Freight Transportation Infrastructure Policies
Case Synopsis
The old adage that "all politics is local" is no more apparent than in transportation infrastructure expenditures in North America over the two decades since the NAFTA was signed. The creation of integrated production and marketing systems has not been accompanied by an integrated transportation system. This Working Paper, prepared for the North American Transportation Competitiveness Research Council, first provides an overview to the emergence of deeply integrated production systems in North America in the 1980s and '90s and to the creation of a North American freight transportation system
The case then provides a useful examination of how the three national governments in Canada, Mexico and the US responded to the growing crisis in freight transportation infrastructure in the past 20 years.
The paper provides an overview of the three national transportation policy vectors from 1990-2006 with a brief critique of each. In all three cases, transportation policies have been focused on local needs (US), cut back drastically to meet other budgetary objectives (Mexico) or on budget-balancing, urban problems and maintenance or replacement of aging infrastructure (Canada). It likens the public policy response of the three national governments to a growing crisis - a "perfect storm" - in the transportation system in the early 2000s as one of developing infrastructure programs, but none created a vision of a North American system. The perfect storm continues to rage.
In 2007, Ottawa, Mexico City and Washington all announced new transportation infrastructure development programs which were designed to remedy the infrastructure gaps that had emerged over the past decade of intensified use and delayed maintenance. The paper asks if these new national efforts will create the foundation for a freight transportation system that will maintain North American global competitiveness in the first decades of the 21st century.
The paper finds that despite impressive new funding efforts in the US, Canada and Mexico, some of the key assumptions on which these policies and programs rested are flawed and the answer to this question is no.
Educational Objectives
The case should be used as a supplementary reading in upper-level undergraduate or graduate courses in transportation, international business, comparative politics and comparative business systems and public policy. Basic additional information on transportation modes, North American geography and NAFTA would be needed in order to make optimum use of the case.
The case would serve well as the basis for a discussion of the achievements and failures of the NAFTA agreement. It shows that without specific undertakings in such areas as transportation link, international agreements may be hampered in providing the benefits expected by the countries involved. But it also raises more specific questions of the impact of federalism and the role of national governments in decentralized systems. It provides a good study of policy-making and difficulties encountered as highly localized political systems seek to collaborate on one level, while ignoring each other on another level.
Finally, the case could be used as the basis for a comparative assessment with the European Union - as a vehicle for a discussion of different forms of political and economic integration. It would be useful, too, as an in-depth assessment of the policy-making process in three political systems and of how policy makers frame responses to emerging vital issues.
Teaching Plan
Transportation issues discussions must of necessity sometimes employ a jargon that is not known to those whose exposure to transportation has been slight to non-existent. This case does require that the instructor go over certain terms in advance, such as ‘supply chains', ‘earmarking', ‘multimodal' and ‘cabotage' (see Glossary of Terms below). Many students may not have crossed a land border and this process needs to be discussed.
Besides transportation topics, the case ranges over relations between national governments and between levels the three federations of the US, Canada and Mexico. These relationships should be covered as well, especially in business courses where government activity is too often put into a ‘black box' off to one side. The case gives an example of how competing interests for government attention can affect business activity and profitability. Good transportation is too often assumed as something that exists when teaching a business strategy course.
Student discussion of this case can take many tacks, as the case is a layered one. The instructor should try to shift between the layers of transportation realities, political decision-making and intergovernmental relationships in order that students come away with a feeling for the complexity of this facet of business-government relationships.
GLOSSARY OF TERMS
Cabotage is a term used to describe free trade in transportation services. The country permitting cabotage grants permission to foreign carriers to pick and deliver freight or passengers within its internal borders. Cabotage is not a law per se. It is the absence of non-tariff barriers, like immigration and employment restrictions on foreign nationals, and customs regulations that prohibit the use of foreign equipment in a domestic market
By infrastructure we refer to the physical structures that support the movement of goods and people, including roads, rail, pipelines, electrical lines, bridges, tunnels and so on.
Supply chains represent the series of value-adding services, processes, information and financial flow that generate final products. Firms that constitute the supply chain add value by transforming, storing, transporting and merchandising products. Firms can participate in many different supply chains, but each product has a unique supply chain.
A gateway is a location at the edge of an economic region where transshipment, sorting and storing of inventories occurs. Typically, gateways provide a natural transportation advantage that funnels trade in and out of a region. Unlike a hub that has a circular hinterland, gateways have one-sided hinterlands with the other side having little or no trade. An ocean port is an example of a gateway.
We speak of privatization when state owned enterprises are sold (or given) to private owners.
Protectionism is the combination of tariff and non-tariff barriers to trade that are designed to make foreign competition for the domestic market more difficult. Protectionism can vary from tariffs and fees that just make imported goods more expensive to quota and prohibitions that limit the physical volume of imported goods.
Questions for Discussion
1. Given the desire of all three governments to use infrastructural renewal for purposes of economic stimulus in the global recession, what are the prospects for any kind of coordinated, continental transportation effort?
2. What does this case suggest about the prospects for North American economic integration? Can one talk about the need for a "vision" as a key element of public policy making?
3. How does the North American integration "model" differ from the European Union? In fact, one could argue that integration in important economic sectors was "deeper" in North America than in Europe.
4. What has been the impact of the sudden growth of Asian, especially Chinese trade, had on the transportation systems in North America? Have they re-emphasized the east-west orientation, or are there signs of a renewal of north-south activity?
5. How would you rank the 2006-9 infrastructure programs in the three countries in terms of their apparent planning coherence? What would account for their differences? Culture? Geography? Size of economy?
Relevant Courses
This paper would be useful as a reading in graduate courses in Transportation Policy, Comparative Government, and Economic Development. It would be especially appropriate in courses on US/Canada or US/Mexico relations or in a course on NAFTA and integration.
Useful Links from PNA
- A North American Community: A Modest Proposal to the Trilateral Commission
- A Review of Recent Research on North American Freight Transportation Infrastructure
- Building A Secure and Competitive North America
- Drivers of Change: Thinking About North American Freight Transportation Infrastructure in 2030
- Enhancing Competitiveness in Canada, Mexico and the United States
- Freight Transportation Infrastructure Policies in Canada, Mexico and the United States: An Overview and Analysis
- It's a dead end for free trade
- Managing Rail Expansion and Congestion in North American Freight Transportation: The Thruport Concept
- Preparing for the Future Mexican Land Bridge to the United States
- Quebec-New York Trade Corridors Initiatives
- Roads, Trains and Ports: Integrating North American Transport
- The Freight Transportation Sections of the SPP Reports to Leaders and the NACC Report to Ministers
- Transport experts try for glimpse of future
Suggested Bibliography
Blank, Stephen (2008). "Trade Corridors and North American Competitiveness." American Review of Canadian Studies 38(2): 231-237.
Bradbury, Susan L. (2008). "Are Enhanced Trade and Enhanced Security Mutually Exclusive? The Western Canada-U.S. Borderland in a Post-9/11 World." American Review of Canadian Studies 38(3): 317-340.
Bradbury, Susan L., and Daniel E. Turbeville III (2009). "Planning Transporation Corridors in Post-NAFTA North America." Journal of the American Planning Association 68(2): 137-150.
Brooks, Mary R. (2004). "Mapping the new North American Reality: The Road Sector." Policy Options 25(6): 50-53, available from http://www.irpp.org/miscpubs/archive/NA_integ/wp2004-09k.pdf
Brooks, Mary R. (2008). North American Frieght Transportation: The Road to Security and Prosperity (Transport Economics, Management and Policy). London: Edward Elgar Publishing.
Nelson, Rainbow (2008). "Overhaul of transport links fuels the agenda; Mexican president Calderon says improvements to infrastructure are key to kick-starting economy." Lloyd's List, 30 September, sec. Special Report - Mexico: 10.
Pastor, Robert A. (2008). "The Future of North America: Replacing a Bad Neighbor Policy." Foreign Affairs 87(4): 84-143
Rodrigue, J.P. (2008). "The Thruport concept and transmodal rail freight distribution in North America." Journal of Transport Geography 16(4): 233-246.
Schwanen, Daniel (2005). "A NAFTA customs union: Necessary step or distraction?" International Journal 60(2): 399-406.
Taylor, John C., Douglas R. Robideaux and George C. Jackson (2004). "U.S.-Canada Transportation and Logistics: Border Impacts and Costs, Causes, and Possible Solutions." Transportation Journal 43(4): 5-21.
Vieira, Paul (2008). "Prentice urges port, border upgrades; Trade prospects at risk, Industry Minister warns." Financial Post, 19 August: FP1.
Washington Post Editorial (2009). "Truck Stop; Congress flashes a yellow light on free trade with Mexico." The Washington Post, 6 March, Regional Edition: A14.
Note: PNA is committed to encouraging intelligent discourse among our members. Comments are moderated by PNA, in accordance with the PNA Comment Policy. PNA does not necessarily endorse any of the views posted below.
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