On current trends the money to build and maintain US highways will run out for the first time in 2009.That was the unwelcome message delivered by Jeff Shane, considered to be one of the country’s leadingtransportation experts, to the Spring Policy Forum of the National Industrial Transportation League(NITL) in April. Shane, formerly Undersecretary for Policy at the US Department of Transportation, saidthat the government’s Highway Trust Fund was likely to turn negative by next year. The Fund was set upin 1956 to develop the interstate highway programme and remains the key source of financial support forlarge-scale road building in the US. Shane said the gasoline tax, on which contributions to the fund arebased, was coming under pressure because high fuel prices were limiting demand and pushing consumersto seek out more fuel-efficient vehicles. His conclusion was that new funding mechanisms would have tobe considered, including congestion charging, public-private infrastructure partnerships, and possibly thedevolution of the federal gasoline taxes to back projects developed at state level. The latest issue if BMI’sUS Transport Report also notes that as the credit crunch bites, the road haulage industry is facing slowergrowth this year. We predict that over the 2008-20012 forecast period, US road haulage traffic will growat a subdued average annual rate of 1.7%.
With attention now strongly focused strongly on the 2008 US presidential race, we expect few legislativeinitiatives affecting the freight industry this year. Companies will be monitoring the cooling economy toassess how far and how fast the operating climate deteriorates. BMI predicts that overall freight traffic,measured in million tonne-kilometres, will rise by an annual average of 1.9% during 2008-2012. In linewith the pattern in developed economies, this is a little slower than overall economic growth, which willaverage 2.4% a year over the period. We expect transport and communications GDP to grow toUS$1.154trn by 2012, representing 6.6% of US GDP.
The protectionist trend in US freight transport first hit the headlines early in 2006, when US Congressbroke ranks with President George W. Bush and successfully opposed the sale of a controlling interest insix key ports (including New York, Philadelphia, and Miami) to Dubai Ports World (DPW) on securitygrounds. Under intense political pressure DPW, which acquired the ports through its takeover of LondonbasedPeninsular & Oriental (P&O), then agreed to sell its US interests to a third party, an AmericanInternational Group (AIG) unit. Similar protectionist trends have shown up in the aviation sector, whereCongress and trade unions tried to hold back plans to give foreign investors a greater say in the running ofUS-based airlines. The exception, perhaps because it has gone largely unnoticed, was road transport,where a series of foreign toll-road operators have been buying large stakes in US roads over the past yearor so.
As the largest economy in the world, it could be argued that there is already enough internally-generatedcompetitive drive in the US freight business. BMI disagrees, taking the view that even major UScompanies could improve their performance by being exposed to greater external competition. Major USairlines have, despite some exceptions and recent improvements, piled up massive losses and have been inand out of bankruptcy protection. There has been a notorious lack of new investment in the country’spipeline and refinery infrastructure, exposed during Hurricane Katrina. We score the US competitiveenvironment at 67.5, which places the country at the higher end of the ranking.
Should the competitive environment deteriorate further, the danger is that key US companies will losesome of their competitive edge facing new global players, particularly those in emerging Asia. On thewhole, we believe it would be premature to make such a gloomy prediction, but it is a danger to be noted.
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