National Freight Forum Speech by Thomas J. Donohue

National Freight Forum
Luncheon Address by Tom Donohue
President & CEO
U.S. Chamber of Commerce

Washington, DC
March 14, 2002

Thank you. Good afternoon, ladies and gentlemen. It’s an honor to be here this afternoon.

The Transportation Research Board has done everybody a great service by creating the National Freight Forum.

The Chamber, as a steering committee member, is very pleased to work with Lillian and Mike and all the Forum members to draw public attention to the challenges facing our freight transportation system.

At the chamber, we deal with a lot of issues…health care, trade, taxes, regulatory reform, and legal reform, to name just a few.

But transportation is a top priority, and lately I’ve been spending a lot of time drawing attention to it.

On Monday, I gave a speech to our friends at the American Public Transportation Association, on Tuesday I spoke at the Air Freight Management Conference, and next week I’m headed to a transportation construction trade show.

All of these groups are focused on one or two components of the supply chain, and they’re fighting to protect their share of federal dollars.

And all the while, no one has given any consideration for the well-being of the entire system.

Until we invest adequately across the board, in all modes, we’ll never really achieve efficient and productive movement of freight and people.

Today, I’d like to give you the larger business community’s perspective on the state of our infrastructure system and talk about what we need to do to fix it, and how.

Causes of infrastructure deterioration/Future demand

I’m sure many of you are familiar with the statistics that show a transportation infrastructure system that is ill-prepared to handle higher and higher volumes of freight and people.

Only two major hub airports have been built in the United States in the past twenty-five years, and new runway projects like the one in San Francisco can take as long as 15 years to build.

Unless something happens soon, our aviation system will be virtually grounded by an expected tripling of air cargo volume by 2015, and a 50% increase in passenger traffic during that same period.

Highways…In just a twenty-five year span—1970 to 1995—highway passenger travel in the U.S. nearly doubled.

But improvements to and expansion of our highway system are not keeping up. Since 1970, vehicle miles traveled have soared 123% while road capacity has increased just 5%.

Railways, another important intermodal connector, are also seeing a surge in growth. Since deregulation of the industry in 1980, rail freight volumes have increased by 50%, and they are expected to grow by another billion tons in the next 20 years.

The U.S. Marine Transportation System, which is 25,000 miles of navigable channels, 300 ports and nearly 4,000 marine terminals, annually moves more than a billion tons of domestic and international freight.

At the current rate, every major U.S. container port will experience a doubling or tripling of container volume by 2020, but as of right now, many aren’t even equipped to handle the new mega containerships.

Effects of deteriorating infrastructure

There are many consequences of a subpar system— congestion, decreased productivity, more accidents and diminished global competitiveness.

The cost of road congestion to the U.S. economy was nearly $78 billion in 1999—more than triple what it was 20 years ago!

The nation’s air traffic control system and overcrowded airports are on the brink of gridlock, causing delays that cost the airlines an estimated $6.5 billion in 2000.

And that’s just the airlines. Billions and billions more are lost to companies when their products don’t reach their destinations on time.

Our ports simply don’t compete on an international level. When you compare our seaports with some of those in Asia, you’ll have difficulty figuring out which ones belong to the most advanced nation in the world, and which belong to a developing country.

Failure to modernize seaports has increased costs for shippers, carriers, and ultimately, consumers, and threatens our status as the world’s strongest trading partner.

While I’m on the subject of ports, let me mention that we’ve joined with several partners to conduct a 14-month comprehensive study that will assess the capabilities and operational effectiveness of our North American ports and associated road and rail systems.

We are taking a close look at efficiency and productivity, security, funding and planning and implementation impediments.

The results will be released this fall and will identify directives for both the private and public freight transportation sectors to ensure U.S. trade competitiveness in the global economy.

Let me be clear. The intent is not to determine winners and losers, but merely to describe real system impediments to greater multimodal productivity and flexibility.

And if the federal government is smart, it will incorporate the suggestions and recommendations that come out of this study into its thinking as it reframes national transportation policy this year and beyond.

Solutions

It’s clear our infrastructure system is in trouble, and it’s threatening our economic vitality and our global competitiveness.

So what is the Chamber doing to bring about positive change? Well, we’re continuing to build a coalition, Americans for Transportation Mobility, that has two very simple and straightforward objectives:

One, Ensure full funding of the federal transportation trust funds and make sure those dedicated funds—which, by the way, are primarily user fees that came out of our pockets—are spent for their intended purpose of infrastructure improvements; and,
Two, accelerate the project review process by removing redundancies. All the money in the world will not help if we are not efficient in the planning and approval for much-needed improvement projects.

The ATM coalition is bringing together for the first time the business and labor communities—we have six labor union members—in educating lawmakers on the importance of improved mobility and safety to future economic growth.

And we’re going to be around for the long haul. We’ve not going to fold our tents after the budget and reauthorization debates are over.

Highway funding bill

Let’s talk money. Funding of the trust funds was on target before September 11th, but the economic slowdown that followed created a $8.6 billion highway funding shortfall because of an equation in TEA-21.

That’s the bad news. The good news is that we have a $19 billion surplus currently gathering dust in the Highway Trust Fund. The money – our money – is there. We just have to exert the political will to spend it.

The Chamber has helped build overwhelming support in Congress for legislation that would make up about half of the budget shortfall.

It’s a good first step, but we’ve got to work harder to get the other half back.

Congress had better get the picture: Failure to maintain full funding levels has enormous implications for jobs, the nation’s economic well-being, and our way of life.

TEA-21/AIR-21

The second major issue before us is reauthorization of TEA-21and AIR-21, both of which expire next year.

The reauthorization is an opportunity for the public and private freight community to proactively and meaningfully address port and intermodal system congestion, capacity, and productivity issues.

I want to stress the intermodal component. The Chamber has put Congress on notice that TEA-21 reauthorization must include provisions that will allow for the improvement of connections among all transportation modes.

And by the way, we’re also supporting efforts to allow railroads to increase capital investments by urging Congress to repeal the 4.3 cents per gallon tax that goes into the government's general treasury. Repeal would provide railroads with up to $170 million for capital investments.

When it comes to transportation funding, we’re going to have to work hard to protect our turf. There are lots of groups, such as the health care industry, vying for federal dollars and pressuring Congress to address their issues.

We have to think of new ways to work with these groups to advance our own goals. These days, it’s all about coalition-building and giving a little to gain a lot.

And another thing to remember – we’ll fight like hell for the money, but we won’t go after people. We have to keep in mind that someone who votes against us on one issue might cast the winning vote on another of our important issues.

As far as “process” goes, we’re going to try to force government to take a fresh approach to how it plans and approves projects so that a runway, port, or highway doesn’t take 15 years to build.

Supply Chain Visibility, Collaboration and Security

There are other challenges that money won’t solve.

First, there’s the increasing reliance on supply chain visibility and collaboration.

In an attempt to meet ever increasing customer mandates, businesses are moving from “Push Logistics” – using inventory based strategies – to “Pull Logistics,” using replenishment-based approaches, to reduce freight transport costs and improve business productivity.

And, supply-chain collaboration is considered so crucial today that dozens of the world’s largest shippers are voluntarily grouping together to advance the science, standards and practice of collaborative planning, forecasting, and replenishing across multiple modes.

Second, additional security concerns. In the wake of September 11, we must properly introduce transparency and inspection to an already sluggish system that requires more, not less velocity.

Consequently, service interruptions – like accidents, congestion, driver shortages, labor strikes, late arrival of ships and trains, terrorism, and unpredictable systemic inefficiency – can quickly unravel today’s tightly strung systems.

That’s why the Chamber is challenging proposals that are advanced to make us feel more secure, but which won’t work.

Defending the homeland should be achieved without losing our openness and mobility, or slowing the engines of commerce.

Distinguishing ideas that will work from those that won’t, and balancing the need for greater security with the requirements of international commerce will be one of the most series issues we face this year – and one the Chamber will be out in front on.

Next month, the Chamber is hosting a Cargo Summit that will examine the supply chain and discuss ideas for improving our system to meet security, safety, business and economic needs. It’s going to be a very interesting discussion, so I hope some of you can make it.

Third, the whole concept of intermodalism. It’s a word we like to throw around, but are we really giving it anything more than just lip service?

We attend unending meetings and other conferences in which we pretend that intermodalism is a thing accomplished.

In truth, we really don’t have intermodalism – we merely have transport modes that sometimes meet. And we at the Chamber believe that for the sake of our global competitiveness it is time to stop pretending.

We must strengthen and modernize our national freight transportation infrastructure and synchronize its operation and management.

To begin, we must change our point of view… to think about transportation differently. We must do more than acknowledge that transportation is a set of interconnected systems.

We must move our minds to a place that believes we have efficient transportation only if the individual components in the system work together.

And there’s the rub. We’ve been taught to think about transportation vertically – about each particular mode as an individual economic stovepipe.

Each, of course, has its strengths and its weaknesses, and its wants and needs … and those are legitimate characteristics of individual business.

But in today’s world, American economic efficiency requires that we rise above parochial thinking.

It’s time to ditch the “silo” mentality and begin to view transportation horizontally … as a single set of inter-related parts that, when assembled and connected correctly, create highly efficient “trade corridors” that measurably enhance not just domestic business effectiveness, but our safety, mobility, national security, and global competitiveness.

Single modal enhancements, piecemeal improvements to failing infrastructure, and catering to special interest issues just won’t cut it any longer.

Conclusion

In closing, you should know that the U.S. Chamber will continue to play an active and aggressive part in advancing the idea of a transportation agenda that makes a difference.

We are living in a new world that requires new thinking and approaches to transportation that should be characterized by changed behaviors and measurable results.

We will remind the public and Congress that infrastructure is not disposable – it is a strategic asset that must be renewed and protected.

In an increasingly competitive world, America needs to move goods faster. This society will no longer tolerate:

Technologies that don’t harmonize;
Labor that refuses to become more productive;
Cities and states that choose not to be cooperative; and
Environmentalists who fail to recognize that there is more than one ingredient that makes up the quality of our lives.

Freight transportation can no long be taken for granted, and “seamless multi-modal trade corridors” are no longer the stuff of transportation fiction.

Transportation – as an integrated system – is an essential component of America’s global competitiveness, and, as such, it can no longer be relegated to the backbench of U.S. public policy.

I ask you to continue to exercise your influence and help us change the way this country thinks about freight transportation.

Thank you very much.