Modal Trends in U.S. Merchandise Trade

Modal Trends in U.S. Merchandise Trade

A large amount of freight carried over the U.S. transportation network is imported or bound for export. In 2001, over 1.6 billion short tons of international merchandise moved to and from the United States, a 5 percent increase from 1997.15 Imports accounted for about 71 percent of this tonnage in 2001, up from about 65 percent in 1997. The relative roles of transportation modes in carrying this large amount of freight vary by value and weight16 (table 7).

Water transportation carries more trade, both in terms of tonnage and value, than any other mode (figure 6). Its share of the weight of U.S. trade rose from 73 percent in 1997 to 78 percent in 2001, but its share of the value declined slightly from 40 percent to 38 percent. Water is less dominant in terms of value because higher value-per-ton commodities are often moved by air and truck, especially in U.S.-NAFTA trade. While air transportation accounted for nearly 28 percent of the value of total U.S. trade in 2001, its share of the tonnage remained less than 1 percent. Trucks moved 21 percent of the value and 11 percent of the weight.

In terms of value, a far higher share of imports enter the United States by water transportation than are exported by ship-46 percent compared with 27 percent. By contrast, truck and air moved a larger share of the value of exports than imports. Trucks moved 26 percent of the value of exports and 18 percent of imports (table 7). In terms of weight, water accounted for 79 percent of U.S. imports and 75 percent of U.S. exports.

Despite the decline in overall freight movements in 2001 compared with 2000 (see appendix table C-6, p. 121), the relative modal shares do not show a dramatic change. However, airs share of the total value declined noticeably from 30 percent to 28 percent, in part, due to the closure of U.S. airspace for several days following the September 11 terrorist attacks. Trucking maintained its share, while rail rose very slightly. Waters share rose slightly by value but remained stable by weight (table 8).

International Maritime Trade and Transportation

In 2001, merchandise trade valued at over $718 billion moved between the United States and foreign seaports. Trade with Canada and Mexico accounted for only 4 percent of the value of this maritime trade, while trade with overseas countries17 represented the remaining 96 percent. In 2001, Japan was the top U.S. maritime trading partner by value, followed by China and Germany (table 9, p. 29). Like overall U.S. trade, maritime trade is concentrated among a few large trading partners, with the top five maritime partners accounting for 43 percent of the value of this trade in 2001.

Over 1.6 billion tons of goods were traded between the United States and other countries in 2001, and maritime transportation carried over three-quarters of the weight of these goods. The top U.S. maritime trading partner by weight was Mexico followed by Venezuela and Saudi Arabia. These three countries were also among the leading crude oil suppliers to the United States. Nigeria and the United Kingdom, which also supply a large amount of crude oil to the United States, are among the top maritime partners by tonnage. The top five maritime trade partners by weight accounted for more than one-third of the tonnage of U.S. maritime trade.

The type of goods transported in U.S. maritime imports and exports varies greatly, affecting the kinds of vessels and the seaports used. The physical characteristics, value, and weight of commodities are some of the factors that determine the use of container, tanker, or bulk vessels. Among the top U.S. maritime trading partners, the value per ton of merchandise ranged from a high of $2,800 for trade with Germany to a low of $100 for trade with Canada. Clearly, most U.S.-Canada maritime trade involves low value-per-ton commodities (e.g., petroleum, agricultural, and lumber products), while higher value-per-ton goods (e.g., automobiles and automotive parts) move by surface modes. By contrast, most U.S.-Germany maritime trade involves higher value merchandise (e.g., automobiles) that moves by container vessels.

In 2001, the top U.S. seaport for international merchandise trade by weight was Houston, handling over 130 million short tons of commodities, mostly petroleum, valued at $44 billion (table 10). The leading port by value was Los Angeles, which handled 46 million short tons of commodities, primarily manufactured goods, valued at $104 billion. The rankings of the leading ports by value and weight are evidence of the specialization among U.S. seaports, with the U.S. Pacific and Atlantic coast ports heavily involved in container trade, while the U.S. Gulf Coast ports are mainly involved in dry bulk and tanker trade. Houston handled mostly bulk commodities (e.g., grain and coal) and petroleum products valued at an average of about $340 per ton, while Los Angeles handled primarily containerized commodities valued at nearly $2,300 per ton.

Growth and Shift in Container Trade

One of the most important trends in maritime trade worldwide in recent decades has been the growth in containerization and the resulting increase in longer distance shipments. Over 18 million 20-foot equivalent units (TEUs)18 of merchandise moved in and out of U.S. container ports in 2001, up 36 percent from 13 million in 1995 (table 11, p. 32). U.S. container ports handled an average of 50,000 TEUs a day in 2001.

In 2001, there were 5.6 million maritime container entries into the United States, down 6 percent from nearly 6 million in 200019 (figure 7, p. 33). While the number of vessel containers entering the United States had been declining even in the months before September 11, when compared with the same months in 2000, there were 19 percent fewer such containers in September 2001 than in September 2000. The declines continued in October, November, and December 2001 compared with the corresponding months in 2000.

Three of the top five container ports in the United States are on the West Coast (table 11). Between 1995 and 2001, the Ports of Los Angeles and Long Beach grew the most in terms of container traffic, reflecting increased trade with Pacific Rim countries. Los Angeles and Savannah, Georgia, showed the largest average annual growth rate. High growth rates for Savannah, Miami, and Houston reflect the strong activity in U.S. container trade with Latin American countries.

The first use of containers for commercial intermodal sea-land movements was in the United States in 1956 (between Newark, New Jersey, and Houston). Since then, containers have greatly affected the movement of U.S. international trade, port operations, and the distribution of ports share of total maritime trade.20 In the 1970s, the distribution of commodities entering the United States started to shift, with West Coast ports surpassing East Coast ports, a trend that continues today and affects transportation activity within the United States. U.S.-Asian Pacific trade was modest in the 1970s, and East Coast ports handled the majority of international maritime trade. As trade with Asia grew, the East Coast ports share of the value of trade declined while West Coast ports share increased. Gulf of Mexico ports experienced a modest increase in their relative share as trade with Latin America grew.

Over half of U.S. containerized merchandise trade, measured in TEUs, passes through West Coast ports (table 12). Nearly 56 percent of containerized imports and 43 percent of the exports passed through these ports in 2001. California ports alone handled 48 percent of U.S. container imports and 32 percent of the container exports. As West Coast ports handled many more containers for import than export, those ports had a larger share of the oceanborne containerized trade deficit, in terms of export-import balance, than other regional ports. Hence, West Coast ports serve more as import gateways into the United States than export gateways to the rest of the world.

In contrast, East Coast ports handled more exports than imports. East Coast ports handled 37 percent of U.S. containerized imports and 41 percent of the exports in 2001. The port of New York-New Jersey handled 14 percent of the nations container imports and 12 percent of the exports.

The critical role of maritime ports to U.S. international trade was seen in the fall of 2002. Operations at West Coast ports shut down due to a labor dispute between shipping lines/ port operators and dockworkers negatively affecting the flow of maritime goods passing through these ports to the rest of the United States (box 2, p. 35).

Box 2
West Coast Ports Shutdown

West Coast ports in Washington, Oregon, and California shut down operations for 10 days from September 29 to October 8, 2002, due to an unresolved labor dispute between the Pacific Maritime Association (PMA), a group representing shipping lines and port operators, and members of the International Longshore and Warehouse Union (ILWU). The ports reopened for business on October 9, 2002, after President George W. Bush invoked the Taft-Hartley Act and a federal judge ordered the ports reopened for an 80-day period.1 Working with a federal mediator, both sides reached a final agreement on a six-year contract on November 24, 2002. Both sides then ratified a new six-year contract in January 2003.

Before the shutdown, PMA and ILWU had been without a contract since July 1, 2002. At issue was the desire of the shipping companies and port operators to introduce new computer technologies designed to streamline the loading and unloading of goods at the ports and the effects of these technologies on union jobs.

Since West Coast ports handle nearly half the value of U.S. maritime merchandise trade (over $300 billion in 2001), the shutdown had national economic implications for the United States. These ports move about $6 billion worth of goods per week and a sizeable proportion of the cargo passing through West Coast ports is destined for states east of the Mississippi River.

The lockout affected several sectors of the U.S. economy, particularly farms, automakers, and retailers. During the lockout, several tons of perishable agricultural products could not be transported and auto plants and retailers that rely heavily on just-in-time deliveries struggled with depleted inventories. The effects of the lockout also extended beyond the United States to Asian-Pacific countries, the predominant shippers to West Coast ports.

Footnote

1 The Taft-Hartley Act allows the President of United States to seek an injunction to end a lockout and require work to resume, when he determines this to be in the national interest. The injunction provides both sides of a labor dispute time to resolve their differences and pursue a permanent solution.

Port Concentration

The distribution of maritime trade among U.S. port regions shows a greater concentration of traffic in a small number of ports, primarily because of the growth in container traffic and the demand for larger, faster, and more specialized vessels. Today, Post-Panamax super-freighter vessels21 are longer than 2 football fields, can carry up to 6,500 TEUs, and can cruise at speeds over 25 knots. More of these larger vessels are calling at ports in the United States and around the world. Some of the next generation of mega ships under construction today could carry over 8,500 TEUs (Muller 1999).

To handle these newer vessels, ports have had to invest in larger cranes, berths, storage yards, improved information technology systems, and additional dredging. The large investments needed to accommodate these vessels have resulted in fewer port calls or even no port calls by mega ships at certain ports (USDOT 1999). A change in the pattern of port calls could lead to changes in freight flows in different geographic regions of the United States. For example, traffic in and out of ports able to handle the mega ships could grow, thereby increasing the demand for landside infrastructure facilities in adjacent local areas. Along the same lines, more coastwise traffic could arise in some areas, possibly leading to an expanded maritime hub-and-spoke network, where cargo unloaded at a larger port is separated and sent to smaller U.S. ports aboard smaller vessels.

While large investment needs are associated with mega ships, their increased use is thought to have improved the economics of containerization and brought some cost savings to the maritime industry. Larger ships make some of these gains and labor costs savings possible, since above a given ship size, the number of crew needed to operate a vessel does not necessarily change, thereby lowering the operating cost per ton (Campbell 1993). Also, faster turnaround time in ports (now generally less than one day, and hours in some cases) leaves more time for moving cargo and increases the volume of cargo moved in a year.

Port Calls and Vessel Capacity

As container activity has become increasingly concentrated, so too have vessel port calls and capacity. In 2000, the top five container ports handled over half of the containership calls to U.S. ports and nearly two-thirds of the cargo capacity22 of the calling vessels (table 13). Vessels calling at U.S. ports were also, on average, larger than those calling worldwide. The average size (per call) of container vessels calling at U.S. ports was nearly 38,000 deadweight tons (dwt) in 2000, up about 6 percent since 1998 (USDOT MARAD 2002a). In contrast, the average size of container vessels calling at ports worldwide was just 30,000 dwt. In 2000, three U.S. ports, San Francisco Bay Area ports, Los Angeles-Long Beach, and New York-New Jersey, ranked among the worlds top 10 container ports in 2000, measured by average vessel size per call (table 14, p. 38).

Major Challenges

Two of the major challenges facing U.S. seaports that handle larger containerships are dredging and disposal of dredged material and landside access issues. Channel dredging is a leading issue for U.S. ports, because channels and berths need depths approaching 50 feet in order to accommodate the larger container vessels. Beyond the engineering requirements, there is also the environmental issue of storage of contaminated sediments. Once dredged, channels need continuing maintenance to be kept passable, but this can be challenging since many ports are located in or near environmentally sensitive areas such as wetlands, estuaries, and associated fisheries. In addition to dredging, other port-related environmental concerns include waste and pollution generated from facilities and ships, congestion, noise, and other quality of life impacts on nearby communities.

Landside access issues affect ports and terminals of all types and container ports in particular. For example, bottlenecks due to insufficient highway and rail connections from ports and marine terminals to distribution centers could become more of a concern if the current growth rate of international trade continues with no marked access improvements. Major landside bottlenecks include traffic congestion on the roads and rails nearest the ports and terminals, at-grade rail crossings, and rail access impediments such as bridge clearance and distance from terminals. A Federal Highway Administration report on the National Highway System Intermodal Freight Connectors found that Interstate highway connectors going to the nations seaports had more mileage with pavement deficiencies than highway connectors to airports, in part due to the high priority given to airport access (USDOT FHWA 2000). The report also found that problems with inadequate turning radii and travel lanes and heavy traffic were the most common causes of congestion on highway connectors to ports.

A major effort to improve landside access to two of the nations busiest seaports is the Alameda Corridor freight rail expressway in California, opened in April 2002 (USDOT OST 2002b). The Alameda Corridor, a $2.4 billion project funded by private and public investments, connects the ports of Los Angeles and Long Beach to the railyards near downtown Los Angeles and the national railroad network.23 The project consolidates 90 miles of branch rail tracks into one 20-mile railroad expressway. The project eliminated about 200 street-level railroad crossings, thus allowing trains to travel more quickly and easing highway traffic congestion. Several other objectives of the Alameda Corridor project included the improvement of direct access to terminals and docks, the reduction of cargo handling and dwell time at the ports due to improved rail lines that decrease transit times, and the reduction of air and noise pollution from idling trains, trucks, and cars at highway rail crossings.

Some intermodal connector projects aimed at improving landside access to ports include: 1) the FAST Corridor project (Freight Action Strategy for Seattle-Tacoma-Everett) in Washington state to streamline the movement of freight through the Puget Sound region of the state; 2) the Portway project in New Jersey to improve truck access to Port Newark, Port Elizabeth, and northern New Jersey; and 3) the Cross Harbor Freight Movement project study in New York City, which is currently evaluating alternatives to improve freight access to the New York and northern New Jersey metropolitan area (USDOT FHWA 2000).

International Air Freight

Air cargo is transported by both all-cargo carriers and carriers that also transport passengers. In 2001, U.S. airports handled $519 billion of international merchandise trade for both types of carriers, down from $593 billion in 2000 (table 15). Air transportations share of the value of total trade also declined slightly from 30 percent to 28 percent, due in part to the September 11 terrorist attacks. Because the commodities moved by air tend to be higher in value per ton (e.g., electronics, clothing, and high-value perishable goods such as flowers) than those transported by other modes, air freights share of U.S. trade by weight was less than 1 percent (about 6 million short tons) in 2001.

Despite the decline in 2001, the value of international trade moved by air transportation has grown tremendously over the past three decades, from $10 billion in 1970 to $519 billion in 2001, growing at an average annual rate of 14 percent per year (in current dollars). Air cargo grew at the fastest rate in the 1970s, averaging over 20 percent per year (table 16). The period with the slowest growth rate was between 1980 and 1985, due in part to the economic recession of the early 1980s. Also, high aviation fuel prices at the time dampened U.S. international air cargo movements. By the late 1990s, the growth rate for U.S. international air cargo was about half the rate in the 1970s. Overall, during this period, imports grew faster than exports, accounting for the current air trade imbalance.

In 2001, the top U.S. air cargo trading partner by value was Japan, followed by the United Kingdom, Germany, France, and Canada (table 17). Western European and Asian Pacific countries dominate air cargo trade to and from the United States, although the United States has many other air trade partner countries. In 2001, the top five air trading partners accounted for 38 percent of the value of air trade, compared with 54 percent for the top five partners for all U.S. merchandise trade. By virtue of geography, air transportation is more prevalent with overseas trade partners than with the NAFTA countries. While air transportation accounted for about 7 percent of the value of U.S. trade with Canada and about 5 percent of trade with Mexico in 2001, it accounted for 87 percent of trade with Ireland, 56 percent with the United Kingdom, and 35 percent with Japan.

Among the top 25 U.S. air trade partners, the value per ton of all merchandise (both imports and exports) ranged from a high of over $280,000 for trade with Ireland to a low of $41,000 for trade with Spain. For imports only, the value per ton of merchandise from Ireland, which includes commodities such as cashmere clothing and telecommunications equipment, was valued at almost $500,000 per ton.

In 2001, among the top 25 overall air trading partners, the United States had a positive air trade balance (exports minus imports) with 10 countries. U.S. trade with the Netherlands showed the largest air trade surplus of about $7 billion, followed by Canada and Hong Kong with $5 billion each. U.S. air trade with Ireland showed the largest deficit of about $12 billion, followed by Malaysia and China with $6 billion each.

Top Air Freight Gateways

In 2001, the leading U.S. airport for international merchandise trade by value was New Yorks John F. Kennedy (JFK) International Airport (table 18). JFK handled 23 percent of the value ($117 billion) of U.S. air trade moving into and out of the United States.

Two of the top five U.S. air cargo airports by value of trade are located on the West Coast: Los Angeles ($64 billion) and San Francisco24 ($62 billion). These 2001 levels represent declines from previous years, as the Asian economic crisis of the late 1990s, along with the general economic slowdown and the effects of September 11, affected air cargo handled by both of these airports.25

Overall, the United States imports more than it exports by air, but there is much variation among airports. At Miami International Airport, the value of exports exceeded imports by $8 billion, reflecting trade with Latin America. At the opposite extreme, imports were $16 billion more than exports at New Yorks JFK airport26 (figure 8, p. 45).

In tonnage terms, Anchorage handled the most international air cargo, nearly 2 million short tons (23 percent) of the total air cargo weight in 200027 (table 19, p. 46). Miami International Airport and New Yorks JFK followed with over 1 million short tons each. Between 1990 and 2000, the weight of U.S. international air cargo grew an average of 7 percent per year, reaching over 8 million short tons in 2000. During this period, Memphis International Airport grew the most as Federal Express expanded its hub operations there. With Federal Express moving freight from locations throughout the country to its Memphis hub before final shipment to foreign locations worldwide, Memphis moved up the tonnage ranking for international cargo handled from 48th position in 1990 to 9th position in 2000. Other U.S. international airports emerged as world leaders in air cargo, particularly Philadelphia, which grew by 21 percent per year, and Fairbanks, Alaska, which grew by 20 percent per year.28

U.S. international air cargo originating from and destined for U.S. gateway airports are transported along major air routes. In 2000, 5 of the top 10 gateway pairs by weight included Anchorage.29 Anchorage-Tokyo ranked first in bidirectional international air cargo, handling over 500,000 short tons of freight (table 20). Regional specialization also characterizes airport pairs and major U.S. air gateways. All five gateway pairs involving Anchorage were in Asian Pacific countries: Japan (two gateways), South Korea, Taiwan, and Hong Kong. The top gateway pairs with West Coast airports, San Francisco and Los Angeles, were also with Asian Pacific airports. Miami International Airports top gateway pairs were with Latin American airports in Colombia, Argentina, Costa Rica, and Chile. New Yorks JFK and Chicago OHare were the major gateways to European airports, including those in Belgium, the United Kingdom, Germany, and France.

U.S. International Air Cargo Revenues and Capacity

Air cargo is an increasingly important source of revenue for the air transportation services industry, and the financial performance of U.S. air carriers influences their competitiveness in international markets. Between 1980 and 2001, freight operating revenues for U.S. international air cargo, moved by both the all-cargo and passenger carrier sectors of the industry, more than quadrupled from $1 billion to over $6 billion (in current dollars).30 U.S. international freight operating revenues grew at a faster average annual rate (9.5 percent per year) than U.S. domestic freight operating revenues, which grew at 8.4 percent per year. During this period, growth in U.S. international air cargo revenues closely mirrored the increases in overall U.S. air freight revenue ton-miles, a measure of the utilization of air freight service31 (figure 9). However, in 2001, while international revenue ton-miles by U.S. carriers declined, international air cargo operating revenues by U.S. carriers held steady, due in part to changes made immediately after the September 11 attacks.

Available revenue ton-miles (the level of useable freight capacity) and unused ton-miles (the difference between available ton-miles and revenue ton-miles used) are two other measures indicating the utilization of air freight services. The availability of excess cargo capacity enables shippers to quickly arrange transportation of small quantities of goods to meet market demands, while maintaining low inventories. Between 1980 and 2001, the U.S. international available air ton-miles grew rapidly as the industry added capacity by acquiring new aircraft. International revenue ton-miles by U.S. carriers grew at a slower rate than the available capacity and the gap between used and available ton-miles widened32 (figure 10). Also during this period, U.S. international air cargo load factors (the ratio of used to available ton-miles) declined from 48 percent in 1980 to 44 percent in 2001.

The air cargo industry continually modifies its services to take into account new methods of goods manufacturing and distribution. A heightened challenge is cargo security. As suppliers and manufacturers integrate new production processes worldwide, the need to provide door-to-door security for merchandise could affect choices about business inventory and supply chain costs and influence future air cargo growth.

North American Trade and Transportation

The North American Free Trade Agreement, which entered into force on January 1, 1994, aims to reduce trade barriers and liberalize trade policies among the United States, Mexico, and Canada. As NAFTA reduced some of the obstacles to the movement of freight across the borders (including restrictions on transportation services), trade among the three countries soared. Between 1994 and 2001, the value of U.S.-NAFTA trade increased 79 percent from $343 billion to $614 billion (in current dollars), growing at an average annual rate of 9 percent, faster than the rate for U.S. merchandise trade with all other countries (table 21). The growth of U.S. trade with Canada and Mexico highlights the importance of north-south transportation corridors, the role of key land gateways, and the emergence of dominant flows (e.g., between Detroit, Michigan, and Laredo, Texas), which will continue to alter the pattern of freight movement within the United States.

Once the NAFTA provisions are fully implemented and freight operators licensed in one country are allowed broader access in another, freight services and operations will change (box 3). Differences in arrangements for transporting freight across the three countries could affect the movement and flow of this traffic on the transportation networks of the United States. It also will increase vehicle inspection activity at U.S. borders and heighten the need for improved security for the millions of containers and trailers that enter the United States from Canada and Mexico.

Box 3
Current Status of NAFTA Motor Carrier Provisions

In November 2002, President George W. Bush took actions aimed at implementing the trucking provisions of the North American Free Trade Agreement (NAFTA).1 Under NAFTA, Mexican motor carriers were to gain access to U.S. border states by December 1995 and access to the rest of the United States by January 1, 2000.2 However, the United States delayed implementation of these provisions for safety reasons. The fiscal year 2002 Transportation and Related Agencies Appropriations Act, signed into law on December 18, 2001, established 22 requirements that must be satisfied before the U.S. Department of Transportation (USDOT) could certify that the NAFTA trucking provisions can be implemented without undue safety risks to the American public. To implement this law, the Federal Motor Carrier Safety Administration (FMCSA) of the USDOT, the agency charged with overseeing and implementing trucking safety in the United States, established a detailed application process for Mexican carriers seeking to operate in the United States, as well as a comprehensive safety-monitoring program that met each of the 22 requirements.

President Bushs November 2002 action modified the existing moratorium on granting operating authority to Mexican motor carriers for transporting international freight to and from the U.S. interior. Mexican motor carriers must first submit applications to FMCSA. FMCSA will review the applications, conduct safety audits, and then grant provisional authority to qualified carriers to operate beyond the designated commercial border zone.3 These carriers will receive a USDOT license number distinguishing them from U.S. and Canadian trucks and from Mexican trucks authorized to operate only in the commercial border zone.

To obtain this provisional authority, Mexican carriers must submit proof of U.S. insurance, pass a safety audit, and its vehicles must pass safety inspections performed by either U.S. or Mexican government officials. Mexican vehicles that pass the safety inspection will receive Commercial Vehicle Safety Alliance (CVSA) decals certifying that they have met safety standards. These decals must be renewed every three months. The carriers will be subject to an additional 18 months of intensive safety monitoring.4

Mexican carriers operating beyond the commercial border zone will only be allowed to enter the United States at border crossings where certified safety inspectors are on duty. As with U.S. carriers, they are required to be part of a program that includes random drug and alcohol testing and be in compliance with federal hours-of-service requirements for commercial drivers. Mexican carriers that receive and maintain a satisfactory safety rating after a compliance review will be given permanent operating authority at the end of their 18-month provisional authority.

Mexican carriers that receive operating authority as a result of this process will be permitted to deliver and back-haul international cargo to and from the United States. The change in the moratorium affects only international cargo between the United States and Mexico. A reciprocal prohibition on the provision of point-to-point service within the United States and Mexico remains in place.

As of early January 2003, FMCSA had received over 180 applications from Mexican carriers requesting authority to operate in the United States beyond the commercial zone. The agency is providing educational and technical assistance to Mexican carriers and has held free seminars for Mexican carriers to acquaint them with the new rules governing application for operating authority.

In January 2003, a federal appeals court judge ordered the government to study the potential environmental effects prior to implementing the March 19, 2002 regulations. For additional information on Mexican and Canadian truck and bus operations in the United States, visit FMCSAs website at www.fmcsa.dot.gov.

Footnotes

1 NAFTA entered into force Jan. 1, 1994.

2 Canadian carriers can provide service anywhere in the United States provided they comply with U.S. regulations and are transporting international cargo. U.S. carriers access to Canada mirrors Canadian carriers access to the United States. With implementation of the NAFTA provisions, U.S. carriers are supposed to receive reciprocal access rights in Mexico.

3 Commercial zones along the U.S. southern border generally extend 3 to 20 miles past the corporate limits of cities, depending on population. FMCSA also registers Mexican carriers for operating authority in these zones. Even with the implementation of the NAFTA trucking provisions, FMCSA expects that most carriers from Mexico will be certified for operating only in the commercial border zones.

4 FMCSA issued regulations governing Mexican carrier operations on March 19, 2002.

SOURCES

New York Times Online. 2003. Court Blocks Plan To Open U.S. Highways to Mexican Trucks. Available at http://www.nytimes.com. January 16.

U.S. Department of Transportation, Federal Motor Carrier Safety Administration. 2002. North American Free Trade Agreement Fact Sheet. Washington, DC. March 14. Also available at http// www. fmcsa.dot.gov/rulesregs/Mexican/NAFTA_Fact_Sheet.htm.

_____. 2002. U.S. Transportation Department Implements NAFTA Provisions for Mexican Trucks, Buses. Press release. November 27. Also available at http://www.fmcsa.dot.gov/contactus/press/2002/112702.htm.

_____. 2002. DOT Sets Safety Requirements for Mexican Trucks, Buses in United States. Press release. March 14. Also available at http://www.fmcsa.dot.gov/contactus/press/2002/031402.htm.

_____. 2002. Revision of Regulations and Application Form for Mexico-Domiciled Motor Carriers To Operate in United States Municipalities and Commercial Zones on the United States-Mexico Border. 49 CFR Parts 368 and 387 [Docket No. FMCSA-98-3297]. March 19. Also available at http://www.fmcsa.dot.gov/rulesregs/mexican/Parts_368_and_387.htm.

U.S.-NAFTA: Overall Trade

In 2001, merchandise trade with Canada and Mexico represented one-third of the value of all U.S. international trade or $614 billion, with Canada accounting for about 20 percent and Mexico about 13 percent. Surface modes transported the majority of the value of U.S.-NAFTA trade, over 89 percent in 2001, nearly the same proportion as in 1994.33 Maritime trade accounted for 5 percent while air freight held a 6 percent share.

U.S. surface trade with Canada and Mexico fell in 2001 for the first time since the inception of NAFTA in 1994, with the greatest decline occurring after September 11 (table 21). Surface trade was lower for most of 2001, showing a 1.5 percent drop between January and August, compared with the same period in 2000, and a decline of 11.6 percent between September and December 2001. Surface exports declined more steeply (7 percent) than imports (3 percent) for the year.

Despite the drop seen between 2000 and 2001, the value of U.S.-NAFTA surface trade grew between 1997 and 2001, with an increase of 29 percent from $426 billion to $547 billion. However, surface exports grew more slowly than surface imports during this 5-year period, 18 percent compared with 37 percent (table 22).

U.S.-NAFTA Trade: Modal View

Nearly two-thirds of the value of overall U.S.-NAFTA merchandise trade in 2001 was moved by trucks, similar to their share in 1997. By value, trucking was followed by rail with about 15 percent, then air, water, and pipeline (table 23, p. 54). From a tonnage perspective, waterborne modes moved the majority of U.S.-NAFTA trade in 2001 (figure 11). The relatively higher tonnage share for waterborne modes is due to the trade in bulk commodities, particularly petroleum products in the Gulf of Mexico.

The September 11 terrorist attacks caused immediate drops in U.S.-NAFTA activity, particularly for the truck and air sectors. Trade by truck fell over 15 percent in September 2001, compared with 2000, and continued drops over the remainder of 2001 resulted in the first annual decline in U.S. truck trade since NAFTAs inception. Of all the modes, air freight experienced the steepest fall in 2001-nearly 18 percent-due largely to the immediate impact of September 11 on the North American aviation services and system. Although the overall value of rail trade fell slightly in 2001, it was less dramatically affected than other modes, due partly to the fact that immediately after September 11, railroads continued moving freight across borders because the industry already had an effective cargo preclearance system in place for major shippers engaged in NAFTA trade.

Despite many of the modal declines seen in 2001 U.S.-NAFTA trade, there has been relative stability in modal shares between 1997 and 2001. However, some modes have grown at a more rapid pace during the five-year period. For example, although pipeline accounted for a relatively small percentage of the value of U.S.-NAFTA trade in 2001 (about 4 percent), it grew at a faster rate than any other mode-an average annual rate of 17 percent between 1997 and 2001-due largely to greater petroleum product imports to the United States (table 22).

In addition to overall U.S.-NAFTA modal trends, there are some notable modal differences between U.S.-Canada and U.S.-Mexico trade. Although trucks carry over 60 percent of the value of U.S. trade with both Canada and Mexico, it is possible that when greater cross-border access for commercial trucking carriers is implemented between the United States and Mexico, truckings share of the value of U.S.-Mexico trade could increase further.

Rail plays a critical role in particular corridors and for certain commodities in U.S.-NAFTA trade. Rail trade with Canada is greater than with Mexico, especially for U.S. imports. Although smaller proportionately, U.S.-Mexican rail trade has grown since 1997, both by value and weight, allowing rail to capture higher modal shares. This could increase further if there are notable efficiencies arising from Mexicos rail privatization (begun in the 1990s) and the resulting development of rail alliances by U.S., Mexican, and Canadian carriers.34

Overall, U.S.-NAFTA waterborne trade plays a critical role particularly for trade in bulk commodities in the Great Lakes and Gulf of Mexico. In 2001, waterborne trade accounted for the majority of both U.S.-Canada and U.S.-Mexico trade by weight. However, waterborne trade plays a relatively greater role, both by weight and value, in U.S.-Mexico trade primarily due to large volumes of petroleum-related products.

NAFTA Trade and U.S. States

Key freight access and infrastructure issues in the United States are influenced by the distribution of NAFTA trade among U.S. states. Concern exists about future shifts in freight flows within the United States as NAFTA trade grows. While existing highway, rail, and water links allow all U.S. states to trade with Canada and Mexico, U.S. trade with Canada is heavily concentrated in the industrialized northeast and midwest and the states of California, Washington, and Texas. U.S. trade with Mexico is even more concentrated geographically with a few southern border states, although Mexican trade with Michigan, source of much automotive trade, is quite large. The transportation networks of these states could be especially affected by growth in NAFTA trade.

Several factors affect the distribution of NAFTA trade among U.S. states, including the location of dominant border ports, the size of a states population and its economy, and its manufacturing activities (figure 12). In 2001, Michigan, Texas, California, New York, and Ohio accounted for 51 percent of the value of NAFTA surface trade. Michigan, Texas, and California alone, all of which are large in terms of economy, population, and manufacturing activities, and are close to either Canada or Mexico, accounted for 40 percent of the value of NAFTA trade. As with trade levels, U.S. inbound truck crossings are heavily concentrated in a few states. Just four states (Michigan, Texas, New York, and California) handled over three-quarters (or 8.4 million) of the inbound truck crossings in 2001.

Overall surface trade with Canada and Mexico declined in 2001 compared with 2000, although trade with a few states grew (figure 13). Among the top five states for U.S.-NAFTA surface trade, New York had the largest decline in the value of trade, nearly 12 percent, followed by Texas with 8 percent. Other border states, such as Vermont, experienced even steeper declines (27 percent).

The majority of U.S.-NAFTA trade by value is trucked across national and state boundaries. Because of their gateway role, border states carefully monitor trade activity by this mode, both by value and number of crossings. Many states experienced declines in 2001 truck crossings-Texas, Washington, and Michigan all saw drops of over 5 percent from 2000 levels. Other border states experienced lesser drops, while crossings in Alaska and North Dakota rose.

Land Ports and Border Crossings

Although there are over 75 land ports along the U.S.-Canadian border and over 25 along the U.S.-Mexican border, the freight traffic at the border is heavily concentrated at a few major gateway ports. Such concentration affects traffic and congestion at the border, as well as the growth of major trade corridors. In 2001, the top land ports for U.S.-NAFTA surface trade by value were Detroit, Laredo, and Buffalo-Niagara Falls (table 24). Together, these three ports accounted for over 35 percent of the value of all U.S.-NAFTA trade in 2001 and 46 percent of U.S.-NAFTA surface trade.

Many of the top U.S.-NAFTA ports are national and regional trade gateways, while others serve local markets. For example, only about 20 percent of the value of shipments passing through Buffalo-Niagara Falls originate or terminate in New York. A similar figure is seen for Laredo. For Detroit, the biggest U.S.-Canadian border port, 70 percent of the value of shipments start or end outside of Michigan. In contrast, over 90 percent of the shipments passing through Otay Mesa, the largest California port, originate or end up in California.

The top U.S.-NAFTA land gateways handle thousands of truck crossings each day. In 2001, there were almost 11.1 million commercial truck crossings into the United States from Canada and Mexico, translating to 30,000 daily truck crossings.35 This was up 44 percent from 1994, but down 4.3 percent from 2000. The majority of these crossings occurred on the U.S.-Canadian border (61 percent), although the growth rate in truck crossings, as with trade, has been more rapid on the U.S.-Mexican border (table 25). As with trade levels, truck crossings are concentrated among a few ports. In 2001, the top three ports (Detroit, Laredo, and Buffalo-Niagara Falls) handled nearly 40 percent of all truck crossings (table 26).

Although trucking accounts for the majority of U.S.-NAFTA trade at the major land ports, several ports serve as important U.S.-NAFTA rail gateways, carrying long-haul freight to origins and destinations in several states. Over half of the value of U.S.-NAFTA rail trade passes through just two gateways, Laredo and Port Huron, Michigan, and these two ports, along with Eagle Pass, Texas, have seen explosive growth in the value of rail cargo since 1994, in part due to rail privatization in Mexico and new North American rail alliances. In the 1990s, rail lines, such as Kansas City Southern, focused on acquisitions, joint ventures, and strategic marketing alliances with other rail lines to form what has become known as the NAFTA Railway (KCS 2002). These rail alliances provide service from the central United States into Mexico and Canada. In conjunction with other large rail lines, such as Groupo Transportacion Ferrovia Mexicana, S.A. de C.V. (TFM), the Texas Mexican Railway, and Canadian National, shipments can move easily with a single rate throughout North America. Growth in rail cargo has also been accompanied by increases in crossings of trains, as well as full and empty containers. In 2001, over 40,000 trains carrying about 2.4 million containers entered the United States from Canada and Mexico, equaling approximately 112 trains and 6,500 daily container entries (table 26).

Trade flows and vehicle and equipment crossings at key land gateways have fluctuated since the inception of NAFTA, generally characterized by a steady rise through 2000, followed by modest downturns in 2001, due to economic slowdowns throughout North America, the September 11 terrorist attacks on the United States, and the accompanying fall in trade between the United States, Canada, and Mexico. During the 1990s, traffic and flows at these gateways were influenced by notable differences in the geography and direction of trade flows, as U.S. trade expanded more rapidly with Mexico than Canada and import flows from Canada and Mexico grew more quickly than U.S.-NAFTA exports. In addition, key gateways are affected by the mix of commodities passing through these ports as well as changes in carrier efficiencies. For example, changes in commodity mix and other factors help to explain why growth in the value of truck import shipments mirrors that of incoming truck crossings between 1994 and 2001 (figure 14).

Despite the overall rise in trade levels for U.S.-NAFTA land gateways during the 1990s, notable changes were seen in 2001. Surface trade levels at most of the major U.S.-NAFTA gateways fell between 2000 and 2001, with Buffalo-Niagara Falls experiencing the steepest decline (13.9 percent) of the top 10 land ports. Together the top three U.S.-NAFTA ports (Detroit, Laredo, and Buffalo-Niagara Falls) saw surface trade values fall 6.5 percent over 2000 levels. Of the top gateways, on the U.S.-Mexican border, Otay Mesa, California, was the only U.S. land port that saw a rise in trade in 2001 (3.3 percent). This rise was outpaced by a small U.S.-Canadian port, Eastport, Idaho, which experienced a 140 percent increase in 2001 because of the opening of a new pipeline and a resulting $4 billion increase in pipeline imports (USDOT BTS 2002a).

Multimodal View: Top Gateways

Water, air, and land modes36 and their associated services and infrastructures are all used to transport goods in U.S. international trade. Whether goods are exported or imported, substantial domestic transportation activity is needed to move goods to and from U.S. air and land gateways and seaports. Often, several modes of transportation are involved. Figure 15 shows the nations top ports of entry and exit for U.S. international trade shipments by value in 2001. In 2001, the top five gateways represented air, water, and land modes. The leading gateway overall in 2001 was New Yorks John F. Kennedy International Airport with $117 billion of air cargo. The maritime ports of Los Angeles and Long Beach, the land gateway of Detroit, and the maritime port of New York-New Jersey followed JFK.

These ports handled both exports and imports, with some serving primarily as gateways for imports into the United States, while others were predominately gateways for exports from the United States to destinations around the world (table 27, p. 66). Among the top 10 gateways, only the land port of Detroit, Los Angeles International Airport, and San Francisco International Airport handled more exports than imports.

Continuing growth in U.S.-Asian Pacific trade, further integration of North American manufacturing, variations in commodity mix, and many other factors will continue to affect the top gateways as well as the movements of international trade shipments to, from, and within the United States. Additionally, these gateways could be affected and their relative roles may shift as the United States embraces new freight security measures to protect against the use of freight conveyances for terrorist acts.

Footnotes

15 During the same period, however, the value of merchandise trade grew by 20 percent (current dollars). Due to the way official U.S. trade statistics have been collected and processed by U.S. Customs and the U.S. Census Bureau, it is not possible to report an overall weight for all U.S. international merchandise trade for all modes prior to 1997. To calculate the total tonnage for all imports and exports, BTS estimated the U.S. export weight for truck, rail, pipeline, and other and unknown modes based on value-to-weight ratios from the import data. These estimates were added to official export weight data for water and air and then combined with official import weight data for all modes.

16 Due to the way in which U.S. trade data are collected, the modal shares represent single modes in use at U.S. ports of entry or exit even though more than one mode may be used in transporting the goods from point of origin to destination.

17 Overseas countries are all countries except Canada and Mexico.

18 A TEU is the standard unit for counting containers of various lengths and describing the capacity of container vessels.

19 These numbers are for individual containers, not TEUs. Because containers come in different lengths (e.g., 20 foot, 40 foot, 48 foot, and 53 foot), these figures differ from the TEU figures, which convert the tonnage of goods moved in the containers into TEUs.

20 Containers were first used for commercial intermodal ocean-land service by the McLean Trucking Company (now Sea-Land Service Inc.). The use of standard containers among multiple modes was revolutionary. Prior to this, containers or strong large-size boxes were used for truck and rail transportation within the United States and Europe (Muller 1999).

21 These vessels are too large to pass through the Panama Canal.

22 Capacity equals the number of calls multiplied by the vessel deadweight tons.

23 The Alameda Corridor project took about 20 years to plan and 5 years to construct, and consists of bridges, underpasses, overpasses, and street improvements that separate freight rail, passenger rail, and street traffic (ACTA 2002).

24 San Francisco includes the San Francisco International Airport and other smaller regional airports.

25 In 1997, Los Angeles handled $69 billion worth of international air cargo and San Francisco handled $75 billion.

26 JFK was followed by Ancorage, AK, and airports in Chicago, IL.

27 These airport gateway figures, from the Bureau of Transportation Statistics Office of Airline Information, reflect carrier data reported by both U.S. and foreign carriers. Data also include transshipments. Therefore, these data are not directly comparable to shipper-based merchandise trade data for international air activity. Detailed air cargo weight data by airports were not available for 2001 at the time this report was prepared.

28 Between 1990 and 2000, air cargo passing through other major air cargo hubs also grew: DHL through Cincinnati, OH, by 670 percent, and UPS through Louisville, KY, by 3,040 percent.

29 Similar data are not available for value of the cargo.

30 Based on special tabulations from BTS Office of Airline Information data, May 2002. By comparison, U.S. international passenger service operating revenues grew from over $5 billion to over $24 billion.

31 A revenue ton-mile is equal to one ton carried one mile and measures use of freight services.

32 Changes in the level of spare capacity might be an indicator of the timely availability of air services. For example, a shipper with a sudden need for air service will be more likely to obtain a better flight when spare capacity is higher. Space limitations affect not only the timeliness but also the availability of air freight services (USDOT BTS 2002b).

33 Surface trade includes merchandise moved by truck, rail, pipeline, and other modes. It excludes trade moved by water and air.

34 U.S. freight railroads, including Kansas City Southern and Union Pacific, won concession rights for some of the privatized rail lines in northeast and northwest Mexico. They have partnered with other Mexican and Canadian rail companies to improve service offerings, infrastructure investment, and operating efficiencies on lines in Mexico and have linked such lines to others in the United States and Canada (KCS 2002).

35 Data for vehicle and equipment crossings (truck and rail) are collected by the U.S. Customs Service and are only available for inbound crossings into the United States. In addition, the crossing numbers do not represent the number of unique vehicles. For example, one truck may cross the border multiple times in one day.

36 Land modes here include truck, rail, and pipeline. Although many international trade shipments involve multiple modes of transportation, it is not possible to report on intermodal or multimodal activity due to the way in which U.S. international trade statistics are collected.