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US Freight Transport Report Q1 2008Product Type: Market Research ReportPublished by: Business Monitor International Published: November 2007 Product Code: R302-2051 Description President George W Bush’s White House is little over a year away from packing up its bags, as thecountry’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. Table of Contents
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