can indeed do that, despite the fiscal and economic challenges that lay ahead.

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