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Home > Business/Finance > Diversified Services > Shipping & Logistics
US Freight Transport Report Q1 2008
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President George W Bush’s White House is little over a year away from packing up its bags, as the
country’s political attention focuses on the November 2008 elections. The probability of major new
legislation affecting the freight transport industry is therefore falling. The administration in any case must
co-exist with the opposition Democrats, who hold majorities in both houses of Congress. In addition, the
economy has caught something of a chill this year, with sharp falls in share prices in August, amid
concern over the state of the sub-prime mortgage market. BMI’s newly-released US Freight Transport
Report notes that despite the 2007 slowdown, moderate economic growth will continue to ensure the
underlying health of the freight industry. However, growing worries over foreign ownership in strategic
areas are slowly changing the prevailing climate in a more protectionist direction. The fundamentals for
the industry remain solid. BMI predicts that freight traffic, measured in million tonne-kilometres, will rise
by an annual average of 2.3% during 2008-2012. In line with the pattern in developed economies, this is a
little slower than overall economic growth, which will average 2.7% a year over the period. We expect
transport and communications GDP to grow to US$1.111trn by 2011, representing 6.5% of US GDP.
The protectionist trend in US freight transport first hit the headlines early in 2006, when US Congress
broke ranks with President George W. Bush and successfully opposed the sale of a controlling interest in
six key ports (including New York, Philadelphia, and Miami) to Dubai Ports World (DPW) on security
grounds. Under intense political pressure DPW, which acquired the ports through its takeover of Londonbased
Peninsular & Oriental (P&O), then agreed to sell its US interests to a third party, a process that
has now been completed. In December DPW said it had agreed to sell its US ports to an American
International Group (AIG) unit. New legislation now under discussion in Congress will tighten up
procedures for approving foreign takeovers in a way that, according to some analysts, could discourage
inward investment and job creation. Similar protectionist trends are showing up in the aviation sector,
where Congress and trade unions lined up against plans to give foreign investors a greater say in the
running of US-based airlines. The exception, perhaps because it has gone largely unnoticed, is road
transport, where a series of foreign toll-road operators have been buying large stakes in US roads over the
past year or so. New legislation has also been approved to tighten port security, raising concerns about the
cost to the industry.
As the largest economy in the world, it could be argued that there is already enough internally-generated
competitive drive in the US freight business. BMI disagrees, taking the view that even major US
companies could improve their performance by being exposed to greater external competition. Major US
airlines have, despite some exceptions and recent improvements, piled up massive losses and have been in
and out of bankruptcy protection. There has been a notorious lack of new investment in the country’s
pipeline and refinery infrastructure, exposed during Hurricane Katrina. Reflecting our concern, we earlier
lowered our score for the industry competitive environment to 6.0 from 7.0 (out of a maximum of 10).
Our overall score for the US freight industry competitive environment now stands at 43 (out of 70).
Should the competitive environment deteriorate further, the danger is that key US companies will lose
some of their competitive edge facing new global players, particularly those in emerging Asia. On the
whole, we believe it would be premature to make such a gloomy prediction, but it is a danger to be noted.
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