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US Freight Transport Report Q3 2007Product Type: Market Research ReportPublished by: Business Monitor International Published: October 2007 Product Code: R302-1499 Description US politics are now well into the last two years of President George W Bush’s Republican White House,which has to co-exist with the opposition Democrats, who hold majorities in both houses of Congress. The economy has caught something of a chill this year. BMI’s newly-released US Freight Transport Report notes that despite the 2007 slowdown, strong economic growth will continue to ensure the underlying health of the sector. 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 very solid. BMI predicts that freight traffic, measured in million tonne-kilometres, will rise by an annual average of 2.6% over the 2007-2011 period. In line with the pattern in developed economies, this is a little slower than overall economic growth, which will average 3.1% per annum over the period. We expect transport and communications GDP to grow to US$1.113trn by 2011, representing 6.5% of US GDP. The protectionist trend in US freight transport first hit the headlines early in 2006 when the US Congress broke ranks with President 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 London-based Peninsular & Oriental (P&O), then agreed to sell its US interests to a third party, a process that has now been completed. In December 2006, 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 are lining up against plans to give foreign investors a greater say in the running of US-based airlines. The exception, which has also 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 previously (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 in the face of 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. Table of Contents
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