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Mar.21, 2016

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SURFACE & DOMESTIC TRANSPORTATION TRUCKING | RAIL | INTERMODAL | AIR & EXPEDITED | DISTRIBUTION 44 THE JOURNAL OF COMMERCE www.joc.com MARCH 21.2016 By Turloch Mooney WEAK EXPORT GROWTH is a serious imped- iment to economic growth and prosperity in the U.S. and is hampered more by inad- equate infrastructure than by the strong U.S. dollar, speakers told this month's TPM Conference in Long Beach. "If we don't get this to work, it's not going to be good for the U.S., for the world economy or for the maritime transpor- tation industry," said Walter Kemmsies, chief economist with global infrastructure adviser Moffatt & Nichol. Despite the monthly deficit in oil trade falling from about 40 percent to 9 percent of the overall trade deficit, the U.S. currently runs a deficit of $40 billion. That figure becomes $60 billion when the effect of a positive deficit in services is removed. Moffatt & Nichol identifies agriculture, capital goods and energy as three sectors where the U.S. has a comparative advantage and high potential for containerized and bulk or breakbulk exports. Because labor is more expensive and capital cheaper in the U.S. than in emerging markets such as China, U.S.-produced commodities such as wood pulp, soy, cotton, animal feeds, chemical products, cereal grains, dairy products, meat, crude oil and petroleum/natural gas products and organic chemicals can be competitive in global markets. The increasing scarcity of water in Asia and the Middle East and its relative abun- dance in much of the Americas gives the U.S. the potential to become the breadbasket of the world. The U.S. dollar's recent appreciation by an average of 20 percent against all cur- rencies and 40 percent against emerging markets moves a big price advantage to com- petitors. However, it's infrastructure issues, including a neglected inland waterway sys- tem and chronic shortage of containers in areas that should be exporting more, that are the main barriers to export develop- ment, Kemmsies believes. "Exporters in areas of the Midwest that are not very urban have the least amount of containers available," he said. "This ham- pers agricultural exports that are best suited for containerization. Less congestion in port gateways could improve container availabil- ity in the Midwest." According to Larry Gross, a partner with intermodal transportation consultant FTR Associates, the strong dollar and weaker overseas economies create a difficult envi- ronment for exporters, even with ocean rates at an all-time low. On top of this, although the inland transportation network is generally in good condition, imports don't necessarily travel to where potential exports are generated. "Someone has to pick up the cost of mak- ing sure containers end up where they are needed," Gross said. Those costs are significant and include rail costs such as terminal handling, switch- ing and train delays, as well as liner costs such as container usage time and order processing. Gross believes structural changes need to be made that draw eastbound loads to the right locations to service exports. Unless such changes are made, the problem of container supply in remote locations will continue, he said. With a global middle class of 2.5 billion people set to double by 2030, it would be a mistake on the part of the U.S. to neglect the infrastructure needs of its export sec- tor, according to Kemmsies. "It's a growing world market, and the U.S. should be selling more, not selling less," he said. "Reducing the deficit is important for employment and therefore economic growth." JOC Contact Turloch Mooney at turloch.mooney@ihs.com and follow him on Twitter: @TurlochMooney. A version of this story originally appeared in IHS Fairplay, a sister product of The Journal of Commerce within IHS. US INFRASTRUCTURE STUNTS EXPORTS Getting containers to the right place at the right time is key to economic and export growth, experts say

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