U.S. seaports are in an enhancement and expansion mode. While the widening of the Panama Canal may serve as the catalyst for some of the anticipated $9.2 billion in annual facilities investment in the foreseeable future, this is only part of the story.
Several other factors are propelling this huge investment of private capital into U.S. ports. One is the rebounding domestic economy: the value of U.S. exports has risen 70 percent and imports have increased by 53 percent since the first half of 2009.
Another driver is the increasing overseas demand for U.S. exports, particularly among the growing middle class in Latin America and parts of Asia. In fact, in the next decade, total U.S. exports are projected to surpass imports for the first time in a generation.
Yet another consideration is that manufacturing operations are returning to North America, a development known as “nearsourcing.” With rising labor costs overseas, a narrowing labor differential at home and long transit times to market, a Michigan-based AlixPartners survey conducted in 2012 found that 9 percent of manufacturing executives have already taken steps to “near-source” their operations, and 33 percent plan to do so within the next three years.
Although seaports and their private-sector partners are investing more than $9 billion each year into marine terminals and related infrastructure, the U.S. government isn’t doing its share. According to the American Society of Civil Engineers (ASCE), the economy is expected to lose almost $1 trillion in business sales, resulting in a loss of 3.5 million jobs if the $15.8 billion federal investment gap (of the $30.2 billion in predicted “critical need” funding) in road, rail bridge, tunnel, and navigation infrastructure connecting with ports is not addressed by 2020.
This is in stark contrast with China which, in just over 10 years, has planned and built the largest marine terminal in the world at Yangshan Port near Shanghai, costing about $12 billion and capable of accommodating today’s mega-containerships. Conversely, U.S. harbor-deepening projects typically take 20-plus years from planning to completion.
Seaports: A Vital Economic Link
Since the 2008 recession, exports have been a major factor in sustaining and growing the U.S. economy and providing jobs for U.S. workers. In 2012 alone, the growth in the value of waterborne exports from the U.S. was 3.8 percent—a much higher growth rate than the rest of the economy (0.2 percent). The fastest growing trade commodities, in dollar terms, came from automotive products (9.7 percent), capital goods (6.8 percent), and agricultural products such as foods, beverages and animal feeds (5.3 percent).
The lack of adequate connections with ports hampers the movement of these and other types of international commerce—both imports and exports—thereby raising costs to domestic industries and consumers and making America’s exports less competitive in the global marketplace.
While the administration of President Barack Obama tries to double U.S. exports and boost the nation’s international trade competitiveness, the country’s freight transportation networks are faltering. Given that international trade accounts for more than 25 percent of U.S. GDP, provides more than 13 million jobs, and earns in excess of $200 million in annual tax revenue, prioritizing investments in freight transportation is critical for future U.S. competitiveness.
Importantly, it’s not just the coastal states that benefit from this investment. According to the U.S. Army Corps of Engineers, each of the 50 U.S. states relies on between 13 and 15 seaports to handle its imports and exports, which total more than $3.8 billion worth of goods moving in and out of U.S. seaports each day.
Most businesses, including those operating far from one of the U.S. four coasts (East Coast, Gulf Coast, West Coast, and Great Lakes), depend on seaports for their very existence. Many rely on imports for supplies and manufacturing components, and many produce goods for export overseas. More than 99 percent of the volume of overseas imports and exports moves through the nation’s approximately 150 commercial seaports, while less than 1 percent of the volume moves through U.S. airports.
Yet, many seaport-related infrastructure projects remain snarled by red tape and funding challenges.
Cutting through that red tape is crucial, both on the land and water side. More commercial ports need to be able to accommodate the larger ships that will increasingly dominate international trade. At the same time, new land-side infrastructure must be built and existing infrastructure improved to accommodate the trucks and trains heading to or from these facilities. This was borne out in ASCE’s 2013 Report Card for America’s Infrastructure, where the nation’s roads received a D grade, its bridges a C+ and its ports a C.
While adequate port-connecting infrastructure funding remains elusive, port project prioritization is making progress. Provisions included in the 2012 Moving Ahead for Progress in the 21st Century Act (MAP-21) streamlines port- and land-side projects. To help move projects more quickly and reduce the infrastructure project backlog, the Act provides penalties to federal agencies if certain deadlines are not met.
Under MAP-21, the U.S. Department of Transportation also established a National Freight Advisory Council and an Advisory Committee on Supply Chain Competitiveness, both of which will seek input from shippers and transportation advisers to shape America’s transportation priorities
This is a first step toward finally establishing a national freight strategic plan and making sure the U.S. has the funding for it. But to ensure the success of such a plan, federal lawmakers must first appreciate the importance of prioritizing these investments, which will help ensure future U.S. competitiveness in an increasingly interconnected world economy.