North American Freight Transportation: U.S. Trade with Canada and Mexico

North American Freight Transportation: U.S. Trade with Canada and Mexico

June 2006

Overall Highlights

In 2005, the total value of U.S. merchandise trade with Canada and Mexico reached an all-time high of $790 billion, an increase of 11 percent over the $712 billion traded in 2004. This strong growth continues the rebound that started in 2003 after declines in the two previous years. While U.S. goods trade with its North American Free Trade Agreement (NAFTA) partners shows strong growth, the NAFTA share of overall U.S. international goods trade declined for the fourth consecutive year, dropping from a high of 32.8 percent in 2001 to 30.7 percent in 2005, reflecting the rising trend in U.S. trade with its other trading partners (table 1).

Although the value of U.S. merchandise trade with Canada and Mexico has more than doubled in both current and inflation-adjusted dollars since the inception of NAFTA in 1994 (table 1), it is the accompanying increase in volume that has had the greatest impact on trade corridors and transportation infrastructure. From 1995 to 2005, the number of truck crossings into the United States from Canada and Mexico increased 47 percent, from about 8 million crossings in 1995 to nearly 12 million last year.    This increase in trade volume underscores the growing demands on border facilities at key land gateways and the major transportation corridors traversing our northern and southern borders.

Past editions of this annual highlights report featured land modes only; with the addition of air and water to the Transborder Freight Data, this edition now includes all modes. Figure 1 reflects this change by not only showing the trend in U.S.-NAFTA trade since 1994 for land modes but for all modes as well. However, most of the value of U.S.-NAFTA trade is by land modes. In 2005, these modes (truck, rail, and pipeline) moved freight shipments worth $698 billion across the borders with Canada and Mexico, accounting for 88 percent of U.S. trade with these two countries.

Since 1994, the value of freight moved among the three countries has averaged almost 8 percent annual growth in both current and inflation-adjusted terms, compared with about 7-percent growth for U.S. goods trade with all countries (table 1).

In 2005, both goods trade and gross domestic product (GDP) grew in inflation-adjusted terms. Except in 2001 and 2002, during the past decade, U.S. trade with Canada and Mexico has increased at a faster rate than U.S. GDP (figure 2).

In terms of weight, nearly 679 million short tons of freight were transported by all freight modes between the United States and its NAFTA trading partners in 2005 (table A-1). About two-thirds of this trade was with Canada, and one-third was with Mexico. Imports accounted for 69 percent, while U.S. exports to both countries accounted for 31 percent of the tonnage.

Top Trading Partners

Canada has been the number one U.S. trading partner for several decades, and Mexico became number two when it surpassed Japan in 1999. China became our third largest trading partner in 2003 when it surpassed Japan. In 2005, the top five trading partners – Canada, Mexico, China, Japan, and Germany – accounted for almost 54 percent ($1.4 trillion) of the total U.S. international merchandise trade valued at $2.6 trillion.

Among the lead countries, U.S. trade with China grew the most between 2001 and 2005, rising at an annual average growth rate of 23.8 percent (table 2). In comparison, U.S.-Mexico trade had a 5.7 percent annual average growth rate, and U.S.-Canada trade recorded a 7.0 percent growth rate. Reflecting these large differences in growth rates, U.S. trade with China in 2005 was within $5 billion of Mexico—our second largest trading partner (figure 3). U.S. trade with Japan declined for several years after 1999, followed by a slight rebound in 2004 and 2005.
In 2005, U.S. exports to and imports from Canada each grew 12 percent from 2004; the values were $211 billion in exports and $288 billion in imports. Exports to Mexico grew 8 percent from 2004 to $120 billion, while imports grew 9 percent to $170 billion (table A-2).

Modal Perspective

In 2005, land modes of transportation carried the great majority (88 percent) of goods traded with Canada and Mexico, a proportion that has remained stable since 1994 (table 1). Of the remaining goods, 8 percent moved by sea and 4 percent by air.

Transborder freight moved by land modes rose 10 percent from 2004, to $698 billion in 2005. The growth rate slowed slightly from 2004, when land freight was up 13 percent from 2003. Imports by land from NAFTA partners amounted to $401 billion, and exports were $297 billion (figure 4).

In 2005, U.S. merchandise trade by land modes with Canada was valued at $458 billion (66 percent of the total land trade). Imports by land mode from Canada were valued at $265 billion, and exports by land were valued at $193 billion, an increase of roughly 12 percent each over 2004. Trade with Mexico by land modes in 2005 was valued at $240 billion and accounted for 34 percent of U.S.-NAFTA land border freight. This was an increase of 7 percent from 2004 compared to a 12-percent increase between 2003 and 2004. In 2005, imports by land mode from Mexico were valued at $135 billion and exports by land valued at $104 billion, an increase of 6 and 7 percent, respectively, over 2004.

Trucks carried over $491 billion, or 62 percent, of the total value of U.S.-NAFTA merchandise trade by all modes in 2005. Imports by truck were valued at $256 billion and exports at $235 billion (figure 5), an increase of 8 and 9 percent, respectively, over 2004 (table A-2). In 2005, total U.S.-Canada trade by truck reached an all time high of $295 billion, an increase of 10 percent compared to 2004. More freight was exported to Canada by truck ($151 billion) than imported by truck ($144 billion), a trend that differs from the overall U.S. trade balance with Canada.

On the northern border in 2005, there were over 6.7 million truck crossings with 6.8 million truck container crossings into the United States from Canada. Michigan handled 2.7 million and New York 1.9 million incoming truck crossings, accounting for 69 percent of all truck entries from Canada. The state of Washington was the only other state with truck crossings of more than one-half million (table A-3). The border gateways of Detroit and Port Huron in Michigan with 1.7 million and 922,000 truck crossings, respectively, handled almost 40 percent of the truck crossings from Canada. Buffalo-Niagara Falls in New York handled about 1.1 million truck crossings from Canada (table A-4).

The total U.S.-Mexico trade by truck reached $196 billion in 2005, a 6-percent increase from 2004. Imports by truck from Mexico were valued at $112 billion (7-percent increase over 2004) and exports reached $83 billion (5-percent increase over 2004).

On the southern border in 2005, there were more than 5 million truck crossings, including more than 4.6 million container crossings into the United States from Mexico. The state of Texas recorded 3.5 million truck crossings and California 1.1 million, accounting for more than 92 percent of truck crossings into the United States from Mexico (table A-3). The land gateway of Laredo, Texas, handled 1.5 million truck entries followed by Hidalgo, Texas (844,000), and El Paso, Texas (741,000) (table A-4).

Rail transborder freight accounts for almost 15 percent of the value of U.S.-NAFTA trade by all modes. In 2005, rail transborder freight climbed to $116 billion, an 8-percent increase over 2004. Imports by rail from NAFTA partners reached $81 billion, and exports reached $35 billion with growth of 4 and 16 percent, respectively, over 2004. In 2005, rail freight moved between the United States and Canada was valued at $80 billion, an increase of 7 percent over 2004. Rail imports from Canada were valued at $61 billion and exports at $19 billion, an increase of 5 and 16 percent, respectively, over 2004. U.S. merchandise trade with Mexico by rail was valued at $37 billion, an increase of 8 percent over 2004. Rail imports from Mexico were valued at $21 billion and exports at $16 billion, an increase of 3 and 16 percent, respectively, over 2004 (table A-2).

In 2005, about 33,000 trains crossed into the United States from Canada with more than 1.9 million containers. Michigan received about one-third of the freight rail traffic from Canada --10,000 trains and 730,000 rail containers. Minnesota had the second largest number of train crossings from Canada (8,100), and North Dakota had the second most incoming rail containers with over 300,000 entries (table A-3).

In 2005, there were over 9,400 train crossings with about 730,000 container crossings into the United States from Mexico. The majority of these containers came in through Texas, which handled 8,000 train entries and 663,000 container crossings. Train and rail container entries into Texas accounted for 84 and 91 percent of all the southern border rail traffic, respectively. Since 2001, there has been a sizable increase in rail containers entering the United States from Mexico. Between 2001 and 2005, rail container crossings into California grew 77 percent while Texas had a 29-percent increase (table A-3).

Pipelines carried more than 6 percent of the value of U.S.-NAFTA trade by all modes in 2005. The value of commodities moved by pipelines rose to $52 billion in 2005, a 34-percent increase from 2004, U.S. trade with Canada accounted for 99 percent of this activity. Most of this pipeline trade is imports from Canada worth nearly $49 billion. By comparison, U.S. pipeline exports to Canada were valued at $2.4 billion (table A-2).

In addition to the goods transported by surface modes described above, air and maritime carriers moved merchandise worth over $91 billion in 2005. This was a 17-percent increase from 2004 and represented about a 12-percent share of the total U.S.-NAFTA goods trade. Exports were $34 billion and imports were $57 billion (table A-2).

Air cargo trade accounted for 4 percent of total U.S.-NAFTA trade in 2005. Air cargo trade with Canada and Mexico reached $33 billion, a 3-percent increase over 2004. In 2005, there was no significant growth in air trade with Canada. Imports from Canada by air were valued at $8.5 billion and exports to Canada were valued at $14.3 billion, both similar to 2004. U.S. imports from Mexico by air were valued at $3.9 billion, an increase of 13 percent over 2004. Exports to Mexico by air reached $6.4 billion, a 7-percent increase over 2004 (table A-2)

Maritime trade accounted for 7 percent of the total U.S.-NAFTA trade by value. In 2005, the total U.S.-NAFTA merchandise trade by vessel was valued at over $58 billion, a 27-percent increase compared to 2004. Of this U.S.-NAFTA maritime freight activity in 2005, trade with Canada valued at $18.2 billion, an increase of about 32 percent over 2004. Imports from Canada were valued at $14.0 billion and exports were valued at $4.2 billion (table A-2).

In 2005, U.S. maritime trade with Mexico (over $40 billion) was valued at more than twice that of Canada, accounting for 69 percent of the U.S.-NAFTA maritime freight activity. Maritime imports from Mexico reached $31 billion and exports were $9 billion.

Modal Roles by Value and Weight

The relative modal shares are very different when U.S.-NAFTA trade is measured by the weight of the transported goods as opposed to value of shipments (figure 6). In 2005, water transportation carried more freight, in terms of tonnage, than any other mode in U.S.-NAFTA trade. An estimated 237 million short tons moved over water, accounting for about 34 percent of the weight, but less than the 246 million short tons recorded in 2004. Water transportation was followed by truck, pipeline, rail, and air in tonnage.
Water is dominant in terms of weight because it moves heavy bulk products (e.g., grains and crude petroleum), while higher value-per-ton commodities (e.g., fresh flowers, electrical machinery) are more often moved by air, truck, and rail. Water transportation dominated U.S.-Mexico trade by weight, moving 44 percent of the tonnage; water accounted for 26 percent of U.S.-Canada trade tonnage.

In terms of value, trucks transported over 62 percent of U.S.-NAFTA trade goods in 2005 (figure 6). However, trucks moved only about 28 percent of the weight of U.S.-NAFTA trade goods (figure 6). In 2005, trucks moved 22 percent of U.S.-NAFTA import tonnage compared with an estimated 42 percent of export tonnage.

Trucks were more dominant in U.S. freight activity with Mexico, accounting for 67 percent of the value compared to 59 percent with Canada.

Pipelines accounted for 7 percent of the U.S.-NAFTA trade by value and 13 percent by weight (86 million short tons).

The relative modal roles by weight also vary for U.S.-Canada and U.S.-Mexico trade. For example, in 2005, rail transported about 24 percent of the weight of U.S. trade with Canada but just 14 percent of U.S.-Mexico trade. In total, rail accounted for 21 percent of U.S.-NAFTA trade by weight.

Air accounted for 4 percent of the value of U.S.-NAFTA freight, but less than one-tenth of 1 percent of the weight. Goods shipped by air tend to be lighter in weight and high value per ton.

Freight by State and Port

The distribution of U.S. trade with Canada and Mexico and the movement of this freight continue to impact the U.S. transportation network, particularly at major border entry points and north-south highway corridors. In 2005, Texas was the top state by trade value with about $127 billion in goods trade with the NAFTA partners, an increase of 11 percent from 2004. Michigan had a more modest increase of 2 percent, reaching $98 billion. California ranked third with $80 billion (table A-5a). Together, these top three states were the origin and destination for nearly 40 percent of the total value of U.S.-NAFTA trade in 2005.

Michigan topped the list of states for value of merchandise trade with Canada in 2005. Goods transported between Michigan and Canada totaled $73 billion, which was more than double the value of goods moved between the second ranked state and Canada. Michigan was followed by California, New York, and Illinois (table A-6a). The top 2 states trading with Mexico accounted for 51 percent of the value of total U.S.-Mexico merchandise trade in 2005. Texas was the number one ranked state by value of good transported to and from Mexico followed by California and Michigan (table A-6b).

Two of the four largest U.S. land ports are in Michigan – Detroit and Port Huron (table A-7). In 2005, these two ports combined handled over $198 billion of freight. This activity is larger than the $96 billion of land trade for which Michigan is the origin or destination, because these ports serve as trade gateways for all states nationwide. The land ports of entry at Detroit and Port Huron experienced an increase of 15 and 4 percent respectively, yet the state of Michigan itself recorded only a 2 percent increase in U.S.-NAFTA trade by land modes.

On the southern border, the land ports of Laredo, El Paso, and Hidalgo, all in Texas, also serve as national gateways, handling trade valued at $155 billion, far above the total of $98 billion for which Texas is the origin or destination. These three ports in Texas accounted for 22 percent of all U.S.-NAFTA land trade. Freight passing through Texas’ largest port, Laredo, saw a 5-percent increase in 2005 following an almost 14-percent increase in 2004 (table A-7). The state of Texas had a 7-percent increase in land mode trade in 2005 compared to a 16-percent rise at the state level in 2004.

The top 10 U.S. land gateways handled more than 70 percent of total value of goods traded with the NAFTA partners transported by land modes.
Between 2004 and 2005, the fastest growing U.S. states in terms of percentage increase in value of NAFTA merchandise trade were New Hampshire and Oklahoma. In terms of a change in the actual value if NAFTA merchandise trade, the state with the largest increase in 2005 was Texas, despite experiencing a percent change below the average for all states (table A-5a).

In 2005, New Hampshire, Oklahoma, and Colorado recorded the highest percentage increase in trade with Canada over the previous year. Rhode Island and Alaska had the highest percent increase with Mexico between 2004 and 2005 (table A-6a & 6b).

Overall in 2005, merchandise trade declined in four states—Maine , Delaware, West Virginia, and Virginia. Of these states, Maine’s decline was steepest, 31 percent, reflecting a sharp drop in trade with Canada (table A-5a).

In 2005, Texas surpassed Michigan as the top state for value of NAFTA trade by land modes. About $98 billion in freight was transported by land modes between Texas and Canada and Mexico. Michigan was ranked second and California third with $96 billion and $70 billion in trade, respectively (table A-5b). The value of freight transported by land mode between Illinois (the fourth ranked state) and the NAFTA partners increased by nearly $7 billion, more than any other state in 2005.
California was the leading origin and destination state for air shipments with Canada and Mexico, accounting for 22 percent of the total value of U.S.-NAFTA air freight in 2005. The second and third ranked states were Texas and New York for both Canada and Mexico (table A-8). The value of air shipments for the top three combined was 42 percent of U.S.-NAFTA air freight.

Texas was the number one state by value for vessel shipments to and from Mexico. More freight was moved between Mexico and Texas by water ($23 billion) than between Canada and all 50 states by water in 2005. The second and third leading states in U.S.-Mexico waterborne trade were those with ports along the Gulf of Mexico; Louisiana and Mississippi (table A-8). These top three states accounted for 77 percent of the value of vessel shipments between the U.S. and Mexico. The top states for value of freight moved between the U.S. and Canada by vessel in 2005 were New Hampshire, New Jersey, and Texas, accounting for 42 percent of the $18 billion in U.S.-Canada waterborne freight trade.

Freight Shipments by Commodity and Mode

Just 10 commodity groups, with shipments valued at $570 billion, accounted for 73 percent of all U.S.-NAFTA freight shipments in 2005. Exports of these top 10 commodity groups were valued at $225 billion amounting to 68 percent of the total U.S. exports to Canada and Mexico. Imports of the 10 commodity groups were valued at $345 billion – 76 percent of the total imports from our NAFTA partners (table A-9).

Top Commodities

Ranked by value, motor vehicles and parts was the leading commodity group transported between the United States and our NAFTA partners in 2005 (figure 7). Nearly $1 out of every $5 (18.2 percent) of freight shipments between the United States and its NAFTA partners involved motor vehicles and parts, totaling $143 billion. Of this, $104 billion was traded with Canada, and $38 billion was traded with Mexico (table A-9). The dominance of motor vehicles and parts reflects the continued integration of automotive production across the borders of the three countries.

Motor vehicles and parts was the leading commodity in U.S.-Canada land mode trade and third for U.S.-Mexico land mode trade (table A-9).

Electrical machinery and equipment was the top commodity traded with Mexico in 2005 – $63 billion compared to $33 billion with Canada (table A-9). About 37 percent of this trade with Mexico was exports and 63 percent imports. Nearly, the reverse is true for U.S.-Canada trade in these goods–67 percent was exports and 33 percent imports.

By tonnage, the top 10 commodities made up about 76 percent of U.S. freight traded with Canada and Mexico. At the head of the list by a large margin was mineral fuels, oils, and waxes (HS 27), which accounted for 39 percent of the freight tonnage moved by all modes between the United States and NAFTA partners (figure 8). No other commodity group accounted for even 10 percent of the total tonnage.

Commodities by Mode

Truck–While trucks transport many goods between the United States and the NAFTA partners, just a few commodity groups account for the bulk of transborder truck shipments. For example, the top 10 commodities transported by truck in U.S.-NAFTA trade, with shipments valued at $347 billion, accounted for 71 percent of the total U.S.-NAFTA truck freight. The 10 leading commodities moved by truck in U.S.-Canada trade were valued at $203 billion and represented 69 percent of all U.S.-Canada truck trade. The top 10 commodities traded with Mexico by truck totaled $148 billion or 76 percent of U.S. Mexico truck trade (table A-10).

Computer related machinery and parts and other items grouped under the two digit commodity code for nuclear reactors, machinery, and parts 1 were the leading commodities moved by truck in U.S.-NAFTA trade for 2005, totaling $83 billion. Trucks transported $48 billion worth as exports and $35 billion as imports. Of the $83 billion of this commodity hauled by trucks in 2005, about $49 billion went to and from Canada and $34 billion to and from Mexico (table A-10).

Electrical machinery, equipment, and parts was the second largest commodity group in U.S.-NAFTA trade by value transported by truck for 2005, totaling just under $83 billion. This commodity group was the largest by value transported between the U.S. and Mexico overall and by truck, $59 billion.
Motor vehicles and parts is the third leading commodity moved by truck in U.S.-NAFTA trade, valued at $81 billion. Additionally, it was the leading commodity traded between the United States and Canada valued at $66 billion (table A-10).

Rail–The top 10 commodities moved by rail amounted to $98 billion and accounted for 84 percent of all commodities transported by rail in U.S.-NAFTA trade. The leading commodity transported by rail was motor vehicles and parts, for a total of $57 billion in 2005, and accounting for 49 percent of the total U.S.-NAFTA rail freight. Of this, $14 billion was exports and $43 billion was imports (table A-11). Rail shipments of this commodity in 2005 amounted to $37 billion between the United States and Canada, and $20 billion between the United States and Mexico.

Pipeline–In 2005, about $52 billion worth of commodities were transported by pipeline in U.S.-NAFTA trade, an increase of 31 percent compared to 2004. The majority of this trade (94 percent) was imports from Canada, about $49 billion. In contrast, pipelines moved $543 million (all exports) between the U.S. and Mexico, an increase from $87 million traded in 2004. The overwhelming majority of the trade carried by pipelines is mineral fuels, oils and waxes (table A-12).

Air–The top commodity group moved by air with both Canada and Mexico by value was electrical machinery, equipment, and parts, valued at $10 billion; which is just under one-third the value of all U.S.-NAFTA air freight in 2005 (table A-13). Similar to the concentration of commodities moved by surface modes, a few commodity groups account for the majority of U.S.-NAFTA air cargo. The top 10 commodities moved by air accounted for 92 percent of air cargo trade.

Vessel–In U.S.-NAFTA trade, maritime vessel transportation is important for trade in bulk commodities in the Gulf of Mexico, especially petroleum-related products. The top commodity group transported by vessel with both Canada and Mexico in terms of value and weight was mineral fuel, oils, and waxes, valued at about $43 billion, this commodity group made up 73 percent of the value of U.S.-NAFTA maritime freight in 2005 (table A-14). The second largest commodity group transported by vessel between the U.S. and our NAFTA partners was organic chemicals, which made up less than 7 percent of NAFTA freight by water.

For more information on the data presented in this report please visit our website at: http://www.bts.gov/itt.

1 Despite the name “Nuclear reactors” is a very small portion of trade under this commodity grouping (HS 84). The majority of trade for this commodity is computer-related machinery and parts.