In planning a journey, the first focus is the des-tination, and the second is the route. Nationaleconomic recovery and economic security area primary destination for the United States in

2010. If the route were straight and clear, the secondpart of the plan would be “Drive on!”—that is, con-tinue to let market forces dictate economic out-comes. But in a world of rapidly advancingglobalism, climate change, and energy volatility, aroad map is needed.

Since the 1950s, exports have increased as a por-tion of the U.S. gross domestic product (GDP)—thesum of all goods and services produced—from 5 per-cent to nearly 13 percent in 2008. In February 2010,President Barack Obama launched the NationalExport Initiative (NEI) to double exports in the next5 years. In addition to service-sector products,exports will include agricultural goods, manufac-tured goods, and natural resources, which willrequire transport.

The President has noted that exports will boostthe GDP, reduce the trade deficit, and stimulate jobcreation. The NEI aims to improve conditions thatdirectly affect the ability of the private sector—espe-cially of small businesses—to export and to over-come the hurdles to entering new markets. As theUnited States emerges from the recent global eco-nomic constriction, implementation of the NEI willaid in national economic recovery.

Shifts in the trade and transport environment—atthe local, national, and international levels—pose adynamic challenge and point to the need for a strate-gic freight plan. In addition, significant impacts on thesystem can come from two sources: first, from the lackof adequate intermodal transport capability; second,from emerging challenges to energy use and sustain-ability. Policies are needed to ensure that the nation’smarine transportation system (MTS) will be ready tooperate in the rapidly changing environment ofdomestic and international goods movement.

U.S. Secretary of StateHillary Rodham Clintonreviews the new NationalExport Initiative at BoeingShanghai AviationServices in Shanghai,China, this year.

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Maritime Freight Transportation, NationalEconomic Recovery, and Global SustainabilityCoordinating a Strategic PlanT H O M A S W A K E M A N A N D M I C H A E L B O M B A

Wakeman is DeputyDirector, Center forMaritime Systems,Stevens Institute ofTechnology, Hoboken,New Jersey, and Chair ofthe TRB MarineEnvironment Committee.Bomba is SeniorAssociate, AllianceTransportation Group,Inc., Austin, Texas, andSecretary of the TRBIntermodal FreightTerminal Design andOperations Committee.

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GLOBALIZATION AND TRANSPORTATION

New RealitiesThe United States has taken bold steps to address theeconomic recession, but the steps have led to signif-icant debt. Other factors must be considered in chart-ing the road map:

u Global economic dominance eventually willshift from the United States and Western Europe tothe Far East. Nevertheless, even after this shift, theUnited States will continue as the world’s dominantmilitary power.

u Middle-class incomes in the United States andWestern Europe will stagnate or decline as a result ofglobalization and the growth in the global laborforce, which has increased by 1 billion or more work-ers since the collapse of communism. Discretionaryincome and consumption also will decline, and sav-ings will increase, from 1 percent to approximately8 percent, as populations in the West age.

u Economies of scale and scope will increase inimportance as strategies for competitive advantageand marketplace performance. These will affect infra-structure and resource systems.

u Fossil fuel dependency and the volatility ofenergy prices will continue to heighten concernsabout transportation costs and energy security.

u Environment-related concerns such as climatechange, congestion, biohazards, and the availabilityof nonrenewable resources could limit economicgrowth and competitiveness. Moreover, public con-

cerns about livability issues may hinder transporta-tion system initiatives in some regions.

International TradeEconomic security depends on the success of nationsand their megaregions in the global marketplace. Inearly 2007, international trade contributed approxi-mately 28.5 percent of the U.S. GDP; in 2009, theshare declined to approximately 25 percent (1). TheU.S. economy and the global economy both con-tracted between 2007 and 2009; international tradedeclined by 20 to 30 percent for many nations, theworst recession since the 1930s. In the next 15 years,however, international trade will contribute as muchas 50 percent of the U.S. GDP.

Almost 70 percent of the U.S. GDP depends onproducts for personal consumption. The approxi-mately 30 percent that remains comprises businessinvestments (approximately 13 percent) and govern-ment spending (approximately 17 percent). In the mid-2000s, this level of personal consumption caused theU.S. foreign trade deficit to balloon. The trade deficitgrew rapidly as a percentage of GDP in the mid-1990s,with the globalization of production, the expansion ofinternational trade, and rising energy prices.

For years, the United States has had a trade imbal-ance (Figure 1, page 16) that has expanded becauseimports from China greatly exceed U.S. exports toChina and to other international trading partners.This imbalance between imports and exports has

Aerial view of the KwaiTsing Container Terminalsat Hong Kong Port. Thetrade imbalance betweenthe United States andChina—far more goodsare imported from Chinathan are exported fromthe States—has grownsince the 1970s.

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continued since the mid-1970s (Figure 2, below)and has weakened the financial attractiveness of theUnited States to investors considering the purchaseof public debt.

Between the third quarter of 2008 and the thirdquarter of 2009, the U.S. GDP dropped approximately$310 billion, a decline of a little more than 2 percent(1), as U.S. consumers significantly cut back their pur-chases of imports—import volume dropped morethan 25 percent. Exports from the United States fell by2 to 4 percent or more, as the rest of the world expe-rienced the economic shocks of 2008. Exportsrebounded in 2009 as foreign demand for U.S. prod-ucts expanded—the economies of several trading part-ners grew, and the U.S. dollar weakened. Most of theseexports depend on international shipping and distri-bution networks for delivery to overseas customers.

Consumer DemandDuring the past 15 years, much of the global goodstransport system has focused on Asian exports toU.S. and European consumer markets. The extraor-dinary growth in Asian production to satisfy con-sumer demand nearly overwhelmed the U.S. goodsmovement system. When the excess Pacific Coasttransportation capacity was absorbed, routing eco-nomics shifted to favor all-water services to EastCoast ports for East Coast customers. The primaryend-consumer of manufactured goods, however, isshifting to the Far East.

In the next several decades, the emerging middleclasses in China and India will be the primary con-sumers of global goods and services. China has amiddle class of 300 million—approximately thesame size as the population of the United States.According to one estimate, the GDP of emergingmarkets will grow from 35 percent in 2008 to 50percent of world GDP by 2018 (2).

The spending power of China, India, and Russiais expected to triple. The higher growth rates ofemerging markets will attract foreign direct invest-ments from the West. The anticipated creation ofwealth and consumption by China and India willchange global transportation patterns of supply anddemand. The two nations will generate uniqueimport and export trade flows, fostering a demandfor the most efficient transportation assets. Chinaand India may create new demands for U.S. agricul-tural and finished goods.

With population growth and economic conver-gence, developing nations will increase their demandfor goods. The world population is expected to reach7 billion in late 2010 and 8 billion within 20 years.The U.S. Census Bureau estimates that the worldpopulation will exceed 9 billion before 2050. Mean-while, Western populations will age and will increasetheir rates of savings to provide for retirement. Inshort, demand will be on the other side of the planet,where more growth opportunities will arise, includ-ing new infrastructure and other opportunities forcapital investment. These regions will compete tohave the most efficient transportation and distribu-tion services.

To maintain its economic security, the UnitedStates must increase its exports of goods and ser-vices to the global marketplace. Transportation pol-icy makers can ensure that the products of U.S.companies are globally competitive by providing ade-quate infrastructure capacity for the efficient move-ment of goods. In particular, maritime commerce isindispensable in supporting overseas transactionsand therefore is a fundamental building block ofnational economic prosperity.

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FIGURE 2 U.S. imports,exports, and net exportsby year.

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FIGURE 1 U.S. tradebalance as a percentageof GDP.

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Marine Transportation SystemMore than 90 percent of international trade travels bysea (3). Ocean-borne maritime trade more thantripled between 1968 and 2008 (4). Because most ofthe world’s trade travels by ship, the port is a keycomponent of infrastructure, linking water and landtransportation. National ports serve as internationalgateways to world trade.

The MTS, including ports, always has been eval-uated by the cost of services but now must offer flex-ibility and reliability to satisfy the demands ofshippers in the global supply network. Ports are eval-uated not only for their costs but for their connec-tivity. Ports that do not function seamlessly withinternational production networks are likely to havean adverse effect on the economic development ofthe hinterland or market area.

The MTS is a demand-derived service, and whendemand is low, the system is vulnerable to economicand operational disruptions. The demand for inter-national shipping has declined with the recentdecrease in trade. The MTS is threatened not only bysluggish trade economics but by other types of sys-tem shocks—for example, a major natural disaster orhuman-caused incident could cripple the operationof the supply chain, with national economic conse-quences.

Although considerable work has enhanced thesecurity of ports and of the segments of the trans-portation system serving freight, the resiliency of thesystem needs to be built up to protect its criticalinterdependence with other industrial sectors (5).U.S. economic security increasingly will depend onthe transportation infrastructure and global connec-tions.

Economies of Scale and ScopeThe dominant players in the recovering global trademarkets will achieve economies of scale and scope.The bulk carriers started the trend with larger ships,and the container carriers in the late 20th centuryachieved new economies of scale (6). Because profitmargins are slim, only ports and logistics systemswith sufficient capacity to handle the volume of cargoon megaships will compete successfully in the globalmarketplace.

Economies of scope also have become importantto competitiveness. So-called port poles are formingas collaborative freight networks in Asia, India, andEurope to achieve economies of scope (7). The portpoles offer the size and reliability to attract cargo andcan serve as regional platforms for freight logistics.The networks combine the infrastructure and busi-ness services of more than one port into an expan-sive platform of distribution and delivery services,

gaining agility, cost-effectiveness, and resiliencewhen shocks occur. Shippers see the networks asreliable because of the redundancy of services.Future investments in transportation infrastructurewill have to consider economies of scope and scale,as well as shippers’ needs for connectivity and relia-bility.

Infrastructure RequirementsCosts and reliability are the watchwords for globalbusiness. As goods flow across the world’s oceans andthrough ports and connect to domestic corridors,they may face delays en route and uncertainty aboutdelivery schedules because of infrastructure capacityconstraints. Today’s freight must flow seamlessly orface a time, cost, or reliability penalty.

The United States has been living on its past infra-structure construction accomplishments. If the con-sumption patterns of earlier in the decade had beensustained, the MTS would have been overwhelmedby traffic and would not be adequate for anticipateddemands.

The American Society of Civil Engineers (ASCE)estimates that more than $1 trillion is needed to meetthe shortfall in funding for road and bridge infra-structure investments (8). Some transportation fund-ing was allocated under the 2009 stimulus package,which is distributing $787 billion—although lessthan $52 billion is scheduled to support transporta-tion infrastructure improvements, with $27.5 billionfor highway and bridge construction projects.According to ASCE, more than $50 billion is neededto rebuild the U.S. inland waterway system.

Navigation and terminal infrastructure require-ments have expanded as new megaships with largercontainers are calling on the U.S. ports along the

Instructors at the U.S.Customs and BorderProtection’s CanineEnforcement TrainingCenter stand by as ahandler and a dog searcha seaport container forcontraband. Since thegrowth of maritime tradein the past 40 years, portsecurity has becomecrucial to the system’shealth.

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Pacific and Atlantic. The vessels require channeldepths of 50 feet or more. To stay competitive, thenation must enlarge its navigation channels—and insome cases, raise bridges and increase rail tunnelclearances—to accommodate the enormous ocean-going vessels in an environmentally friendly manner.The U.S. transportation infrastructure system needssignificant financial investments to ensure that busi-nesses can maintain global competitiveness.

Panama Canal ExpansionThe Panama Canal Authority is investing $5.3 billionto accommodate container ships with capacities of8,000 20-foot-equivalent units and more (9). Whenthe new locks open in 2014, a new era will begin thatcould change global trading patterns as the originalcanal did in 1914.

According to some estimates, as much as 25 per-cent of the West Coast cargo base could transfer toEast and Gulf Coast ports as global trade picks upagain. Ports are likely to have only one chance to winover the initial surge; the deepest East Coast portswith the necessary intermodal connections and ware-housing capacity will capture the shift in market share.

SustainabilityThe National Environmental Policy Act, signed intolaw in 1970, raised tensions between the need foreconomic development and the need for environ-mental protection. Sustainable developmentaddresses both needs simultaneously. The UnitedNations’ Brundtland Commission coined the term in1983 and defined it as development that “meets theneeds of the present without compromising the abil-ity of future generations to meet their own needs.”

Sustainable development—or sustainability—must allow for economic viability while protectingthe health of individuals, communities, and the envi-ronment and embracing social responsibility andcommunity livability. The challenge is to achievethese central tenets while the world’s populationincreases rapidly—and as the most affluent popula-tions consume the greatest volume of resources at anincreasingly disproportionate pace. While thesechanges are occurring on the demand side, on thesupply side many natural resources are becomingmore scarce and expensive.

A scarcity of oil is the most significant economicconcern. Many of the world’s oil reserves are comingunder the control of national governments and cor-porations indifferent or hostile to the United States.Other dwindling natural resources include freshwater in some regions; rare earths, used in manyhigh-tech manufacturing processes; and potassium,essential for agriculture.

Without modifying the global consumption pat-terns of the most affluent nations, reducing thedemands of people in developing countries becomesdifficult, risking future scarcities that threaten thequality of life for this and future generations. Long-term solutions to environmental issues for global tradeand transportation and for sustainability will require

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A container ship crossesunder the ArthurRavenel, Jr., Bridge at thePort of Charleston, SouthCarolina. U.S. marinetransportationinfrastructure mustcontinue toaccommodate ever-largeroceangoing vessels.

A cruise ship passesParaiso Hill in thePanama Canal. The firstdry excavation contractof the Canal ExpansionProgram—the new locksare scheduled to open in2014—took place in June2008.

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efforts at the community, national, and global levels.Ports and their associated freight transportation

are heavy industrial activities that must address air,water, and land impacts and community livabilityunder the applicable laws and regulations. From2002 to 2007, many ports established proactive envi-ronmental policies to gain community approval tooperate and expand. Most major ports experienceddouble-digit increases in their volume, causing prob-lems with surrounding communities over road con-gestion, noxious air emissions, and safety concerns.In the San Pedro Bay area of California, for example,neighborhood groups voiced their anger to localpoliticians, and port projects were placed on hold.

The chief local issue is emissions, including nitro-gen oxides and particulate matter from traffic con-gestion and the diesel combustion of port vehicles(10, 11). West Coast and East Coast ports are insti-tuting emissions reduction programs for trucks,marine vessels, and railroad locomotives. Portauthorities are working with the Environmental Pro-tection Agency, local air boards, and tenants to curbemissions beyond the regulatory requirements, toachieve the objective of sustainable development.Despite the progress in improving air quality, portleaders must acknowledge that solving these prob-lems will lead to other demands to address livabilityissues that have not received adequate attention.Examples of unresolved issues include noise, light,siting decisions, and environmental justice concerns.

Environmental compliance often is viewed as anessential but expensive maritime requirement. Poorenvironmental performance on the waterside or thelandside, however, can have a devastating impact onthe success of maritime business—as occurred, forexample, with the Exxon oil spill in Alaska’s PrinceWilliam Sound and with public concerns about port-associated air emissions in the Los Angeles–LongBeach Basin. Environmental concerns not only canstall port and logistics infrastructure developmentbut also can cost millions of dollars to mitigate.

Efforts to eliminate noxious air pollutants areimportant. But equally important and maybe moredifficult to mitigate are the air pollutants that con-tribute to climate change—greenhouse gases(GHGs).

Climate ChangeGlobal agreements addressing the emerging issue ofclimate change may affect the international maritimeindustry. Will a carbon tax or cap-and-trade policy beestablished worldwide? What will be the cost penaltyfor oceanborne cargo here or worldwide? How fastwill engine room and terminal equipment technol-ogy adapt?

The United States contributes 20 percent of theworld’s emissions from burning fossil fuels; Indiacontributes 4 percent. Other nations demand thatthe United States implement stringent emissionsreduction standards before they act accordingly. TheUnited States could apply such measures as a carbontax, a carbon cap-and-trade program, or other mech-anism. A national GHG emissions reduction proto-col, however, will have to consider the businessperspective and the cost implications for the UnitedStates in the global marketplace.

Yet the transportation sector generates approxi-mately one-third of global GHG emissions. TheInternational Maritime Organization and regulatorsworldwide are increasing their scrutiny of emissionsfrom ships and cargo movement. These concernsand anticipated costs will affect the market practicesof carriers and shippers. Ports and vessel owners pre-pared to address the issue proactively and to increasetheir competitiveness can reduce their liabilities andlook for opportunities to profit as the new carbonmarkets open.

Finally, one other consequence of global climatechange is the melting of ice, particularly in the polarregions, which will raise global sea levels. As sea lev-els rise, the infrastructure of ports in low-lying areasmay be inundated during tidal fluctuations or stormsurges. Sea level changes also are likely to affect road-way and rail infrastructure connecting ports to mar-kets. Landside connectivity may be limited or severedduring intense storm events. The potential for signif-icant impacts to low-lying regions could outstrip theability of state and local governments to pay for infra-structure mitigation or for full replacement.

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A clam shell dredge digsvirgin material as part ofa $700 million,multiphase Port ofAnchorage, Alaska,expansion project.Environmentalcompliance is vital to thesuccess of portoperations and projects.

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will be enormous. New laws and regulations couldaffect U.S. port performance and operating costsfrom three perspectives: U.S. emissions require-ments; emissions controls for international oceancarriers; and measures to protect transportationinfrastructure from sea level rise and storm surges. Ifdealt with reactively, these issues will have a severeeffect on the cost of port and transport services.

Systemwide InitiativesThe future of U.S. economic recovery depends onmore than building on past domestic economic prac-tices. Recovery will demand a strong export policyfor U.S. goods. For the NEI to succeed, exports mustenter the international marketplace at competitiveprices, moving from the point of manufacture to aport along intermodal corridors that operate effi-ciently and effectively. The nation’s rural transporta-tion infrastructure, which brings agriculturalproducts to ports, will require ongoing maintenanceand enhancement.

For these transport capabilities to be available,however, the freight transportation sector—includ-ing the maritime sector—will have to develop a sys-temwide plan for transport capacity and will have toaddress emerging domestic and international energyand sustainability demands proactively.

National and state decision makers will need toaddress the inability of public funding mechanismsfor transportation infrastructure to meet the needs oftoday’s global marketplace. If these issues areresolved, the U.S. freight transportation sector willcontribute positively to national economic recoveryand global sustainability.

AcknowledgmentsWalter Kemmsies, Moffatt & Nichol, New York, sup-plied the trade data analyses and the graphic pre-sentations in Figures 1 and 2.

References1. U.S. Economic Accounts. Bureau of Economic Analysis,

U.S. Department of Commerce, 2010. www.bea.gov/.2. Emerging Markets Take Centre Stage. Business Monitor

International, Ltd., London, 2010.3. International Maritime Organization. International Ship-

ping, Carrier of the World Trade. United Nations, NewYork, 2005.

4. Shipping Facts. International Chamber of Shipping, Lon-don, 2009. www.marisec.org/.

5. Sustainable Critical Infrastructure Systems: A Frameworkfor Meeting 21st Century Imperatives. National ResearchCouncil of the National Academies, Washington, D.C.,2009. www.nap.edu/catalog/12638.html.

6. Stopford, M. Maritime Economics, 3rd ed. Routledge, Lon-don; New York, 2009.

7. Notteboom, T. Economic Analysis of the European SeaportSystem. Report to the European Sea Ports Organization,ITMMA; University of Antwerp, Belgium, 2009.

8. Report Card for America’s Infrastructure. American Societyof Civil Engineers, Washington, D.C., 2009. www.infrastructurereportcard.org/.

9. Expansion Program. Panama Canal Authority, Panama City,Panama, 2010. www.pancanal.com/eng/expansion/index.html.

10. San Pedro Bay Ports Clean Air Action Plan. Port of LosAngeles and Port of Long Beach, California, 2006.www.polb.com/environment/air/caap.asp.

11. Ross and Associates. A Clean Air Strategy for the Port ofNew York and New Jersey, Port Authority of New Yorkand New Jersey, New York, Oct. 21, 2009. www.panynj.gov/about/pdf/CAS-FINAL.pdf.

Located at the northernend of the AntarcticPeninsula, James RossIsland has experiencedatmospheric warming ofapproximately 2°C since1950, causing a vastretreat of its floating iceshelves, among othereffects. Ice melt, aconsequence of climatechange, will raise globalsea levels, affectingfreight infrastructure.

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