Antiquated Transportation Infrastructure the Biggest Threat to U.S. Competitiveness

The biggest threat to American competitiveness isn’t the cost of manufacturing, but moving goods across a broken freight network that leads to expensive delays for shippers and higher prices for consumers and businesses, transportation and trade experts warned today.

“It’s obvious that our border countries get it,” Hasan Ikhrata, Executive Director of the Southern California Association of Governments, told an international audience on Day 2 of the NAFTANext Summit in Chicago. “Even with limited budgets, they’re wisely making robust investments in transportation infrastructure and reaping economic benefits. We on the other hand continue to live off of investments made generations ago.” 

The summit has gathered representatives from the United States, Mexico and Canada, business leaders and regional planning agencies from across the country to discuss the impact of the North American Free Trade Agreement 20 years after its adoption. A study released Wednesday showed that while NAFTA has met or exceeded most expectations over the past two decades, border processing delays and inadequate transportation infrastructure, left unchecked, will compromise America’s competitiveness moving forward.

Gary Gallegos, Executive Director of the San Diego Association of Governments, noted that truckers crossing the U.S.-Mexico border face delays averaging three to four hours, threatening an increasingly vital component of our economy. Otay Mesa, the largest port of entry between California and Baja, handled 1.5 million truck crossings with a total trade value of $35.7 billion during 2013. 

“We’re missing out on an additional $7 billion in economic output because we can’t get our ports and borders to work together,” Gallegos said. “It’s costing us 62,000 jobs – the equivalent of five Qualcomms, which is our biggest employer in San Diego. We’re simply not taking advantage of what NAFTA brings us.”

Border issues aside, an antiquated transportation infrastructure is the biggest challenge facing the U.S., attendees were told. 

According to SCAG’s Ikhrata, the U.S. in 2011 invested about 2.4 percent of its gross domestic product in infrastructure, compared with 5 percent in Europe and 9 percent in China. The U.S. is also failing in its operating and maintenance of facilities. In 2006, America spent more than twice as much per person as Britain on new construction, but Britain spent 23 percent more per person maintaining its roads.

Compounding the problem is debate over how to pay for transportation improvements. The Highway Trust Fund relies on the federal gasoline tax, which hasn’t seen an increase in 20 years. As a result, and with the proliferation of fuel-efficient and alternative-energy vehicles, the fund is expected to be bankrupt by this fall. 

Time also is running out on the existing surface transportation funding authorization – Moving Ahead for Progress in the 21st Century (MAP-21) – which expires Oct. 1. The Obama Administration has proposed a $302 billion, four-year plan which includes, for the first time, funding for a national freight program. The latter is something transportation planners from across the country have pushed for years. 

“Enhancing our trade capacity greatly relies on the quality of our transportation network and ability to move goods efficiently throughout North America and globally,” Randy Blankenhorn, Executive Director of the Chicago Metropolitan Agency for Planning. “While metropolitan Chicago has unparalleled infrastructure assets and is a freight hub, without adequate investment in our transportation network we stand to lose our competitive advantage.” 

Chicago is part of a “megaregion” with other Midwest cities – loosely defined by their interconnected economic systems, shared natural resources and ecosystems, and common transportation systems that link their population centers together. There are 11 such regions in the U.S., all facing a similar challenge of accommodating goods movement needs with population growth.

In Southern California, SCAG projects population growth of 4 million in the next 25 years over the 18.2 million who currently live in the six-county region. At the same time, the region is home to one of the country’s most important goods movement networks, moving more than 1 billion tons and $2 trillion worth of goods each year.

“It has been estimated that we consume approximately 40 tons of freight per person annually. Obviously that requires infrastructure investments,” said Fran Inman, Senior Vice President for Industry-based Majestic Realty. “The big discussion we all have to have is about funding options for transportation infrastructure.”

 Said Paul Fisher, Vice Chair at both CenterPoint Properties and the Supply Chain Innovation Network of Chicago, “It is essential that metropolitan Chicago and other regions understand the important role logistics, advanced technology, and infrastructure play in maximizing both trade and manufacturing opportunities.”

 NAFTANext, presented by the Coalition for America’s Gateways and Trade Corridors, continues through Friday.